Q: You are a project manager on a data analytics project. When you planned the project, your enterprise environmental factors included a policy which stated that all cost over 5% of the budget should be approved by the VP-Finance. One of your important stakeholders has submitted a change request that would require a 6% increase in the project budget. Your company has an outsourcing effort, and you believe that a small alteration to the way this change is requested could allow you to take advantage of it and reduce your costs by half. What is the best way to handle this type of situation?

a. Request approval from the VP-Finance.

b. Work with the stakeholder who has requested the change to figure out how to reduce the cost of this change by a third.

c. Document the change requested by the stakeholder since all changes must be documented.

d. Reject the change as it is over 5% of the budget.

Answer: Request approval from the VP-Finance.

Explanation: Refer to PMBOK 6th Edition, Pg 113. You need to follow the company policy and not to find a workaround for the same. Since it is company policy, you will go ahead and ask for approval from the VP-Finance.

Q: Thomas is a project manager on a construction project. The electrician is already in the process of laying out the wiring, when the customer comes to him with a change request that he needs additional outlets. Thomas thinks that this will increase the cost of the electrical work. What is the first thing Thomas should do?

a. Refer to the Project Management plan to see how this change can be handled.

b. Refuse to make the change because increasing the cost of the project is making Thomas project over budget.

c. Refer to the contract to see if there is any clause like this or not.

d. Make the change, since the customer has requested it.

Answer: 

Refer to the Project Management plan to see how this change can be handled.

Refer to PMBOK 6th Edition, Pg 86-88. Remeber if you see the word change or change request, it has to follow the proper change control system. A proper change control procedure is explained in the project management plan.

As per PMBOK the Organizational Process Assets is divided in two categories

1. Processes and procedures
2. Corporate knowledgebase

1. Processes and procedures

The organization's proceses and procedures for performing project work include, but not limited to 

2. Corporate knowledge base

The PMBOK does not divide the corporate knowledge base according to the process groups. As per the PMBOK the corporate knowledge base includes but not limited to

• Configuration management knowledge bases (contains the versions, baselines, organization standards, policies, procedures etc)
• Financial databases (contains information of labor hours, incurred costs, budgets etc.)
• Historical information and lessons learned knowledge bases (project records, documents, project closure documentation, project performance information, and information from risk management activities from previous projects)
• Issue and defect management databases
• Process measurement databases
• Project files from past projects (scope, cost, schedule, and performance measurement baselines, project calendars etc.

Q: The project charter has been developed for a new medical research project. Who should formally approve this project charter?

a. the project team

b. the stakeholders

c. the project manager

d. a member of senior manager

A:

a member of senior management

A member of senior management should approve the project charter. The project charter includes the business need for the project. The project charter is created during the Develop Project Charter process and signed by senior management. The project charter is a high-level document that identifies the project manager, the product description, and a description of the business need for the project. It is important that the project charter be approved by someone to whom all team members ultimately report.

Q: Developing a contingency allowance to handle a specific risk is an example of which type of risk response?

a. avoidance

b. mitigation

c. acceptance

d. transference

Answer: 

accceptance

Developing a contingency allowance to handle a specific risk is an example of acceptance. Acceptance involves accepting the risk and leaving the project plan unchanged. Examples of acceptance would include taking no action at all or leaving the plan unchanged and developing a contingency or fallback plan. A contingency allowance, or reverve, can be determined by quantifying the impact of the risk. When these reserves are allotted, this would demonstrate acceptance. Developing a contingency allowance is one of the most common ways of accepting a risk. 

Q: You are in the process of documenting the stakeholder needs and requirements as part of the Collect Requirements process. You need to gather all of the inputs to the Collect Requirements process. Which option is an input to this process?

A. enterprise environmental factors

B. project charter

C. expert judgment

D. preliminary scope statement

Answer:

project charter

In the PMBOK 4th Edition, the inputs to the Collect Requirements process were the project charter and the stakeholder register. In the PMBOK 5th Edition, the inputs to the Collect Requirements are as follows:

Scope management plan - an output of the Plan Scope Management process

Requirements management plan - an output of the Plan Scope Management process

Stakeholder management plan - an output of the Plan Stakeholder Management process

Project charter - an output of the Develop Project Charter process

Stakeholder register - an output of the Plan Stakeholder Mangement process

1. Plan Risk Management
2. Identify Risk
3. Perform Qualitative Risk Analysis
4. Perform Quantitative Risk Analysis
5. Plan Risk Responses
6. Control Risks

5 general techniques for resolving conflict:

1. Withdraw/ avoid
2. Smooth/ accommodate
3. Compromise/ reconcile
4. Force/ direct
5. Collaborate/ problem solve

The critical chain method is another way to develop a bought-into, approved, realistic, and formal schedule. Unlike the other schedule network analysis techniques, it takes into account both activity and  resource dependencies. There are many variations of this method, so be careful here. The critical chain method uses a network diagram and critical path to develop a schedule by assigning  each activity to occur as late as possible to still meet the end date. You add resource dependencies to the  schedule, and then calculate the critical chain. Starting at the end date, you build buffers for resource  limitations and risks into the chain at critical milestones (think of this as your time reserves from risk  response planning). These reserves, spread throughout the project, provide cushions for delays in the  scheduled activities. You manage these buffers so that you meet each individual milestone date and thus the project milestone completion date as well.  Note that buffers are not the same as padding. They are planned and inserted to minimize known risks. Do not get carried away with studying this technique; it should not be mentioned on the exam more  than three times. And remember, this does not necessarily mean there are three questions about it—it  could just be an incorrect choice in a question.

Q: Developing a contingency allowance to handle a specific risk is an example of which type of risk response?

A. avoidance

B. mitigation

C. acceptance

D. transference

Answer:

acceptance

Developing a contingency allowance to handle a specific risk is an example of acceptance, Acceptance involves accepting the risk and leving the project plan unchange. Examples of acceptance would include taking no action at all or leaving the plan unchanged and developing a contingency or fallback plan. A contingency allowance, or reserve, can be determined by quantifying the impact of the risk. When these reserves are allotted, This would demonstrate acceptance. Developing a contingency allowance is one of the most common ways of accepting a risk.

This would not be an example of avoidance. Avoidance involves modifying the project plan to eliminate the risk or its impact. Examples of avoidance would include limiting the scope of a project or adding resources to a project to eliminate the risk.

This would not be an example of mitigation. Mitagation involves reducing the probability or impact of a risk to an acceptable risk threshold. Examples of mitigation would include taking actions to minimize the probability of a risk, performing contigent planning, developing system policies, procedures, responsibilities, and developing planning alternatives.

This would not be an example of transference. Transference involves transferring the risk, and its consequences, to a third party. The thrid party is then responsible for owning and managing the risk. One method of transferring risk is to purchase insurance. Many companies self-insure against some risk. Problems that can arise from self-insurance include 1)falling to reserve funds to handle worse case scenarios (low probability events), resulting in severe financial damage to the company, and 2) confusion of business risks with insurable risks. Insurance is one of the most popular ways to deal with risk.

Q: What equation related to cost performance on a project is NOT used in Earned Value Analysis?

A. CV = EV - AC

B. EV = AC x CPI

C. CV = PV - AC

D. CPI = EV / AC

Answer:

CV = PV - AC

The equation CV = PV - AC is not used in Earned Value Analysis

CV or Cost Variance = EV - AC or BCWP - ACWP

CPI = EV / AC or BCWP / ACWP

EV = CPI x AC

Q: Your company is considering buying a building worth $1 million. If the company buys this building and rents it out for the next five years, it will get $100,000 per year as rent (receivable by the end of each year). At the end of the fifth year, the company will resell the building at $1.1 million. What is the NPV of this investment at 10% per annum discount rate?

NPV = discounted inflows - discounted outflows

For year 1: PV1 = 100,000 / 1.1^1 = 90,909

For year 2: PV1 = 100,000 / 1.1^2 = 82,645

For year 3: PV1 = 100,000 / 1.1^3 = 75,131

For year 4: PV1 = 100,000 /1.1^4 = 68,301

For year 5: PV1 = 1,200,000 /1.1^5 = 745,106

Hence the total PV of the inflows = 1,062,092

NPV = 1,062,092 - 1,000,000 = $62,092

Q: You have been asked to fill in for another project manager who is on vacation. During the next project status meeting, you ask for a risk report. The project team says that they have never reported on that before and are unsure if there is a master project risk log. What do you do?

A. Do nothing

B. Develop a list of risks yourself, based on experiences you have had managing similar projects.

C. Ask the team to brainstorm the risks they think may impact the project.

D. notify the project stakeholders.

Answer: Notify the project stakeholders

Report the lack of risk tracking and communication to the project stakeholders. Risk reporting is a key part of any project status meeting. PMI's Code of Ethics and Professional Conduct requires project managers to follow project processes and policies and to provide timely and accurate project information. Failure to track and communiate risks represents a violation of the code.

Q: As a project manager, you are concerned with both prevention and inspection of errors in a work product. The difference between prevention and inspection is:

A. Inspection is work done by the Quality Control (QC) team whereas Prevention is work done by the Quality Assurance (QA) team

B. Inspection referes to keeping errors out of the process whereas prevention refers to keeping errors out of the hands of the customer.

C. Prevention refers to keeping errors out of the process whereas inspection refers to keeping errors out of the hands of the customer.

D. Inspection and Prevention refer to the same activity depending on what stage of the project the activity is done.

Answer: Prevention refers to keeping errors out of the process, while inspection referes to keeping errors out of the hands of the customer.

The Control Quality process uses a set of operational techniques and tasks to verify that the delivered output will meet the requirements. Quality assurance should be used during the project's planning and executing phases to provide confidence that the stakeholder's requriement will be met and quality control should be used during the project executing and closing phases to formally demonstrate, with reliable data, that the sponsor and/ or customer's acceptance criteria have been met.

The project management team may have a working knowldge of sttistical control processses to evaluate data contained in the control quality outputs. Among other subjects, the team may find it useful to know the differences between the following pairs of terms:

• Prevention (keeping errors out of the process) and inspection (keeping errors out of the hands of the customer).
• Attribute sampling (the result either conforms or does not conform) and variables sampling (the result is rated on a continuous scale that measures the degree of conformity).
• Tolerances (specified range of acceptable results) and control limits) that identify the boundaries of common vairation in a statistically stable process or process performance).

WBS dictionary - The WBS dictionary is a document that provides detailed deliverable, activity, and scheduling information about each component in the WBS. The WBS dictionary is a document that supports the WBS. Information in the WBS dictionary may include, but is not limited to:

• Code of account identifier,
• Description of work,
• Assumptions and constraints,
• Responsible organization,
• Schedule milestones,
• Associated schedule activities,
• Resources required,
• Cost estimates,
• Quality requirements
• Acceptance criteria,
• Technical references, and
• Agreement information

Q: Large variations in the periodic expenditure of funds are undesirable for organizational operations. Therefore, the expenditure of funds is frequently reconciled with the disbursement of funds for the project. According to the PMBOK, this is known as:

A. Disbursement reconciliation

B. Expenditure Reconciliation

C. Budget Reconciliation

D. Funding Limit Reconciliation

Answer: Funding Limit Reconciliation

This is known as funding limit reconciliation. This will necessitate the scheduling of work to be adjusted to smooth or regulate those expenditures.

PMBOK 5th edition p. 212

Funding Limit Reconciliation

The expenditure of funds should be reconciled with any funding limits on the commitment of funds for the project. A variance between the funding limits and the planned expenditures will sometimes necessitate the rescheduling of work to level out the rate of expenditures. Thsi is accomplished by placing imposed date constraints for work into the project schedule.

Q: Different stakeholders might require dissimilar overcomes from a project. An integral component of stakeholder management is managing these competing expectations throughout the project from initiation to closure. Which of the following stakeholder management techniques can help in this situation?

A. Stakeholder engagment analysis

B. Facilitation

C. Questionnaires

D. Expert judgment

Answer: Facilitation

The project manager applies management skills to coordinate and harmonize the group toward accomplishing the project objectives. For example:

• Facilitate consensus toward project objectives,
• Influence people to support the project,
• Negotiate agreements to satisfy the project needs, and
• Modify organizational behavior to accept the project outcomes

We saw the term decomposition used in the Scope Management chapter, in the Create WBS process. Carefully read exam questions using the term. If the team is decomposing work into work packages (deliverables), they are creating a WBS (part of scope management). If they are decomposing work packages into the activities required to produce them, they are in the Define Activities process.

Discretionary dependencies - Deiscretionary dependencies are sometimes referred to as preferred logic, preferential logic, or soft logic. Discretionary dependencies are established based on knowledge of best practices within a particular application area or some unusual aspect of the project where a specific sequence is desired, even though there may be other acceptable sequences. Discretionary dependencies should be fully documented since they can create arbitary total float values and can limit later scheduling options. When fast tracking techniques are employed, these discretionary dependencies should be reviewed and considered for modification or removal. The project team determines which dependencies are discretionary during the process of sequencing the activities.

The cost baseline is the approved version of the time-phased project budget, excluding any management reserves, which can only be changed through formal change control procedures and is used as a basis for comparison to actual results. It is developed as a summation of the approved budgets for the different schedule activities. 

The summation of the control accounts make up the cost baseline. Since the cost estimates that make up the cost baseline are directly tied to the schedule activities, this enables a time-phased view of the cost baseline, which is typically displayed in the form of an S-curve.

Q: Which of the following Perform Quality Assurance techniques relates to root cause analysis and is used to identify a problem, discover the underlying causes, and develop preventive actions?

A. Sensitivity Analysis

B. Expected monetary value analysis

C. Earned Value Analysis

D. Process Analysis

Answer: Process Analysis

Process analysis follows the steps outlined in the process improvement plan to identify needed improvements. This analysis also exmines problems experienced, constraints experienced, and non-value-added activities identified during process operation. process analysis includes root cause analysis - a specific techinque used to identify a problem, discover the underlying causes that lead to it, and develop preventive actions.

