PMstudy Summery PDF

Project Management Framework
Study Notes
PMI, PMP, CAPM, PMBOK, PM Network and the PMI Registered Education Provider logo are registered marks of the
Project Management Institute, Inc.
2014 VMEdu, Inc. All rights reserved
Points to Note
Please read Chapter 1, Chapter 2, and Chapter 3 from Project Management Institute, A Guide
to the Project Management Body of Knowledge, (PMBOK Guide) Fifth Edition, Project
Management Institute, Inc., 2013 (pages 1 to 61).
The study notes explains topics that are important for PMP exam preparation and you can
expect several questions from these topics.
Pay close attention to all the terms used. It is very important to understand all the concepts
discussed in this chapter.
Try to relate the concepts to real life examples.
After reading the study notes, please read, understand, and answer the chapter test
questions in this knowledge area. The chapter questions improve your understanding of the
concepts discussed in the study notes.
What is a Project?
*Project is a temporary endeavor undertaken to create a unique product, service, or result.
Features of project:
Temporary: Project has a definite beginning and a definite ending. The duration may vary from one day to
even a few years but ultimately all projects must either meet their objectives or be terminated. Please
note that even though the projects are temporary, the products or services created by them may far outlast
the projects themselves.
Unique product, service or result: All projects create something unique which has never been created
before. A product or service may be unique to whatever category it belongs (e.g., a project to create a
building has a unique design, location, resources, etc.).
Please visualize those situations at your work place and check whether what you are working on is in fact a
project or some other engagement, taking into account the following guidelines that help you understand some
of the characteristics of a project:
Does it have features of operations that are repetitive, and required to sustain business?
Does it relate to merely fixing something which is broken or making minor modifications or carrying on
maintenance activities (e.g., making changes in a document or website, resolving minor issues, etc.)?
These activities will not produce a unique product and are hence not projects.
Does the work require you to follow project management practices (e.g., does it require you to use expert
knowledge discussed in several PMBOK Guide Knowledge Areas such as Integration Management, Time
Management, Scope Management, Cost Management, etc.?)? Does it require a project plan to be created
and Project Manager assigned? If answers to these questions are No, then you are not dealing with
projects.
Important: Please read PMBOK Guide Fifth Edition (pages 3 and 4) which cites examples of projects and how
they can be identified.
*This definition is taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) Fifth Edition, Project
Management Institute, Inc., 2013
Projects and Operations

(How they differ)
Projects
Operations
Duration
Temporary - has definite

beginning and definite end
(although duration may vary)
Ongoing activity
Objective
Deliver service/product and

close the project
Sustain business
Create unique product or

service
Sustain business
End Result
Programs, PMO, and Portfolios

Program:
*A group of related projects, subprograms, and program activities managed in a
coordinated way to obtain benefits not available from managing them individually.
Program management (as opposed to project management) is important because:
It provides a holistic view of several related projects which, if executed together, will
achieve better results than when executed individually.
It satisfies a distinct strategic objective, which requires management of several projects
simultaneously.
e.g.: A space launch is usually a program. It includes several individual projects related
to manufacturing, testing, creating the launch pad, R&D, etc. It may also include
operational activities like co-ordination with research institutes, compliance with
procedures, remembering lessons learned from other launch programs, etc. For the
space launch to be successful, all the underlying projects and associated operational
activities should be well coordinated and executed as part of a single program.
Programs, PMO, and Portfolios (continued)

Project Management Office (PMO):
*An organizational structure that standardizes the project-related governance processes
and facilitates the sharing of resources, methodologies, tools, and techniques.
An entity that selects, deploys, and manages project resources
Portfolio:
*Projects, programs, sub portfolios, and operations managed as a group to achieve
strategic objectives.
Portfolio Management is important because:
It satisfies strategic business objectives.
It identifies, prioritizes, authorizes, controls, and manages projects, programs, and other
related work.
e.g.: A space launch portfolio will include several individual space launch programs. The
Portfolio Manager will be instrumental in determining which space launch programs should be
selected based on risks, returns, human resources, strategic objectives, and other
considerations. Also, all the programs and projects will be managed as part of the portfolio and
follow the standards & guidelines laid down as part of the portfolio.
Important: Please read PMBOK Guide Fifth Edition (pages 7 to 12) which discusses
these concepts in greater detail.
*These definitions are taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) Fifth Edition,
Project Management Institute, Inc., 2013
Project Stakeholders
*An individual, group, or organization who may affect, be affected by, or perceive itself to be affected by a
decision, activity, or outcome of the project. Some examples are:
Project Managers:
Responsible for managing the project
Not required to be a technical expert
Customers:
*Person(s) or organization(s) that will pay for the projects product, service, or result (e.g., for a new
computer processor manufacturing project, the computer manufacturers are the customers).
Users:
Those who directly use the projects product (e.g., when a new drug is launched, patients are the users)
Functional Managers:
Responsible for managing the work related to the functional areas of the business
Sponsor:
Provides resources and support for the project, is accountable for the project success, and serves as an
escalation point for important issues.
Project Team:
Group of persons that carries out the project work
Program Managers:
Responsible for managing related projects
Portfolio Managers/ Portfolio Review Board:

Responsible for governing a number of projects or programs that may or may not be interdependent.
Characteristics of Project Stakeholders

Stakeholders interests may positively or negatively impact the project.
Stakeholders may exert influence over the project and its outcome.
Very important for the Project Manager to identify all the stakeholders and their expectations
(sometimes their expectations may be implicit and not explicitly stated).
Stakeholders may have conflicting interests and objectives; so managing stakeholders may
involve balancing those interests.
Project Manager must aim to find resolutions to issues among various stakeholders.
Involving stakeholders in the project phases improves the probability of successfully
completing the project and thus satisfying customer requirements. This may also result in buyin or shared ownership of the project by the stakeholders.
In general, differences among stakeholders must be so resolved in favor of the customer.
Organizational StructuresTheir Influence

on Projects
Reference: Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide)
Fifth Edition, Project Management Institute, Inc., 2013 Table 2-1, Page 22. Also, please refer PMBOK Guide - Fifth
Edition - Figures 2-1 through 2-6, Pages 22 to 26.
Comparison of Functional vs. Projectized

Organization Structures
Functional
Projectized
Project Manager's authority
Virtually none
High to almost total
Ability to get resources for

project
Very difficult, because resources work

in specific functional areas
Easier to get resources
Reporting hierarchy
Resources report to Functional

Manager
Resources report to Project Manager
Dedication to the project
Low
High
Performance Evaluation
Done by Functional Manager
Done by Project Manager
Home for the resource after

project completed
Available, resources go back to

functional departments
No home after project is completed
Specialized skills
Well developed, because resources

place more emphasis on functional
skill-sets compared to projects
Not as well developed, team members

need to pay more emphasis to
projects and not to develop functional
skill-sets
Efficiency of resource
allocation
Efficient allocation of resources
Less efficient- duplication of job

functions
Career paths
Well defined - along functional

specialization
Depends on type of project, no well

defined career path
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Some Important Terms

*Project Management Office (PMO): It is an organizational structure that standardizes the
project-related governance processes and facilitates the sharing of resources, methodologies,
tools, and techniques.
*Program: A group of related projects, subprograms, and program activities managed in a
coordinated way to obtain benefits not available from managing them individually.
*Portfolio Management: The centralized management of one or more portfolios to achieve
strategic objectives.
*Subproject: A smaller portion of the overall project created when a project is subdivided into
more manageable components or pieces.
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Product Life Cycle, Project Life Cycle,

Project Management Life Cycle
*Product Life Cycle: The series of phases that represent the evolution of a product, from
concept through delivery, growth, maturity, and to retirement.
The product lifecycle is used to launch a new product. A single product life cycle may have
been generated as an outcome of several projects (multiple project life cycles). For example, a
project undertaken to bring out a new desktop computer in to the market constitutes only one
phase in the product life cycle of the desktop computer.
*Project Life Cycle: The series of phases that a project passes through from its initiation to its
closure.
Understanding the project life cycle constitutes the basic framework needed for managing the
project.
Project Management Life Cycle: It describes the processes required to be followed to
manage the project and are grouped under various process groups (i.e., Initiating, Planning,
Executing, Monitoring & Controlling, and Closing) explained in PMBOK Guide - Fifth Edition.
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Project Life Cycle - Features

Defines the beginning and end of the project
Includes the transitional activities at the beginning and the end of the project (thus provides
linkages with ongoing operations of the performing organization)
Defines work and resources involved in each phase
Project life cycle may be just one phase of the product life cycle
Subprojects within projects have their own distinct life cycles
13
Project Life Cycle - Characteristics

Factors that increase with project progress and then decrease sharply when project
nears completion:
Cost of project
Staffing levels
Start of project
Project Duration
End of project
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Project Life Cycle Characteristics

(continued)
Factors that increase with project progress:
Probability of successfully completing the project
Cost of changes made
Cost of correcting errors
Start of project
Project Duration
End of project
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Project Life Cycle Characteristics

(continued)
Factors that decrease with project progress:
Uncertainty/risks about the project
Ability of stakeholders to influence final characteristics of projects product
Ability of stakeholders to influence final cost of projects product
Start of project
Project Duration
End of project
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Process Groups
The five process groups or project management process groups are:
Initiating
Planning
Executing
Monitoring and Controlling
Closing
Process groups are linked by the results they produce, i.e., output of one process group
becomes input to the succeeding process group.
Process groups may overlap and interact within phases.
If a project is broken down into several phases (e.g., design, implementation, etc.), then the
process groups will occur in each of these phases.
Note: Please refer PMBOK Guide - Fifth Edition (figure 3-3, Page 53). Please spend some
time in understanding the processes and their interactions. These processes are explained in
detail in subsequent chapters.
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Key General Management Skills

Leadership
Decision Making
Team Building
Motivating
Influencing
Communicating
Negotiating
Problem Solving
Political and Cultural Awareness
Trust building
Coaching
Conflict Management
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) Fifth Edition, Project Management Institute, Inc., 2013, Page 18.
18
Project Integration Management

Study Notes
Points to Note
Please read Chapter 4 from Project Management Institute, A Guide to the Project
Management Body of Knowledge, (PMBOK Guide) Fifth Edition, Project Management
Institute, Inc., 2013 (pages 63 to 104).
The study notes explain topics that are important for PMP exam preparation and you can
After reading the study notes, please answer the chapter test questions in this knowledge
area. The chapter questions improve your understanding of the concepts discussed in the
study notes.
What is Project Integration Management?

