PMP Exam Guide

2011
PMP EXAM GUIDE

Project Management Professional
PANKAJ SHARMA
PMP,PRINCE 2 PRACTIONER
PMP EXAM GUIDE
PMP
EXAM
GUIDE
PANKAJ SHARMA
Project Management Body of Knowledge , Fourth Edition (PMBOK Guide) 2008

Project Management Institute, Inc.
PMP EXAM GUIDE
ABOUT THE AUTHOR

Pankaj Holds Master degree in computer engineering from Birla Institute of technology and
Science, Pilani (India) and is a certified PMP, ITIL v3 and a Prince2 practitioner. Enriched with
long industry experience, coupled with excellent professional track record, Pankaj is extremely
passionate about sharing his professional knowledge and experience. He has coached employees
from the companies IBM, Accenture, Deloitte, Birlasoft, HCL, TCS and Indian defense forces
(Army, Navy and Indian Air force). Presently he is Chief Technology Officer for Connoisseur
Consulting Solutions Pvt Ltd and in the current role he is responsible for IT and business
Strategy management.
An energetic and enthusiastic project management consultant and trainer with over 15 years of
practical hands-on project and program management experience in managing and directing mid
and large sized IT program/projects involving distributed teams in Manufacturing, HR and
healthcare verticals across US, Europe and UK geography.
PMP EXAM GUIDE
CONTENTS OVERVIEW
CONTENTS OVERVIEW ______________________________________________________________ 4
Introduction to PMP Examination _______________________________________________ 7

Introduction to PMI _______________________________________________________________ 8
Purpose of PMBOK Guide __________________________________________________________ 8
Why Become a Certified PMP ________________________________________________________ 9
PMP Examination _________________________________________________________________ 9
PMI Principles ___________________________________________________________________ 12
Project Management Framework _______________________________________________ 15

Project __________________________________________________________________________ 16
Why Projects Fail? ________________________________________________________________ 18
Project Management ______________________________________________________________ 18
Organizational Structure ___________________________________________________________ 22
The Project Life Cycle ______________________________________________________________ 24
Project Management Knowledge Areas _______________________________________________ 28
Project Integration Management _______________________________________________ 36

Project Integration Management ____________________________________________________ 37
Develop Project Charter ____________________________________________________________ 38
Develop Project Management Plan ___________________________________________________ 42
Direct and Manage Project Execution _________________________________________________ 43
Monitor and Control Project Work ___________________________________________________ 45
Perform Integrated Change Control __________________________________________________ 46
Close Project or Phase _____________________________________________________________ 48
Project Scope Management ____________________________________________________ 50

Project Scope Management _________________________________________________________ 51
Collect Requirements ______________________________________________________________ 52
Create WBS ______________________________________________________________________ 56
Verify Scope _____________________________________________________________________ 58
Control Scope ____________________________________________________________________ 59
4
PMP EXAM GUIDE
Project Time Management ____________________________________________________ 61

Project Time Management _________________________________________________________ 62
Define Activities __________________________________________________________________ 63
Sequence Activities _______________________________________________________________ 65
Estimate Activity Resources _________________________________________________________ 68
Estimate Activity Duration __________________________________________________________ 70
Develop Schedule _________________________________________________________________ 72
Control Schedule _________________________________________________________________ 77
Project Cost Management _____________________________________________________ 80

Project Cost Management __________________________________________________________ 81
Estimate Costs ___________________________________________________________________ 82
Determine Budget ________________________________________________________________ 85
Control Costs ____________________________________________________________________ 87
Earned value Management (EVM) ____________________________________________________ 88
Project Quality Management __________________________________________________ 93

Project Quality Management________________________________________________________ 94
Plan Quality _____________________________________________________________________ 96
Perform Quality Assurance _________________________________________________________ 99
Perform Quality Control ___________________________________________________________ 101
Project Human Resource Management _________________________________________ 106

Project Human Resource Management_______________________________________________ 107
Develop HR Plan _________________________________________________________________ 108
Acquire Project Team _____________________________________________________________ 111
Develop Project Team ____________________________________________________________ 113
Manage Project Team ____________________________________________________________ 115
Organization Theories ____________________________________________________________ 118
Project Communication Management __________________________________________ 122

Project Communication Management _______________________________________________ 123
Identify Stakeholders _____________________________________________________________ 124
PMP EXAM GUIDE
Plan Communication _____________________________________________________________ 126