Rough Order of Magnitude estimate = -50% to +50% (PMBOK®)
Preliminary estimate = -15% to + 50%
Budget estimate = -10% to +25%
Definitive estimate = -5% to +10%
Final estimate = 0%

Configuration control is focused on the specification of both the deliverables and the processes; while change control is focused on identifying, documenting, and approving or rejecting changes to the project documents, deliverables, or baselines.

Some of the configuration management activities included in the Perform Integrated Change Control process are as follows:

Configuration identification - Identification and selection of a configuration item to provide the basis for which the product configuration is defined and verified, products and documents are labeled, changes are managed, and accountability is maintained.

Configuration status accounting - Information is recorded and reported as to when appropriate data about the configuration item should be provided. This information includes a listing of approved configuration identification, status of proposed changes to the configuration, and the implementation status of approved changes.

Configuration verification and audit - Configuration verification and configuration audits ensure the composition of a project's configuration items is correct and that corresponding changes are registered, assessed, approved, tracked, and correctly implemented. This ensures the functional requirements defined in the configuration documentation have been met.

Q: One of the configuration management activities in a project involves capturing, storing and reporting configuration information needed to manage products and product information. This is known as:

A. Configuration status accounting

B. Configuration auditing

C. Configuration verification

D. Configuration identification

Answer: Configuration status accounting.

Information is recorded and reported as to when appropriate data about the configuration item should be provided. This information includes a listing of approved configuration identification, status of proposed changes to the configuration, and the implementation status of approved changes.

[PMBOK 5th edition, Pages 195, 198]

[Project Integration Management]

Q: Your company is considering buying a building worth $1 million. If the company buys this building and rents it out for the next five years, it will get $100,000 per year as rent (receivable by the end of each year). At the end of the fifth year, the company will resell the building at $1.1 million. What is the NPV of this investment at 10% per annum discount rate?

For year 1: PV1 = 100,000 / 1.1^1 = 90,909
For year 2: PV1 = 100,000 / 1.1^2 = 82,645
For year 3: PV1 = 100,000 / 1.1^3 = 75,131
For year 4: PV1 = 100,000 / 1.1^4 = 68,301
For year 5: PV1 = 1,200,000 / 1.1^5 = 745,106

Hence the total PV of the inflows = 1,062,092
NPV = 1,062,092 - 1,000,000 = $62,092

More Example:

https://accountingexplained.com/managerial/capital-budgeting/npv

Q: Your company has a fixed price plus incentive fee contract with a vendor. The contract has the following details:

Target price: $600,000

Target incentive fee: $100,000

Share ratio: buyer 70% and vendor 30%

Actual cost: $650,000

Ceiling price: $725,000

What is the final price your company will have to pay?

Step 1: Find the incentive

Because the actual cost is greater than the target cost, this indicates a cost overrun. Thus the incentive is negative, as shown below.

Incentive = (target cost - actual cost) x vendor's share ratio percentage

Incentive = (600,000 - 650,000) x 30 / 100

Incentive = -50,000 x 0.3 = -$15,000

Step 2: Find the overhead fee

Overhead fee = target fee + incentive

In this case because of the cost overrun, the incentive is negative, so the incentive will be deducted from the vendor's target fee.

Overhead fee = 100,000 + (-15,000)

Overhead fee = $85,000

Step 3: Find the contract cost

Contract cost = actual cost + overhead fee

Contract cost = 650,000 + 85,000

Contract cost = $735,000

Step 4: Compare ceiling price with contract cost

Ceiling price < contract cost

Because the ceiling price is less than the contract cost, the fee paid to the vendor will be limited to the ceiling price, which is $725,000. Had there been no ceiling price, the contract cost would have been $735,000 as computed in Step 3.

Q: You have recently joined an organization as the procurements manager. You have just received an invoice from a contractor. Some of the items from the invoice are as follows:

PV of work completed to date: $50,000

AC of work completed to date: $40,000

Total costs reimbursed by the buyer to date: $35,000

If the contract between the buyer and the contractor is a CPIF contract, what is the total value payable to this contractor? (Assume that the contract allows for a 10% fee over actual costs whenever CPI > 1).

A. $500

B. $5,500

C. $44,000

D. $55,000

Answer: $5,500

Because the total costs reimbursed released by the buyer to date is $35,000, the actual of work completed to date is $40,000, it has said that the contract allows for 10% fee over the actual costs.

CPI = EV / AC = 50,000 /40,000 = 1.25

Actual cost = 40,000
Reimbursable = 35,000

Incentive = (target cost - actual cost) * vendor's share ratio percentage
total cost reimbursable by vendor = 40,000 - 35,000 (total cost reimbursable by the buyer) = 5,000

if (CPI > 1) then 10% fee is applicable on the total cost reimbursable.
CPI = 1.25
5,000 * 1.1 = 5,500

Q: Your company (the buyer) has negotiated a cost plus incentive fee contract with a vendor. The contract has a target cost of $300,000. The vendor's target profit is set at 10%, and the share ratio between buyer and vendor is set at 80/20. The actual cost of the contract ends up being $275,000. What is the total cost of the contract to the buyer?

Step 1: find the incentive

Incentive = (target cost - actual cost) x vendor's share ratio percentage

Incentive = (300,000 - 275,000) x 20/100

Incentive = 25,000 x 0.2 = $5,000

Step 2: find the overhead fee

Overhead fee = vendor's target profit + incentive

Overhead fee = (300,000 x 10%) + 5,000 = 30,000 + 5,000

Overhead fee = $35,000

Step 3: Find the contract cost

Contract cost = actual cost + overhead fee

Contract cost = 275,000 + 35,000

Contract cost = $310,000

Types of problems to expect (5 types):

1. Computing the total contract cost of a cost plus incentive fee contract without a ceiling price
2. Computing the total contract cost of a cost plus incentive fee contract with a ceiling price
3. Computing an incentive fee
4. Computing the fee adjustment when there is a cost overrun
5. Computing the fee adjustment when there is a cost underrun

Formulas

Incentive = (target cost - actual cost) x vendor's share ratio percentage

Overhead fee = vendor's target profit + incentive

Contract cost = actual cost + overhead fee

A tornado diagram is a special type of bar cahrt used in sensitivity analysis for comparing the relative importance of the variables. 
In a tornado diagram, the Y-axis contains each type of uncertainty at base values, and the X-axis contains the spread or correlation of the uncertainty to the studied output. 

Deming, Shewhart cycle
- Plan-Do-Check-Act (PDCA) Cycle

Juran, Pareto
- 80-20 law, for many events, roughly 80% of the effects follow from 20% of the causes
- the root cause of quality issues was the resistence to change, and human relations problems

Joseph Juran

• He developed the 80/20 principle, advocated top
  management involvement and defined quality as “fitness
  for use”.
• Also known as Pareto principle
• E.g. 80% of problems is caused by 20% of
  causes
• Implication: fixing 20% of causes will resolve 80%
  of problems
• Concept of focusing

Crosby
- Doing It Right the First Time

The common denominator should be a document that is common between the buyer and the supplier, that is the supply agreement. The rest of the choices are the project artifacts what will be different for each party since supplier's scope of work is limited in comparison to the buyer's scope of work.

[PMBOK 5th edition, Page 382]

[Project Procurement Management]

A chart representing the hours and the time the position, department, or company will be working on the project is an example of a resource histogram.

[PMBOK 5th edition, Pages 265, 266]

[Project Human Resource Management]

Triangular Distribution (Simple Average)

A simple average of the three-point estimates can be done using the formula (P + O + M) /3. The use of simple averaging gives equal weight to each of the three-point estimates when calculating the expected activity duration or cost. Using this formula, the risks (P and O estimates) are considered equally along with the most likely (M) estimate.

Beta Distribution (Weighted Average)

The use of beta distribution (a weighted average) gives stronger consideration to the most likely estimate. Derived from the Program Evaluation and Review Technique (PERT), this technique uses a formula to create a weighted average for the work to be done. The formula for beta distribution is (P + 4M + O)/ 6. Since the most likely estimate is multiplied by 4, it weights the average toward the most likely estimate. This has the avantage of taking into consideration the benefits of risk management in reducing the uncertainty of estimates. When a good risk management process is followed, the most likely estimates are more likely to occur because risk response plans have been developed to deal with identified opportunities and threats that have been factored into the pessimistic and optimistic estimates.

Range of Estimate =

Expected Activity Duration (EAD) - Standard Deviation (SD)

A.
i. (47 + 4 * 27 + 14) /6 = 28.17
ii. (47 - 14) / 6 = 5.5
iii. 28.167 - 5.5 = 22.667, 28.167 + 5.5 = 33.667

B.
i. (89 + 60 * 4 + 41) / 6 = 61.667
ii. (89 - 41) / 6 = 8
iii. 61.667 - 8 = 53.667, 61.667 + 8 = 69.667

C.
i. (48 + 44 * 4 + 39) / 6 = 43.833
ii. (48 - 39) / 6 = 1.5
iii. 43.833 - 1.5 = 42.333, 43.833 + 1.5 = 45.333
D.
i.(42 + 37 * 4 + 29) /6 = 36.5
ii. (42 - 29) / 6 = 2.167
iii. 36.5 - 2.167 = 34.333, 36.5 + 2.167 = 38.667

Q: A project manager needs to analyze the project costs to find ways to decrease costs. It would be BEST if the project manager looks at:

A. Variable costs and fixed costs

B. Fixed costs and indirect costs

C. Direct costs and variable costs

D. Indirect costs and direct costs

Answer: 

Direct costs and variable costs

Direct costs are directly attributable to the project,  and variable costs are costs that vary with the amount of work accomplished. It is best to look at decreasing these costs on the project.

Q: The difference between the cost baseline and the cost budget can be BEST described as:

A. The management reserves

B. The contingency reserves

C. The project cost estimate

D. The cost account

Answer:

Cost accounts are included in the project cost estimate, and the contingency reserves are added to that to come up with the cost baseline. Thereafter, the management reserves are added to come up with the cost budget. The management reserves make up the difference between the cost baseline and the cost budget.

• Cost Baseline: Cost Baseline is the authorized time-phased spending plan for the project on which the project cost performance is to be measured against. As the Cost Baseline is baselined and managed under configuration management, changes to the Cost Baseline must undergo proper change management processes.
  • The Cost Baseline includes all the project activities/resources costs and the money set aside to respond to risks identified (i.e. known unknowns) over time and it is usually represented as an S-curve
  • Cost Baseline = Project Cost Estimates + Contingency Reserves
• Cost Budget: the allowable deviations requested based on customer expectations
  • The Cost Budget is the estimate of total amount of money required for carrying out the Project, including money set aside for identified and unidentified risks (i.e. unknown unknowns)
  • The Cost Budget can be thought of as the Cost Baseline over time plus the Management Reserves
  • Cost Budget = Project Cost Estimates + Contingency Reserves + Management Reserves

Identified risks are:

A. An input to the Estimate Costs process

B. An output of the Estimate Costs process

C. Not related to the Estimate Costs process

D. Both an input to and an output of the Estimate Costs process

Identified risks are listed in the risk register, an input to the Estimate Costs process. In completing the Estimate Costs process, additional risks may be uncovered. These are added to the risk register as project documents updates.

Q: The project manager is allocating overall cost estimates to individual activities to establish a baseline for measuring project performance. What process is this?

A. Cost Management

B. Estimate Costs

C. Determine Budget

D. Control Costs

Answer:

Cost Management is too general. The estimates are already created in this situation, so the answer is not Estimate Costs. The answer is not Control Costs, because the baseline has not yet been created. The work described is the Determine Budget process.

Q: Early in the life of your project, you are having a discussion with the sponsor about what estimating techniques should be used. You want a form of expert judgment, but the sponsor argues for analogous estimating. It would be BEST to:

A. Agree to analogous estimating, as it is a form of expert judgment

B. Suggest life cycle costing as a compromise.

C. Determine why the sponsor wants such an accurate estimate

D. Try to convince the sponsor to allow expert judgment because it is typically more accurate

Answer: 

Agree to analogous estimating, as it is a form of expert judgment

This is a tricky question. Determining why the sponsor wants such an accurate estimate sounds like a good idea at first. However, analogous estimates are less accurate than other forms of estimating, as they are prepared with a limited amount of detailed information. Reading every word of this choice helps eliminate it. In order to pick the best answer, you need to realize that analogous estimating is a form of expert judgment.

Q: Value analysis is performed to get:

A. More value from the cost analysis

B. Management to buy into the project

C. The team to buy into the project

D. A less costly way of doing the same work

Answer:

A less costly way of doing the same work

Notice that you need to know the definition of value analysis to answer this question. Also notice that the other choices could be considered correct by someone who does not know the definition. Value analysis seeks to decrease cost while maintaining the same scope.

To understand Value Analysis it is necessary to understand some key concepts:

Value:

the ratio between a function for customer satisfaction and the cost of that function.

Function:

the effect produced by a product or by one of its elements, in order to satisfy customer needs.

Value analysis:

Methodology to increase the value of an object. The object to be analysed could be an existing or a new product or process, and it is usually accomplished by a team following a workplan.

Need:

something that is necessary or desired by the customer.

Project setup costs are an example of Fixed costs.

Team training is type of Direct cost. You are training the team on skills required for the project. The cost is directly related to the project and thus a direct cost.

Q: A cost baseline is an output of which cost management process?

A. Estimate Activity Resources

B. Estimate Costs

C. Determine Budget

D. Control Costs

Answer:

Determine Budget

A cost baseline is an output of the Determine Budget process

Plan Cost Management - The process that establishes the policies, procedures, and documentation for planning, managing, expending, and controlling project costs.

Estimate Costs - The process of developing an approximation of the monetary resources needed to complete project activities.

Determine Budget - The process of aggregating the estimated costs of individual activities or work packages to establish an authorized cost baseline.

Control Costs - The process of monitoring the status of the project to update the project costs and managing changes to the cost baseline.

Q: A rough order of magnitude estimate is made during which project management process group?

A. Planning

B. Closing

C. Executing

D. Initiating

Answer:

Initiating

This estimate has a wide range. It is done during project intiating, when very little is known about the project

An estimate of costs and time provided in the early stages of a project when its scope and requirements has not been fully defined. An ROM is used to reduce the uncertainty of cost outcomes for both parties when project details have yet to be identified.

