Contingency Plan vs Workaround Although many people use the terms contingency plan interchangeably with workaround, they

are not the same. The difference between the two terms is related to whether the problems being handled were identified ahead of time or not. Contingency plans are made based on potential risks that are identified that could derail a project. Workarounds are responses to problems that develop while the project is being worked that were never identified. When a project plan is first put together, potential risks are identified that could pose a significant threat to the project if they occur. Contingency plans are developed around those possible issues and they are completed before the threat takes place. These contingency plans should address the objective of the plan, the criteria for activating the contingency plan, the people and responsibilities involved, and the additional details required for implementation. Here is an example of a contingency plan. A company that produces skis has a project to stock its retail stores with the latest models for the winter season. While the project was being planned, a risk was identified regarding a potential strike. The project continued, but a contingency plan was developed in case the strike lasted longer than anticipated. In the case that the strike was not over by a pre-identified date, the company decided to reassign the work that was to be done by the factory on strike to alternative factories. Potential costs were reviewed and it was determined that this contingency plan would be beneficial. A workaround is not a planned response because the problems being addressed were not anticipated ahead of time. Per the name, a workaround lets you work around the problem. As soon as it is determined that there is an unanticipated problem, it needs to be addressed, researched and incorporated into the documentation of the project plan. A corrective action must be taken occasionally to make sure the project stays in line with the projected results. Examples of corrective action include the implementation of both contingency plans as well as workarounds. Most projects will require the implementation of a contingency plan or will require a workaround to be created. Since larger projects tend to be more complex, these are common fixtures as the size of the project increases. The PMBOK Guide discusses both Workaround and Contingency Plans in sections 11.5.3 11.6.3 in its fourth edition. A risk register is a critical project document and should not be short changed. Regardless of how well your project is planned and executed, there are always risks associated with it. The key to a successful project is being aware of those risks and documenting them so that if they materialize, they dont completely derail the project. Each potential risk is identified and added to the risk register. Then the risk is analyzed to decide how likely it is to occur, how much of an effect it would have and whether or not any steps should be taken to either reduce the likelihood of the risk occurring or to mitigate the possible damage. In many cases, plans are also made on how to handle the situation if the risk occurs. This may include the steps that must be taken and who will be responsible for those actions. Being prepared is an essential part of a successful project. Completing a comprehensive risk register, and reviewing it after each stage of the project is completed will help to keep the project on track and ensure that it s a success. A good risk register also makes it easier to keep senior management aware of the risks associated with a project so that they are not surprised. One final note: The risk register is not part of the project management plan but it is instead just another project document. See PMBOK Guide, Appendix A, Table A-1. =================================================================================== There are two separate components within Cost of Quality (COQ). We looked at the Cost of Conformance in our last tip and this time we focus on the Cost of Non-conformance. The Cost of Conformance is focused on avoiding potential failures and the Cost of Non-conformance is the cost incurred as a result of any failures because the quality expectations were not met. This a failure is really easy to understand: You built a product, service or result through your product and it failed to meet quality expectations. Now you have to fix it, which is going to cost you. There are both internal and external costs related to failure. Internal costs are those identified within the scope of the project. This includes things like the time and money it will take to rework part of the project. It also includes any cost involved if you have to throw away parts of your project work, which is officially called scrap. External failure costs are those identified after the product or service has been delivered to the customer. This includes things like warranty fulfilment, liability costs and the potential of a loss of business. =================================================================================== There are two separate components within Cost of Quality (COQ) and you must have a complete understanding of both of them for your PMP Exam. One is the Cost of Non-conformance, which is the money (and time) that will be spent due to the failure of a deliverable from your project. The other is the Cost of Conformance. This is the figure that is determined to be necessary to avoid those failures in the first place. There are two categories within the Cost of Conformance. The prevention costs are those associated with building a quality product or service so that any errors are within the range that is considered acceptable. These usually include the elements of training and equipment. Also included in this category is the time and effort required to fully document processes and to do things the right way. The other category within the Cost of Conformance is the appraisal costs. These are the costs associated with determining the level of quality to ensure it meets the required standards. Appraisal costs include things like inspections and various types of testing that