*Comprises the processes and activities needed to identify, define, combine, unify, and
coordinate the various processes and project management activities within the Project
Management Process Groups.
Involves making trade-offs between alternatives and competing objectives.
Includes following processes:
Develop Project Charter

Develop Project Management Plan
Direct and Manage Project Work
Monitor and Control Project Work
Perform Integrated Change Control
Close Project or Phase
Please refer to the PMBOK Guide - Fifth Edition (page 65; figure 4-1):
Understand all the processes
Try to relate the processes to real-life examples that you have come across in your projects
*This definition is taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide)
Fifth Edition, Project Management Institute, Inc., 2013
Some Examples of Integration Processes

Project work should be integrated with the ongoing operations of the performing organization.
Product and Project Scope must be integrated.
Cost estimates must be integrated with the processes in cost, time, and risk Knowledge Areas.
Change requests should be integrated with initial project deliverable projections.
Earned Value Analysis

Most common technique for performance measurement.
Integrates the project scope, cost, and schedule measures to assist the project management
team to assess project performance from initiation through closeout.
Involves calculating:
*Planned Value (PV): The authorized budget assigned to scheduled work. It is also known
as performance measurement baseline (PMB)/ budgeted cost of work scheduled (BCWS).
*Actual Cost (AC): The realized cost incurred for the work performed on an activity during a
specific time period. It is also known as actual cost of work performed (ACWP).
*Earned Value (EV): The measure of work performed expressed in terms of the budget
authorized for that work. It is also known as budgeted cost of work performed (BCWP).
Please note that more details on Earned Value will be discussed in our chapter
notes on Project Cost Management.
Project Constraints
*A limiting factor that affects the execution of a project/program/portfolio/process.
Examples:
Pre-defined budget, contractual provisions

Labor union requirements
Organization structure of the performing organization
Preferences of the project management team (i.e. advocating structures that were
successful in the past)
Competencies of individuals available for the project etc.
Project Assumptions
*A factor in the planning process that is considered to be true, real, or certain without proof or
demonstration.
Are progressively elaborated (i.e., we have a high level understanding of assumptions in the
early stages of the project, and they get better defined as project progresses).
Need to be identified, documented, and validated.
Involves risk hence forms an integral component of Risk Management System.
Examples:
Availability of human resources,
Availability of resources with the desired qualifications,
Assumptions about environment, economy, inflation, government policies, markets,
technology, etc.
Project Charter
*A document issued by the project initiator or sponsor that formally authorizes the existence of
a project (i.e., formally signals the start of a project).
Includes (directly or by reference to other documents):

Business need - why project is being undertaken and how it promotes business growth
Product scope description
Strategic Plan
Issued by the project initiator or sponsor
**Provides Project Manager with the authority to apply organizations resources to project
activities.
**Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOKGuide) Fifth Edition, Project Management Institute, Inc., 2013, Page 71.
When should the Project Manager be

Identified/Assigned?
As early in the project as possible
Preferably while the project charter is being developed
Always before project planning starts
Definitely before the start of project execution
Project Management Plan, Project Schedule,

and Performance Measurement Baseline
*Project Management Plan: The document that describes how the project will be executed,
monitored, and controlled.
*Project Schedule: An output of a schedule model that presents linked activities with planned
dates, durations, milestones, and resources.
*Performance Measurement Baseline (PMB): An approved integrated scope-schedule-cost
plan for the project work against which project execution is compared to measure and manage
performance. The PMB includes contingency reserve, but excludes management reserve.
10
Components of the Project Plan
Change management plan

Communications management plan
Configuration management plan
Cost management plan
Cost baseline
Human resource management plan
Process improvement plan
Procurement management plan
Quality management plan
Stakeholder management plan
Scope baseline:
Project scope statement
WBS
WBS dictionary
Schedule baseline
Scope management plan
Requirements management plan
Risk management plan
Schedule management plan
Please note: You will understand what these documents signify in subsequent chapters.
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) Fifth Edition, Project Management Institute, Inc., 2013, Table 4-1,
Page 78.
11
Preventive Action, Corrective Action, and

Defect Repair
Preventive Action:
*An intentional activity that ensures the future performance of the project work is aligned
with the project management plan.
Corrective Action:
*An intentional activity that realigns the performance of the project work with the project
management plan.
Defect Repair:
*An intentional activity to modify a nonperforming product or product component.
12
Work Authorization System

Formal procedure to:
Sanction project work to ensure that work is done by the appropriate persons, at the right
time, and in proper sequence.
Begin work This is primarily a written authorization process.
For smaller projects, a verbal authorization system is permitted.
Also, work to be performed is well-defined so that nothing extraneous to it is performed (i.e. to
prevent gold plating).
13
Role of Stakeholder
Every stakeholder has skills and knowledge that contribute to creating a project plan.
Different stakeholders make varying contributions at various stages of the project. Project
Manager must create an environment in which stakeholders can contribute optimally.
The Project Manager should be open to the opinions of all stakeholders and try to understand
their explicit and implicit requirements.
Getting inputs from stakeholders is important as the stakeholders feel more involved with the
project and, thus, there will be stakeholder buy-in.
14
Project Management Information System

(PMIS)
PMIS consists of tools and techniques used to gather, integrate, and disseminate the outputs
of project management processes.
Used to support all aspects of the project management from initiating till closing.
Can include both manual and automated systems.
15
Lessons Learned
*The knowledge gained during a project which shows how project events were addressed or
should be addressed in the future with the purpose of improving future performance.
Lessons can be learned from each and every project, even if some of them are failures.
Lessons should be learned not only from own mistakes but also from others mistakes.
Most companies conduct post-implementation meetings and examine case studies to
document lessons learned.
16
Change Control System

*A set of procedures which describes how modifications to the project deliverables and
documentation are managed and controlled.
It includes documentation, tracking systems, processes, and approval levels needed for
authorizing change.
In many cases, the Change Control System of the performing organization can be adopted as
is for use in the present project also.
Certain identified types of changes can be Automatically Approved.

All changes must be documented.
Changes change the project baselines.
Includes Change Control Board (CCB) a group responsible for approving or rejecting
proposed changes.
*This definition is taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) Fifth Edition, Project Management
Institute, Inc., 2013
17
Perform Integrated Change Control

Process of influencing the factors that circumvent integrated change control so that only
approved changes are implemented.
Process to review, analyze, and approve change requests - timely response minimizes the
possibility of negative effect on time, cost, or the feasibility of a change
Involves managing the changes that are approved
Involves maintaining integrity of the performance measurement baselines
Involves documenting the entire impact created by the change request
Process to review, approve/reject recommended preventive, or corrective actions
Involves coordinating changes across the entire project (e.g., change in schedule will impact
cost, risk, quality, and staffing)
Very important: Change Control in one Knowledge Area will impact other Knowledge
Areas. So, the Project Manager should be able to relate changes across Knowledge Areas.
18
Steps Followed If Customer Requests for

Changes
Evaluate and assess the changes. Determine how the changes are going to have an impact
on the project.
Discuss with team members how best to handle the changes (is it possible to crash, fasttrack, etc.?). Also, try to determine what would be the implication of each change e.g.,
impact on scope, schedule, cost, quality, etc.
Inform customer about the implication of the changes.
If customer still wants the changes to be implemented, discuss with the management, sponsor,
and other stakeholders.
Based on their inputs, if the change is warranted, a change control request will have to be
formally made and entered into the change management/configuration management system,
necessary approvals need to be received, and then the team will work on the approved
changes.
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Guiding Rule Who Can Authorize A

Change?
Type of Change
Approving Authority
Change to project charter
Person who approved the project charter
Change in the project direction impacting cost,

quality, time, etc.
Management
Minor changes that can be managed within the

project plan
Project Manager
20
Configuration Management System

A part of the overall project management system
*A collection of formal documented procedures, which are used to apply technical and
administrative direction and surveillance to:
Identify and document the functional and physical characteristics of a
product/component/result/service
Control changes to such characteristics
Record and report each change and its implementation status
Support the audit of products, components, results, or services to verify conformance to
requirements
21
Project Scope Management

Study Notes
Points to Note
Institute, Inc., 2013 (pages 105 to 140).
study notes.
What is Project Scope Management?

*Project Scope Management includes processes required to ensure that the project includes
all the work required, and only the work required, to complete the project successfully.
Please note that gold plating, i.e., including features and requirements in the product or
deliverable not originally planned, is not a recommended practice.
Major scope management processes include:
Plan Scope Management

Collect Requirements
Define Scope
Create WBS
Validate Scope
Control Scope
*This definition is taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) Fifth Edition,
Product Scope vs. Project Scope

Product Scope
Project Scope
Features and functions that characterize

a product, result or service.
Work that must be done to deliver a

product with the specified features and
functions.
Processes, tools and techniques

required vary by application area
defined as part of the product life cycle
Processes, tools and techniques

required vary by application areas
defined in project life cycle
Defined in product life cycle (not defined

in this chapter differs depending on the
industry)
Defined in project life cycle discussed

in this chapter
Completion of product scope measured

against the product requirements
Completion of project scope measured

against the project management plan
A product may have several subsidiary

components with their own separate but
independent product scopes
A project generally results in a single

product or deliverable
Processes in Project Scope Management

Processes in Project Scope Management are Plan Scope Management, Collect
Requirements, Define Scope, Create WBS, Validate Scope, and Control Scope.
Please refer to figure 5-1 in PMBOK Guide - Fifth Edition, page 106.
Understand all the processestheir inputs, tools and techniques, and outputs-very well.
Try to relate the processes to real-life cases that you have come across in your projects.
Plan Scope Management

Process of creating a scope management plan which documents how the project scope will be
defined, validated and controlled.
*Main benefit of this process is that it gives direction and guidance on how the projects scope
will be managed through out the project.
Outputs of this process are Scope management plan and requirements management plan.
* Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) Fifth Edition, Project Management Institute, Inc., 2013, Page 107
Scope Management Plan

Includes:
How project scope will be defined, developed, integrated, monitored, controlled and verified
How the expected stability of project scope will be assessed (i.e., determining the
probability for its change)
Process for preparing a detailed project scope statement
Process which enables creation of WBS
Process which clearly states how WBS will be maintained and approved
Process which states how formal acceptance of the project deliverables is obtained
Process to control how change requests to the detailed project scope statement will be
processed
May be formal or informal, highly detailed or broadly framed, based on the needs of the project
Subsidiary plan of the project management plan
Collect Requirements
*Collect Requirements process involves:
Determining, documenting, and managing stakeholders needs and requirements to meet
project objectives
Defining and managing customer expectations
*Tools and Techniques used:
Interviews
Focus groups
Facilitated workshops
Group creativity techniques
Group decision-making techniques
Questionnaires and surveys
Observations
Prototypes
Benchmarking
Context Diagrams
Document Analysis
Collect Requirements (continued)

Outputs are:
Requirements Documentation:
Describes how individual requirements meet the business need for the project.
Requirements Traceability Matrix:
Links product requirements from their origin to the deliverables that satisfy them .
Traces requirements throughout the project life cycle.
Define Scope
Process to develop a detailed description of the project and product
Benefits:
Improves accuracy of cost, duration, and resource estimates
Defines baseline for performance measurement and control
Facilitates clear responsibility assignments
Poor scope definition results in:
Higher final project costs

Changes that disrupt the project rhythm
Rework
Increase in project time
Lower productivity
Lower morale of workforce
10
Product Scope Description

Documents the characteristics of the product, result, or service described in the requirements
documentation and project charter.
Is progressively elaborated (i.e., gets better defined as the project progresses).

Should be detailed enough to support project planning.
11
Product Analysis
Involves developing a better understanding of the product of the project by asking questions
about the product and forming answers to describe the use, characteristics, and other relevant
aspects of the product that is going to be manufactured.
Used as a tool in Define Scope process
*Techniques used:
Product breakdown
Systems analysis
Requirements analysis
Systems engineering
Value engineering
Value analysis
12
Project Scope Statement

Contains a detailed description of the scope elements
Contains description of the project scope, major deliverables, assumptions, and constraints.
Provides a documented basis for making future project decisions
Helps to develop common understanding among all stakeholders
May need to be revised if there are scope changes
Includes:
Product scope description

Acceptance criteria
Deliverable
Project exclusions
Constraints
Assumptions
13
Decomposition
Dividing and subdividing the project scope and project deliverables into smaller, more
manageable parts.
Steps:
1. Identify major deliverables
2. Can cost and duration

estimates be developed at
this level of detail?
YES
4. Verify Correctness of
Decomposition
NO
3. Identify constituent components
of the deliverable
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Work Breakdown Structures (WBS)

Very important topic you can surely expect some questions on WBS, WBS dictionary, and
work packages.
Definition: WBS is a hierarchical decomposition of the total scope of work to be carried out by
the project team to accomplish the project objectives and create the required deliverables.
The WBS is finalized by assigning each work package to a control account and establishing a
unique identifier for that work package from a code of accounts.
These identifiers provide a structure for hierarchical summation of costs, schedule, and
resource information.
Control accounts are placed at selected management points in the WBS.
15
Work Packages and WBS Dictionary

Work packages:
Are the work defined at the lowest level of the WBS for which cost and duration can be
estimated and managed
May be further decomposed into subproject work breakdown structure
WBS dictionary:
Provides detailed deliverable, activity, and scheduling information about each component in
the WBS
Supports the WBS
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Inspection
Is a tool and technique in Validate Scope process
Is also called:
Review
Product review
Audit
Walkthrough
Includes activities like measuring, examining, and validating to determine whether results
conform to requirements
17
Scope Changes
Modifications to an agreed upon project scope as defined in the WBS
Will require adjustments to:
Cost
Time
Quality
Other project objectives
What happens if scope changes?