Rough Order of Magnitude (ROM) Estimates - This type of estimate is usually made during project initiating. A typical range for ROM estimates is -25 to +75 percent from actual, but this range can vary depending on how much is known about the project when creating the estimates.

Budget Estimate - This type of estimate is usually made during project planning and is in the range of -10 to +25 percent from actual.

Definitive Estimate - As the project progresses, the estimate will become more refined. Some project managers use the range of +/-10 percent from actual, while others use -5 to +10 percent from actual.

Q: Which of the following is an example of a parametric estimate?

A. Dollars per module

B. Learning bend

C. Bottom-up

D. CPM

Answer:

Dollars per module

Parametric estimates use a mathematical model to predict project cost or time.

Q: The main focus of life cycle costing is to:

A. Estimate installation costs

B. Estimate the cost of operations and maintenance

C. Consider installation costs when planning the project costs

D. Consider operations and maintenance costs in making project decisions.

Answer: 

Consider operations and maintenance costs in making project decisions.

Life cycle costing looks at operations and maintenance costs and balances them with the project costs to try to reduce the cost across the entire life of the project.

This concept involves looking at costs over the entire life of the product, not just the cost of the project to create the product. Would it be wise to design the project so that the projects are low but the maintenance costs are higher than the project cost savings? For example, you can plan the project to produce the product at a lower level of quality and save $9,000. After the project is completed, the maintenance costs are $100,000 over the product's life, instead of the $20,000 in maintenance it could have cost had you built the product to a higher quality standard. Your $9,000 project "savings" cost the company $80,000 (or $71,000 in additional cost). This is the concept of life cycle costing - looking at the cost of the whole life of the product, not just the cost of the project.

Estimate at Completion

Estimate at Completion (EAC) is the expected cost of an activity or project at completion. The EAC at any given point in time is calculated using the actual cost of the project thus far and the estimated cost to complete the remaining work. But it can also be calcuated by some other methods depending on the nature of the project. The different ways to determine the Estimate at Completion are as follows:

a. Project cost has no deviations from the budget or the rate of spending is the same - Since the amount being spent on the project is in line with established budget, the BAC is used to compute the EAC.

EAC = BAC / CPI

b. Original estimates are flawed - If original estimates of the cost of the project are flawed, it is best to make a new estimate of the cost of remaining work in order to compute the EAC. This new ETC includes a manual analysis of all the remaining work in the project bearing in mind past performance.

EAC = AC + ETC

c. Project has atypical variance - Atypical variances imply that the project had an unexpected risk or opportunity that skewed the project performance results. If the risk or opportunity is not likely to be repeated, the variance is considered to be atypical. In this case EAC is

EAC = (AC + (BAC - EV))

d. Project has typical variances - Typical variances imply that the variances that have occurred in the project are likely to be repated in the future. In this case EAC is

EAC = AC + [(BAC - EV) / CPI]

Earned Value Analysis: Forecast

BAC - Budget at Completion (the budget) - How much did we BUDGET for the TOTAL project effort?

EAC - Estimate at Completion - What do we currently expect the TOTAL project to cost (a forecast)?

ETC - Estimate to Complete - From this point on, how much MORE do we expect it to cost to finish the project (a forcast)?

The method used to calculate the ETC varies depending on the nature of the project estimates and variances

a. Original estimates are flawed - When the original estimates of a project are flawed, the ETC is best calcuated by analyzing the situation and making new estimates. This approach excludes the use of any mathematical formula and involves an independent analysis of all the work remaining on the project, bearing in mind the project's past project performance analysis.

b. Project has atypical variances - Atypical variances imply that the project had an unexpected risk or opportunity that skewed the project performance results. If the risk or opportunity is not likely to be repeated, the variance is considered to be atypical. In this case ETC is the difference between the Budget at Completion and the Earned Value.

ETC = BAC - EV

c. Project has typical variances - Typical variances imply that the variances that have occurred in the project are likely to be repeated in the future. In this case, ETC is the difference between the Budget at Completion and Earned Value divided by the CPI.

ETC = (BAC - EV) / CPI

VAC - Variance at Completion - As of today, how much over or under budget do we expect to be at the end of the project?

SPI = EV / PV

CPI = EV / AC

SV = EV - PV

CV = EV - AC

Earned Value Forecast formula

Estimate to Completion - ETC = EAC - AC

a. Bottom-up estimating
b. Analogous estimating
c. Expert judgment
d. Parametric estimating
e. Three-point estimates

1. The Starbuzz across the street opened just a few months ago. Alice sits down with the contractor who did the work there and asks him to help her figure out how much it will cost. He takes a look at the equipment Charles and Jeff want to buy and the specs for the cabinets and seating and tells her what she can afford to do with the budget she has.

Tool: Analogous estimating

Since Alice is using the contractor's experience with a similar project to figure out how long her project will take, she is assuming that her project will go like the Starbuzz one did.

2. Alice creates a spreadsheet with all of the historical information from similar remodeling projects that have happened on her block. She sits down and types in the guys' desired furnishings and the square footage of the room to generate an estimated cost.

Tool: Parametric estimating

In this one Alice is just applying some numbers particlar to her project to some historical information she has gathered from other projects and generating an estimate from that.

3. Before Alice finishes her schedule, she gathers all of the information she has about previous projects' costs (like how much labor and materials cost). She also talks to a contractor, who gives valuable input.

Tool: Expert judgment

Expert judgment offer involves going back to historical information about past projects as well as consulting with experts or using your own expertise.

4. Alice sits down and estimates each and every activity and resource that she is going to need. Then she adds up all of the estimates into "rolled-up" categories. From there she adds up the categories into an overall budget number.

Tool: Bottom-up estimating

Starting at the lowest level and rolling up estimates is bottom-up estimating. Alice started with the activities on her schedule and rolled them up to categories and finally to a budget number.

5. Jeff sets up an appointment with the same contractor his friend used for some remodelling work. The contractor comes to the house, takes a look at the room, and then gives an estimate for the work.

Tool: Expert judgment

This is another example of asking somebody who has direct experience with this kind of work to give an estimate.

6. Alice figures out a best-case scenario, a most likely scenario, and a worst-case scenario. Then she used a formula to come up with an expected cost for the project.

Tool: Three-point estimates

Alice came up with the three estimates and then performed the PERT calculation on them.

Variance at Completion (VAC) is an indicator of whether the project is over or under the Budget at Completion. It is the difference between the Budget at Completion and the Estimate at Completion.

VAC = BAC - EAC

if VAC > 0 - the project is under budget

if VAC < 0 - the project is over budget

if VAC = 0 - the project is on budget

Q: To assess the status on your project, you call a meeting of the project team and analyze the project performance based on earned value figures as of today. You find that some of the activities are behind schedule and that the organization is spending more than planned costs on other activities. What would be an output of this meeting?

a. rework

b. lessons learned

c. change requests

d. approved corrective actions

Answer:

change requests

Change requests would be an output of this meeting. Change requests come up after an analysis of project performance, and these requested changes are an output of the Control Communications process. Change requests refer to requests made to change some aspects of the project based on performance evaluation. Requested changes are an input to the Perform Integrated Change Control process. Change requests usually result in changes to the schedule, cost, or scope. All requested changes should be recorded in the change log, even if the change request was denied.

Q: The project team is creating the budget for a new construction project, You need to collect all of the inputs that are needed. All of the following are inputs to this process, EXCEPT:

a. cost baseline

b. activity cost estimates

c. project schedule

d. agreements

Answer: cost baseline

The cost baseline is an output of the Determine Budget process, not an input. In the PMBOK 4th Edition, this output was called cost performance baseline. The determine Budget process involves aggregating the estimated costs of the individual schedule activities or work packages.

Rough Order of Magnitude (ROM) Estimates - This type of estimate is usually made during project initiating. A typical range for ROM estimates is -25 to +75 percent from actual, but this range can vary depending on how much is known about the project when creating the estimates.

Budget Estimate - This type of estimate is usually made during project planning and is in the range of -10 to +25 percent from actual.

Definitive Estimate - As the project progresses, the estimate will become more refined. Some project managers use the range of +/-10 percent from actual, while others use -5 to +10 percent from actual.

The issue log is not an organizational process assets update. The issue log is considered to be a project document.
All of the other options are considered to be organizational process assets updates as part of the Manage Communications process.

The inputs to the Manage Communications process are as follows:

• Communications management plan
• Work performance reports
• Enterprise environmental factors
• Organizational process assets

The tools and techniques used by the Manage Communications process are as follows:

• Communication technology
• Communication models
• Communication methods
• Information management systems
• Performance reporting

The outputs of the Manage Communications process are as follows:

• Project communications - include performance reports, deliverables status, schedule progress, and costs incurred
• Project management plan updates - include project baselines, communications management plan updates, and stakeholder management plan updates
• Project document updates - include the issue log, project schedule, and project funding requirements
• Organizational process assets updates - include stakeholder notifications, project reports, project presentations, project records, stakeholder feedback, and lessons learned documentation

The Manage Communications process is part of the Project Communications Management Knowledge Area and Executing Process Group. The Project Communications Management Knowledge Area was changed significantly in the PMBOK 5th Edition and now consists of the following three processes:

• Plan Communications Management - referred to as Plan Communications in the PMBOK 4th Edition
• Manage Communications - referred to as Distribute Information in the PMBOK 4th Edition
• Control Communications - referred to as Report Performance in the PMBOK 4th Edition

The key benefit of the Manage Communications process is that it enables efficient and effective
communications flow between project stakeholders.

Independent Estimates

The buyer may compare the seller’s proposed cost with an estimate created in-house or with outside assistance. This allows the buyer to discover significant differences between what the buyer and seller intend in the procurement statement of work. The buyer must have their own estimates to check reasonableness and cannot rely solely on the seller’s cost estimates.

An independent estimate can help you figure out why the pricing in a seller's proposal might be very different from what you anticipated. An independent estimate, which can be done internally or externally, is an assessment of the work that will be contracted out to sellers. An independent estimate is also known as a "should-cost" estimate.
Parametric estimating is an estimation technique that compares different variables to historical information. It is used in cost estimating and activity duration estimation.
Three-point estimates are used to predict the most likely, best-case, and worst-case scenarios for a given cost or duration estimate.
Bottom-up estimates are used to calculate the cost for the smallest individual work packages so that the summation of these detailed costs can produce a high-level cost estimate.
Sometimes an incomplete or inaccurate statement of work may be the cause of discrepancies between seller proposals and your expectations, but other factors can cause such discrepancies as well. For instance, the market price of a requisite material, such as fuel, may have increased dramatically since the time of your own estimates. Therefore, an independent estimate is the best choice because it should be able to assess a wide variety of possible causes.

Benefit-cost ratio
Benefit-cost ratio compares the revenue (benefit) of a project to its cost. Cost-benefit ratio and benefit-cost ratio refer to the same analysis between cost and revenue.

Cost-benefit ratio = cost / benefit (if > 1, the project is a profitable venture)
Benefit-cost ratio = benefit / cost (if < 1, the cost are higher than the benefit and the project may not be profitable)

Opportunity cost
Often a company has to choose between projects for reasons of limited capital, resources, or time. The opportunity cost is equal to the net present value of the project not chosen.
e.g. Project B with NPV - $700,000
Project A with NPV - $500,000

Sunk cost
Sunk costs are the costs that cannot be recovered from a project. While all projects are started in an earnest effort to earn a profit, some projects inevitably veer off course despite a heavy influx of investment and commitment.

Depreciation

STRAIGHT-LINE DEPRECIATION
In the straight-line type of depreciation, it is assumed that the asset provides the same value in every year of its life span and hence the asset is devalued by the same percentage every year.

Straight-line depreciation = cost of the asset / life of the asset

ACCELERATED DEPRECIATION
With accelerated depreciation, the asset is not devalued by the same percent or amount for every year of its life.
Depreciation is higher in the initial years and decreases as time goes on.

- Declining Balance Method
Current asset value = original asset value - previous depreciations
Depreciation amt = current asset value / total estimated life

- Sum of the years method
Add the numbers from 1 through the estimated number of years in the life of the asset.

Break-even analysis
Let x be the year
sum of one-off costs + yearly cost * x = revenue * x

Return on sales
Return on sales (ROS) is a measure of a firm's operational efficiency.
Return on sales = (net income before or after taxes / total sales) * 100

Return on Assets
Return on assets is a measure of a firm's ability to use its assets efficiently to generate revenue.

Return on assets = (net income before or after taxes / total asset value) * 100

Return on Investment
Return on investment (ROI) is a measure of the profitability of a project from an accounting perspective.
Return on investment = (net income before or after taxes / total investment) x 100

Working Capital Ratio
Working capital is a measure of a firm's ability to meet its financial obigations toward its liabilities in the short term:
positive working capital -> availability of cash
negative working capital -> excessive cash or inventory

Working capital = current assets - current liabilties

Organizations often have different standards for different ranges of accuracy of estimates:

preliminary -> conceptual -> feasibility -> order of magnitude -> definitive estimate

Standards:

• Rough Order of Magnitude (ROM) Estimate - This type of estimate is usually made during project initiating. A typical range for ROM estimates is -25 to + 75 percent from actual, but this range can vary depending on how much is known about the project when creating the estimates.
• Budget Estimate - This type of estimate is usually made during project planning and is in the range of -10 to +25 percent from actual.
• Definitive Estimate - As the project progresses, the estimate will become more refined. Some project managers use the range of +/- 10 percent from actual, while others use -5 to +10 percent from actual.

Planning, in particular project cost and time planning, requires a lot of estimation as the work involved has not happened yet. In real-world project management and the PMP® Exam, estimation usually involves two distinct types of methods: Analogous Estimating and Parametric Estimating. This post will expound on the similarities and differences of the two kinds of estimation methods.