are then evaluated to ensure the quality expectations are being met. In our next tip, we take a closer look at the Cost of Non-conformance ============================================================================================== Scope baseline is a critical input to both the Verify Scope and Control Scope processes. However it is not being shown in the PMBOK4 guide as a separate input to these processes. The project management plan is an input to both of these processes which includes the scope baseline. Please refer to PMBOK4 page 122 where it states, The scope baseline is a component of the project management plan. Perform quantitative risk analysis Probability distributions were created in order to calculate probabilities of events with a high certainty with minimal effort. If we dont use probability distributions, we would have to use the conventional mathematical probability calculation methods and must have big sample sizes in order to calculate probabilities with high certainty or in statistical terms high confidence level. Usual problems that we have been solving in our mathematics classes were very limited, like we were asked to calculate the probability of rolling dice totals 11 or flipping coins etc. If I give you a more complex problem, like if I ask you to calculate the probability of my factory producing less than 3.4 defect per one million opportunities (6 sigma standard) how would you do that? If you want to use the traditional probability calculation methods you have to collect a very big sample, say 200,000 samples? But that would take my factory two years to produce 200,000 units? Do I have to wait for two years to calculate this probability? Or shall I take a smaller sample to calculate the probability? The answer is if you take a smaller sample, you cant calculate the probability with high confidence level. You have to wait for two years to have a high confidence level estimate if you want to use the traditional methods. Here probability distributions come into play. If we know how the target population is distributed, we can apply an appropriate probability distribution to easily calculate even probabilities with high confidence interval. There are a number of probability distributions but the most widely used one is the normal distribution. A majority of the target population is approximately normally distributed (makes a bell-shape if we plot the target populations relative frequency distribution). If the target population is in close approximation to a normal distribution, we can apply the normal distribution mathematical formulas to calculate probabilities and other statistics like the population variance and the population mean etc. Please note that usually most of the populations relative frequency distributions resembles a normal distribution, they are never 100% a normal distribution. That is why our computed statistics are never 100% accurate. The level of confidence also depends upon the closeness of a relative frequency distribution to a normal distribution. Also please note that the same argument applies to the rest of the statistical distributions as well. To summarize, we first have to analyze with probability distribution most closely fits our population, and then apply that probability distributions formulas to estimate the population parameters. Before I move on, let me clear out one thing, the difference between a statistic and a parameter. A statistic is the value calculated by analyzing a sample, while the parameter is the actual population value. For example if I have 10 units out of a population of 100 units and compute the sample average as 5.5, then 5.5 is my sample statistic. I would use this sample statistic to estimate the population parameter, which is the actual population mean (which can be different than the sample mean, e.g., 5.8). Now lets talk about the simulations. At times we dont want to rely on our assumption that a populations relative frequency distribution fits some probability distribution as a wrong assumption will yield wrong results. Also, it can also be possible that we are unable to determine the shape of our target populations relative frequency distribution. In such cases, we would consider using the traditional methods. But the traditional methods are very time-consuming? Right? For example, lets consider that my project has got 300 activities and multiple critical paths. I have an optimistic and pessimistic estimate for duration for every project activity. Finding out the optimistic time for the entire project is very simple, just assume that every activity finishes on time. Similarly finding out the pessimistic time is simple as well. But how shall I calculate the most likely duration of the entire project. Also what if I want to further calculate the probability of the project finishing in X days after when I calculate the most likely estimate? Ahh! If I take the conventional method, my project is definitely going to be late as performing such calculations with every possible combination would take more time than to execute the project itself! :) Also I dont know the shape of the relative frequency distribution so I cant use the probability distribution to help me out over here. What shall I do? Submit a resign? Hang myself up or what? The solution is to use a software simulation. A simulation software calculate project durations (and other estimates like risk probabilities and impacts) for every possible combination and prepares the populations relative frequency distribution. The software then fits a probability distribution to the computed results that most closely represents it to calculate my required numbers. Perform Qualitative Risk Analysis According to the PMBOK guide, the Risk Management Plan is defined as document describing how project risk management will be structured and performed on the project. The risk management plan is different from the risk register that contains the list of project risks, the results of risk analysis, and the risk responses. As you can see from the definition, the risk management plan is basically a guide that helps a project manager perform risk management for his/her project. Actual project risk probability and impact analysis is never carried out during the Plan Risk Management process hence the actual project risk probability and impact matrix is never documented (and cannot be documented) in the risk management plan. I think you are getting confused when you see that the risk management plan contains the following two items, as mentioned in the PMBOK4 page 281:

Definitions of risk probability and impact Probability and impact matrix

The first item is self-explanatory as it specifically mentions that these are the definitions and not the actuals. Regarding the probability and impact matrix being documented in the risk management plan, lets analyze what does the PMBOK says about this: Risks are prioritized according to their potential implications for having an effect on the projects objectives. A typical approach to prioritizing risks is to use a look-up table or a Probability and Impact Matrix. The specific combinations of probability and impact that lead to a risk being rated as high, moderate, or low importance, with the corresponding importance for planning responses to the risk are usually set by the organization. You can see that here the PMBOK is referring to a look-up probability and impact matrix and NOT referring to the actual project risk probability and impact matrix. When we are planning for risk, we would collect organizational data, historic data and our experience to put together a robust risk management plan. We would document this information into our risk management plan, but this information is not the actual project information right? Its just the information that would provide us guidance when we would be actually managing the project risks. For example, consider I am managing a mega construction project in a foreign country. During the Identify Risks process I have identified that labor strike and a potential delay due to it is a project risk. During the Perform Qualitative Risk Analysis process I want to assign a probability and impact to this risk. How shall I do that? Should I use my gut-feeling to classify this as high, medium or low? You would agree that wouldnt be a good approach as my feelings can be biased and also since I am operating in a new country and I do not understand the environment. Great! So what should I do? I must refer to the risk management plan and see how does it define high, medium and low, also life would have been much better if I could find a lookup probability impact matrix that my organization has already defined for this specific country? I hope this answers the question. Quality Management DOE has been explained immaculately by V.P. Let me address the remaining part of your question. A process improvement plan is an official approved document that details what process improvement activities would be carried out during the project, who would carry them out, what would be the budget for such activities and how much authority does the process improvement team has to execute their activities. When we talk about process improvement, we are taking about making processes better, more efficient and more robust. However, nothing comes for free. For process improvement, we need a separate team dedicated to carry out process improvement, we have to provide them training if they dont have it already, we have to stop project operations during the process improvement activities. These all have cost and schedule implications. Project management plan addresses these issues with a subsidiary process improvement plan. Lets have another look; every process improvement sub-project would also provide some inputs to the project team, this means change requests, which would again impact schedule and the project budget. If we dont have an approved process improvement plan, we have no way to justify the improvement activities, their budget and the change requests generated as the result. What is quality? The most easy way to define quality is by saying quality means conformance to requirements. But how shall we measure it? Suppose I am managing a project and have to deliver a product with 10 features. If my final product contains 9 features and one feature is missing, I can roughly say that I have met 90% quality requirements. So what is this 90%; a way to measure the quality (although very rough, I have only used this for the sake of this example). Quality metrics are the ways to measure quality of a product or service. Normally we dont use percentage metric to measure quality. There are a number of other quality metrics that are generally used like, KPIs, CPI, CPK, PPI, PPK, standard deviation and variance etc.

Process Analysis, Root Cause Analysis and Process Analysis Quality Audit define by PMBOK as, A quality audit is a structured, independent review to determine whether project activities comply with organizational and project policies, processes, and procedures. By an independent review it is meant that somebody external to the project team carries out the quality audit. This external party can be the corporate quality assurance department, the customer, a certification body or even a governmental agency. The purpose of the quality audit is to make sure that the deliverables being produced by the project team are in conformance with the pre-set standards and specifications. For customers this can be the voice of the customer (VOC), for the corporate quality assurance department it can be the corporate quality policy, for the certification body it can be a published standard like CMMI or COBIT and for governmental agency it can be the local governing rules and regulations. The purpose of the quality audit is to make sure that the project is meeting its quality requirements, and the party that wants to make sure of this is external to the project team. PMBOK defines the process analysis as, Process analysis follows the steps outlined in the process improvement plan to identify needed improvements. Process analysis identifies shortcoming in the processes (that the project team is performing) and optimize them. Process improvement is a very vast field and there are a number of ways to improve the processes. Some of these improvement techniques are Kanban, TQM, Lean Poke Yoke, Kaizen and Six Sigma etc. However all of these look at the processes from a different angle, they all have one item in common, you have to analyze the process first and collect the process information/measurements. A root cause analysis is a technique to find the cause of a problem by starting investigating the symptom and then back-tracking it to the main cause. Please try to differentiate it with the process analysis. Process analysis is carried out to further improve the process, while the root cause analysis is carried out to identify the root cause of a problem and then fixing it. For example assume that my company processes 50 customer requests per day (8 hours). Even