Scope changes are fed back through the planning process
Technical and planning documents are updated as needed
Stakeholders are notified
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Control Scope
*Control Scope is a process to monitor the status of the project and product scope and
manage changes to the scope baseline
The project management plan contains the following information that is used to control scope:
Scope baseline
Scope management plan
Change management plan
Configuration management plan
Requirements management plan
In variance analysis, project performance measurements are used to assess the magnitude of
variation from the original scope baseline.
*This definition is taken from the Glossary of the Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) Fifth Edition, Project Management
Institute, Inc., 2013
19
Project Time Management

Study Notes
Points to Note
Please read chapter 6 from Project Management Institute, A Guide to the Project
Institute, Inc., 2013 (pages 141-192).
The study notes explain topics that are important for PMP exam preparation, and you can
study notes.
What is Project Time Management?

*Project Time Management includes processes required to manage the timely completion of
the project.
Processes involved in the project time management include:
Plan Schedule Management
Define Activities
Sequence Activities
Estimate Activity Resources
Estimate Activity Durations
Develop Schedule
Control Schedule
Each of these processes occur at least once in every project and in one or more project
phases (if the project is divided into phases).
Please refer to PMBOK Guide - Fifth Edition, figure 6-1, page 143. This provides an
overview of the processes in Project Time Management.
Plan Schedule Management

*Process of establishing the policies, procedures, and documentation for planning, developing,
managing, executing, and controlling the project schedule.
Guides and directs how the project schedule will be managed throughout the project.
Some of the main inputs are:
Project Management Plan

Project Charter
Tools and Techniques used are:
Expert judgment
Analytical techniques
Meetings
Schedule management plan is the only output of this process

*The schedule management plan is a component of the project management plan that establishes
the criteria and the activities for developing, monitoring, and controlling the schedule.
The schedule management plan could be either formal or informal, highly detailed or broadly framed.
Define Activities
*Process of identifying and documenting the specific actions to be performed to produce the
project deliverables.
Activities are smaller decomposed components of the project work packages, which represent
the work necessary to complete the work package.
Tools and Techniques used in Define Activities process:
Decomposition
Rolling wave planning
Expert judgment
Outputs of Define Activities process are:
Activity list
Activity attributes
Milestone list
Decomposition
*A technique used for dividing and subdividing the project scope and project deliverables into
smaller, more manageable parts.
Subdivides the project work packages into activities

Provides better management control
Leads to activities, the lowest level of the work packages in the Define Activities process
Leads to the work package, the lowest level in the Work Breakdown Structure (WBS) in the
Create WBS process, where the deliverables are identified
Process can involve team members. This can lead to better and more accurate results.
Sequence Activities
Identifies and documents relationships among project activities
Uses logical relationships
Can be performed by using manual or automated techniques or project management software
*Some important inputs are:
Activity list
Activity attributes
Milestone list
Project scope statement
Tools and Techniques used for the Sequence Activity process are:
Precedence diagramming method (PDM)

Dependency determination
Leads and lags
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) Fifth Edition, Project Management Institute, Inc., 2013, Page 153.
Precedence Diagramming Method (PDM)

*A technique used for constructing a schedule model in which activities are represented by
nodes and are graphically linked by one or more logical relationships to show the sequence in
which the activities are to be performed.
ActivityOn-Node (AON) is one of the methods representing precedence diagram. It is used by

most project management software packages
Includes four types of dependencies or logical relationships:
Finish-to-start (FS)
Finish-to-finish (FF)
Start-to-start (SS)
Start-to-finish (SF)
Most commonly used precedence relationship: the finish-to-start (FS)

Does not use dummy activities
Does not allow for loops or conditional branches
Activity on Node
Activity on Node (AON) or Precedence Diagramming Method (PDM) showcases the interdependencies among various project activities.
This technique is used to draw the project schedule network diagrams; e.g. Critical Path
Network Diagram to identify the Critical path and the float for each activity
In an AON diagram, each rectangle box represents a node and a project activity. These
rectangular boxes are connected using arrows to the succeeding activity box thereby
portraying the project dependencies.
Activity on Node uses four types of dependencies.
Finish to Start (FS): The end of one activity is required for the start of the next one. This is
the most common dependency
Finish to Finish (FF): The end of the first activity is required for the second activity to finish
Start To Start (SS): The second activity starts only after the first activity has started
Start to Finish (SF): second activity cannot be finished until first activity starts.
Conditional Diagramming Methods

Allows non-sequential loops or conditional branches
Example:
GERT (graphical evaluation and review techniques)

System dynamics
10
Types of Dependencies
Mandatory dependencies:
Also referred to as hard logic

Required as per contract or inherent in the nature of the work
Usually involve physical limitations (e.g., you cannot build the ceiling until walls are constructed)
Are determined by the project management team during the activity sequencing process
Discretionary dependencies:
Also referred to as preferred logic, preferential logic, or soft logic

Should be used with care and well documented, since they may limit later scheduling options
External dependencies:
*Involve a relationship between project and non-project activities such as activities outside the
project teams control (e.g., dependence on external sources for deliveries, environmental factors
governed by statutes, etc.)
Internal dependencies:
Involve a precedence relationship between project activities
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) Fifth Edition, Project Management Institute, Inc., 2013, Page 158
11
Project Schedule Network Diagrams

Is the main output of Sequence activities
*A graphical representation of the logical relationships among the project schedule activities.
Can be produced manually or using project management software
Can have full project details, or have one or more summary activities
12
Estimate Activity Resources

Estimates the type and quantities of material, human resource, equipment, or supplies required to
perform each activity.
Identifies the quality, type, and characteristics of resources required to complete the activity.
Coordinates closely with Estimate Costs process
*Some important inputs are:
Activity list
Activity attributes
Resource calendars
Risk register
Activity cost estimates
*Tools and Techniques used are:
Expert judgment
Alternative analysis
Published estimating data
Bottom-up estimating
Project management software
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) Fifth Edition, Project Management Institute, Inc., 2013, Page 161
13
Outputs of Estimate Activity Resources

Activity Resource Requirements
*The types and quantities of resources required for each activity in a work package
Determines the estimated resources for each work package and each work period by
aggregating their requirements like the types and the quantities
Will be documented by including basis of estimates and the assumptions made
Resource Breakdown Structure
*Is a hierarchical representation of resources by category and type
Helps organize and report project schedule data with resource utilization information
Project Document Updates
The project documents that may be updated include:
Activity list
Activity attributes
Resource calendars
14
Estimate Activity Durations

Process of estimating the number of work periods needed to complete individual activities with
estimated resources.
Provides the amount of time each activity will take to complete.
Uses information on the activity scope of work, required resource types, estimated resource
quantities, and resource calendars, as well as historical information.
Is progressively elaborated with duration estimates becoming progressively more accurate and of
better quality
Should take into consideration the input datas quality and availability
All assumptions and data used for supporting the duration estimating are documented
Expert judgment
Analogous estimating
Parametric estimating
Three-point estimating
Reserve analysis
15
Historical Information
Available from:
Project files: Records of previous project results that are detailed enough to help in duration
estimating.
Commercial duration estimating databases: Available for standard tasks.
Team members past experience: Individual members of the project team, who worked on
prior similar projects, and who might be able to recollect details of estimates from those
projects for possible application in the current project.
16
Analogous Estimating
(Top-Down Estimating)
*A technique for estimating the duration or cost of an activity or a project using historical data
from a similar activity or project.
It is a gross value estimating approach

Used when there is a limited amount of any in-depth information about the project.
Uses historical information and expert judgment
Less costly and less time consuming than other techniques
Generally less accurate
Most reliable when:
Previous activities are similar in fact and not just in appearance.
Individuals preparing the estimates have the needed experience.
17
Parametric Estimating
*An estimating technique in which an algorithm is used to calculate cost or duration based on
historical data and project parameters.
Uses a statistical relationship between historical information and other variables to calculate an
estimate for activity parameters
Determines how many times the specific work category is going to be performed in the given
activity
Can be applied to a total project or segments of a project

Activity durations=Quantity of work to be performed x Labor hours per unit of work
18
Three-Point Estimating
With limited information to find out activity durations, the three-point estimating technique is
used to find a distribution of the durations for different scenarios.
Three estimates are produced based on prior experience or best-guesses:

O = the optimistic estimate
M = the most likely estimate
P = the pessimistic estimate.
The two commonly used formulae for calculating the expected duration, E, are triangular and
beta distribution formula, which are given below:
Beta Distribution formula: E = (O + 4M + P) / 6
Triangular Distribution formula: E = (O + M + P) / 3
19
Develop Schedule
*The process of analyzing activity sequences, durations, resource requirements, and schedule
constraints to create the project schedule model.
Iterative process
Determines the project activities scheduled start and finish dates
Determines the milestones scheduled start and finish dates
Schedule network analysis

Critical path method
Critical chain method
Resource optimization techniques (like Resource leveling and Resource Smoothing)
Modeling techniques (like What-If Scenario and Simulation)
Leads and lags
Schedule compression
Scheduling tool
20
Constraints and Milestones

Constraints:
*A limiting factor that affects the execution of a project, program, portfolio, or process
Factors that will limit a management teams options for a defined course of action.
An internal or external restriction that will affect the project
Internal to the project - Dates imposed on any planned activity, used to restrict the start or
finish dates for the tasks, start no earlier than and finish no later than types, etc.
External to the project - Market window on a technology project, weather restrictions on
outdoor activities, government-mandated compliance requirements, etc.
Key event or major milestone schedule:
*A summary-level schedule that identifies the major schedule milestones
Denotes identified deliverables and their specified dates of completion, as requested by project
sponsor, customer, or other stakeholders
Once scheduled, milestones may be difficult to shift
21
Mathematical Analysis
Involves calculating theoretical early and late start and finish dates
Popular techniques:
Critical Path Method (CPM):

*Used to estimate the minimum project duration and determine the amount of scheduling
flexibility on the logical network paths within the schedule model.
Used to calculate early and late start and finish dates for each activity based on specified
sequential network logic and activity duration estimates
Project Evaluation and Review Technique (PERT):
*A technique for estimating that applies a weighted average of optimistic (O), pessimistic
(P), and most likely (M) estimates when there is uncertainty with the individual activity
estimates.
The two commonly used formulae for calculating the expected duration, E, are
triangular and beta distribution formula, which are given below:
22
Schedule Compression
*Techniques used to shorten the schedule duration without reducing the project scope
Techniques used are:
Crashing:
*A technique used to shorten the schedule duration for the least incremental cost by
adding resources.
Will only work for those activities on the critical path where additional resources will
reduce the activitys duration
Does not always produce a viable alternative
Could increase either risk or cost, or both risk and cost of the project
Fast tracking:
*A schedule compression technique in which activities or phases normally done in
sequence are performed in parallel for at least a portion of their duration.
Works only if activities overlap
Can result in rework and increased risk
23
Simulation, Resource Leveling, and Critical