Analogous Estimating vs Parametric Estimating

• Analogous Estimating: the estimation is made by simply taking the values from past projects/activities with similar scope to the current projects/activities (somewhat like making an analogy)
  • the fastest and easiest estimation method to give a rough estimation
  • requires a combination of historical information and expert judgment (the information from past projects can be adjusted with consideration of the special circumstances of the current project, e.g. including inflation, etc.)
  • however the estimation is least reliable as no two projects are identical
  • used in cases where there is limited amount of available information early in the project
  • also known as “Top-Down Estimating“
• Parametric Estimating: the estimation is based on historical information of very similar projects with consideration of the scale differences
  • by first identifying the unit cost/duration from the past projects/activities and scale the estimation to the required number of units for the current project/activity
  • the estimation is more reliable
  • used only when a statistical relationship between historical data and current work can be established; often have limited use as the nature/details of the current project/activity may differ significantly from previous ones and thus makes parametric estimating not feasible

Though both Analogous Estimating vs Parametric Estimating are based on the historical information from the organization/industry to estimate cost/duration for the project/activity, there are some very noted differences between them:

• Analogous Estimating is considered a top-down approach which is much less accurate than parametric estimating in which Analogous Estimating is based on simple “analogy”;
• Parametric Estimating is more accurate for projects/activities with components which are similar and “scalable”, it is based on a unit cost/duration from historical data which is scaled  to give the estimation;
• Analogous Estimating is used early in the project where there is limited amount of information available while Parametric Estimating is used if the project/activity is “scalable”.

In addition to the two types of estimation methods detailed above, the PMBOK® Guide has also mentioned two other estimation methods:

• Bottom up Estimating — (also known as the “definitive technique”) the most accurate and time-consuming of all estimation methods in which every single activity is broken down into details at the bottom level and aggregate the estimations of each individual components to give an overall estimation.
• Three point Estimating — this more accurate estimation is developed from three estimates using the PERT (Program Evaluation And Review Technique) formula:
  • (Eo + 4Em + Ep)/6
    • Most Likely Estimate (Em): The estimate when everything goes as normal
    • Pessimistic Estimate (Ep): The estimate when everything goes (almost) wrong
    • Optimistic Estimate (Eo): The estimate when everything goes (almost) smoother than expected
  • risks and uncertainty are taken into accounts
  • more accurate than  Analogous Estimating and Parametric Estimating

Illustrated Example

For the exam prep project, before the actual preparation, Aspirants are highly advised to make a project plan for their exam studies by detailing the scope and estimated timeframe.

There are 10 Knowledge Areas identified in the PMBOK® Guide. Suppose it is known that it would take 10 hours for going through 1 project management Knowledge Area, the time taken to go through all the 10 Knowledge Areas would be:

10 hours/Knowledge Area x 10 Knowledge Areas = 100 hours

Parametric Estimating is employed here since we have the data to know the “unit duration” for the exam project (but beware that the length and difficulty of each individual Knowledge Area for the PMP® Exam is different from the others, the actual time spent on each Knowledge Area would be quite different in my experience).

Suppose you have taken the CAPM® Certification Exam in the past with a total of 300 hours of preparation. And since the CAPM® and PMP® Certification Exams are both offered by PMI, you try to make use of Analogous Estimating here to estimate it would take 300 hours for the exam preparation.

Q: You are building a mile-long bridge on a T&M contract. During the excavation activity you found out that some telephone cables are crossing the alignment where you have to construct the bridge. You need to relocate these telephone cables but there is no provision of such an activity in the contract. Further, the relocation of the cables will be a costly task and a lot of government paperwork needs to be done as well. You requested an amendment in the contract but the buyer has rejected it. Despite many efforts you both have not been able to resolve this issue. What should you do next?

A. Terminate the contract following the termination procedures mentioned in the contract

B. File a judicial petition in accordance with the state's law

C. Seek arbitration following the ADR procedures in the contract

D. Relocate the cables at your own expense since the activity is not covered by the contract

Answer:

Seek arbitration following the ADR procedures in the contract

In this scenario there has been an increase in the scope of works. Since the contract doesn't accommodate this, the contractor rightfully requested for an amendment. However, since both parties cannot settle this amicably, the next step is to seek aribitration.

[PMBOK 5th edition, Page 384]
[Project Procurement Management]

Q: The Cost Management Plan is an output of the Plan Cost Management process. This plan is then integrated with other project plans in which of these processes?

A. Develop Project Management Plan
B. Monitor and Control Project Work
C. Perform Integrated Change Control
D. Direct and Manage Project Work

Answer:
Develop Project Management Plan
The cost management plan is a component of the project management plan. Once the cost management plan is developed, it is integrated with the project management plan during the Develop Project Management Plan process.
[PMBOK 5th edition, Page 198]
[Project Cost Management]

Q: What is the document for  the Project's escalation process?  

A: Communications management plan

Communications management plan vs Stakeholder management plan

Although there is a lot of overlap of information between the project communication management and stakeholder management plans, the project escalation process is only documented in the communications management plan.

[PMBOK 5th edition, Pages 206, 403]

[Project Stakeholder Management]

The upper/ lower control limits are normally set at + / - 3 sigma.

A milestone list is a valid output of the Define Activity process.

While these characteristics remain present to some extent in almost all project life cycles, they are not always present to the same degree. Adaptive life cycles, in particular, are developed with the intent of keeping stakeholder influences higher and the costs of changes lower throughout the life cycle than in predictive life cycles.

Quality is defined as the degree to which the project fulfills requirements.
Grade is commonly used to discuss quality. Grade is used to category or classify a deliverable or resource of a project.
Quality management:
Plan Quality Management
Perform Quality Assurance
Control Quality.

3 or 6 Sigma
Sigma, is another name for standard deviation, and indicates how much variance from the mean has been established as permissible in a process. The level of quality a company has decided to try to achieve is represented by 3 or 6 sigma.

(Note that Six Sigma” is a methodology for organizational process improvement and achieving high levels of correctness with extremely reduced variances.) At 6 sigma, less than 1.5 out of 1 million doors produced will have a problem. At 3 sigma, approximately 2,700 will have a problem. Achieving 6 sigma requires extensive planning. In some organizations, 3 sigma might be acceptable because the amount of planning you’d have to do to reach 6 sigma would be cost- and time-prohibitive. A project under 3 sigma requirements is going to allow a wider range of variance, and planning and control will not require such attention to detail.

Q: Work Performance Data is an important input to the Control Procurements process. Which of the following is not a component of Work Performance Data?

A. Data regarding supplier's conformance to quality standards
B. Data on deliverables that have been completed
C. Data regarding costs that have been incurred or committed on each supplier contract
D. Data on supplier invoices and respective payments

Answer:
Data on deliverables that have been completed

Data on status of deliverables progress is part of Work Performance Information and not Work Performance Data. The subtle difference between Work Performance Information confuses many people, however it is very important to clearly distinguish between these two concepts.
[PMBOK 5th edition, Page 382]
[Project Procurement Management]

Work Performance Information

• Data on status of deliverables progress
• Generated by the Direct and manage Project Execution process

Three inputs to Work performance data:

• Monitor and Control Project Work process
• Perform Integrate Change Control
• Direct and Manage Project Execution

Work Performance data --> Work Performance Measurements

Work Performance Data, Information and Reports - The PMBOK' Guide uses three different terms—work performance data, work performance information, and work performance reports—to differentiate the various stages of project data and information. Work performance data are the initial measurements and details gathered during project work (executing). When work performance data have been analyzed for conformance to plan during controlling processes, they become work performance information. This information can then be organized into work performance reports, which are distributed to the various stakeholders who need to receive and possibly act on the information. 

The project scope statement documents and addresses the characteristics and boundaries of the project and its associated products and services, as well as product acceptance criteria and scope control.
[PMBOK 5th edition, Page 123]
[Project Scope Management]

Q: Linda is a project manager in charge of an online banking project. The project has completed phase 1 and is moving into the next phase of the project. For phase 2, which of the following processes must be performed first?

A. Define Scope
B. Identify Stakeholders
C. Develop Project Charter
D. Develop Project Mangement Plan

Answer:
Identify Stakeholders

Linda needs to initiate the second phase of her project. There is no need to revisit the Develop Project Charter process. However, she needs to revisit the Identify Stakeholders process to determine any change in the stakeholders for the second phase of the project. Stakeholder identification is a continuous process.

[PMBOK 5th edition, Page 31]
[Project Stakeholder Management]

Efficient communication means providing only the information that is needed; nothing more, nothing less.

[PMBOK 5th edition, Page 290]

[Project Communications Management]

Lucy is managing a high-tech software development project. She has been lucky in acquiring the best performing employees of the organization. However, the project team is not communicating effectively causing delays. The project communications plan is in place but it seems like it is not being followed. The communication plan outlays the communications requirements but does not explicitly assign responsibilities. What should Lucy do first? (assume that all of the following actions need to be taken at some stage)

A. Persuade the team to follow the plan
B. Motivate the team to effectively communicate
C. Set and manage expectations
D. Resolve conflicts to prevent disruptive behavior

Answer:
Set and manage expectations

Assuming that none of the given actions have been undertaken in the past, the first thing to do is to set expectations. Once the expectations are set, the behavior need to be managed. Persuasion, motivation and conflict resolution should follow this.
[PMBOK 5th edition, Page 288]
[Project Communications Management]

The WBS represents all product and project work. The total work at the lowest levels should roll up to the higher levels s that nothing is left out and no extra work is performed. This principle is also called the:

A. 100% rule
B. 80/20 rule
C. Pareto's rule
D. Ground rule

Answer
100% rule

The WBS represents all product and project work. The total work at the lowest levels should roll up to the higher levels so that nothing is omitted and no extra work is performed. This primciple is also called the 100% rule.

[PMBOK 5th edition, Page 131]
[Project Scope Management]

Estimate to Complete (ETC) = BAC (Budget At Completion) - EV (Earned Value)

Q: A project was estimated to cost $200,000 with a timeline of 10 months. Due to a shipment delay, the schedule was slightly delayed. However, this was made up by shipping the first batch of materials for the project by air. The net result was that there was some additional cost in the project. At the end of the second month, the Project Manager reviews the project and finds that the project is 20% complete and Actual Costs are $50,000. The Estimate to Complete (ETC) for the project would now be:

Q: The Banks in Ukraine have raised the annual interest rates sharply to 30%. You have the option to invest your money either in Ukrainian banks or to build a small factory for a client. The total cost of building the factory will be $12 million but will be spread evenly over one year ($1 million payable by the end of each month for the next 12 months). The client will make a payment of $3.9 million at the end of each quarter from the start of the project. Which of the following is the best option (if you are only considering the return on investment)?

Stakeholder analysis generally follows the steps described below:

• Identify all potential project stakeholders and relevant information, such as their roles, departments, interests, knowledge, expectations, and influence levels. Key stakeholders are usually easy to identify. They include anyone in a decision-making or management role who is impacted by the project outcome, such as the sponsor, the project manager, and the primary customer. Identifying other stakeholders is usually done by interviewing identified stakeholders and expanding the list until all potential stakeholders are included.
• Analyze the potential impact or support each stakeholder could generate, and classify them so as to define an approach strategy. In large stakeholder communities, it is important to prioritize the stakeholders to ensure the efficient use of effort to communicate and manage their expectations.
• Assess how key stakeholders are likely to react or respond in various situations, in order to plan how to influence them to enhance their support and mitigate potential negative impacts.

There are multiple classification models used for stakeholders analysis, such as:

• Power/interest grid, grouping the stakeholders based on their level of authority (“power”) and their level or concern (“interest”) regarding the project outcomes;
• Power/influence grid, grouping the stakeholders based on their level of authority (“power”) and their
  active involvement (“influence”) in the project;
• Influence/impact grid, grouping the stakeholders based on their active involvement (“influence”) in the project and their ability to effect changes to the project’s planning or execution (“impact”); and
• Salience model, describing classes of stakeholders based on their power (ability to impose their will),
  urgency (need for immediate attention), and legitimacy (their involvement is appropriate).

Q: Nancy is carrying out cost-benefit analysis for a project. If undertaken, the project will start in January next year and end by December. The project will incur a constant cost of $10,000 each month (payable by the end of each month) giving a total cost of $120,000 for the project. The revenue from the project will be collected on a quarterly basis. The toal revenue for the project by the end of December will be $20,000. The opportunity cost of the project is 12% which is the bank interest rate Nancy can get if she does not invest in this project. The total present value of all cash outflows is $112,551, while the total present value of all cash inflow is $185,721. What is the benefit-to-cost ratio for the project?

Benefit-to-cost ratio (BCR) = PV of inflows/ PV of outflows = 1.65

The gross BCR can also be calculated as Total Revenue/ Total Cost. However, since the total present value of both the inflow and outflow is given, this must be used for a more accurate calculation.
[PMBOK 5th edition, Page 195, 198, 235, 535]
[Project Integration Management]

$10,000 - constant cost (payable by the end of each month)
$120,000 - total cost
$200,000 - total revenue for the project by the end of Dec
12% - opportunity cost
$112,551 - Total NPV of all cash outflows
185,721 - total present value of all cash inflow

In Rolling Wave Planning, the work to be accomplished in the near term is estimated in detail at a low level of the Work Breakdown Structure (WBS), while the work far in the future is estimated as WBS components that are at a relatively high level of the WBS. The work to be performed within another one or two reporting periods in the near future is planned in detail during the current period.
[PMBOK 5th edition, Page 152]

Cost of Conformance vs Cost of Non-Conformance

• Cost of Conformance: this is the costs incurred by carrying out activities to ensure the project and deliverables conform to the quality requirements and avoid failure (i.e. building quality into the project processes).
  • Cost of Conformance can be broadly divided into two categories:
    • Prevention Costs — money spent on activities/equipment to prevent defects from arising in the first place, e.g. :
      • Equipment update and maintenance
      • Training provided to staff
      • Documentation
      • Following quality standards
      • Time and human resources involved
      • Quality Assurance activities
    • Appraisal Costs — money spent on those activities to inspect and dig out defects to prevent these defects from getting into the hands of the customers, e.g.:
      • Testing and inspection
      • Destructive testing loss
      • Quality Control activities
• Cost of Non-Conformance: this is the money that needs to be spent for not conforming to the quality requirements.
  • Cost of Non-Conformance can also be broadly divided into two categories:
    • Internal Failure Costs — the costs incurred when defects in the deliverables are detected internally (i.e. not yet presented to the customers)
      • Defect Repair
      • Rework
    • External Failure Costs — the costs incurred when defects are found the deliverables have been delivered to customers and in actual use (this is the wrost kind of quality costs)
      • Warranty work
      • Liabilities
      • Loss of business goodwill

Both the Cost of Conformance and the Cost of Non-Conformance can be collectively referred to as the Cost of Quality. Cost of Conformance is considered much lower than the Cost of Non-Conformance. Therefore in the PMP® Exam, quality management advocates “prevention over inspection”.