though I am within my specification limits and my bosses and my customers both are happy, I would like to study my process so that it can process 50 request in less than 6 hours. This would give me more cushion in my scheduling and also rest my team and also allow other team development activities. So I want to further optimize my process, hence I am doing a process analysis. On the other hand assume that due to an unknown reason, I am failing to process 50 customer requests per day. Now I would like to sit with my team and discover the real reason behind this and hopefully eliminate it. This would be a root cause analysis. I hope these properly address your questions. Quality Theorists Please not that superficial study of this area would definitely land you in hot waters during your PMP exam. I strongly recommend you to study the work of the below mentioned quality champions before you take the exam. Please note that I am not recommending reading the books written by these great people, but a substantial study of the work is required. I recommend you read articles on these people at Wikipedia, which should provide enough knowledge required for the certification exam. The reason that you find different quotations for these quality champions in different books is that these great people are known by the extensive research and contributions they have done and not by their one-line sayings. If we study their work, we can see that they all have said different things at different times. For example Deming extensively taught in US as well as in Japan, he should have a lot to say right? Secondly authors of different PMP exam preparation books quotes some of the prominent works and ideas from these philosophers which makes a reader believe that these guys only talked about one thing, which is not correct. I highly discourage all PMP candidates to prepare for their exams that way. Having said that let me give you a list of these champions that I would highly recommend you to further research over Internet. No book can beat your own research. Confusion arises when we study the work of these people without knowing their histories. For example Deming worked with Shewhart at Western Electric. Deming, although not a student of Shewhart, was so impressed by the work and ideas of Shewhart that he considered him his teacher. Deming later promoted and enhanced Shewharts work. Also Deming worked with Juran and they both served in the Japanese quality revolution. You see a lot of work is either connected or is influenced. If you would do a deeper research, the concept would start to gel with each other. Following is the list of some great people you must research: 1. 2. 3. 4. 5. 6. 7. 8. Walter A. Shewhart W. Edwards Deming Joseph M. Juran Philip B. Crosby Armand V. Feigenbaum Kaoru Ishikawa Genichi Taguchi Bill Smith

I hope this would help you prepare for you PMP exam better. Quality Control Its a very small question to ask but a very long answer to write. Let me give it a try. This is going to be a long drive so please fasten up your seat belts. Tolerances and control limits ----------------------------------Before I explain the difference between the tolerance and control limits of a process, allow me to hit a bigger topic first, i.e., Statistical Process Control. A control chart is a tool of Statistical Process Control that is used to study the process behavior over time. I am not assuming that you are unfamiliar with this concept over here, and thats not the reason I am going in there. Actually, I want to address a bigger audience when explaining such a key concept which I personally think, is not discussed in a great detail either in PMBOK or any other PMP preparation books. Control Charts is a Statistical Process Control (SPC) technique for observing and controlling process behavior. SPC assumes that studying each and every measurement from an entire population is not practical most of the times and hence is based on sampling and sampling distributions. (Assume that a factory produces 10,000 fuses every minute. It will be highly impractical, if not impossible, to test each and every fuse for its quality standards). SPC requires random samples to be taken from the population periodically to estimate the population parameters, in other words, the process behavior. To estimate the population parameters based on samples, the samples must be taken out randomly from the population so that the each and every measurement in the sample is independent of all the other measurements in the sample and also all the measurements have an equal chance of being selected. In simple words, samples must be scattered and not very closely related, otherwise the population will not be accurately estimated. Now, since we are plotting the data collected from the samples, we cannot be 100% sure of the entire population and its parameters. However we can, for a reasonable degree of confidence, estimate these parameters. We would then compare the estimated parameters with two thresholds or standards. Firstly, with the one set by our customer, i.e., the specification limits, and secondly with a statistical control limit. The specification limits (the upper and lower specification limits) are given by the customer. The difference between the upper and lower specification limits is the tolerance of the process, that is to say, that the customer wont tolerate a product lower than the lower specification limit or higher than the upper specification limits.