Distribute Information ____________________________________________________________ 128
Manage Stakeholder Expectations __________________________________________________ 130
Report Performance ______________________________________________________________ 132
Project Risk Management ____________________________________________________ 135

Project Risk Management _________________________________________________________ 136
Plan Risk Management____________________________________________________________ 137
Identify Risks ___________________________________________________________________ 139
Perform Qualitative Risk Analysis ___________________________________________________ 142
Perform Quantitative Risk Analysis __________________________________________________ 145
Plan Risk Responses ______________________________________________________________ 148
Monitor and Control Risks _________________________________________________________ 151
Project Procurement Management _____________________________________________ 154

Project Procurement Management __________________________________________________ 155
Plan Procurements _______________________________________________________________ 156
Conduct Procurements____________________________________________________________ 159
Administer Procurements _________________________________________________________ 161
Close Procurements ______________________________________________________________ 163
Professional Responsibility and Ethics___________________________________________ 166

Introduction ____________________________________________________________________ 167
Ensure Integrity _________________________________________________________________ 167
Contribute to PM Knowledgebase and Community _____________________________________ 167
Respect Diversity ________________________________________________________________ 168
PMP EXAM GUIDE
Introduction
Introduction to
PMP Examination
Introduction to PMP Examination
Introduction to
PMP Examination
Introduction to PMI
Purpose of Guide to PMBOK Guide
Why Become a Certified PMP
PMP Examination
PMI Principles
PMP EXAM GUIDE
Introduction to PMI
PMI is headquartered in USA, founded in 1969
Worlds leading not-for-profit project management association
Over 288,000 Members across 170 countries
Advocates Best Practices in Project, Program and Portfolio Management
Credentials
Certified Associate in Project Management (CAPM)
Project Management Professionals (PMP)
Program Management Professional (PgMP)
PMI Risk Management Professional (PMI-RMP )
PMI Scheduling Professional (PMI-SP )
Purpose of PMBOK Guide
The SUM of knowledge within the profession of project management
Includes widely applied practices and innovations
Constantly evolving
The knowledge and practices are applicable to most projects
PMBOK Guide is used as a reference for professional development programs
Structure of PMBOK Guide
Section I The Project Management Framework
Section II The Standard for Project Management of a Project
Section III The Project Management Knowledge Areas

8
PMP EXAM GUIDE
Program based on Newly Launched Fourth Edition of PMBOK Guide
Why Become a Certified PMP
Widely recognized Project Management Certification
Worldwide Recognition of your knowledge of Project Management
Demonstrates Proof of Professional Achievement
Improves the way you manage your Projects
Increases your Marketability
Displays your willingness to pursue Growth
Increases Customer Confidence
Valued Globally across Industry Verticals & Companies
PMP Examination
PMP EXAM GUIDE
PMP Examination
Source: PMI Credential Handbook
PMP Examination Type of Questions
Scenario based
Situational
Using attached illustrations such as Network Diagram
Definitions
Fill in the Blanks
Formulas and Computing

10
PMP EXAM GUIDE
Negative descriptors such as Except
Two likely Answers
Roadmap to Become a PMP
11
PMP EXAM GUIDE
PMI Principles
A Project does NOT exists without a CHARTER
The Project Scope includes all of the work and ONLY the work
Activities are estimated by the Team
Lessons learnt are collected throughout the Project
Establish the extent of completion if the Project is terminated prematurely
Work Breakdown Structure is the basis for all planning activities
Quality is not an afterthought.it should be BUILT-IN
Project Management Plan drives how the Project work will be carried out
Risks are identified throughout the Project
Identify all Stakeholders to prevent Changes
Use Historical Information for Planning
Project Manager spends most of his/her time Communicating
Save Scope, Schedule and Cost baselines for comparison
Protect the Buyer and the Seller relationship to work as a Team
Set-up formal Change Control System
Prefer Preventive actions over Corrective actions
Project Manager should preserve his integrity
12
PMP EXAM GUIDE
13
PMP EXAM GUIDE
Chapter 1
Project Management
Framework
Project Management
Framework
Projects and Operations