Q: All of the following are examples of the cost of nonconformance EXCEPT:
A. Rework.
B. Quality training.
C. Scrap.
D. Warranty costs.

Answer:
Quality training

As a project manager of a project, you are analyzing the costs which have been incurred. Which of the following costs cannot be classified under cost of non-conformance?

A. Quality Assurance Costs
B. Warranty costs
C. Costs due to loss of reputation
D. Rework Costs

Answer:
Quality Assurance Costs

The Quality Assurance Costs are part of the cost of conformance.
The cost of non-conformance includes the failure costs.
[PMBOK 5th edition, Page 229]
[Project Quality Management]

Validate Scope is the process of formalizing acceptance of the completed project deliverables. The key benefit of this process is that it brings objectivity to the acceptance process and increases the chance of final product, service, or result acceptance by validating each deliverable.

Scope Validation involves obtaining the stakeholders' formal acceptance of project deliverables.

[PMBOK 5th edition, Page 133]
[Project Scope Management]

Q: A management control point where scope, budget, actual cost and schedule are integrated and compared to earned value for performance measurement is called a:

A. Code of accounts
B. Control packages
C. Control account
D. Account Plan

Answer
Control account

Control accounts are placed at selected management points of the Work Breakdown Structure (WBS). Each control account may include one or more work packages, but each of the work packages must be associated with only one control account.

[PMBOK 5th edition, Page 132]
[Project Scope Management]

When doing Earned Value Management within a standard project structure there can be a defined level that is considered a "control account". A control account is normally the intersection of the functional organization doing the work and the Project organizational hierarchy. This is typically defined as the level that you can aggregate BCWS, BCWP, and Actuals AND is a level that is controlled by a single organization. Below a control account is a "Work Package". The work package is the level of the project that the user plans and a takes status on for EV.

Below is the general hierarchy concept of organizing and maintaining a control account or work package:

• A work package is BELOW a control account. However, it does not have to be directly below a control account.
• You cannot have a control account below another control account.
• You cannot have a work package below another work package.
• Management Reserve and Undistributed Budget cannot be part of the control account hierarchy. In other words
  • Cannot be an object that has a Control Account defined BELOW it.
  • Cannot be an object that has a Control Account defined ABOVE it.

Once the project structure is defined into control accounts and work packages responsibility and ownership can now be established. This requires assigning Control Account Managers or CAMs to play an essential role in Earned Value Management. They are responsible for the planning, coordination, and achievement of all work within a control account. They also provide authorization for all scope, technical and cost changes for their respective control accounts.

Q: Unless an enterprise-wise ERP is deployed in an organization,disparate IT systems perform specialized tasks in a project. Which of the following systems typically processes supplier's payments once all the necessary certification of satisfactory work has been obtained?

A. Project management information systems
B. Accounts payable systems
C. Change control and tracking systems
D. Supply chain management system

Answer:
Accounts payable systems

Payments to the seller are typically processed by the accounts payable system of the buyer after certification of satisfactory work by an authorized person on the project team.

[PMBOK 5th edition, Page 383]
[Project Procurement Management]

Q: Which of these statements correctly links project and product life cycles?

A. A product life cycle is generally contained within a project life cycle.
B. A project life cycle is generally contained within a product life cycle.
C. A product life cycle is the same as a project life cycle.
D. The last life cycle for a project is generally the product's retirement.

Answer:
A project life cycle is generally contained within a product life cycle.

The product life cycle usually consists of sequential, non-overlapping product phases. The project life cycle is typically contained within one or more product life cycles.

[PMBOK 5th edition, Page 12, 13, 38]

Q: You are looking at various process improvement models. Which of the following is not a process improvement model?

A. Malcolm-Baldrige
B. Organizational Project Management Maturity Model (OPM3)
C. Capability Maturity Model Integrated (CMMI)
D. Shewhart-Deming

Answer:
Shewhart and Deming were quality management experts. The other choices are process improvement models.

[PMBOK 5th edition, Page 220]
Project Quality Management

Malcolm-Baldrige
Baldrige Framework

The Baldrige Excellence Framework has three parts: (1) the criteria for performance excellence, (2) core values and concepts, and (3) scoring guidelines. The framework serves two main purposes: (1) to help organizations assess their improvement efforts, diagnose their overall performance management system, and identify their strengths and opportunities for improvement and (2) to identify Baldrige Award recipients that will serve as role models for other organizations.

• Growth in customer satisfaction, engagement, and loyalty
• World-class product and service outcomes
• Role model process efficiency
• Increased workforce and volunteer satisfaction and engagement
• Growth in revenue and market share, and improved financial results
• Increased student learning outcomes
• Dramatically improved patient outcomes, safety, and loyalty

Organizational Project Management Maturity Model (OPM3)

What OPM3 Is, and What It Is Not

What are some other ways we can describe what OPM3 is?

Certainly, OPM3 is a means to understand and assess the ability of an organization to implement its high-level strategic planning by managing its portfolio or portfolio's and then delivering at the tactical level by successfully, consistently, and predictably managing programs and individual projects.

Basic OPM3 Model Architecture

Basic Model Components

As indicated earlier, the basic components of the OPM3 model are the following:

Best Practices in organizational project management;
the constituent Capabilities (see Exhibit 1) that are necessary for the existence or attainment of Best Practices;
observable Outcomes signifying the existence or attainment of each relevant Capability;
Key Performance Indicators, which are the means of measuring each Outcome;
model context, including the Organizational Project Management Process and the stages of process improvement:
the pathways that identify the Capabilities aggregating to Best Practices being reviewed including both intra-relationships or capability dependencies within one Best Practice and inter-relationships or capability dependencies across Best Practices.
OPM3 is also a tool that can help businesses drive improvement in an organization.
OPM3 is also a merging of Best Practices from the constituent domains of organizational project management, including portfolio management, program management, and project management.

Capability Maturity Model Integration (CMMI)

Capability Maturity Model Integration (CMMI) is a process level improvement training and appraisal program. Administered by the CMMI Institute, a subsidiary of ISACA, it was developed at Carnegie Mellon University (CMU). It is required by many United States Department of Defense (DoD) and U.S. Government contracts, especially in software development. CMU claims CMMI can be used to guide process improvement across a project, division, or an entire organization. CMMI defines the following maturity levels for processes: Initial, Managed, Defined, Quantitatively Managed, and Optimizing. Version 1.3 was published in 2010. CMMI is registered in the U.S. Patent and Trademark Office by CMU.

Q: Three years back, your organization awarded a fixed price contract to a reputable local contractor to construct a new airport terminal in the city. Few days back, you have received a change request from the contractor requesting to adjust the price of the contract. The contractor is claiming that as a result of the recent national recession, the prices of raw materials have gone up and he cannot complete the rest of the project at the contract price. Is the contactor's request legitimate?

A. Yes, you cannot penalize the contactor for price escalations due to force majeure
B. Yes, unless there is no Economic Price Adjustment provision in the contract
C. No, the price of the contract is fixed and cannot be changed
D. No, the price hike due to recession must be adjusted against the contractor's profit

Answer
Yes, unless there is no Economic Price Adjustment provision in the contract

Unless this is no provision for economic price adjustment due to inflation, a fixed price contract's value cannot be changed. Usually fixed price contracts spanning over one year in duration have this provision built into the contract.
[PMBOK 5th edition, Page 363]
[Project Procurement Management]

Q: Martin is the project manager of a project that is in an early phase. He needs to estimate costs but finds that he has a limited amount of detaile dinformation about the project. Which of the following estimation techniques would be least suited to his requirements?
A. Top-down Estimating
B. Bottom-up Estimating
C. Analogous Estimating
D. Budgetary Estimating.

Answer:
Bottom-up Estimating

Bottom-up estimating is a technique that can be applied only when there is a sufficient amount of detail available to the project manager.

[PMBOK 5th edition, Page 205]

Q: Which of the following processes produces a work breakdown structure as an output?
A. Create WBS
B. Define Scope
C. Develop Project Management Plan
D. Define Activities

Answer:
Create WBS

[PMBOK 5th edition, Page 125]
[Project Scope Management]

You are in the middle of a major new facility construction project. The structural steel is in place and the heating conduits are going into place when a senior manager informs you that he is worried the project will not meet the quality standards. What should you do in this situation?

A. Assure senior management that during the Plan Quality Management process, it was determined that the project would meet the quality standards.
B. Analogously estimate future results.
C. Form a quality assurance team.
D. Check the results from the last quality management plan.

Answer:
Form a quality assurance team.

Assuring management that it was determined in planning that the project would meet quality standards is not productive, since it does not solve the problem. An analogous estimate looks at the past history of other projects. This would not be appropriate to determine how the current project is going. The quality management plan does not provide results. A quality assurance team could help to determine whether the team is following the correct process to satisfy the relevant quality standards.

Q: A control chart shows seven data points in a row on one side of the mean. What should be done?
A. Perform a design of experiments.
B. Adjust the chart to reflect the new mean.
C. Find an assignable cause.
D. Nothing. This is the rule of seven and can be ignored.


Answer:
Find an assignable cause

a process is out of control if:

-A data point falls outside of the upper or lower control limits.
-7 data points in a row fall above or below the mean.
-7 data points in a row trending up or down (crossing the mean).

The rule of seven applies here. If you have seven data points in a row on the same
side of the mean, statistically the mean has shifted, calling for action to correct the problem.

Q: A project has faced major difficulties in the quality of its deliverables. Management now states that quality is the most important project constraint. If another problem with quality were to occur, what would be the BEST thing for the project manager to do?
A. Fix the problem as soon as possible.
B. Allow the schedule to slip by cutting cost.
C. Allow cost to increase by fixing the root cause of the problem.
D. Allow risk to increase by cutting cost.

Answer:
Allow cost to increase by fixing the root cause of the problem.

If a problem with quality were to occur again, many people would opt to fix the
problem as soon as possible. It is proactive, but some other project constraint(s) must change to accommodate fixing the root cause of the problem. It may not be necessary to allow the schedule to slip, because the project manager might be able to compress the schedule in other areas. Cutting cost does not necessarily cause the schedule to slip, nor would that necessarily fix the problem at hand. Allowing risk to increase by cutting cost is not the best choice, because a quality problem is most likely to create additional cost, rather than cut cost. Allowing the cost to increase by fixing the root cause of the problem addresses both finding the cause and the probable impact of dealing with the problem.

Q: To what does the following definition refer? “The point where the benefits or revenue to be received from improving quality equals the incremental cost to achieve that quality.”
A. Quality control analysis
B. Marginal analysis
C. Standard quality analysis
D. Conformance analysis

Marignal Analysis
Marginal analysis is an examination of the additional benefits of an activity compared to the additional costs incurred by that same activity. Companies use marginal analysis as a decision-making tool to help them maximize their potential profits. Individuals unconsciously use marginal analysis as well, to make a host of everyday decisions.

Typically used in conjunction with tree diagrams, these charts let you decompose a goal into the steps required to achieve it. Each step is then reviewed for potential risk. For example, imagine that one goal of your process improvement plan is to increase the accuracy of estimates to 88 percent. Using PDPC, you can break down the steps to achieve that goal. The team might then brainstorm ideas for anything that could go wrong, and come up with contingency plans to keep things on track.

The process decision program chart (PDPC) systematically identifies what might go wrong in a plan under development. Countermeasures are developed to prevent or offset those problems. By using PDPC, you can either revise the plan to avoid the problems or be ready with the best response when a problem occurs.

When to Use PDPC

• Before implementing a plan, especially when the plan is large and complex.
• When the plan must be completed on schedule.
• When the price of failure is high.

PDPC Procedure

1. Obtain or develop a tree diagram of the proposed plan. This should be a high-level diagram showing the objective, a second level of main activities and a third level of broadly defined tasks to accomplish the main activities.
2. For each task on the third level, brainstorm what could go wrong.
3. Review all the potential problems and eliminate any that are improbable or whose consequences would be insignificant. Show the problems as a fourth level linked to the tasks.
4. For each potential problem, brainstorm possible countermeasures. These might be actions or changes to the plan that would prevent the problem, or actions that would remedy it once it occurred. Show the countermeasures as a fifth level, outlined in clouds or jagged lines.
5. Decide how practical each countermeasure is. Use criteria such as cost, time required, ease of implementation and effectiveness. Mark impractical countermeasures with an X and practical ones with an O.

Here are some questions that can be used to identify problems.

• What inputs must be present? Are there any undesirable inputs linked to the good inputs?
• What outputs are we expecting? Might others happen as well?
• What is this supposed to do? Is there something else that it might do instead or in addition?
• Does this depend on actions, conditions or events? Are these controllable or uncontrollable?
• What cannot be changed or is inflexible?
• Have we allowed any margin for error?
• What assumptions are we making that could turn out to be wrong?
• What has been our experience in similar situations in the past?
• How is this different from before?
• If we wanted this to fail, how could we accomplish that?

PDPC Example

A medical group is planning to improve the care of patients with chronic illnesses such as diabetes and asthma through a new chronic illness management program (CIMP). They have defined four main elements and, for each of these elements, key components. The information is laid out in the process decision program chart below.

Dotted lines represent sections of the chart that have been omitted. Only some of the potential problems and countermeasures identified by the planning team are shown on this chart.

For example, one of the possible problems with patients’ goal-setting is backsliding. The team liked the idea of each patient having a buddy or sponsor and will add that to the program design. Other areas of the chart helped them plan better rollout, such as arranging for all staff to visit a clinic with a CIMP program in place. Still other areas allowed them to plan in advance for problems, such as training the CIMP nurses how to counsel patients who choose inappropriate goals.