Lets analyze this with an example. Assume that I have been awarded a contract to produce 10,000 pistons for an automobile company. The automobile company will use these pistons to fit into their designed engines. Now the ideal piston diameter for my customer is 105mm, however the customer would accept and pay for all the pistons that are in the range of 104mm to 106mm in diameter. So my tolerance is 2mm. If I take these specification limits as my process control limits, I would get an alarm only when I would be manufacturing the pistons out of these specification limits. I dont want that, I need my process to be more robust and accurate. So I would rather set 104.5mm and 105.5mm as my process control limits. Getting the idea? The control limits are generally tighter than then specification limits given by the customer. I have tired to explain the concept keeping things as simple as I could have. However this must be noted that although the customer sets the specification limits, we do not just choose a tighter control limit. Control limits are calculated by complex statistical formulas that are different for different sampling distributions. Attribute Sampling vs. Variable Sampling -------------------------------------------------There are two types of data/measurements, variable (also called continuous) and attribute (also called discrete). Discrete or attribute data can only measured by categories (like yes/no, true/ false, pass/fail etc.) or intervals (like absolute rank, educational level, types etc.). Attribute data is always about counting of measurements falling in different categories. Attribute data cannot be further divided, for example if I say I have 10 students who are either taking a math class or a science class, there will be no student who would be taking 50% of the match class and 50% of the science class. On the other hand, variable or continuous data can be further divided into more classifications and that will still have meaning. For example if I measure temperature for two rooms, 22F and 23F respectively, this does not mean that a temperature of 22.2F or 22.5F cannot be recorded. Having said that and clearing the concepts of attribute and variable data, answering your question is very simple. If we are taking samples on attribute measurements, we are doing attribute sampling and vice versa. Another question arises over here, (that you havent asked) why we need two different types of sampling techniques. Remember that samples are taken to estimate the population parameters? Statistical formulas for estimating population parameters are different for different probability/sampling distributions. To correctly estimate a population parameter to a reasonable degree of confidence, first we have to determine the correct data type, i.e., attribute or variable, and then determine an appropriate probability distribution that fits the sample. I hope these answers the questions. Difference between Focus group and Facilitated workshop The difference between moderator and facilitator highlighted by Krishna is explanatory. However I would like to continue with the difference between a facilitated workshop and a focus group. The PMBOK guide defines a focus group as, Focus groups bring together prequalified stakeholders and subject matter experts to learn about their expectations and attitudes about a proposed product, service, or result. On the other hand, the PMBOK guide defines a facilitated workshop as, Requirements workshops are focused sessions that bring key cross-functional stakeholders together to define product requirements. The commonality between the focus group and the facilitated workshop is that both require a group of subject matter experts to crack a problem at hand. On the other hand, the difference is in the approach. Focus group is more like a meeting where we invite subject matter experts to have an interactive meeting to crack a problem. For example consider if I am managing a complex construction project and I find myself way behind the schedule and failing to meet the deadline would impose heavy penalties. I would invite expert civil engineers from inside and outside of the organization to come to a meeting to discuss the available state-of-the-art technology and ways to complete the project within time. By the end of the meeting I would have valuable and agreed feedback from the experts that I can later ask my team to implement, of course after getting the change request approved. On the other hand, during the facilitated workshop I would require the experts to solve the problem for me or perform some activity for me rather than just sharing their feedback and opinion. Lets consider the same situation I have mentioned. If I ask the expert engineers to come and supervise the use of the state-of-the-art technology or method so that I am sure that these are being used correctly, this would be a facilitated workshop. Other examples could be gathering the experts to actually define the quality requirements by building a QFD house, or develop or supervise the software development with my team as in Joint Application Development (JAD), or help me perform a quality audit etc. You can sense from here there a focus group is carried out to gather expert opinion and knowledge to help ourselves increase our knowledge so that we can apply it later. On the other hand, a facilitated workshop is carried out to get the experts actually perform something. A facilitated workshop can be carried out to perform any project activity. However the PMBOK references it (in the definition part) as a requirements gathering activity during the collect requirements process, which makes sense for the process. But this does not mean that only requirements workshops are examples of facilitated workshops, a requirements workshop is just one example of many possible facilitated workshops than can be carried out. The PMBOK partially clears this out by giving references to QFD and JAD.

The confusion arises when we only compare the requirements workshop with a requirements focus group. Since there is no actual fieldwork being carried out in both of these activities, they both seem to look very similar. Also please note that the PMBOK is putting more weight on requirements over here is because we are talking about the collect requirements process. Again I would say that a requirements focus group will help you understand the requirements, while a requirements facilitated workshop will actually define and document the requirements for you. I hope this answers the question. How to Assess of Key StakeHolder This is a very interesting yet very subjective question. There can be a number of views and opinions regarding the best practices for stakeholder identification, analysis and developing stakeholder management strategy. The PMBOK guide does not documents any one of these, it just recommends to perform these activities and leave it at the discretion of the project manager. Let me share with you my opinion based on some recognized techniques. The PMBOK defines stakeholders as, Project stakeholders are persons and organizations such as customers, sponsors, the performing organization, and the public that are actively involved in the project, or whose interests may be positively or negatively affected by the execution or completion of the project. If we just stick to this definition we would get lost since this definition encompasses a ton of such people and organizations. To keep the process simple and robust, we need to start from one end and traverse till the other end, making sure that nobody has been left unanalyzed. You must have heard of the American automobile crisis of the 80s. The reason behind this crisis was that the American automobile industry was focusing on traditional manufacturing processes, while on the other hand Japanese automobile industry was focusing on customers and stakeholders to improve their processes. The techniques Japanese used to beat the American automobile competition at that time has been famous world-wide since then and now nearly every industry has adopted them. Yes I am talking about those techniques that set the foundations for Lean and Six Sigma. Okay, to address your question, I would make a reference to some of these Japanese techniques. Kanban: Kanban is the inverse of inventory control system. Rather, it is a scheduling system that tells you what to produce, when to produce it, and how much to produce. Kanban requires you to first understand your customer, their needs and expectations and then produce your product according to these needs and expectations (pull system). This is totally opposite to the traditional systems in which we first manufacture the product and then market it and try to sell it to customers (push system). Kaoru Ishikawa! (yes you are right, the inventor of the fishbone diagram, have you prepared this topic? This will be tested in your PMP exam like what is a fishbone diagram ;) ). So I was saying, Ishikawa said, the next process is your customer. This means that every process that we complete produces an output that serves as the input to some other process. Even if both of these processes are internal to an organization, we have to treat the next process as it were our customer. Consider a leather jacket brand company that first purchases raw leather dries and dies the leather, cut pieces and then stitches them together to produce a jacket. All these processes are internal to this company, but if every process would treat the next process as its customer, there would a lot of respect for the needs for the next process. You would also try to fulfill the requirements of the next process happily even if they seem unreasonable. You must be wondering that what I am talking about when your question was strictly about stakeholder identification, analysis and management strategy. Just give me a minute, let me stitch the above two Japanese concepts together to answer your question. Although the kanban technique and the Ishikawas saying are inclined towards manufacturing, we can apply the essence to the stakeholders identification, analysis and management strategy development. I recommend we start with the project charter and identify our end customers. After listing down the end customers, we have to capture and document their specifications and expectations. Then we have to analysis how and in what ways these customers can impact or influence our project, this will define their power and influence. Then we analyze our last process that would produce the final deliverable. We would search for some answers over here like, what this process does? Who does it? What are the input requirements? What can go wrong? What can be expected in future? We would document the information and now some of our project team members would become our important stakeholders. We would backtrack this process till we reach our suppliers. Once we have traversed this backwards, we would have identified all the stakeholders and their expectations and influences. Now in the second round we need to develop our action plan or in other words, the strategy, to manage these stakeholders. I hope that my opinion would have addressed your concern. I must reiterate that this is my opinion and not documented anywhere in the PMBOK guide. I would welcome all the comments and disagreements. Managing multiple projects with competing priorities When we are talking about managing multiple projects with competing priorities we are talking about portfolio management. Also please note that your question is totally aligned with the PMP exam as nearly every exam contains a few questions from program and portfolio management. I highly recommend every PMP as well as every PMP student to obtain a PMI membership. One of the number of benefits you will get from your PMI membership is that you will get free access to a big treasure of project, program and portfolio management knowledge, guides, standards and articles. Please see the following two standards from PMI for deeper knowledge on portfolio management: - Organizational Project Management Maturity Model (OPM3) - Second Edition