Project Management
Organizational Structure
Project Life Cycle
PMBOK Guide Knowledge Areas
14
PMP EXAM GUIDE
Project Management
Framework
Project Management Framework
Learning Objectives
After the completion of this chapter, the learner will be
able to:
Explain the PMBOK Guide project management
concepts
Explain why projects are undertaken
Describe the phases of the project life cycle
Describe the five project management process groups
Name the nine knowledge management areas
Map the process groups and the nine knowledge areas
15
PMP EXAM GUIDE
Project
Definition A project is a temporary endeavor undertaken to create a unique product or

service.
as per
PMBOK
Guide
All organizations perform work as projects or as operations. There is a thing line between the
two but still both share the following common characteristics:
Are performed by people

Constrained by resources
Are planned, executed and managed
Temporary
Temporary means that every project has a definite beginning and end. It does not mean that the
duration is short. Some projects can last for years. The projects end when the objectives of the
project have been achieved or it is clear that the project objectives cannot be met.
Unique
Unique means that the product or service or result is different from other product or service or
result. Projects are unique even if the category of the product it creates is a large domain. For
example, buildings are constructed but every such building that is created is unique because of
the difference in location, raw materials, contractors, and so on.
Progressive Elaboration
You learn about the project as it progresses. The specifications of the product become clear as
you move further and requirements become clearer. This is also called proceeding in steps.
Example of Projects
Building a new office

Designing a new product or service
Creating an advertisement campaign
Creating a new process with a business unit
16
PMP EXAM GUIDE
Moving from one building to another

Designing a space vehicle
Project
A temporary endeavor means that every project has a definite

beginning and end.
Unique means that the product or service or result is different
from other product or service or result.
Progressively elaborated - proceeding in steps
Projects versus Operations

Operations are ongoing and produce repetitive products, services, or results. Operations work is
ongoing that sustains the organization over time.
Operations and projects differ in the way that operations are ongoing but projects are
temporary.
Operations are repetitive in nature while projects create a unique product or service.
Operations objective is to sustain business while project closes after the objectives are
achieved.
Examples of Operations
Assembly line production

Call center operations Help desk, customer service, and so on
PROJECTS
OPERATIONS
Temporary
Ongoing
Unique
Repetitive
Closes after attaining the objectives
Objective is to sustain business
Prototyping the new car model
Assembly line production
17
PMP EXAM GUIDE
Why Projects Fail?
Lack of clearly defined purpose

Inexperienced project Managers
Poor estimation of duration and cost
Cultural and ethical misalignment
Poor requirements and scope management
Lack of coordination of resources and activities
Poor communication
Inadequate planning of scope, schedule, resources, cost, risk and quality
Lack of progress and quality control
Project Management
Definition Project Management is the application of knowledge, skills, tools and

as per
techniques to project activities to meet the project requirements.
PMBOK
Guide
The project team carries out the work needed to complete the project, while the project manager
schedules, monitors, and controls the various project tasks. The project manager requires
knowledge, performance, and personal skills to perform better at their jobs.
The typical work of a project manager involves:
Requirements gathering
Managing stakeholder expectations
Managing project constraints including scope, quality, schedule, resources, budget, and
risk.
18
PMP EXAM GUIDE
What is the role of a Project Manager?

The role of a Project Manager is to achieve project objectives. It is different from the role of a
functional or operations manager. The functional manager provides management oversight for an
administrative area. The operations managers are accountable for a facet of the core business.
A project manager should have knowledge and skills in the areas of Project Management,
Specific Application Area, and General Management.
For effective project management, the project manager should have:
1. Knowledge: This relates to what the project manager knows about project management.
2. Performance: This relates to what the project manager is able to accomplish by using
this knowledge.
3.
Personal Skills: This relates how the project manager behaves when managing the
project (attitudes, core personality characteristics, and leadership. To sum up the ability
to guide the project team while achieving project objectives and balancing the project
constraints.
A project manager spends about 90% of time communicating.
Project Stakeholders
Project stakeholders are individuals and organizations involved in the project that will be directly
or indirectly impacted by the project. The stakeholders may have positive or negative influence
on the outcome of the project.
19
PMP EXAM GUIDE
The stakeholders must be identified early in the project. This is often a difficult task. The project
manager needs to manage the expectations of the key stakeholders to successfully complete the
project.
Key stakeholders include:
Project Manager
Customer / User
Performing organization
Project team members
Project management team
Sponsor
Influencers
PMO
Apart from the above, there are other categories of stakeholders such as external and internal
stakeholders, team members and their families, government agencies, and so on.
Project, Portfolio and Program Management
Portfolio :
A portfolio refers to a collection of projects or programs and other work that
Definition are grouped together to facilitate effective management of that work to meet
as per
strategic business objectives.
PMBOK
Program:
Guide
A program is defined as a group of related projects managed in a coordinated
way to obtain benefits and control not available from managing them
individually.
Programs
Collection of related projects