Project Quality Management Overview

Fundamental Relationships of Quality Assurance and Control Quality to the IPECC, PDCA, Cost
of Quality Models and Project Management Process Groups

Monitor and Control Project Work is the process of tracking, reviewing, and reporting the progress to meet the performance objectives defined in the project management plan. The key benefit of this process is that it allows stakeholders to understand the current state of the project, the steps taken, and budget, schedule, and scope forecasts.

Monitoring is an aspect of project management performed throughout the project. Monitoring includes collecting ,measuring, and distributing performance information, and assessing measurements and trends to effect process improvements. Continuous monitoring gives the project management team insight into the health of the project and identifies any areas that may require special attention. Control includes determining corrective or preventive actions or replanning and following up on action plans to determine whether the actions taken resolved the performance issue. The Monitor and Control Project Work process is concerned with:

• Comparing actual project performance against the project management plan;
• Assessing performance to determine whether any corrective or preventive actions are indicated, and then recommending those actions as necessary;
• Identifying new risks and analyzing, tracking, and monitoring existing project risks to make sure the risks are identified, their status is reported, and that appropriate risk response plans are being executed;
• Maintaining an accurate, timely information base concerning the project’s product(s) and their associated documentation through project completion;
• Providing information to support status reporting, progress measurement, and forecasting;
• Providing forecasts to update current cost and current schedule information;
• Monitoring implementation of approved changes as they occur; and
• Providing appropriate reporting on project progress and status to program management when the project is part of an overall program.

Direct and Manage Project Work is the process of leading and performing the work defined in the project management plan and implementing approved changes to achieve the project’s objectives. The key benefit of this process is that it provides overall management of the project work.

Direct and Manage Project Work activities include, but are not limited to:

• Perform activities to accomplish project objectives;
• Create project deliverables to meet the planned project work;
• Provide, train, and manage the team members assigned to the project;
• Obtain, manage, and use resources including materials, tools, equipment, and facilities;
• Implement the planned methods and standards;
• Establish and manage project communication channels, both external and internal to the project team;
• Generate work performance data, such as cost, schedule, technical and quality progress, and status to facilitate forecasting;
• Issue change requests and implement approved changes into the project’s scope, plans, and environment;
• Manage risks and implement risk response activities;
• Manage sellers and suppliers;
• Manage stakeholders and their engagement; and
• Collect and document lessons learned and implement approved process improvement activities.

The project manager, along with the project management team, directs the performance of the planned project activities and manages the various technical and organizational interfaces that exist within the project. The project manager should also manage any unplanned activities and determine the appropriate course of action. The Direct and Manage Project Work process is directly affected by the project application area. Deliverables are produced as outputs from processes performed to accomplish the project work as planned and scheduled in the project management plan.

During project execution, the work performance data is collected and appropriately actioned and communicated. Work performance data includes information about the completion status of deliverables and other relevant details about project performance. The work performance data will also be used as an input to the Monitoring and Controlling Process Group.

Direct and Manage Project Work also requires review of the impact of all project changes and the implementation of approved changes:

• Corrective action—An intentional activity that realigns the performance of the project work with the project management plan;
• Preventive action — An intentional activity that ensures the future performance of the project work is aligned with the project management plan; and/or
• Defect repair—An intentional activity to modify a nonconforming product or product component.

The Monitor and Control Project Work process is responsible for keeping track of the project's measures, including cost.
[PMBOK 5th edition, Page 86]
[Project Integration Management]

The Monitor and Control Project Work process monitors the project performance while the Direct and manage Project Work process is concerned with performing the activities to accomplish project requirements.

The Monitor and Control Project Work process monitors the other project processes including the Direct and Manage Project Work process, while the Direct and Manage Project Work Process completes the project scope.
[PMBOK 5th edition, pages 79, 86]

Q: You are beginning a new project. When should you use the Perform Integrated Change Control process?

A. Throughout the entire project
B. Only when closing out the project
C. Only after the project is completely funded
D. Only after the project scope is clearly defined

Answer:
Throughout the entire project

Integrated Change Control process is valuable for managing and tracking those changes.
[PMBOK 5th edition, Page 96]

Q: Which of the following is not an output of the Direct and Manage Project Work process?

A. Deliverables
B. Work performance data
C. Project management plan
D. Change requests

Answer:
Project management plan

The Direct and Manage Project Work process has several outputs, including deliverables, work performance data, change requests, project management plan updates and project document updates. The project management plan is an input to the process.
[PMBOK 5th edition, Page 79]

Q. Which of the following is an input to the Develop Project Team process?

A. Resource Requirements
B. Resource Conflicts
C. Resource Calendars
D. Resource Breakdown Structure

Answer:
Resource Calendars
[PMBOK 5th edition, Page 273]
[Project Human Resource Management]

Q. Which of the following is an enterprise environmental factor?

A. Configuration management knowledge base
B. Change control procedures
C. Historical information
D. Commercial database

Answer:
Commercial database

Commercial database are considered enterprise environmental factors. The other choices are organizational process assets.
[PMBOK 5th edition, Page 29]
[Project Framework]

Q: The work breakdown structure can BEST be thought of as an effective aid for communications.
A. Team
B. Project manager
C. Customer
D. Stakeholder

Answer:
Stakeholder

The term “stakeholder” encompasses all the other choices. In this case, it is the best answer since the WBS can be used (but does not need to be used) as a communications tool for all stakeholders to “see” what is included in the project.

Q: When should the Validate Scope process be done?
A. At the end of the project
B. At the beginning of the project
C. At the end of each phase of the project
D. During the planning processes

Answer:
At the end of each phase of the project

The Validate Scope process occurs during project monitoring and controlling. It is done at the end of each project phase to get approval for phase deliverables, as well as at other points to get approval for interim deliverables.

Q: The project is mostly complete. The project has a schedule variance of 300 and a cost variance of —900. All but one of the quality control inspections have been completed and all have met the quality requirements. All items in the issue log have been resolved. Many of the resources have been released. The sponsor is about to call a meeting to obtain product validation when the customer notifies the project manager that they want to make a major change to the scope. The project manager should:
A. Meet with the project team to determine if this change can be made.
B. Ask the customer for a description of the change.
C. Explain that the change cannot be made at this point in the process.
D. Inform management.

Answer:
Ask the customer for a description of the change

Do not jump into the problem without thinking. The customer only notified the project manager that they want to make a change. They did not describe the change. The project manager should not say no until he or she knows more about the potential change, nor should the project manager go to management without more information. The project manager must understand the nature of the change and have time to evaluate the impact of that change before doing anything else. Of these choices, the first thing to do is to determine what the change is. The project manager might then analyze the potential change with the team, but only if their input is required.

Q: To manage a project effectively, work should be broken down into small pieces. Which of the following does NOT describe how far to decompose the work?
A. Until it has a meaningful conclusion
B. Until it cannot be logically subdivided further
C. Until it can be done by one person
D. Until it can be realistically estimated

Answer:
Until it can be done by one person

The lowest level of the WBS is a work package, which can be completed by more than one person. The other choices are aspects of a work package.

Q: The MAIN purpose of writing a user story is:
A. To document features or functions required by stakeholders.
B. To create a record of issues encountered on the project.
C. To perform what-if analysis.
D. To communicate progress.

A user story is a way of stating a requirement, often using the following format: As a <Role>, I want <Functionality/Goal>, so that <Business Benefit/Motivation>. User stories may be developed in facilitated workshops or as part of other requirements-gathering methods.

Q: You are managing a six-month project and have held bi-weekly meetings with your project stakeholders. After five-and-a-half months of work, the project is on schedule and budget, but the stakeholders are not satisfied with the deliverables. This situation will delay the project completion by one month. The MOST important process that could have prevented this situation is:
A. Monitor and Control Risks.
B. Control Schedule.
C. Define Scope.
D. Control Scope.

Answer:
Define Scope

Monitor and Control Risks, Control Schedule, and Control Scope are monitoring and controlling processes. This situation asks how to prevent the problem, which would have been done during planning. The project deliverables are defined in the Define Scope process, which is a part of project planning. Good planning reduces the likelihood of a situation like the one described, by including the right people and spending adequate time clarifying the project scope.

The development of the scope baseline can BEST be described as involving:
A. The functional managers.
B. The project team.
C. All the stakeholders.
D. The project expediter.

Answer:
The project team

Q: After obtaining input from the customer and other stakeholders, the project team is responsible for developing the scope baseline. Remember that the scope baseline includes the WBS, WBS dictionary, and project scope statement. Which of the following can create the MOST misinterpretation of the project scope statement?
A. Imprecise language
B. Poor pattern, structure, and chronological order
C. Small variations in size of work packages or detail of work
D. Too much detail

Answer:
Imprecise language

Much of the work on the project is dictated by the project scope statement. Any imprecision in such a key document will lead to differing interpretations.

The validate scope process:

frequent, planned meetings with the customer or sponsor to gain formal aceptance of deliverables during project monitoring and controlling.

• Work must be completed and checked each time before you meet with the customer; therefore, you must have what are called verified deliverables from the Control Quality process. (Note that the PMBOK' Guide formerly called these validated deliverables but changed the term to verified deliverables in the fifth edition; nevertheless, the fifth edition of the PMBOK' Guide does occasionally revert back to this older term, so it’s a good idea to be aware of both names.)
  It's helpful to have the approved scope with you when you meet with the customer, so you need the scope baseline (from the project management plan).You might also need the requirements traceability matrix for the meeting, so you can track where requirements came from and prove that requirements were achieved.
• In addition, you should have the requirements documentation to refresh your memory about the full details of the requirements.
• Another component you should have from the project management plan is the scope management plan, which shows the previously agreed-upon deliverables and plans for gaining formal acceptance for them.
• You will need to refer to work performance data from the Direct and Manage Project Work process to assess how well product deliverables are meeting the requirements.

For scope, the baseline is the version of the:

• WBS
• WBS dictionary
• project scope statement that is approved at the end of planning.

Work packages are reached when deliverables:

• Can be realistically and confidently estimated
• Can be completed quickly
• Can be completed without interruption
• May be outsourced or contracted out
• Nouns, not actions: “program files”, “installed hardware”

• Project title is at the top of the WBS
• Next level is project life cycle
• Later levels break the project into smaller pieces
• Decomposition continues until the work packages can be managed
• 2 approaches: 8-80 hours rule OR easy for estimation
• Top-down effort
• A WBS is deliverable-orientedand includes only deliverables that are needed
• Deliverables not in the WBS are not part of the project

Q: Julia is currently recruiting her project team. She has carried out various interviews and has shortlisted potential candidates. Now, according to the project communication management plan, she has to submit the shortlisted profiles to the project client (customer of the project) for approval. Only the approved candidates can then be formally hired for the project. The submission of the profiles to the client will be done through which of the following processes?
a. Manage Stakeholder Expectations
b. Acquire Project Team
c. Manage Communications
d. Plan Human Resource Management

Answer:
Manage Communications

Manage Communications is the process of distributing project information in accordance to the communications management plan. The interviews and shortlisting was carried out during the Qcquire Project Team and so will be the hiring once the approvals come in. However, the profiles submission to the client will be done through the Manage Communications process.
[PMBOK 5th edition, Page 297]

Sunk cost is defined as a cost that has already been incurred and which cannot be recovered.

[PMI best practice; not explicitly stated in PMBOK]

Colocation is a tool and technique of the Develop Project Team process. 

The term co-location represents an organizational technique in which the location of team members is determined in a strategic way to maximize productivity. The specific ways in which this is done is varied, but essentially as follows. When co-location is practiced at the start o a project (or, for that matter, it can be enacted at any time), the project team members are moved to alternate locations (either full-time or only for parts of days) to allow them to better work with one another, and on the project in general. This is because typically this newer organizational placement is done in a way which provides for improved communication among the team members, the ability to form better and closer working relationships, and in many cases can lead to improved productivity (for the reasons above as well as for other more materials ones, such as better access to sophisticated office equipment).

The communications channel formula is:

ch = n * (n-1) /2

Q: Which of the following is not a general management technique used to generate different approaches to execute and perform the project work?
a. Lateral thinking
b. Analysis of alternatives
c. Map out
d. Brainstorming

Answer:
Analysis of alternatives

Alternatives Identification concerns itself with identifying techniques to generate different approaches to execute and perform the work of the project. Map-Out is not a valid technique; the other three (brainstorming, lateral thinking and analysis of alternatives) are techniques use4d to generate ideas for different approaches.
[PMBOK 5th edition, Page 123]

Q: Which of the following is incorrectly represented by the term Progressive Elaboration?
a. Changes to project scope
b. Rolling wave planning
c. Detailing out the product requirements which were developed during the initiation process.
d. Production of fabrication and construction drawings from the design drawings for a chemical plant.

Answer:
Changes to project scope

The distinction between progressive elaboration and scope creep needs to be understood since the two terms are different. The changes to scope (especially in an uncontrolled manner) are called scope creep. In contrast, progressive elaboration involves building on or elaborating the output of a previous phase.

A Pareto chart, also called a Pareto distribution diagram, is a vertical bar graph in which values are plotted in decreasing order of relative frequency from left to right. Pareto charts are extremely useful for analyzing what problems need attention first because the taller bars on the chart, which represent frequency, clearly illustrate which variables have the greatest cumulative effect on a given system. 

A Pareto chart can be used to quickly identify what business issues need attention. By using hard data instead of intuition, there can be no question about what problems are influencing the outcome most.

Q: If you are working on a project where there is no definite detailed scope, but similar projects have completed in the past, what is the correct Estimate Activity Durations tool to use?

a. Three Point Estimating
b. Parametric Estimating
c. Analogous Estimating
d. Critical Path Estimation

Answer:
Critical Path Estimation

Analogous, parametric, and three-point estimating techniques are all accepted practices for determining the correct amount of time required for a portion of the project. The Critical Path Analysis techniques evaluate the whole project schedule.

Q: Quantitative risk analysis should be performed:
a. only on risks identified by the project manager
b. only in extreme cases
c. only on prioritized risks
d. on all risks

Answer:
only on prioritized risks

Since the quantitative risk analysis is a more in-depth process, it should only beperformed on prioritized risks to minize impact to the overall project schedule. [PMBOK 5th edition, Page 334]

The schedule variance is the earned value minus the planned value.

schedule variance = earned value - planned value

At the end of the project, all of the planned values should be earned, and the differences should be zero.