Chain Method
Simulation:
Involves calculating multiple project durations with different sets of activity assumptions to
assess the feasibility of the project schedule under adverse conditions, such as delay in major
component delivery, strike, etc. Monte Carlo analysis is the most common simulation
technique.
Resource Leveling
*A technique in which start and finish dates are adjusted based on resource constraints with
the goal of balancing demand for resources with the available supply.
Done because mathematical analysis produces a preliminary early-start schedule that requires
more than the allocated resources during certain time periods
e.g., Rule of thumb allocate scarce resources to critical path activities first.
Often results in a project duration that is longer than the preliminary schedule. (Also called
resource based method).
Critical Chain Method:

*A schedule method that allows the project team to place buffers on any project schedule path
to account for limited resources and project uncertainties.
24
Resource Smoothing
*A technique which adjusts the activities of a schedule model such that the requirement for
resources on the project do not exceed certain predefined resource limits.
In this technique:
Projects critical path is not changed
Completion date may not be delayed
Activities within their free and total float may only be delayed
25
Project Schedule
Should have at least a planned start date and a planned finish date for each activity.
A targeted schedule can also be made with a defined target start and end date for every
activity.
Can be presented in detail or in summary form (referred to as master schedule or milestone
schedule)
Often presented graphically or in tabular form
Graphically presented using:

Milestone charts
Bar charts
Project schedule network diagrams
26
Schedule Updates, Schedule Baseline, and

New Target Schedules
Schedule Updates:
Any modifications to the project schedule
Schedule baseline:
*The approved version of a schedule model that can be changed only through formal change control
procedures and is used as a basis for comparison to actual results.
Component of the project management plan, which is accepted and approved by appropriate stakeholders
Has a baseline start date and baseline finish date. It is an updated version of the project schedule and is
developed from the schedule network analysis
Can be changed to incorporate the approved change requests related to project scope
changes/resources/duration estimates
New target schedules:
If there are small changes to the project schedule, then the schedule baseline is kept constant but new
target schedules may be used.
If the project schedule gets delayed severely, then a new target schedule has to be developed, which
forecasts the start and finish dates needed for providing realistic data for directing work, and measuring
performance and progress.
27
Guide to Mathematical Section

Please login to your PMstudy.com account and read the Guide to Mathematical section slides
for better understanding.
With this we come to the end of the PMstudy Study Guide on Project Time Management.
28
Project Time Management

Formulae section
PERT Estimations
Formula
Term
Beta Distribution
(from the traditional PERT technique)
{Pessimistic+ (4*Most Likely) + Optimistic}

6
Triangular Distribution
(Optimistic + Most Likely + Pessimistic)

3
Standard Deviation (Sigma)
Pessimistic Optimistic
6
Variance
(Standard Deviation)2
For more than one task (e.g., for a project where all tasks lie on the critical path)
Term
Formula
Project PERT Value
Sum of PERT Values of individual tasks
Project Standard Deviation
Square root of project variance
Project Variance
Sum of variances of individual tasks
Tasks in Network Diagrams
Free Float:
*The amount of time that a schedule activity can be delayed without delaying the early start
date of any successor or violating a schedule constrain.
Float =LF EF = LS ES
Total Float:
*The amount of time that a schedule activity can be delayed or extended from its early start
date without delaying the project finish date or violating a schedule constraint.
How to Calculate Critical Path for a

Network Diagram
Find out the lengths of all the paths in the network diagram
The longest path is the critical path
Performing Network Analysis

Let us try to do this through an example.
For the network diagram shown below, we have to calculate:
Critical path
Slack for all the tasks
The customer wants the tasks to be completed within 25 days, so we also have to calculate
the project float.
Performing Network Analysis (continued)

Step 1: Draw a Network Diagram (forward pass, calculate the ES and EF dates)
Please note: Task 5 can begin only after Task 2 and Task 4 are completed. So, the ES for Task 5
is 17 days (because Task 4 can be completed only after 17 days)
Performing Network Analysis

(continued)
Step 2: Calculate the lengths of all paths and determine the Critical Path
Length of all paths:
Task1 ->Task2 -> Task5 : 3+10+4 = 17 days
Task1 -> Task3 -> Task4 -> Task5 :3+6+8+4 = 21days
Critical Path = Longest path = 21 days
Please note that we obtained the same result for EF for Task5 (i.e. 21 days)

Step 3: Calculate Float in all tasks Backward Pass
Please note:
For all the tasks on the Critical Path (i.e., Task1, Task3, Task4, and Task5)
EF = LF and ES = LS
Hence, Slack for the tasks on the Critical Path = LF EF = 0
Slack for Task2 = LF EF = 17 13 = 4

Step 4: Calculate Project Float
Customer wants an end date of 25 days.
Hence project float:
= Total amount of time that the project can be delayed without delaying the
externally imposed project completion date required by the customer.
= 25 21 = 4 days
Please note: The project float can be negative, i.e., the customer wants the task to be
completed sooner than planned in the project schedule. The project, then, needs to be crashed
or fast-tracked.
Crashing
If we need to shorten the duration of the project, then it may be necessary to assign additional
resources to tasks to decrease the time required to complete those tasks.
Crashing is usually a simple exercise in which you examine different alternatives to get the
desired duration compression with minimal increase in cost. There are several examples
relating to crashing in the PMstudy chapter tests.
Please note: You will find several questions on crashing in our chapter test on Project Time
Management. Answering those questions will help you broaden your understanding of the
concept of crashing.
10
Time Management Questions - Practice

Chapter tests on Time management have several mathematical questions.
Please answer these questions to understand such of those concepts of Time management
that are explained in terms of mathematical formulae.
11
End of review of concepts on

Time Management formulae section
12
Project Cost Management

Study Notes
Points To Note
Please read Chapter 7 from Project Management Institute, A Guide to the Project Management
Body of Knowledge, (PMBOK Guide) Fifth Edition, Project Management Institute, Inc., 2013
(pages 193-226)
It is very important to understand all the concepts discussed in this chapter; so, please pay close
attention to all the terms used.
After reading the study notes, please answer the chapter test questions in this knowledge area.
The chapter questions improve your understanding of the concepts discussed in the study notes.
What is Project Cost Management?

*Processes involved in planning, estimating, budgeting, financing, funding, managing and
controlling costs so that the project can be completed within the approved budget.
Processes primarily concerned with the cost of the resources needed to complete the project
activities.
Processes associated with Project Cost Management include:

Plan Cost Management
Estimate Costs
Determine Budget
Control Costs
Please refer to PMBOK Guide Fifth Edition, figure 7-1, page 194. This provides an overview of
the processes in Project Cost Management.
Plan Cost Management

*Process that establishes the policies, procedures and documentation for planning, managing
expending, and controlling project costs.
Component of the project management plan.
**Provides guidance and direction on how the project costs will be managed throughout the
project.
The important inputs to the process are:
Project management plan
Project charter
The tools and techniques used are:

Expert judgment
Meetings
Output of this process is Cost management plan.

**Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) Fifth Edition, Project Management Institute, Inc., 2013, Page 195
Cost Management Plan

*A component of a project or program management plan that describes how cost will be
planned, structured, and controlled.
The cost management processes and their associated tools and techniques are documented in
the cost management plan.
It can establish units of measure, level of precision, level of accuracy, organizational procedures
links, control thresholds, and rules of performance measurement.
Estimate Costs
*The process of developing an approximation of the monetary resources needed to complete
project activities.
It determines the amount of cost required to complete project work.
Cost estimate is a quantitative assessment of the likely costs for resources required to complete
the activity.
**Cost estimates are a prediction based on the information known at a given point in time. It
should be reviewed and refined during the course of the project.
Estimate Costs process identifies and considers costing alternatives to initiate and complete the
project.
The accuracy of estimation of costs increases as the project progresses through its life cycle.
Process outputs are:
Activity cost estimates
Basis of estimates
Project document updates
Differs from pricing: Pricing is what the seller charges for their products or services whereas
costs are what the manufacturer incurs for manufacturing those products or rendering those
services.
Management Institute, Inc., 2013.
Estimate Costs Tools and Techniques

Expert judgment
Analogous estimating
Parametric estimating
Bottom-up estimating
Three-point estimating
Reserve analysis
Cost of quality (COQ)
Project management software
Vendor bid analysis

For details, please refer to PMBOK Guide - Fifth Edition, pages 204-207
Analogous Estimating
(Top Down)
Uses the actual cost of a previous, similar project as the basis for estimating the cost of the
current project.
Frequently used to estimate total project costs when there is a limited amount of detailed
information about the project
Uses historical information and expert judgment

Generally is less costly, less time consuming but less accurate than other techniques
Can be applied to a total project or to segments of a project
Provides reliable information when:
Previous projects are similar in fact and not just in appearance.
Project team members preparing the estimates have the needed expertise.
Bottom-Up Estimating
Method of estimating a component of work.
Estimates the cost of individual activities or work packages to the greatest level of specified
detail.
Summarizes by rolling up the individual estimates to get a project detail.
Summarizes or rolls up detailed costs to higher levels for further reporting and tracking.
The level of accuracy and the cost estimate varies, depending on the size and complexity of the
individual activity or work package.
Parametric Estimating
*An estimating technique in which an algorithm is used to calculate cost or duration based on
historical data and project parameters.
Produces higher levels of accuracy based on the data and the sophistication built into the model.
Can be applied either to a total project or to segments of a project, in conjunction with other
estimating methods.
10
Three-Point Estimating
* A technique used to estimate cost or duration by applying an average of optimistic, pessimistic,
and most likely estimates when there is uncertainty with the individual activity estimates.
Optimistic, most likely, and pessimistic estimates clarify the range of uncertainty of the cost
estimates.
Technique helps in improving the accuracy level of the cost or duration estimates, when the
underlying activity or cost component is uncertain.
Originated with PERT (Program evaluation and review technique). PERT uses this method of
estimating to define the range for an activitys cost.
**The two commonly used formulae for calculating the expected cost, E, are triangular and
beta distribution formula, which are given below:
11
Activity Cost Estimates

*The projected cost of the schedule activity that includes the cost of all resources required to
perform and complete the activity, including all cost types and cost components.
Quantitative assessments of the probable costs required to complete project work.
Estimate the costs for all resources direct labor, materials, equipment, services, facilities,
information technology, and special categories such as an inflation allowance, cost of financing
or a cost contingency reserve.
Indirect costs, if included in the project estimate, can be included at the activity level or higher
levels.
12
AACE Types of Estimates

AACE has identified five types of estimates of construction costs during Engineering
Order of Magnitude
Conceptual
Preliminary
Definitive
Control
Estimate
% Variance
Order Of Magnitude
- 50% to +50%
Budgetary Estimates
- 15% to +25%
Definitive Estimates
- 5% to +10%
13
Determine Budget
*The process of aggregating the estimated costs of individual activities or work packages to
establish an authorized cost baseline.
Determines the cost baseline against which project performance can be monitored and
controlled.
The cost baseline is the approved project budget, but excludes management reserves.
Project budgets constitute all the funds authorized to execute the project.
Main outputs of this process are:
Cost Baseline
Project Funding Requirements
14
Project Schedule and Resource Calendars

Project Schedule:
Part of the project management plan.
Includes planned start and finish dates for the projects activities, milestones, work packages,
and control accounts. This information can be used to aggregate costs to the calendar periods in
which the costs are planned to be incurred.
Resource Calendars:
Provides information on which resources are assigned to the project and when they are
assigned. This information can be used to indicate resource costs over the duration of the
project.
15
Cost Baseline
*The approved version of the time-phased budget, excluding any management reserves, which
can be changed only through formal change control procedures and is used as a basis for
comparison to actual results.
Developed by summing up the approved budgets by time period and is typically displayed in the
form of an S-curve.
16
Revised Cost Estimates, Budget Updates,

Re-baselining
Revised cost estimates
Modification to the cost information used to manage the project
May or may not require adjustments to other aspects of the project plan
Budget updates
Special category of revised cost estimates
Changes to an approved cost baseline
Re-baselining
Process of redefining the cost performance/schedule/performance measurement/technical
baseline.
If cost variances are very severe, re-baselining will be done to provide a realistic measure of
performance.
17
Control Costs
*The process of monitoring the status of the project to update the project costs and managing
changes to the cost baseline.
Provides the means to recognize variance from the plan in order to take corrective action and
minimize risk.
Any increase to the authorized budget can only be approved through the Perform Integrated
Change Control process.
Cost control efforts involve analyzing the relationship between the funds that have been utilized
and the physical work accomplished for such expenses.
For effective cost control, one must be able to manage the approved cost baseline and the
changes to that baseline.
Important outputs are:
Work performance information
Cost forecasts
Change requests
Project Management Plan Updates

18
Control Costs Tools and Techniques

Earned Value Management (EVM)
*A methodology that combines scope, schedule, and resource measurements to assess project
performance and progress.
Commonly used method to measure performance.
The EVM principle is applicable to all projects, in all industries.