- The Standard for Portfolio Management - Second Edition Difference between Measurable Objectives, Requirement, Product Scope and Project Scope Let me answer your question by comparing Objectives with Requirements and Project Scope with Product Scope. Requirements, also called as the voice of the customer (VOC), states the projects outcome requirements from the point of the customer and is very generic and high level. On the other hand, the project objectives are more detailed and elaborates the steps required to meet the customer requirements. For example, lets consider we are building a house for a client. The client wants the house to be airy, state-of- the-art, comfortable and spacious etc. These are the customer requirements or the VOC. However if we base our project on these requirements, the customer satisfaction is not guaranteed. The reason for this is that, although we have the customer requirements, these are not measureable. We must make sure that all the customer requirements are measureable or quantifiable in some way. Example of such measureable requirements can be; the house must be made airy by providing two window per every room, the house must be state-of-art by providing X security measures and Y design measures, the house must be comfortable by providing Z standard heating arrangements etc., and the house must be spacious by making every room more than 200 square feet of area. Now these are again customer requirements, but they are now measureable. On the other hand, the project objectives are the step required to be taken/executed in order to fulfill these requirements. Examples of such objectives can be locate and acquire land at X location, engage an approved architect, subcontract to a renewed construction company, get the design approved by the authorities. To summarize, requirements tell how the end product should be, while the objectives tell how to deliver the end product. Now lets compare the second pair, i.e., Project Scope with the Product Scope. The product scope documents the customer requirements, or in other words, the end products requirements. It also documents which features are included and which are excluded, as well as assumptions and constraints. On the other hand, the project scope documents the work requirements, i.e, what work is required to complete the end product, what is included and what is excluded as well as assumptions and constraints. To summarize, the product scope documents the features of the end product or project deliverables. While the project scope documents the effort requirements to deliver that product or deliverable. I hope this answers your question. Change requests and baseline Before I address your question, lets clear one thing out first, i.e., the difference between corrective action and defect repairs. Both of these actions try to fix project issues, the only difference between them is the corrective action is taken in advance, i.e, before the deliverable is complete. On the other hand, defect repair is performed when the defect in the deliverable is observed after when it is complete. Since the defect repair is carried out when defects are observed in the deliverables after their completion, you will always incur additional costs, and your project reserves would bear these costs. This means that your cost baseline will change. That is the reason PMBOK makes it mandatory to follow the change control process, i.e., issue a change request, for each defect repair. (Please note that a change request is also required for corrective and preventive actions as well). Similarly, most of the time, the project schedule would also not have enough cushion to adjust the time-requirement for defect repairs. If thats the case, the schedule baseline will need to be adjusted as well. Since corrective and preventive actions are a proactive way to manage the project and issues before they arise, most of the time we have cushion in cost and schedule baselines to adjust them. However, if we dont have this cushion, these baselines would need to be change as well. I hope that answers the question. Anatomy of a change Change requests arise from two parties; from the project team including the project manager and from the customer or sponsor. If the change request is from the sponsor or the customer, that is, external to the project, you have to analyze the change request first before you forward it for approvals. You can see here, that in this scenario, the change request is followed by the analysis. On the other hand, if during any stage, either the project manager or the project team feel a change imperative to the project, you need to first analyze it before you issue the change request and then seek its approval. You can see that in this scenario the analysis is now followed by the change request. No matter what the situation is, a change request must always be analyzed before you forward it for approvals. Lets address your second question now. Lets see the lifecycle of a specific change request by an example. Consider you are managing a building construction project that you have to complete in one year. In the sixth month, you feel that if you continue with your current speed you will not be able to complete the project before the deadline. Now you want to fast-track the project in order to complete it within time. However before you issue the change request, you have to study the change impact during the control schedule process. If you are satisfied by the change and its impacts, you will issue the change request and forward it for the approvals. Now hold over here for a minute, you have just issued a change request and forwarded it for approvals, dont you have to document this? You have to document the reasons behind the change request, your analysis details and the change request itself right? Correct! So you will document all these in your project documents before you forward the change request for approvals. The change request will be processed out of the project team by the CCB during a part of the integration change control process. You will receive the approved change request in your direct and manage