Seven basic tools of quality control:

1. Cause and effect diagrams
2. Control charts
3. Flowcharting
4. Histograms
5. Pareto charts
6. Check sheets
7. Scatter diagrams

Fast tracking

Fast tracking is a technique where activities are performed in parallel. These are activities that would have been performed sequentially using the original schedule. In fast tracking, the activities are worked on simultaneously instead of waiting for each piece to be completed separately.

It is usually important to start with this technique first. The main reason for this is that fast tracking does not involve any costs. It is simply a rearrangement of the activities in the original schedule.

Although fast tracking may not result in an increase in the cost, it leads to an increase in the risk, because activities that were originally intended to be performed sequentially are now performed in parallel. It may lead to a rework or rearrangement of the project. This reworking of the project can cause loss of even more time.

It should be noted, however, that fast-tracking can only be applied if the activities in question can actually be overlapped. In conclusion, the person managing the project, in order to know whether it is going to be worthwhile, must weigh the pros and cons of fast tracking against each other. A person must decide whether he or she is willing to make the trade-off between having this increased risk for a cost, and being able to implement a shorter project schedule.

Crashing

Crashing is the technique to use when fast tracking has not saved enough time on the schedule. It is a technique in which resources are added to the project for the least cost possible. Cost and schedule tradeoffs are analyzed to determine how to obtain the greatest amount of compression for the least incremental cost.

Crashing is expensive because we are adding more resources to the project. Undoubtedly, if you add more resources to an activity or project, it is going to cost you more. It only works for critical path activities where it is possible to shorten schedules.

Crashing analyzes and categorizes activities based on the lowest crash cost per unit time, allowing the team behind the project to identify those activities that will be able to deliver the most value at the least incremental cost. The results of a crashing analysis are usually in a crash graph, and activities with the flattest slope are the ones that will be considered first, for the simple reason that they lead to an equal amount of time savings, but have a smaller increase in cost.

When the crashing approach is used, any additional costs associated with rushing the project are reviewed against the possible benefits of completing the project within a shorter span of time. In addition to that, other items that are considered when one is using the crashing approach include adding more resources to the project, allowing additional overtime, paying extra to receive delivery of critical components more quickly, among others.

Crashing only works if the additional resources are going to allow you to complete the project sooner. If the fast tracking did not accelerate the schedule enough, the team behind the project is going to consider adding resources to the critical activities of the project.

The manager of the project should take into consideration those resources that have the lowest associated costs and start with the lowest incremental cost resource pool first.

Q:James is managing a shopping mall construction project. During the project execution he finds out that the project communications management plan is not effective and requires a major update. Which of the following processes will issue a change request for the required update?

a. Plan Communications Management
b. Manage Communications
c. Perform Integrated Change Control
d. Control Communications

Answer:

Control Communications

Change request is an output of the Control Communications process. The Control Change process will produce the change request, the Perform Integrate Change Control process will get that approved, and then the Plan Communications process will make the necessary updates. [PMBOK 5th edition, Page 307]

PMBOK 10.3.3.3 Project Management Plan Updates
Control Communications process may trigger updates to the communications management plan as well as other components of the project management plan (e.g. stakeholders and human resource management plans).

Q: When would Rolling Wave Planning be useful in a project?

a. You should use Rolling Wave Planning to help you achieve the appropriate level of detail in each work package at the right time.
b. You should use Rolling Wave Planning to determine the correct sequencing for long term items.
c. You should use Rolling Wave Planning to help you organize team member's activities within a large project group.
d. You should use Rolling Wave Planning to help you determine which activities are more important and should be done first.

Answer:

You should use Rolling Wave Planning to help you achieve the appropriate level of detail in each work package at the right time.

Rolling Wave Planning is a technique used to create a more detailed work plan while keeping the right level of detail for each activity: Activities happening sonner have more detail than those further in the future. [PMBOK 5th edition, Page 152]

The best position for the process "Identify Key Deliverables" process.

a. Define Scope and Create WBS
b. Create WBS and Validate Scope
c. Plan Scope Management and Collect Requirements
d. Collect Requirements and Define Scope

Answer:

Collect Requirements and Define Scope

The identification of key project deliverables can only be done once the project requirements are collected, analyzed and documented. This is done during the Collect Requirements process. Further, the key project deliverables are documented in the project scope statement which is an output of the Define Scope process. The best position of the newly proposed "Identify Key Deliverables" process should be between the Collect Requirement and Define Scope processes. [PMBOK 5th edition, Pages 110, 120]

Precedence Diagramming Methods:

• Start to Start
• Finish to Finish
• Finish to Start
• Start to Finish

Not commonly used - Start to Finish relationships indicate that the next task cannot be completed until the one preceding it has started. This type is not commonly used.[PMBOK 5th edition, Page 157]

Most commonly used - A-Finish-to-Start relationships indicate that the next task is not able to start until the one preceding it is completed. This is the most commonly used type of activity relationship. [PMBOK 5th edition, Page 157]

Requirements Traceability Matrix is an output of the Collect Requirements process. It is used for tracing requirements to project scope, objectives, and test strategy. Tracing requirements to project risk is not a valid use. [PMBOK 5th edition, Pages 117, 118]

What is Traceability Matrix?

A traceability matrix is a document that co-relates any two-baseline documents that require a many-to-many relationship to check the completeness of the relationship.

It is used to track the requirements and to check the current project requirements are met.

What is Requirement Traceability Matrix (RTM)?

Requirement Traceability matrix or RTM captures all requirements proposed by the client or development team and their traceability in a single document delivered at the conclusion of the life-cycle.

In other words, it is a document that maps and traces user requirement with test cases. The main purpose of Requirement Traceability Matrix is to see that all test cases are covered so that no functionality should miss while testing.

Requirement Traceability Matrix - Parameters include

• Requirement ID
• Risks
• Requirement Type and Description
• Trace to design specification
• Unit test cases
• Integration test cases
• System test cases
• User acceptance test cases
• Trace to test script

 On the basis of Business Requirement Document (BRD), Technical Requirement Document (TRD) and unit test document.

 Business Requirement Document (BRD):

Technical Requirement Document (TRD):

Unit test cases:

Mapping TR with Test case:

Mapping Br, Tr and unit test

Requirement Traceability Test Matrix:

Sample of RTM from PMBOK:

Q: Which of the following tools and technique used during the Control Quality process?
a. SIPOC model
b. Salience model
c. Schedule model
d. Communication model

Answer:
SIPOC model
The question is asking for a tool and technique used during the Control Quality process. The SIPOC model is a specific type of a flowchart which is a tool and technique of the Control Quality process.

Supplier|Input|Process|Output|Customer

• Suppliers - who are the people or organizations that provide you with resources you use to provide your services (or goods)?
• Inputs-what specific resources or raw materials must you have to provide your services (or goods)?
• Processes - what are the key processes or "core processes" that help you take inputs and turn them into usable services or goods?
• Outpus - What specific services or goods do you provide to constituents or customers?
• Customers - Who are major groups of people or organizations you provide services or good to?

The SIPOC tool is particularly useful when it is not clear:

• Who supplies inputs to the process?
• What specifications are placed on the inputs?
• Who are the true customers of the process?
• What are the requirements of the customers?

Salience Model

Salience Model categories stakeholders according to their prominence by ranking stakeholders according to their power, legitimacy and urgency.

Power: to influence the project deliverables or the organization

Legitimacy: of their interaction with the project and it's appropriateness

Urgency: of their communication requirements

Project Framework
Stage Gates, Phase Gates and Kill Points are all refer to a phase end review with the objective of obtaining autorization to close the current phase and start the next one. This is a retrospective review of the current phase. Phase planning, on the other hand, is performed early during the planning phase of the project [PMBOK 5th edition, Page 41]

Phase–gate process

Project management technique in which an initiative or project (e.g., new product development, process improvement, business change) is divided into stages (or phases) separated by gates.

At each gate, the continuation of the process is decided by (typically) a manager or a steering committee.

The decision is based on the information available at the time, including the business case, risk analysis, and availability of necessary resources (e.g., money, people with correct competencies)

These points are referred to as

Phase exits,
milestones,
Phase gates,
Decision gates,
Stage gates,
Kill points.

Brainstorming - The goal of brainstorming is to obtain a comprehensive list of project risks. The project team usually performs brainstorming, often with a multidisciplinary set of experts who are not part of the team. Ideas about project risk are generated under the leadership of a facilitator, either in a traditional free-form brainstorm session or structured mass interviewing techniques. Categories of risk, such as in a risk breakdown structure, can be used as a framework. Risks are then identified and categorized by type
of risk and their definitions are refined.

The Delphi technique - involves anonymous questionaires circulated to a group of experts and provides an unbiased assessment of the risks. The Delphi technique is a way to reach a consensus of experts. Project risk experts participate in this technique anonymously. A facilitator uses a questionnaire to solicit ideas about the important project risks. The responses are summarized and are then recirculated to the experts for further comment. Consensus may be reached in a few rounds of this process. The Delphi technique helps reduce bias in the data and keeps any one person from having undue influence on the outcome.

Interviewing - Interviewing experienced project participants, stakeholders, and subject matter experts helps to identify risks.

Root cause analysis -Root-cause analysis is a specific technique used to identify a problem, discover the underlying causes that lead to it, and develop preventive action.

Communication Models

The communication models used to facilitate communications and the exchange of information may vary from project to project and also within different stages of the same project. A basic communication model, consists of two parties, defined as the sender and receiver. Medium is the technology medium and includes the mode of communication while noise includes any interference or barriers that might compromise the delivery of the message. The sequence of steps in a basic communication model is:

• Encode. Thoughts or ideas are translated (encoded) into language by the sender.
• Transmite Message. This information is then sent by the sender using communiction channel (medium). The transmission of this messsage may be compromised by various factors (e.g. distance, unfamilar technolgy, inadequate infrastructure, cultural difference, and lack of background information). These factors are collectively termed as noise.
• Decode. The message is translated by the receiver back into meaningful thoughts or ideas.
  Acknowledge. Upon receipt of a message, the receiver may signal (acknowledge) receipt of the message but this does not necessarily mean agreement with or comprehension of the message.
• Feedback/Response. When the received message has been decoded and understood, the receiver encodes thoughts an ideas into a message and then transmits this message to the original sender.

Q. A contractor is currently constructing a new building for your organization on a cost-plus-incentive contract. You have just received the project status report from the contractor's project manager. According to the report, the project's CPI is 1.5. You are shocked as you believe that the project costs are out of control. Upon investigation you find out that the $1 million advane payment (20% of the estimated project cost) to the contractor at the start of the project has been included in the earned value of the project. Further the cost of the inventory at the project site has been excluded from the total actual costs. According to the contract, your company only reimburses the costs for the completed deliverables and not for the supplies in the project's inventory. In this scenario, the reported project's CPI is incorrect because:
a. Actual cost has been understated
b. Earned value has been overstated and actual cost has been unerstated
c. Earned value has been overstated
d. Both the earned value and the actual cost have been overstated

Answer:
Earned value has been overstated

In this scenario the earned value has been overstated while the reported actual cost is ok. Earned value should be the sum of PVs of all completed activities. The initial 20% advance should not be part of this. Further, since the buyer is not liable for the inventory cost and only reimburses the costs associated with completed deliverables, the cost of the inventory does not become part of the actual cost until that inventory is consumed during the construction process. The inventory is an asset for the contractor until it is consumed on the project and at that time it becomes a cost for the project.
[PMBOK 5th edition, Page 218]

If the project's current total earned value (EV) is $100,000 and the actual amount spent (AC) is $95,000, what is the cost variance of the project?

The cost variance (CV) = total earned value (EV) - the acutual amount spent (AC).
CV = 100,000 - 95,000
CV = 5,000

Responsible, Accountable, Consult and Inform statuses:

• Responsible — those who actually carry out the work to achieve the task objectives.
• Accountable — the one individual who is ultimately accountable for the success (or failure) of a task and will approve the work created by those Responsible. There is ONE and ONLY ONE Accountable for a specific task / deliverable.
• Consulted — those who would have opinions that need to be sought / weighted in for the task / deliverable and be kept updated of the progress (two-way communication).
• Informed — those who would need to be updated on the task progress (one-way communication).

Net Present Value
Q: If an investment in a project returns 15% annualy, how much should you invest in order to get $5 million by the end of the 5th year?
a. 2485884
b. 2857143
c. 2501376
d. 2685292

Answer:

2485884

Present Value = Future Value / (1 + rate)^period

x * (1 + 0.15)^5 = 5000000
x * 2.01136 = 5000000
x = 5000000/ 2.01136

Q: Project requirements are determined during the Collect Requirements process through various toos and techniques. These requirements form the basis for defining the project scope. One of the responsibilities of a project manager is to identify key project deliverables during this exercise. Where are the key project deliverables documented?
a. Scope Management Plan
b. Requirements Management Plan
c. Project Scope Statement
d. Accepted Deliverables

Answer:
Project Scope Statement

Project Scope Statement
The Project Scope Statement provides a baseline understanding of the scope of a project to include the project’s scope and deliverables, the work required to complete the deliverables, and ensure a common understanding of the project’s scope among all stakeholders.

Project Scope Statement - The primary result, or output, of the Define Scope process is the project scope statement. This document in effect says “Here is what we will do on this project” or “Here is the approved project and product scope for this project.” The development of the project scope statement can take a lot of time and involve the expert judgment of many stakeholders and even experts from outside the organization. While defining requirements and, in turn, defining scope, you should identify areas where people requested scope but it was not approved to be included in the project. You should also clarify areas where the scope could easily be misunderstood. It is a waste of project time and money to create scope that is not needed or approved, yet it is easy for this to occur. One way to avoid this problem is to identify in the project scope statement what is not in the project to make it clear that such additions are not allowed.

The project scope statement, along with the WBS and WBS dictionary, comprise the scope baseline, which is part of the project management plan.