Planned Value (PV): *Authorized budget assigned to scheduled work
Earned Value (EV): *The measure of work performed expressed in terms of budget authorized
for that work
Actual Cost (AC): *The realized cost incurred for the work performed on an activity during a
specific time period.
Forecasting
*An estimate or prediction of conditions and events in the projects future based on information and
knowledge available at the time of the forecast.
To-Complete Performance Index (TCPI)
*A measure of the cost performance that is required to be achieved with the remaining resources in
order to meet a specified management goal, expressed as the ratio of the cost to finish the
outstanding work to the remaining budget.

19
Control Costs Tools and Techniques

(continued...)
Performance Reviews
*A technique that is used to measure, compare, and analyze actual performance of work in
progress on the project against the baseline.
It compares cost performance over time, schedule activities or work packages overrunning
and under running the budget, and estimated funds needed to complete work in progress.
Project Management Software:
Used to monitor PV, EV, and AC so as to display graphical trends.
Reserve Analysis:
*An analytical technique to determine the essential features and relationships of components
in the project management plan to establish a reserve for the schedule duration, budget,
estimated cost, or funds for a project.
20
Guide to Mathematical Section

Please login to your PMstudy.com account and read the Guide to Mathematical section slides
for better understanding.
With this we come to the end of the PMstudy Study Guide on Project Cost Management.
21
Project Cost Management

Guide to Mathematical Questions
Payback Period and Life Cycle Cost

Payback Period
Number of years required for an organization to recapture an initial investment

Discount rate is not taken into account in payback period calculations
Project selection criterion: Select a project with a shorter payback period
Example: There are 2 projects. Project A has an investment of $ 500,000 and payback period
of 3 years. Project B has an investment of $ 300,000 and payback period of 5 years.
Using the payback period criterion, which project will you select?
Answer: Project A will be selected. (The fact that project B has a lower investment than
project A will not impact the selection.)
Life Cycle Cost
The overall estimated cost of a particular project alternative over the time period corresponding to the
life of the project. Includes
Direct and Indirect Costs
Periodical or continuing costs of operation and maintenance
Project selection criterion: For 2 projects having the same investment, select a project with lower Life
Cycle Cost.
Return on investment (ROI)

Represents profits in relation to the capital invested.
Used to evaluate the efficiency of an investment by comparison with different investment options.
ROI
= (gain from investment / cost of investment-1)

= Net profit / Investment
Project selection criterion: For 2 projects having the same investment, select a project with lower
Life Cycle Cost.
Present Value, NPV and DCF

Present Value is the future value (FV) of a payment discounted at a discount rate (r) for the delay in payment.
Example of Present Value: Assume that $ 1,100 (FV) is going to be invested one year (n) from now. The
discount rate (e.g. inflation) is 10% (r). What is the Present Value?
Answer: Present Value =
FV
(1 + r/100)n
.=
$ 1,100 . = $ 1,100 = $ 1,000

(1 + 10/100)1
1.1
What this means: The future value of todays $1,000 is $1,100 after one year. Thus, there is a decrease in the value of
money.
Net Present Value (NPV)
Net Present Value (NPV) = (Present Value of All Cash Inflows) - (Present Value of All Cash Outflows)
Project Selection Criteria: Select the project with the maximum Net Present Value. The time value of money is
already taken into account while calculating NPV.
Example: There are 2 projects. Project A has as NPV of $ 1,000 and will be completed in 5 years.
Project B has a NPV of $ 800 and will be completed in 1 year. Which project will you select?
Answer: Project A will be selected. The fact that project B has a lesser duration than project A
does not matter because time is already taken into account in NPV calculations.
This is also called as Discounted cash flow (DCF) analysis
Internal Rate of Return (IRR)

Discount Rate on an investment which makes present value of cash inflows equal to present value
of cash outflows.
Project selection criterion: Select a project with higher IRR
Example: There are 2 projects. Project A has an IRR of 15% and will be completed in 5 years.
Project B has an IRR of 10% and will be completed in 1 year. Which project will you
select?
Answer : Project A will be selected. (The fact that project B has a lesser duration than
Project A does not matter because time is already taken into account in IRR
calculations.)
Benefit Cost Ratio (BCR)

BCR = Benefits (or Payback or Revenue)
Costs
Project selection criterion: Select project with a higher BCR

BCR > 1 means that benefits (i.e. expected revenue) is greater than the cost. Hence it is beneficial
to undertake the project.
Project selection criterion: Select a project with a higher BCR
Example: There are 2 projects. Project A has an investment of $ 500,000 and a BCR of 2.5.
Project B has an investment of $ 300,000 and a BCR of 1.5. Using the Benefit Cost
Ratio criterion, which project will you select?
Answer : Project A will be selected. (The fact that project B has a lower investment than
project A will not impact the selection.)
Benefit / Payback / Revenue = Cost + Profit earned or Cost Loss incurred
Opportunity Cost and Sunk Cost

Opportunity Cost:
This is the cost of passing up the next best choice while making a decision.
Once the best option is decided, the opportunity cost of not choosing the other option is determined.
Example: There are 2 projects. Project A has as NPV of $ 1,000. Project B has a NPV of $ 800. What is the
opportunity cost if Project A is selected?
Answer : If project A is selected, NPV is $ 1,000. If Project A is selected and Project B is rejected,
project with NPV of $ 800 will not be executed. Hence the opportunity cost of Project A
= $ 800.
Sunk Cost:
This is the cost that has already been incurred therefore cannot be avoided.
Project selection criterion: When deciding on the best option, ignore the sunk cost, because it has already been
incurred and cannot be avoided.
Example: Project A had an initial budget of $ 1,000 out of which an amount of $ 800 has already been spent.
To
complete Project A, we still need an additional $ 500. Project B requires $ 1200 to complete. Which
project do you select?
Answer : $ 800 spent in Project A is sunk cost hence should be ignored. So:
Cost of completing project A = $ 500
Cost of completing project B = $ 1200
Hence, we should select project A.
Depreciation
Depreciation is the decrease in value of an asset over a period of time and is considered for
accounting and tax purposes.
Depreciation Methods:
Straight Line Depreciation:
The asset depreciates by the same
amount every year
Initial
Cost
Salvage
Value
Accelerated Depreciation:
The asset depreciates more rapidly in this
method during the initial years as compared
to the Straight Line method.
Other methods of depreciation are:
Double Declining Balance
Sum of the Years Digits
time
Initial
Cost
Salvage
Value
time
Earned Value Management

Earned Value Management is a methodology to asses Project performance and progress.
It combines scope, schedule and resource measurements.
Points to note:
Positive Variances (e.g., SV, CV) are desirable
All ratios greater than 1 (e.g., CPI, SPI) are desirable
Earned Value Management

Acronym
Term
Description
Formula
PV
(BCWS)
Planned Value
(Budgeted Cost of Work
Scheduled)
The value of the work planned to be completed to a

point in time, usually the data date, or project
completion.
EV
(BCWP)
Earned Value
(Budgeted Cost of Work
Performed)
The planned value of all the work completed

(earned) to a point in time, usually the data date,
without reference to actual costs.
Actual Cost
Actual Cost of work completed that is incurred and

recorded.
Schedule Variance
A measure of schedule performance on a project.

Negative SV: Behind schedule
Positive SV: Ahead of schedule
CV
Cost Variance
A measure of cost performance on a project. .

Negative CV : Over budget;
Positive CV : Under budget
EV AC
CPI
Cost Performance Index
A measure of cost efficiency on a project. Value got

for 1$ of actual cost.
EV = (BAC)
AC
(EAC)
SPI
Schedule Performance Index
A measure of schedule efficiency on a project.

Progress as a % of planned progress
EV
PV
AC
SV
EV PV
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) Fifth Edition, Project Management Institute, Inc., 2013, Table 7-1, Page 224.
10
Earned Value Management (continued)

Acronym
EAC
Term
Estimate at
Completion
Description
Formula
The expected total cost when the defined scope of

work will be completed.
1. Original estimating assumptions no longer valid
2. Current variances are atypical; similar variances
will not occur in the future
3. Current variances are typical; similar variances
may occur in the future
4. EAC taking both CPI and SPI into account
1. AC + ETC
2. AC + BAC-EV
3. AC+ {(BAC-EV)/CPI} Or
BAC/CPI
4. AC+{(BAC-EV)/(CPI*SPI)}
BAC
Budget at Completion
Budget for the whole project
EAC * CPI
ETC
Estimate to Complete
From a particular point in time, how much

more time is required to complete the project
EAC AC
VAC
Variance at
Completion
Over or under budget
BAC EAC
TCPI
To-Complete
Performance Index
The work remaining divided by the funds

remaining.
Equation expressed in terms of EAC:
Equation expressed in terms of BAC:
(BAC-EV) / (EAC-AC)
(BAC-EV) / (BAC-AC)
Project Management Institute, A Guide to the Project Management Body of Knowledge, (PMBOK Guide) Fifth Edition, Project Management Institute, Inc., 2013, Table 7-1, Page 224.
11
Project Quality Management

Study Notes
Points to Note
Institute, Inc., 2013 (pages 227 254).
area. The chapter questions improve your understanding of the concepts discussed in this
study notes.
What is Project Quality Management?