project execution process. Here you will implement the change request and also update your project plans (remember you will not update your project plans before the change requests get approved). Also, wont you document the actual change request implementation information and impacts observed somewhere now? Earlier were the results of assumptions and analysis, but now you have actuals? Yes, you will document all this information in your project documents and also update the project management plan before you execute the change request, both during the direct and manage project execution process. To summarize, before the change request approval, you will use both the control process and the integration control process to issue the change request. While, once the change request gets approved, you will again used the direct and manage project execution and the control process again to execute and monitor the change. I hope this addresses all of your questions. Plan Quality Tools and Technique - Best for Product (software) company We cannot make a case as which of the Plan Quality tools and techniques is better then the rest. Its actually at the project managers discretion to decide which of these needs to be used and it depends upon the problem under discussion. Let me explain these tools and techniques and the areas where these can be applied more effectively. I hope that such an explanation would answer both of your questions: Cost-benefit analysis =============== Cost benefit analysis technique is applied to all approaches to quality, regardless the business or project is small or large. You would always compare your cost of conformance against the cost of non-conformance as well as other benefits and drawbacks. Cost of Quality =========== The cost of quality, i.e. cost of conformance as well as the cost of non-conformance, again must be determined for each quality initiative regardless of the project or business size. However cost of quality is usually paired with the cost-benefit analysis. Control Charts ========== To tell you the truth, control charts are more effective in operations rather than projects. However if the size of the project is big enough that we have multiple deliverables to inspect, and these deliverable are being offered to us on a periodic basis, control chart would be a good tool to observe a process performance. Quality control with control charts is a technique in Statistical Process Control (SPC) and is used to monitor the performance of a process. Although the control charts can be used for individual readings, the roots are based on statistical sampling. When the project is big, deliverables inspection is periodic and the number of deliverables is so high that inspecting each and every deliverable is not feasible; we do statistical sampling and construct a control chart based on the sampled data. Control charts are most effective in such situations. Benchmarking ========== Benchmarking means setting some standards upfront for quality management. Again this applies to both small and large projects. Benchmarking is not only suitable for products, it is as suitable for services as well. Design of Experiments ================ Design of experiments is a statistical technique that compares all (or at times some) of the possible combinations of some key input variables to a process. Every combination is practically experiments and results are recorded. Based on the results, a statistical analysis gives the best combination to be used. This is again more relevant to operations rather than projects. However if the project is big, complex and longer in duration that it allows for such experimentation, only then this technique is applied. Please note that cost of conformance in case of using this technique is very high, so projects must be big enough to justify these costs. Statistical Sampling ============== Statistical sampling will only be used if the number of deliverables, periodically presented for inspection, is very high. Assume that I contract out the job to install 100,000 light-bulbs to a factory in 100 batches. Since inspecting each and every light-bulb in a single batch of 1,000 bulbs every time will not be cost-effective, we can carry out statistical sampling to make a conclusion regarding the entire batch based on that sample. Again this quality technique is more relevant to operations. Flowcharting ========= Flowcharting is a very effective way to observe the bottlenecks in processes. Sense of vision is the most robust human sense. And when we talk about the sense of vision, perceiving images is easier for a mind than reading paragraphs. Since a flowchart graphically represents a process, it becomes very easy to understand and spot bottlenecks. Quality Management Methodologies ========================== The quality management methodologies are more related to organizations rather than projects. Please note that I am not saying that they dont have any relevance to projects. Usually the costs of adapting such standards is very high, and if they cant be justified by the project budget, they wont be applied. For example, the six sigma standards requires a process in which 99.99966% of the products/deliverables manufactured are statistically expected to be free of defects (3.4 defects per million). If a project requires producing less than 294,000 deliverables, I cant have any defects if I want to comply with the six sigma standards. Usually projects dont have so many deliverables.

Please note that I have mentioned that some of these tools and techniques are more relevant to operations rather than projects. I have not said that they are not relevant to projects at all. PMBOK makes a note of this, and thats the reason they are included in the PMBOK guide. It is on the discretion of the project manager to use which tools he/she deems fit. However, such tools and techniques can always be applied to very-large projects. I hope that answers both of your questions. Procurement Management Contract Types Although I agree with Rob that the Time and Material contract is more inclined toward the Cost-reimbursable contract in comparison to the Fixed-price contract, please note that the PMBOK guide treats the Time and Material contract as a different contract type than Fixed Price and Cost-reimbursable contract (PMBOK4 pg:322). According to PMBOK4 at page 324, Time and material contracts are a hybrid type of contractual arrangement that contain aspects of both cost-reimbursable and fixed-price contracts. These types of contracts resemble cost-reimbursable contracts in that they can be left open ended and may be subject to a cost increase for the buyer. Conversely, T&M contracts can also resemble fixed unit price arrangements when certain parameters are specified in the contract. Hence, treating a T&M contract as a cost-reimbursable contract type will deviate from the PMBOK guide and all the PMP students must make this clear distinction. Now lets address the issue of risk. You can see that I have presented the contract types in order of their decreasing risk to the seller. One should agree that a T&M contract is always less risky for the seller in comparison to the fixed-price contracts. This reasoning places T&M below the fixed price contracts in my rankings. The seller will be reimbursed all the costs incurred both in T&M and cost-reimbursable contractual arrangements. However, as Bob has mentioned, the buyer has got some degree of control over a T&M contractual arrangement in terms of the cost. If we compare a T&M contract with a cost-reimbursable contract, this increases the sellers risk (in comparison to the cost-reimbursable contract). For example, I contract out excavation work to contractors at different sites with similar scope of work. Suppose that the actual cost of excavation that will be incurred to my contractor is $10 per cubic meter. Contractor A agrees on a T&M contract to excavate 1,000 cubic meters at site A at $12 per cubic meter. On the other hand, contractor B agrees on a cost-plus-fixed-fee contract with a fee of $2,000 to excavate 1,000 cubic meters. What will be the final bill amount of both the contractors in ideal case (not considering any other factor)? Both will charge $12,000 right? Now consider, due to economic conditions, during the project execution, the labor costs increase from $10 to $11? Assuming that there is no economic price adjustment clause in the contract, what will be the final bill amount for both of the contractors? Contractor As final bill will be $12,000 because there is no economic price adjustments and the agreed rate is $12 per cubic meter. While the final bill for the contractor B will be $11,000 + $2,000 = $13,000. You can see from this example that the risk or the additional cost is being born by the contractor A. Conclusion, T&M contract are slightly more risky for supplier in comparison to the cost-reimbursable contracts. On the other hand, a T&M contract also decreases the sellers risk in comparison to the fixed-price contract in case scope of work was not accurately determined earlier. This reasoning places my T&M risk ranking (from the sellers perspective) lower than fixed-price but higher than cost-reimbursable contracts. Similar reasoning can be given to show that as sellers risk decreases, the buyers risk increases. Hence the least risky arrangement for the seller is the most risky arrangement for the buyer. In the end, very respectfully, I will disagree with Bob regarding the examination of sellers accounts by the buyer and its relationship with the contract type: Buyers usually dont examine sellers accounts directly until unless such a term is present in the contract. This term/clause can be part of any contract regardless of the contract type. Recently I have managed a $28 million project and most of the project work was outsourced. We had different contract types with different vendors, but none of the contract actually allowed us to examine any of the vendors accounts directly. The bill of quantities from the vendor was verified at site by my engineers and all the invoicing was subsequently based on that BOQ. Whether the buyer can examine the accounts or not depends on the provisions of the contractual terms and not contract type. When we talk about risk in a contractual arrangement, we are talking about if anything changes, who is going to pay for those extra costs, and the contract does mention that. Contract Change Control System The Contract Change Control System is a part of Procurement Management Plan or the Contract? The procurement management plan might or might not contain the contract change control system. The procurement management plan contains the high level details that are required to manage the procurements within a project. For some projects we might have a number of different supplier supplying different items or services, contract change control system can be different for each of these contractual agreement. Even if we have a single agreed upon change control system present in our procurement management plan, it does not have any legal worth since it is our internal document. However, the change control terms of any