The project scope statement may include:

• Product scope
• Project scope
• Deliverables (for the product and the project)
• Acceptance criteria
• What is not part of the project
• Assumptions and constraints

Q. During the Control Procurements process, a number of documents might get updated due to varous reasons. Which of the following components of the project management plan is least likely to get updated during this process?
a. Quality management plan
b. Procurement management plan
c. Schedule baseline
d. Cost baseline

Answer:
Quality management plan
The procurement management plan, schedule baseline and the cost baseline typically gets updated as result of a significant change in procurement contracts or strategy. However, the quality management plan is least likely to get updated during this process since quality requirements always need to be met by all contractors. The contractors can be allowed more money or time to complete the works but cannot be allowed to compromise the quality of the works.
[PMBOK 5th edition, Page 385]

Contingency funds are used to handle cost uncertainty due to unforeseen purchases that may be needed during a project. These funds are generally used for items that are likely to occur but are not certain to occur.

Activity cost estimates are quantitative assessments of the probable costs required to complete project work. Cost estimates can be presented in summary form or in detail. Costs are estimated for all resources that are applied to the activity cost estimate. This includes, but is not limited to, direct labor, materials, equipment, services, facilities, information technology, and special categories such as cost of financing (including interest charges), an inflation allowance, exchange rates, or a cost contingency reserve. Indirect costs, if they are included in the project estimate, can be included at the activity level or at higher levels.

Q. A fundamentally functional organization creates a special project team to handle a critical project. This team has many of the characteristics of a project team in a project organization and has a Project Manager dedicated to the project. Such an organization is called:

a. A projectized organization

b. A functional organization

c. A strong matrix organization

d. A composite organization

Answer:

A composite organization

[PMBOK 5th edition, Page 25]

Q. A fundamentally functional organization creates a special project team to handle a critical project. This team has many of the characteristics of a project team in a project organization and has a Project Manager dedicated to the project. Such an organization is called:

a. A projectized organization

b. A functional organization

c. A strong matrix organization

d. A composite organization

Answer:

A composite organization

[PMBOK 5th edition, Page 25]

Q: During which of the following processes project key stakeholders get engaged with the project for the first time?

a. Develop Project Charter

b. Identify Stakeholders

c. Collect Requirements

d. Plan Stakeholder Management

Answer:

Develop Project Charter

Project stakeholders are involved in each of the project management processes. The Develop Project Charter is the first project management process where the key project stakeholders get engaged for the first time. Stakeholders provide expert judgment and participate in facilitated sessions during the charter development.

[PMBOK 5th edition. Page 71]

[Project Integration Management]

10 knowledges area

1. Project Integration Management
2. Project Scope Management
3. Project Time Management
4. Project Cost Management
5. Project Quality Management
6. Project Human Resource Management
7. Project Communications Management
8. Project Risk Management
9. Project Procurement Management
10. Project Stakeholder Management

5 process groups

1. Initiating (13%)
2. Planning (24%)
3. Executing (31%)
4. Controlling and Monitoring (25%)
5. Closing (7%)

Benefit Cost Ratio ( BCR ) = Revenue/ Cost .

If BCR > 1 that means , you are making profit.
If BCR < 1 that means , you are loosing the money.

The Benefit-Cost Ratio (BCR), or profitability index, is a commonly used project management tool often used to identify the most efficient projects. The BCR is derived from the mathematics of Net Present Value (NPV), which was designed to model situations where a substantial initial investment is followed by an ongoing revenue stream. NPV relies on the assumptions of the discounting model, which are not always valid for technology projects. IT projects tend to have a short duration, complex interdependencies, and high uncertainty, and the BCR is inaccurate when used with interdependent or mutually exclusive projects. Although BCR can be a useful tool, it has inherent measurement difficulties when used for selecting projects; the degree of alignment with business strategy is a better criterion.

Q. Responsibility, self-actualization, professional growth, and recognition are motivatingagents according to which motivational theory?

A. Theory X;
B. Theory Y;
C. Herzberg s Theory;
D. Maslow s hierarchy of needs.

Answer:

Herzberg's theory - responsibility, self-actualization, professional growth, and recognition are motivating agents according to herzbergs theory. Herzbergs theory deals with hygiene factors and motivating agents. Hygiene factors include working conditions, salary, personal life, relationships at work, security and status. Motivating agents are responsibility, self actualization, professional growth and recognition.

Theory x is one of the theories put forth by Mcgregor in which he classified all workers into two groups, x and y. According to theory x, workers will not work unless made to work by the supervisor. They would need close monitoring as they avoid responsibility. According to theory y, workers are always willing to work. They would not need supervision, and they direct their own effort towards achieving the tasks specified.

Maslow established the theory of a hierarchy of needs. In his theory, Maslow stated that human beings are motivated by unsatisfied needs, and that certain lower needs need to be satisfied before higher needs can be satisfied. According to this theory, Maslow identified the following needs, in order of their levels, from lowest to highest:
Level 1: psysiological needs (such as the need for air, water, food, housing, clothing)
Level 2: safety needs (such as the need for security, stability, and freedom from harm)
Level 3: social needs (such as the need for love, affection, recognition, and friends)
Level 4: esteem needs (such as the need for accomplishment, respect, attention, and appreciation)
Level 5: self-actualization (self fulfillment, growth, learning)

Q: You are involved in the Close Procurements process. The seller disagrees with you over several issues.
According to the agreement, a third party will be used to settle the dispute. The findings of the third party are
binding. Which type of proceeding will you be using?

a. mediation
b. arbitration
c. negotiation
d. auditing

Answer:
arbitration - a neural party hears and resolves a dispute

You will be using arbitration. Arbitration is a type of negotiation where a third party is used and the third party's findings are binding.

Meditation is a special type of negotiation whereby a third party is used as the negotiator of the settlement. However, the findings of the third party are not binding.

Negotiation generally occurrs between the two parties. Both parties discuss the issues and reach an agreement on the result.

Auditing occurs when a procurement is reviewed to identify the successes and failures of the Project Procurement Management knowledge area.

the inputs to the Collect Requirements:

• Scope management plan - an output of the Plan Scope Management process
• Requirements management plan - an output of the Plan Scope Management process
• Stakeholder management plan - an output of the Plan Stakeholder Management process
• Project charter - an output of the Develop Project Charter process
• Stakeholder register - an output of the Plan Stakeholder Management process

Q: David has taken an initiative to conduct Six Sigma training for the employees of the organization to increase their productivity with few defects. He decides to conduct this training from the 15th to the 20th of April. Should this initiative be considered as a project? if so, what will be the key deliverable of this project?

a. Yes, this initiative can be considered as a project. The key deliverables of this project will be improved employee skills and increased performance with fewer
defects.
b. Yes, this initiative can be considered as a project. However, the project will end without any deliverables.
c. No, this initiative cannot be considered as a project.
d. No, this initiative cannot be considered as a project. Instead, it can be considered as an operation with the key deliverables of improved employee skills and
increased performance with fewer defects.

Answer:
Yes, this initiative can be considered as a project. The key deliverables of this project will be improved imployee skills and increased performance with fewer defects.

Any initiative that has a definite beginning and end and produces a product, service, or result can be considered as a project. Further, the deliverables of a project need not always be a product. Deliverables can also be an improvement in the existing services or product. The key deliverables of this project will be improved employee skills and increased performance with fewer defects.

The initiative has a definite start and end and will produce results in the form of improved imployee skills. Therefore, it can definitely be considered as a project.

The specified initiative has a definite start and end; therefore, it cannot be an operation as an operation is an ongoing process.

Costs are Typically higher toward the end of a project.
Costs are typicall lower at the beginning of a project.

Costs fluctuate over the course of the project life cycle. However, for the majority of project life cycles, costs typically are lower at the beginning of the project, higher toward the end of the project, and drop dramatically as the project is concluded.

Project Management Process Groups Chart

Initiating Process Group - Those processes performed to define a new project or a new phase of an existing project by obtaining authorization to start the project or phase.

Planning Prcess Group - Those processes required to establish the scope of the project, refine the objectives and define the course of action required to attain the objectives that the project was undertaken to achieve.

Executing Process Group - Those processes performed to complete the work defined in the project management plan to satisfy the project specifications.

Monitoring and Controlling Process Group - Those processes required to track, review, and regulate the progress and performance of the project; identify any areas in which changes to the plan are required; and initiate the corresponing changes.

Closing Process Group - Those process performed to finalize all activities across all Process Groups to formally close the project or phase.

Process Groups Interact in a Phase or Project

1. The cost management plan - This plan developed in the Plan Cost Management process documents the methods you'll use to estimate costs, as well as the level of accuracy required for estimates.
2. The scope baseline - In order to create an estimate, you need to know the details of what you are estimating; this includes knowing what is out of scope and  what constraints have been placed on the project. This information can be found by looking at all the components of the scope baseline (the project scope statement, WBS, and WBS dictionary).
3. Project schedule - This is one of the key inputs to estimating, as the schedule includes the activities, the resources needed to complete the work, and information about when the work will occur. Keep in mind that you need a schedule before you can come up with a budget. You need to develop a time-phase spending plan to control project expenditures.
4. Human resource management plan - The human resource management plan lists the human resources intended to be used for the project. This resources have costs associated with them. Another part of the human resource management plan, reward systems can increase productivity and save money, but they are still a cost item and need to be estimated.
5. Risk register - The risk management process can save time and money, but there are costs associated with the efforts to deal proactively with risks. Risks are an input to this process because they influence how costs are estimated, but they can also be an output because our choices related to estimating costs have associated risks.
6. Policies and historical records related to estimating, templates, processes, procedures, lessons learned, and historical information (i.e., organizational process assets) - Historical records from past projects can be highly beneficial in creating estimates for a current project. Organizational policies and standardized templates related to estimating can also make this effort faster and easier.
7. Company culture and existing systems that the project will have to deal with or can use (i.e., enterprise environmental factors) - For cost estimating, this includes marketplace conditions and commercial cost databases. You might review the different sources from which supplies might be procured and at what costs as part of estimating.
8. Project management costs - It is imporotant to understand that part of the expense of a project comes from the costs associated with project management activities. Although project management efforts save money on projects overall, they do incur costs and should be included in the project cost estimates. These include not only costs associated with the efforts of the project manager but also those associated with status reports, change analysis, etc.

The Plan Cost Management - to answer two questions:

1. How will I go about planning cost for the project?
2. How will I effectively manage the project to cost baseline, control costs, and manage cost variances?

Two techniques:

1. Return on investment
2. Discounted Cash Flow

Q: You are producing a document that includes the cost control variance thresholds, units of measure, and level of accuracy. Which document are you creating?

1. work performance information
2. cost baseline
3. activity cost estimates
4. cost management plan

Answer is: cost management plan

The cost management plan is the document that includes the cost control variance thresholds, units of measure, and level of accuracy. It is created during the Plan Cost Management process.

None of the other options include this information. Work performance information is created in the Control Costs process and includes the calculated cost variance, schedule variance, cost performance index, schedule performance index, and other work performance calculations. The cost baseline is created in the Determine Budget process and includes the approved budget. The activity cost estimates are created in the Estimate Costs process and include all estimated costs for the project.

Rita's PMP Exam Prep:

The cost management plan may include:

• Specifications for how estimates should be stated (in what currency) - Units of measure
• The level of accuracy needed for estimates
• Reporting formats to be used
• Rules for measuring cost performance
• Whether costs will include both direct costs (those costs directly attributable to the project) and indirect costs (costs not directly attributable to any one project, such as overhead costs)
• Guidelines for the establishment of a cost baseline for measuring against as part of project monitoring and controlling (the cost baseline will ultimately be established in Determine Budget)
• Control thresholds
• Cost change control procedures
• Information on control accounts
• Information about how the Estimate Costs, Determine Budget, and Control Costs processes will be conducted
• Funding decisions
• Methods for documenting costs
• Guidelines for dealing with potential fluctuations in resource costs and exchange rates
• Roles and responsibilities for various cost activities

The Close Procurements process is part of the Closing Process Group.

Agreement Closure is not a process. The Contract Closure process was listed in the PMBOK 3rd Edition as part of the Closing process group. HOwever, This process has been renamed the Close Procurements process in the PMBOK 4th and 5th Edition.

Q: You are involved in the Close Procurements process. The seller disagrees with you over several issues. According to the agreement, a third party will be used to settle the dispute. The findings of the third party are binding. The type of proceeding you will be using is arbitration.

• Arbitration - is a type of negotiation where a third party is used and the third party's findings are binding. In arbitration, a neutural party hears and resolves a dispute. (Rita Mulcahy)
• Meditation - is a special type of negotiation whereby a third party is used as the negotiator of the settlement. However, the findings of the third party are not binding.
• Negotiation -  generally occurs between the two parties. Both parties discuss the issues and reach an agreement on the result.
• Auditing - occures when a procurement is reviewed to identify the successes and failures of the Project Procurement Management knowledge area.

Project Integration Management Overview

As a project manager, you are NOT responsible for maintaining strong personal relations with the customer to be protected if anything goes wrong in the project. Seeking personal favors from the customer at the cost of the project is unethical. The first and foremost responsibility of a project manager is to protect the interests of the project and the customer. It is highly irresponsible to protect your interests instead of the project

It is your responsibility as project manager to provide correct and acurate data in all esimates, protect the interests of the customer in the project, or ensure that your vendors sign the non-disclosure agreement if outsourcing the project work requires sharing confidential information with customer's approval.

The customer wants to make a change to the project scope. The first action is to evaluate the impact of a change.
It includes the consideration of:

• the project schedule,
• cost,
• quality,
• risk,
• resources, and
• customer satisfaction.

Due to corporate restructuring, the project sponsor, a major stakeholder, and the CEO have left the company. The project manager's project is past the halfway point and the remaining members of the management team have been lukewarm toward the project. The new CEO does not place a high value on project management methodology, and the project team is nervous about its future. Under these circumstances, the project manager's primary responsibility is to:
interact with others in a professional manner while completing the project. The project manager's primary responsibility is:

• to complete the project he was charactered and approved to complete
• to make sure the project is still nessary, and to determine whether it needs to change based on the customer's need.

Providing accurate and truthful reports are always part of a project manager's professional and social responsibility. However, completing the project in a professional manner is the primary responsibility.