*Includes the processes and activities of the performing organization that determine quality
policies, objectives, and responsibilities so that the project will satisfy the needs for which it
was undertaken.
Addresses both the management of the project and the deliverables of the project.
The processes related to Project Quality Management are:
Plan Quality Management
Perform Quality Assurance
Control Quality
Please refer PMBOK Guide - Fifth Edition, figure 8-1, page 230. This will provide an
overview of the processes related to Project Quality Management.
Quality
Quality is defined as the degree to which a set of inherent characteristics fulfill requirements.
Basic approach to Quality discussed here is intended to be compatible with International
Organization for Standardization (ISO ) norms.
In order to ensure customers satisfaction and achieve quality, the projects deliverables have
to conform to requirements and possess fitness for use (must satisfy real needs).
Every project should have a quality management plan and should have data to demonstrate
compliance with the plan.
Quality Policy
*A policy specific to the Project Quality Management Knowledge Area, it establishes the basic
principles that should govern the organizations actions as it implements its system for quality
management.
Overall intentions and direction of an organization with regard to quality.
Approved by the top management.
Flowchart
*The depiction in a diagram format of the inputs, process actions, and outputs of one or more
processes within a system.
**Displays the sequence of steps and the branching possibilities that exist for a process which
transforms one or more inputs into one or more outputs.
They show activities, decision points and the processing order.
During quality planning phase, it assists the project team to foresee quality problems that
might occur.
Also referred as process maps
May prove useful in understanding and estimating the cost of quality in a process.
Some of the common flowcharting tools and techniques:
Cause-and-effect diagrams (Ishikawa/Fishbone diagrams)
System or Process Flowcharts
Quality Management Plan

*Describes how an organizations quality policies will be implemented.
Describes how the project management team plans to achieve the quality requirements set for
project.
Is a component of the project or program management plan
May be formal or informal, highly detailed or broadly framed, based on the requirements of the
project
Should be reviewed early in the project to make sure that decisions taken are based on
accurate information (this review would also help reduce cost and schedule overruns caused
by rework)
The project management team should determine the appropriate levels of accuracy and
precision for use in the quality management plan.
Perform Quality Assurance

*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.
May support the project team and the performing organizations management, the customer or
sponsor, or other stakeholders not actively involved in the work of the project.
Provides continuous process improvement thereby improving the quality of all processes
involved, reducing waste and eliminating activities that do not add value.
Control Quality
*The process of monitoring and recording results of executing the quality activities to assess
performance and recommend necessary changes.
**Identifies the cause of poor process or product quality and recommends and/or takes action
to eliminate them
**Validates that project deliverables and work meet the requirements specified by key
stakeholders necessary for final acceptance.
Should be performed throughout the project.

Please note:
The project management team may have a working knowledge of statistical control processes to
evaluate data contained in the control quality outputs.
Tools and Techniques used for Control

Quality
Seven basic quality tools
Statistical sampling
Inspection
Approved change requests review
It is most likely that some questions may be asked in the PMP Certification exam on tools and
techniques. So, please spend some time to understand them (PMBOK Guide - Fifth Edition
pages 236 239 and 252).
10
Seven Basic Quality Tools

Also known as 7QC Tools
Used within the context of the PDCA cycle to solve quality-related problems
The seven basic quality tools are:
Cause-and-effect diagrams (also known as Fishbone diagrams or Ishikawa diagrams)
*A decomposition technique that helps trace an undesirable effect back to its root cause.
Flowcharts (also referred as Process maps)
*The depiction in a diagram format of the inputs, process actions, and outputs of one or
more processes within a system.
Checksheets
*A tally sheet that can be used as a checklist when gathering data.
Pareto diagrams
*A histogram, ordered by frequency of occurrence, that shows how many results were
generated by each identified cause
11
Seven Basic Quality Tools (continued)

Histograms
*A special form of bar chart used to describe the central tendency, dispersion, and a
shape of a statistical distribution.
Control Charts
*Graphic display of process data over time and against established control limits, which
has a centerline that assists in detecting a trend of plotted values toward either control
limit
Scatter Diagrams (also called correlations charts)
*Uses a regression line to explain or to predict how the change in an independent
variable will change a dependent variable.
For more details regarding the seven basic quality tools, please spend some time to understand
them (PMBOK Guide - Fifth Edition pages 236 239).
12
Project Human Resource Management

Study Notes
Points to Note
It is very important to understand all the concepts discussed in this chapter, so please pay
close attention to all the terms used.
study notes.
What is Project Human Resource

Management?
*Includes the processes that organize, manage and lead the project team.
The project team is comprised of the people with assigned roles and responsibilities for
completing the project.
The Human Resource Management processes are:

Plan Human Resource Management
Acquire Project Team
Develop Project Team
Manage Project Team
Please refer to figure 9-1, on page 257, in PMBOK Guide - Fifth Edition, which provides
an overview of the processes in Project Human Resource Management
Plan Human Resource Management

*The process of identifying and documenting project roles, responsibilities, required
skills, reporting relationships, and creating a staffing management plan.
Establishes project roles and responsibilities, project organization charts, and the
staffing management plan.
Is closely linked with Communications Planning, since the performing organizations

structure has a major influence on the projects human resource requirements.
Is planned in the early stages in most projects.
Human resource management plan is the output of this process.

A component of the Project Management Plan
Describes how the roles and responsibilities, reporting relationships and the staff
management will be addressed and structured
Human Resource Management Plan

*A component of the project management plan that describes how the roles and
responsibilities, reporting relationships, and staff management will be addressed and
structured.
Should definitely include:

Role and responsibility assignments:
Project roles and responsibilities are closely linked to the Define Scope process.
Roles (who does what), authority (who decides what), responsibility (work
expected to be performed), and competency (skill and capacity needed to
complete the activities in the project) are defined, and role clarity is documented
for the projects human resources.
Project organization chart:

Is a graphical display of project team members and their reporting relationships
Can be formal/informal, highly detailed/broadly framed depending on the needs
of the project
Human Resource Management Plan

(continued)
Staffing management plan which includes:
Timetables for staff acquisition and release
Identification of training needs,

Team building strategies
Plans to recognize and reward programs
Compliance considerations
Safety Issues
Impact of the staffing management plan on the organization
For details, please refer to PMBOK Guide - Fifth Edition, page 264-267
Acquire Project Team

*The process of confirming human resource availability and obtaining the team necessary
to complete project activities.
Outlines and guides the team selection and responsibility assignment to obtain a
successful team.
Points the project manager/project management team has to consider while acquiring the
project team:
Effectively negotiate and influence those who can provide required human resources
Failure to acquire the required human resources could affect the success of the project
and could even result in project cancellation
Alternative resources, even if less competent, should be assigned if, for any reason,
the required human resources are not available. By so doing, no
regulatory/legal/mandatory, or any other criteria should be violated
Acquire Project Team (continued)

The tools and techniques used for this process are:
Pre-assignment
Negotiation
Acquisition
Virtual teams
Multi-criteria decision analysis
Acquire Project Team (continued)

The outputs for the Acquire Project Team process are:
Project staff assignments: The project staff members are assigned, and the
assignments are documented
Resource calendars: They document the time periods each member is available to
work on the project
Project management plan updates: The project management plan should be

updated with human resource management plan after completion of the above two
sub-processes.
Develop Project Team

*The process of improving competencies, team member interaction, and overall team
environment to enhance project performance.
Results in enhanced people skills and competencies, improved teamwork, reduced
staff turnover rates, motivated employees, and improved overall project performance.
Objectives of developing a project team include:
Enhance the skills and knowledge of team members
Enhance a feeling of trust and agreement among team members
Enhance cohesiveness among team members to improve both individual and team
productivity
10
Develop Project Team (continued)

Tools and techniques used for Develop Project Team process are:
Interpersonal Skills
Training
Team Building Activities
Ground Rules
Colocation
Recognition and Rewards
Personnel Assessment Tools
For more details, please refer to PMBOK Guide - Fifth Edition, pages 275-278.
11
Manage Project Team

*The process of tracking team member performance, providing feedback, resolving
issues, and managing team changes to optimize project performance.
**Influences team behavior, manages conflict, resolves issues, and appraises team
member performance.
Project team management achieves the following objectives:
Change results are submitted
Human resource management plan is updated
Issues are resolved
Inputs for performance appraisals are provided
Lessons learned document is added to the organizations database
12
Manage Project Team (continued)

The tools and techniques used for this process are:
Observation and conversation
Project performance appraisals
Conflict management
Interpersonal skills
For more details, please refer to PMBOK Guide - Fifth Edition, pages 282-284
13
Handling Conflicts
There are five general techniques for resolving conflict.
Withdraw/Avoid: Retreating from an actual or potential conflict situation or
postponing the issue.
Smooth/Accommodate: Emphasizing areas of agreement rather than areas of
difference; conceding ones position to the needs of others.
Compromise/Reconcile: Searching for solutions that bring some degree of
satisfaction to all parties in order to resolve the conflict.
Force/Direct: Pushing ones viewpoint at the expense of others; offering only winlose solutions.
Collaborate/Problem Solve: Incorporating multiple viewpoints and insights from
differing perspectives.
14
Maslows Hierarchy of Needs
Source: Project Management - A Systems Approach To Planning, Scheduling, And Controlling (pages 195-196)
15
Herzberg's Theory of Motivators and

Hygiene Factors
Factors such as company policy, supervision, interpersonal relations, working
conditions, and salary are the hygiene factors. The absence of the hygiene factors can
create job dissatisfaction, but their presence does not guarantee motivation or
satisfaction.
Achievement, recognition, the work itself, responsibility, and advancement are

motivators (satisfiers). They are associated with long-term positive effects in job
performance. The hygiene factors (dissatisfiers) consistently produce only short-term
changes in job attitudes and performance.
The satisfiers relate to what a person does, while the dissatisfiers relate to the situation
in which the person does what he or she does.
16
Conflict Intensity
Most of the conflicts occur due to the following issues (in order of decreasing intensity)
Schedules
Highest Intensity
Priorities
Manpower
Technical
Procedures
Personality
Costs
Lowest Intensity
Source: Project Management - A Systems Approach to Planning, Scheduling, and Controlling, page 302
17
Management/Leadership Styles
Some common management/leadership styles are:
Autocratic: Manager makes decisions himself or herself- allows subordinates little
involvement and discussion before a decision is made.
Laissez faire: Manager does not interfere with subordinates so subordinates are
largely unsupervised, which may lead to anarchy.
Democratic: Manager allows subordinates to discuss issues and reach decisions,
although he or she will guide and advise.
Discussing: There is two-way communication and discussion between manager
and subordinates.
Directing: Managers tell people what tasks will be performed and when and how
they should be done.
Delegating: Manager delegates to get consensus on what has been achieved and
what needs to be done.
18
Management/Leadership Styles (continued)

Coaching: Manager issues instructions to others.
Facilitating: Manager coordinates inputs from several sources before making a
decision.
Participatory :Managers interact with other participants as peers to see what they
can discover and create together.
Supportive : Manager is interested in as in giving employees the tools they need to
work themselves more than giving orders and managing every detail.
Task oriented: The Manager focuses on the tasks that need to be performed in
order to meet certain goals or performance standards.
Team-based: Manager focusses on having a well performing team.
Assertive
19
Types of Roles People Play in a Project

Destructive Roles
Supportive Roles
Aggressor
Information Seekers
Dominator
Information Givers
Devils Advocate
Encouragers
Topic Jumper
Clarifiers
Recognition Seeker
Harmonizers
Withdrawer
Consensus Takers
Blocker
Gate Keepers
Initiators
Reference: A Systems Approach to Planning, Scheduling, and Controlling (pages 181-182)
20
Delegation
A method and style of management by which the project manager distributes
responsibility for proper performance of a task to a team member working on the
project.
Project manager, even after delegating responsibility to a team member, still retains the
ultimate responsibility for the end results.
Project manager also agree to be held accountable for the decision to delegate
Project managers should delegate:
Routine tasks
Tasks that require technical expertise
What someone else can do better
Projects involving the critical, visible issues of quality, quantity, cost, and timeliness to self-
21
Delegation (continued)
Involves:
Giving responsibility (obligation to perform the assigned tasks)

Gaining acceptance (the team member's agreement to be responsible)
Granting authority (the right and power to accomplish the tasks)

Expecting reliability (assurance of best and consistent effort)
Requiring accountability (accepting responsibility for success or failure).
managed project teams or self-directed teams.
Please note: The concept and process of delegation can be illustrated by the "4D's" model (Drop, Delay,
Delegate, and Do).
22
Project managers should not fully delegate:
Long range planning (although they should involve others)
Selection, monitoring, motivation, evaluation (performance appraisal) and rewarding of

key team players
Personal matters
Practical method for effective delegation:
There are eight essential ingredients of effective delegation, which can be represented by
the acronym: 2 x ETFP, which stands for Easy To Follow Procedures. Effective and
successful delegation involves four steps, each having two major ingredients.
E Entrust and Enlist
T Teach and Touch
F Familiarize and Follow up
P Praise (the Process) and Participate (in Feedback)
23
The project manager must assign responsibility, grant appropriate authority, expect
reliability, and require accountability from the delegatees.
Authority confers the right to impose some degree of obedience.
Responsibility confers the obligation on the delegatee to act with or without detailed
guidance or specific authorization.
Reliability encompasses two main factorstrack record and quality of work.
Accountability in the project context is the extent to which individuals are answerable
and must provide visible evidence of their actions.