contract are always documented in the contract itself, this not only allows to have different terms for different engagements, it also give these terms a legal worth. Please see PMBOK page 337 where it states that, Contracts can be amended at any time prior to the contract closure by mutual consent, in accordance with the change control terms of the contract. So the answer to your question is, we might have change control system documented in the procurement management plan (this is at the project managers discretion), but we will always have change control terms documented in every contract. Also the change control terms can vary from contract to contract, vendor to vendor or engagement to engagement. Procurement Management Contract Types Thanks for the appreciation. Risk is uncertainty, can be good or can be bad. The traditional concept of risk is that it is always negative, and that is perhaps confusing you on such questions. First of all, whenever you see the word risk in any PMP question, substitute it with uncertainty to eliminate the confusion created by the traditional definition. Now regarding the questions addressing the risk shared by buyer and the seller by the means of a contract type, we have to determine who is more uncertain regarding the procurement arrangement. First lets address the basic categories and then I will go into the sub-categories. The three basic contract types are; Fixed Price Contracts, Cost Reimbursable Contracts, and the Time and Materials Contract. Fixed Price Contract: =============== Remember that every contract has two most important driving factors, i.e., the price and the scope of work. Also the price hits the buyer, whereas the scope of work hits the seller. Since the price is fixed in the fixed price contract, the uncertainty is not with the price, so the buyer doesnt have any uncertainty on its part. If the scope of work was not studied in a greater detail earlier, and during any point in time more work or effort is required to complete the contracted work, this would hit the seller and the uncertainty lies with the seller. Hence fixed price contracts are more risky for the sellers. Cost Reimbursable Contract: ==================== In cost reimbursable arrangement, all the price of work complete is invoiced to the buyer. The total cost of the arrangement is always uncertain to the buyer till the job is complete. On the other hand, the seller is certain that all the costs will be born by the buyer even if the scope of work was not negotiated earlier, so there is no uncertainty on the sellers part. Hence the cost reimbursable contracts are more risky for the buyers. Time and Materials Contract: ==================== Time and Material are a hybrid type of contractual arrangement that contain the aspects of both cost-reimbursable and fixed-price contracts, so the risk is balanced between the buyer and the seller. Now lets look are the sub-categories. Firm Fixed Price Contracts (FFP): ======================== In Firm Fixed Price Contracts, the margin(fee) is fixed. Any change in effort or work will directly hit the seller. The sellers risk is at maximum over here. Fixed Price Incentive Fee Contracts (FPIF): ============================== Although the price is fixed, the sellers margin is a bit variable. The seller will be rewarded by a higher margin based on the performance. Still since the price is fixed, the seller is at risk (its a fixed price contract after all) but in comparison with the firm fixed price contracts, the risk is lower for the seller. Cost Plus Fixed Fee Contracts (CPFF): =========================== The risk for the buyer is maximum over here since all the costs will be reimbursed plus a fixed fee will be paid to the seller regardless of the performance. Cost Plus Incentive Fee Contracts (CPIF): ============================= Although all the costs will be reimbursed to the seller, the sellers fee (or margin) will be determined by the performance. This places a slight control over the arrangement. Again, since its a cost reimbursable contract, the risk lies with the buyer, but in comparison with the CPFF contract, the buyers risk is lower. Note: Please note that incentive in the fixed price arrangement, reduces the risk of the seller. While the incentive in the cost reimbursable contract, reduces the risk of the buyer. Dont associate the risk of either the buyer or the seller to the work incentive. Rather associate the word incentive with reduced. If the incentive is with the fixed price contract, the risk is reduced for the seller. If the incentive is with the cost reimbursable contract, the risk is reduced for the buyer. Remember this thumb-rule: Fixed price Sellers risk Cost reimbursable Buyers risk No incentive/fixed fee Pure risk Incentive Reduced risk

Lets combine all of this information into a list of contract types ordered by the reducing level of risk for the seller: 1. Firm Fixed Price Contract maximum risk) 2. Fixed Price Incentive Fee Contract 3. Time and Materials Contract 4. Cost Plus Incentive Fee Contract 5. Cost Plus Fixed Fee Contract risk) (Sellers