Reference: Organizing Projects for Success (Human Aspects of Project Management) by Vijay Verma.
Chapter 4: Important Issues in Project Organizational Design
24
25
Project Communications Management

Study Notes
Points to Note
Institute, Inc., 2013 (pages 287 - 308).
study notes.
What is Project Communications

Management?
*Processes that are required to ensure timely and appropriate planning, collection, creation,
distribution, storage, retrieval, management, control, monitoring, and the ultimate disposition of
project information.
Project managers spend most of their time communicating with team members and other
project stakeholders internal or external to the organization.
The Project Communications Management processes include the following:
Plan Communications Management
Manage Communications
Control Communications
Please refer to PMBOK Guide - Fifth Edition, figure 10-1, page 288, which provides an overview
of the processes included in Project Communications Management.
Importance of Communications
Management
Project managers spend more than 90% of their time communicating with team members and
other project stakeholders internal (at all organizational levels) or external to the
organization.
The project manager should effectively and efficiently communicate with stakeholders.
Managing communications is very vital for any project.
Although the project manager should pay a lot of attention to managing communications, he
cannot control all the communications, because there are just too many channels. The formula
used to calculate the total number of communications channels is n*{(n-1)/2}, where n refers to
the number of stakeholders.
The project manager uses a variety of communication methods to share information among
stakeholders. He or she should decide what, how, and when to use each communication
method.
A failure in communication can have a negative impact on the project.
Various Forms of Communication and

Their Characteristics
Form of
Communication
Written Formal
Characteristics
Precise
Transmitted through the
medium of correspondence
Written Informal
Oral Formal
Project charter, scope statement, project

plan, WBS, project status
Complex issues
Contract related communications
Memos
Email, notes, letters, etc.

Regular communication with team members
High degree of flexibility

Use the medium of
personal contact, group
meetings, or telephone
Presentations, speeches,
Negotiations
Conversation with team members
Project meetings
Break-room or war-room conversations
About 55% of total

communication
Facial expressions, hand movements, tone

of voice while speaking, etc.
Oral Informal
Non-verbal
Communication
Examples
Reference: Project Management - A Systems Approach To Planning, Scheduling, and Controlling, Ninth Edition, Page 273
Plan Communications Management

*Process of developing an appropriate approach and plan for project communications based
on stakeholders information needs and requirements, and available organizational assets.
**Identifies and documents the approach to communicate most effectively and efficiently with
stakeholders.
Planning the project communications is important to the ultimate success of any project.
Mostly performed during the early stages of the project, i.e., during developing project
management plan.
Is linked with enterprise environmental factors, because projects organizational structure
impacts the projects communication requirements.
The results of this process should be reviewed regularly throughout the project and revised as
needed to ensure continued applicability.
Communications management plan is the main output of this process (for more details, please
refer to PMBOK Guide - Fifth Edition, pages 296-297).
Communications Management Plan

*A component of the project, program, or portfolio management plan that describes how,
when, and by whom information about the project will be administered and disseminated.
Usually includes:
Stakeholder Communication requirements

Information to be communicated, including, time frame, frequency, format, content, level of
detail, etc.
Person responsible for communicating information, for authorizing release of confidential
information, and persons going to receive information
Technologies/methods used to convey information

Resources allotted for communication activities
Escalation process, identifying the time frames and management chain
Flow charts of the information flow, workflows with possible sequence of authorization, list
of reports, and meeting plans, etc.
Communication constraints derived from legislation, regulation, technology, etc.
Method of updating and refining the communications management plan as project
progresses and develops
Plan Communications Management - Tools

and Techniques
Communication Requirements Analysis
*An analytical technique to determine the information needs of the project stakeholders
through interviews, workshops, study of lessons learned from previous projects, etc.
Determines the information needs of the stakeholders.
Determines and limits who will communicate with whom and who will receive what
information.
Communication Technology
*Specific tools, systems, computer programs, etc., used to transfer information among
project stakeholders.
Communication Models
Used to facilitate communications and the exchange of information
Demonstrate how the information is transmitted and received between the sender and the
receiver
Plan Communications Management - Tools

and Techniques (continued)
Communication Methods
Are classified as interactive, push, and pull communications
Meetings
Meetings may be virtual, face-to-face, formal, or informal
May include project team members and other project stakeholders
(For more details, please refer to PMBOK Guide Fifth Edition, pages 291-295)
Manage Communications
*Process of creating, collecting, distributing, storing, retrieving, and the ultimate disposition of
project information in accordance with the communications management plan.
Enables an efficient and effective communications flow between project stakeholders.
Communication technology
Communication models
Communication methods
Information management systems
Performance reporting
Outputs of this process are:
Project communications
Project management plan updates

Project documents updates
Organizational process assets updates
10
Control Communications
*Process of monitoring and controlling communications throughout the entire project life cycle
to ensure the information needs of the project stakeholders are met.
Ensures an optimal information flow among all communication participants, at any moment in
time.
**Triggers an iteration of the Plan Communications Management and /or Manage
Communications processes.
Inputs to this process are:

Project communications
Issue log
Work performance data
Organizational process assets
11
Control Communications (continued)

Expert judgment
Meetings
Outputs are:
Change requests
12
Project Risk Management

Study Notes
Points to Note
Risk Management is not only one of the most extensive process areas in project
management containing several terms and concepts which need to be understood but
also the most vital for project success.
Please read chapter 11 from Project Management Institute, A Guide to the Project
Management Body of Knowledge, (PMBOK Guide) Fifth Edition, Project
Management Institute, Inc., 2013 (pages 309 to 354).
The study notes explain topics that are important for PMP exam preparation and you
can expect several questions from these topics.
Pay close attention to all the terms used. It is very important to understand all the
concepts discussed in this chapter.
Please study the terms and concepts in this Knowledge Area very carefully as
explained in PMBOK Guide Fifth Edition.
After reading the study notes, please answer the chapter test questions in this
Knowledge Area. The chapter questions improve your understanding of the concepts
discussed in this study notes.
What is Project Risk Management?

*The processes of conducting risk management planning, identification, analysis,
response planning, and controlling risk on a project.
Increase the likelihood and impact of positive events, and decrease the likelihood and
impact of negative events in the project.
The Risk Management processes are:
Plan Risk Management
Identify Risks
Perform Qualitative Risk Analysis
Perform Quantitative Risk Analysis
Plan Risk Responses
Control Risks
Please refer to PMBOK Guide Fifth Edition, figure 11-1, page 312. This provides an
overview of Project Risk Management.
Plan Risk Management

*The process of defining how to conduct risk management activities for a project.
Ensures that the degree, type, and visibility of risk management are commensurate
with both the risks and the importance of the project to the organization.
Expert judgement
Meetings
Risk Management Plan

*A component of the project, program, or portfolio management plan that describes
how risk management activities will be structured and performed.
An output of Plan Risk Management process.
It includes:
Methodology
Roles and responsibilities
Budgeting
Timing
Risk categories
Definitions of risk probability and impact
Probability and impact matrix
Revised stakeholders tolerances
Reporting formats
Tracking
Identify Risks
*The process of determining which risks may affect the project and documenting their
characteristics.
**Documentation of existing risks and the knowledge and ability it provides to the
project team to anticipate events.
This is an iterative process, because new risks may evolve or become known as the
project progresses through its life cycle.
Tools and techniques used are:
Documentation reviews
Information gathering techniques (Brainstorming, Delphi technique, Interviewing,
Root cause analysis)
Checklist analysis
Assumptions analysis
Diagramming techniques (Cause and effect diagrams, System or process flow
charts, Influence diagrams)
SWOT analysis
Expert judgment
Identify Risks (continued)

Risk Register is an output of this process.
*Risk register: A document in which the results of risk analysis and risk response
planning are recorded.

*The process of prioritizing risks for further analysis or action by assessing and
combining their probability of occurrence and impact.
Enables project managers to reduce the level of uncertainty and to focus on highpriority risks.
Is usually a rapid and cost-effective means to prioritize risks for Plan Risk Responses
process.
Lays foundation for Perform Quantitative Risk Analysis process, if required.
Is performed regularly throughout the project life cycle.
Risk probability and impact assessment
Probability and impact matrix
Risk data quality assessment
Risk categorization
Risk urgency assessment
Expert judgment

(continued)
Output of this process is project documents updates.
The project documents that are updated are Risk Register and Assumptions log.
The information that may be updated to a risk register may include:
i.
Assessments of probability and impacts for each risk
ii.
Risk ranking or scores
iii.
Risk urgency information or risk categorization
iv.
A watch list for low probability risks or risks requiring further analysis
Assumptions may be incorporated into the project scope statement or in a separate

assumptions log.
Perform Quantitative Risk Analysis

*The process of numerically analyzing the effect of identified risks on overall project
objectives.
Produces quantitative risk information to support decision making in order to reduce
project uncertainty.
Is performed on risks that have been prioritized by the Perform Qualitative Risk
Analysis process.
In some cases, it may not be possible to execute the Perform Quantitative Risk
Analysis process due to lack of sufficient data to develop appropriate models.
Tools and techniques used in this process are:
Data gathering and representation techniques (Interviewing and Probability

distributions)
Quantitative risk analysis and modelling techniques (Sensitivity analysis, Expected
monetary value analysis, Modelling and simulation)
Expert judgment
Outputs of this process is project document updates.
10
Plan Risk Responses

*The process of developing options and actions to enhance opportunities and to
reduce threats to project objectives.
It addresses the risks by their priority, inserting resources and activities into the
budget, schedule, and project management plan as needed.
Strategies for negative risks or threats (Avoid, Transfer, Mitigate, Accept)
Strategies for positive risks or opportunities (Exploit , Enhance, Share, Accept)
Contingent response strategies
Expert judgment
The outputs of this process are:
11
Control Risks
*The process of implementing risk response plans, tracking identified risks, monitoring
residual risks, identifying new risks, and evaluating risk process effectiveness
throughout the project.
Applies techniques, such as variance and trend analysis, which require the use of
performance information generated during project execution.
Also involves:
Choosing alternative strategies
Executing a contingency/fallback plan
Taking corrective action
Modifying the project management plan
12
Control Risks (continued)

Risk reassessment
Risk audits
Variance and trend analysis
Technical performance measurement

Reserve analysis
Meetings
Change requests
13
Utility Function
Ultimate decision on how to deal with risk is based in part on Project Managers
tolerance for risk this is measured by Utility function.
Y axis refers to Utility, i.e. satisfaction that the project manager gets from a payoff. X
axis refers to the amount of money at stake.
$
Risk Neutral
$
Risk Averter
$
Risk Seeker
14
Project Procurement Management

Study Notes
Points to Note
After reading the study notes, please answer the chapter test questions in this Knowledge
Area. The chapter questions improve your understanding of the concepts discussed in the
study notes.
What is Project Procurement Management

*Includes the processes necessary to purchase or acquire products, services, or results
needed from outside the project team.
The procurement management processes are:
Plan Procurement Management

Conduct Procurements
Control Procurements
Close Procurements
Please refer to figure 12-1, page 356. This provides an overview of the processes in Project
Procurement Management.
Understanding Terms and Concepts

Project Procurement Management has several terms and concepts, which need to be studied
and properly understood to perform well in the PMP exam.
Please carefully study the terms and concepts explained in this section (also in the Terms and
Concepts module of our study materials) to fare well in the PMP exam.
Plan Procurement Management

*Process of documenting project procurement decisions, specifying the approach, and
identifying potential sellers..
**Determines whether to acquire outside support, and if so, what to acquire, how to acquire it,
how much is needed, and when to acquire it.
Includes evaluating the risks involved with each make-or-buy analysis, reviewing the type of
contract planned to be used with respect to avoiding or mitigating risks, sometimes transferring
risks to the seller.
Make or Buy Analysis

*Process of gathering and organizing data about product requirements and analyzing them
against available alternatives including the purchase or internal manufacture of the product.
Analysis should include:

Both indirect and direct costs
Prospective as well as the immediate needs of the performing organization.
For example:
Whether a capital goods item can be used for other current or future projects of the
organization (ongoing need of the item)
Additional capacity is available for use within the organization
Proprietary or business critical activity, which is core business for the company (e.g.,
designing of chips in a chip manufacturing company)
Available contract types should also be considered during the buy analysis.
Make or Buy Analysis (continued)

1. Comparing the cost of Make or Buy
Question: You are considering whether to buy or make a software product:
If you buy, the cost is $ 80,000, and the cost of procurement and integrating in your
company is $ 1,000
If you want to make it yourself, the product will require seven software engineers working
three months. Salary of each software engineer is $ 4,000 per month. The overhead costs
apportioned to the project will be $ 2,000.
Which option will you choosemake or buy?

Answer: If you buy, cost will be: $ 80,000 + $ 1,000 = $ 81,000
If you make, cost will be: $ 4,000 x 7 x 3 + $ 2,000 = $ 86,000
So, it is better for you to buy.
Make or Buy Analysis (continued)

2. Comparing the cost of Lease or Buy:
Question: You are considering whether to buy or lease a machine for your heavy engineering
plant. How will the duration of the project influence your decision?
If you buy, the cost is $ 29,000, and the one-time cost of procurement and integrating in
your company is $ 1,000
If you lease, you have to pay $ 10,000 as down payment and $ 5,000 per month
Answer: If you buy, cost is: $ 29,000 + $ 1,000 = $ 30,000

Assuming the lease is for M months, the cost is: $ 10,000 + $ 5,000 x M
The cost of buy = cost of lease, if : $ 30,000 = $ 10,000 + $ 5,000 x M
M = 20,000/5,000 = four months
So, if the duration of the project is less than four months, you should leaseotherwise, you
should buy.
Contract Type Selection
Types of Contracts
Types of contracts include:
Cost-plus percentage fee

Cost-plus fixed fee
Cost-plus guaranteed maximum
Cost-plus guaranteed maximum and shared savings
Cost-plus incentive (award fee)
Cost and cost sharing
Fixed price or lump sum
Fixed price with redetermination
Fixed price incentive fee
Fixed price with economic price adjustment
Fixed price incentive with successive targets
Fixed price for services, material, and labor at cost (purchase orders, blanket agreements)
Time and material/labor hours only
Bonus-penalty
Combinations
Joint venture
Reference: Project Management - A Systems Approach To Planning, Scheduling, And Controlling, Pages 1147-1151
10
Important Fixed Price Contracts

Fixed price or lump sum:
Contractor performs the work for negotiated value.

If estimated target cost is low, profit for seller may be low or even nil.
Lowest risk to the buyer, highest risk to the seller
Usually requires a long period for preparation of bids; also buyers include many contingency
provisions to protect their interests
Done only when the product is very well-defined; subsequent changes made might lead to trouble
and sometimes considerable expenses
Fixed price incentive fee:
Allows for adjustment of the total profit by a formula that depends on the final total cost at the
completion of the project.
There is an incentive to the seller to decrease costs.
Fixed price with redetermination:
Prospective: allows for future negotiations of some fixed prices contracts at specified times
Retroactive: allows for adjustment of contract price after performance has been completed
Fixed price with economic price adjustment:

Allows for price increases, if the contract is for multiple years (for example, to account for inflation)
11
Important Cost Reimbursable Contracts

All cost reimbursable contracts require that the sellers books be audited.
Cost plus fixed fee:
Cost may vary, but the fee remains the same

Provides incentive to the contractor for early completion of the job
Cost plus percentage of costs:
Not preferred, because there is no incentive for the seller to control costs
Is illegal in several companies and countries
Cost plus incentive fee:
Same as cost plus contracts, except that these have provision for adjustment of the fee that
compares the total project cost to the target cost.
Usually used for long-term (e.g., R&D) contracts
12
Procurement Management Plan

*A component of the project or program management plan that describes how a project team
will acquire goods and services from outside the performing organization.
Can be formal/informal, highly detailed/broadly framed and it is based on the needs of each
project.
Describes how the remaining procurement processes (from developing procurement
documents through contract closure) will be managed and includes:
Types of contracts to be used

Persons who prepare independent estimates and when
Actions taken by the procurement department and the project team
Sources of standardized procurement documents
Methods to manage multiple providers
Ways to coordinate procurements with the other aspects of the project
13
Conduct Procurements
*Process of obtaining seller responses, selecting a seller, and awarding a contract.
Provides alignment of internal and external stakeholder expectations through established
agreements.
Bidder conferences
Proposal evaluation techniques
Independent estimates
Expert judgment
Advertising
Procurement negotiations
Important outputs are:

Selected sellers
Agreements
14
Control Procurements
*Process of managing procurement relationships, monitoring contract performance, and making
changes and corrections to contracts as appropriate.
**Ensures that both the sellers and buyers performance meets procurement requirements according
to the terms of the legal agreement.
Includes application of appropriate project management processes to the contractual relationship(s)
and integration of the outputs from these processes into the overall management of the project
Important Tools and Techniques:
Contract change control system

Monitoring performance (procurement performance reviews, inspections, and audits, performance
reporting)
Managing payments (payment systems, claims administration, and records management system)
Outputs are:

Change requests
Updates to project management plan, project documents, and organizational process assets
15
Close Procurements
*Process of completing each procurement.
Documents agreements and related documentation for future reference.
Verifies that all work and deliverables from the contract are acceptable
Early termination of the contract is a special case of procurement closure
Procurement audits
Procurement negotiations
Records management system
Outputs are:
Closed procurements
16
Project Stakeholder Management

Study Notes
Points to Note
study notes.
Project Stakeholder Management

*Processes required to identify all people or organizations impacted by the project, analyzing
stakeholder expectations, and impact on the project, and developing appropriate management
strategies for effectively engaging stakeholders in project decisions and execution.
Focuses on continuous communication with stakeholders in order to understand their needs
and expectations, address their issues as they occur, manage conflicting interests, and foster
appropriate stakeholder engagement in project decisions and activities.
Stakeholder satisfaction should be managed as a key project objective.
The Project Stakeholder Management processes include the following:
Identify Stakeholders
Plan Stakeholder Management
Manage Stakeholder Engagement
Control Stakeholder Engagement
Please refer to PMBOK Guide - Fifth Edition, figure 13-1, page 392, which provides an overview
of the processes included in Project Stakeholder Management.
Identify Stakeholders
*The process of identifying the people, groups, or organizations that could impact or be
impacted by a decision, activity, or outcome of the project; and analyzing and documenting
relevant information regarding their interests, involvement, interdependencies, influence, and
potential impact on project success.
**Allows the project manager to identify the appropriate focus for each stakeholder or group of
stakeholders.
It is critical for project success to identify the stakeholders early in the project or phase.
The identified stakeholders need to be analzyed and classified according to their importance,
expectations, level of interest, involvement, and influence.
Enables the project manager to focus on the relationships necessary to ensure the success of
the project.
Identify Stakeholders (continued)

Stakeholder analysis
Expert judgment
Meetings
Stakeholder register is an output of this process
*Stakeholder analysis is a technique of systematically gathering and analyzing quantitative and
qualitative information to determine whose interests should be taken into account throughout
the project.
*Stakeholder register is a project document including the identification, assessment, and
classification of project stakeholders.
Plan Stakeholder Management

*The process of developing appropriate management strategies to effectively engage stakeholders
throughout the project life cycle, based on the analysis of their needs, interests and potential impact
on project success.
Provides a clear, actionable plan to interact with project stakeholders to support the projects
interests.
Identifies how the project will affect its stakeholders.
The inputs to this process are:
Stakeholder register
Enterprise environmental factors
Organizational process assets
Expert judgment
Meetings
Stakeholder management plan is the main output (for more details, please refer to PMBOK Guide
Fifth Edition, pages 403 and 404).
Stakeholder Management Plan

*Defines the processes, procedures, tools and techniques to effectively engage stakeholders
in project decisions and execution based on the analysis of their needs, interests, and potential
impact.
This is a subsidiary of the project management plan.
For more details on stakeholder management plan, please refer to PMBOK Guide - Fifth
Edition, pages 403 and 404.

*Process of communicating and working with stakeholders to meet their needs/expectations,
address issues as they occur, and foster appropriate stakeholder engagement in project
activities throughout the project life cycle.
Benefits:
Increases the chances for project success
Helps stakeholders understand the benefits and risks associated with the project, thus
securing their involvement and support
Minimize resistance from stakeholders
Keeps the project on track by resolving stakeholder issues
Project Manager is responsible for stakeholder management.
Communications Methods
Interpersonal skills
Management skills

(continued)
Issue log
Change requests
Issue log
*A project document used to document and monitor elements under discussion or in dispute
between project stakeholders.
Change log
*A comprehensive list of changes made during the project. This typically includes dates of
the change, and impacts in terms of time, cost, and risk.

*The process of monitoring overall project stakeholder relationships and adjusting strategies
and plans for engaging stakeholders.
Maintain or increase the efficiency and effectiveness of stakeholder engagement activities as
the project evolves and its environment changes. Stakeholder engagement should be
continuously controlled.
**Stakeholder engagement activities are included in the stakeholder management plan and
are executed during the life cycle of the project.
Input for this process are:
Project Management plan
Issue log
Work performance data
Project documents
Expert judgment
Meetings
10

(continued)
Outputs are:

Change requests
11

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Project Management Framework

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Projects and Operations

Temporary - has definite

Deliver service/product and

Create unique product or

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Programs, PMO, and Portfolios

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Programs, PMO, and Portfolios (continued)

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Portfolio Managers/ Portfolio Review Board:

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Characteristics of Project Stakeholders

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Organizational StructuresTheir Influence

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Comparison of Functional vs. Projectized

Project Manager's authority

High to almost total

Ability to get resources for

Very difficult, because resources work

Easier to get resources

Resources report to Functional

Resources report to Project Manager

Dedication to the project

Done by Functional Manager

Done by Project Manager

Home for the resource after

Available, resources go back to

No home after project is completed

Well developed, because resources

Not as well developed, team members

Efficient allocation of resources

Less efficient- duplication of job

Well defined - along functional

Depends on type of project, no well

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Some Important Terms

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Product Life Cycle, Project Life Cycle,

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Project Life Cycle - Features

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Project Life Cycle - Characteristics

Project Life Cycle Characteristics

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Project Life Cycle Characteristics

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Key General Management Skills

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Project Integration Management

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What is Project Integration Management?

Develop Project Charter

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Some Examples of Integration Processes

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Earned Value Analysis

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