(Buyers maximum

I hope my essay would have resolved the confusions, and my words substitution technique hasnt confused you further. In anything concerns you, feel free to reach out to me. Procurement Management Administer Contract Question You are right that there is a subtle difference between the Procurement Performance Review and the Inspection and Audit tools and techniques. But the Performance Reporting is different altogether. By performance reporting is it meant that your evaluations regarding the contractual arrangement is reported to your higher management. You will either carry out a performance review or an inspection/audit to collect information and will aggregate this into a report for the higher management. Now lets discuss the difference between the performance review and the inspection/audit tools and techniques. The performance review, is an independent review of the suppliers performance. You are not required be on the site and you are not required to be interacting with the supplier to perform this activity. You can do this in your office, with your team members and can use documentation provided by the supplier, your teams observations and the projects progress as the inputs to this activity. However please note that I have used the words that you are not required to, I have not said that you must not. You can be on site and you can interact with the supplier if you deem fit, but it is at your discretion. However you MUST involve your project team for this review. Usually this is an in-office and a team- event, and is carried out on a frequent basis. I do a weekly review with my team for every contractual arrangement and I do it during every team status meeting. However! An inspection or an audit needs to be done on site and with the active involvement of the supplier. You might have questions or queries for the supplier, you might ask the reasons if the performance is not up to the agreed standards etc. Audit or inspection is always related to physically reviewing the deliverables or products, its a very active technique. On the other hand, a review is a passive technique and CAN be done without the involvement of the supplier and without the physical inspection of the actual deliverable or products. Its always based on facts and figures, documentation and YES internal project team feedback. First let me clear that there is no term such as an Actual Budget in Earned Value Management. Remember that Earned Value Management is the cost and schedule performance technique suggested by the PMBOK guide to monitor and control project performance. However since you have asked the question, you must have read this terminology in some book by some author. Remember that Accounting is a vast field and Earned Value Management is just a small subset of it. I cant argue that the question you have asked is incorrect or the author has used the wrong terminology. Lets decipher your question using Earned Value Management concepts. Remember that the word actual in Earned Value Management technique means incurred. Your target budget is the monetary threshold under which you plan to complete your project. Once approved your target budget becomes your cost performance baseline. On the other hand your actual budget is the amount you have spent on the project to complete the project. Since this value cannot be determined during the project execution and can only be determined once the project is completed. Consider I am building a house, and I plan to complete all the work under $100,000. Now this is my target budget that I dont wish to exceed. If during the project execution I found out that my earlier estimate was unrealistic and I have to spend around $150,000 to complete my house, this amount will become my new targeted budget. Where is my actual budget here? Remember actual means incurred, so I can only know my actual budget once I finish my house. Say I finish constructing my house in $140,000, then this is my actual project budget. Again please note that the Earned Value Management (EVM) technique does not recognize the term actual budget and the explanation I have given has no relevance to the PMBOK guide. Please refer to the text where you read this terminology and let me know if it makes sense. Formula for Investment Payback Analysis The Payback Period or refers to the period of time required for the return on an investment to "repay" the sum of the original investment. Whenever you invest in a business you expect the business to pay you back in future in smaller pieces over time. You need to track from the day you invested in the project till the point in time when the total of the revenue to date crosses the invested amount. Most of the time, it is calculated manually. Since, in practical life, the project revenue (or cash flows) never come in equal instalments or amounts, the formula for calculating the payback period cannot be developed other than manually adding up all the cash flows to the point when they cross the investment. However if we assume that we are receiving an equal amount (same instalment) on a fixed periodic basis, a formula can be developed. Assuming that we have an initial investment of x dollars, and we are expecting a fixed amount y dollars per fixed time periods t. Then the payback period will be:

Payback period = x/y (time period units) Suppose I invest $10,000 in a business and expect to get a return of $2,000 by the end of every year. I can use the above formula to calculate my payback period since I have a fixed time period, i.e, 1 year, and I have a fixed return amount, i.e. $2,000. Payback period = 10,000/2,000 = 5 years. However, please note that, in practical life, the cash flows are NEVER in equal instalments and fixed time periods. You need to calculate the payback period manually. Discounted Cash Flow technique The Discounted Cash Flow technique is used to perform cost-benefit analysis for a project which is spread for a big period of time. Please note that this accounting technique is used during project initiation and once the project is rolling, we switch to the Earned Value Management technique for project costing and performance evaluations. The Discounted Cash Flow technique is based on time-value of the money. The money we earn earlier is better than the same amount earned later. Before getting into the technical details, let me present two very basic examples. These examples are not directly related to the Discounted Cash Flow technique, but it will set the foundation I need to explain the concept. First, consider that I hire your company to construct a house for me and we agree that I will pay an X amount for this service in lump sump. Now consider you finish constructing my house in three months and now the X amount is due for payment. What would be your preference, would you like to receive the payment as soon as you finish the construction or would you prefer to receive the payment later, say one year later? Obviously the early the better, right? Another example will consider the opportunity costs. The opportunity cost is the benefit you forgo in pursuit of some other project or benefit. Consider you have $10,000 in your bank account and you want to invest this amount. The bank is already paying you 10% per annum. Would you invest in a project or business that will return you 8% per annum? No? Why? Because the opportunity cost is higher than the benefit. Lets combine these ideas, we know that the early we earn the money is better. However better is very qualitative figure and cannot be measured. We can quantify it by discounting the project cash flows by a discount factor (that is usually determined by the company keeping various factors in mind, including the opportunity costs). Suppose my discount factor is 20% and my project is yielding $10,000 per year. The first payment I will receive after the end of the first year will be $10,000. After discounting it by 20% factor, I get $8,333. Please note that I not calculating the discount by multiplying the future value by 20% (otherwise the discount would have been $2,000 and the discounted value would have been $8,000). Here the formula is reverse, if X is my present value (that I want to calculate for the first year), then X + X*20% = $10,000 ($10,000 is the return I will get after one year). Solving this equation will give X = $8,333. The relation of Present Value (PV) to the Future Value (FV) is given by: FV = PV (1+i)^n Where i is the interest rate or the discount factor, and n is the number of elapsed year after the investment when the return is coming.

Diffence between distribute information and report performan

According to the PMBOK guide, the Distribute Information process is the process of making relevant information available to project stakeholders as planned. (PMBOK pg: 258). This include all types on information like approved change requests, project progress, events, project announcements, daily status reports as well as the project performance reports. Please note that this also includes day to day project information. Point to be kept in mind that, all of the project information will go out to the relevant stakeholders through this process, regardless of the type and nature of the information. On the other hand, the PMBOK guide defines the Report Performance process as the process of collecting and distributing performance information, including status reports, progress measurements, and forecasts. (PMBOK pg:266). Here we are talking about specific formal project information, that is the progress measurements, formal status reports and forecasts. Also the target recipient of such information is a small group of stakeholders and typically they are the decision makers. Also please note that the performance reports are created in the Report Performance

process but they are distributed to the relevant stakeholders through the Distribute Information process. (See figures on pg: 259 and 267). I have met a number of students who were confused regarding the same concept. The main confusion arises from the PMBOKs definition of the Report Performance process. The PMBOK guide says that we collect and distribute the performance information through the Report Performance process. Now the confusion is created due to wrong interpretation of this sentence. First of all, performance information is different from project information. Project information contains everything, while performance information is specific to projects performance in terms of schedule and cost. Secondly, PMBOK says that Report Performance distributes this performance information, it does not say that this distributes this performance information to the relevant stakeholders? Right? By distribution, it means that the Performance Reports are distributed to the Distribute Information, Manage Project Team, Monitor and Control Risks, Administer Procurements, Monitor and Control Project Work and the Perform Integrated Change Control processes. (See figure on page 267). Now the question arises how these performance reports reach the stakeholders for their review if the Report Performance doesnt do that directly? The answer is, through the Distribute Information process.