Controls are implemented and managed in a coordinated way
Collective benefits are realized
Each project has a project manager
20
PMP EXAM GUIDE
Portfolios
Projects share resources and depends on the outcomes of other projects
Collection of programs and projects

Projects meet a specific business goal or objective
Includes weighing the value of each project against the portfolios strategic
objective
Ensures efficient use of resources
Project Management Office (PMO)
Centralized units to oversee project and programs within the organization

Establishes and maintains the standards of project management methodologies
Support managers in planning, estimating, risk management and provide trainings
Project Management Office (PMO)

A project management office (PMO) is an organization body or entity assigned various
responsibilities related to the centralized and coordinated management of those projects
under its domain.
21
PMP EXAM GUIDE
Organizational Structure
Functional
Organization
Weak Matrix
Organisation
Balanced Matrix
Organisation
Strong Matrix Projectized

Organisation Organisation
PMs Title
Expediter
Expediter/
Coordinator
Project Manager
Project
Manager
Project
Manager
Decision
Making
Power
Functional
manager
Functional
manager plays
a major role,
but PM will
make decisions
PM and the
Functional
Manager will
have equal
power
Project
Manager
Project
Manager
Resources
From within
a Dept.
Project
members are
from different
departments
Project members
are from
different
departments
Project
members are
from different
departments
Project
based only
Resource
Allocation
As needed
Only 25% will

be assigned to
the projects
About 50% will

be assigned to
the projects
About 80%
will be
assigned to the
projects
About
100% will
be assigned
to the
projects
Resources
Reports to
Functional
manager
Functional
manager
Two manager
(FM and PM)
Project
Manager
Project
Manager
PM Reports
to
Functional
manager
Functional
manager
Functional
manager and
his/her senior
manager
Company
Senior manager
Company
senior
manager/
higher
authority
After Project
Completion
Team go
back to their
Dept. (home)
Team go back
to their Dept.
(home)
Team go back to
their Dept.
(home)
Team go back
to their Dept.
(home)
No home
move to
different
project or
get laid off
Source: A Guide to the Project Management Body of Knowledge, Fourth Edition (PMBOK Guide) 2008 Project Management Institute, Inc.
All Rights Reserved.
22
PMP EXAM GUIDE
Organization Types Advantages and Disadvantages
Org. Type
Advantages
Disadvantages
Matrix
Highly visible project objectives
Not cost effective because of extra administrative

personnel
Better Project Manager control over

resources
More than ONE boss for project teams
Better coordination
More complex to monitor and control
Team members maintain a home
Higher potential for conflict and duplication of effort

and functional managers have different priorities
Team members report to one supervisor

and clearly defined career paths
No career path in Project Management
Easier management of specialists
People place more emphasis on their functional

specialty to the determent of the project
Efficient project organization
No Home when project is completed
More effective communication than

functional
Duplication of facilities and job functions
Loyalty to the project
Lack of professionalism in disciplines and less

efficient use of resources
Functional
Projectized
23
PMP EXAM GUIDE
The Project Life Cycle

All projects, large or small, can be mapped to the following life cycle:
Starting the project

Organizing and preparing
Carrying out the project work
Closing the project
A typical life cycle shows the following characteristics:
Stakeholder influence and risk are more at the start of the project and decrease as project moves
towards closure.
Cost and staffing levels are low at the start, peak as project moves into execution and finally drop
as project inches towards closure.
The cost of changes increases and correcting errors increases as the project moves towards
closure.
Process Management Process Groups

The five process groups include:
1.
2.
3.
4.
5.
Initiating - process group authorizes the project

Planning - process group plans the course of action to achieve objectives
Executing - process group uses the resources to carry out project tasks
Monitoring - process group measures progress to identify variances
Closing - process group formalizes product acceptance and closure
Though the five project management process groups appear as discrete elements, in
reality they overlap with each other.
The application of project management processes is iterative in nature and is repeated
during the project life cycle.
24
PMP EXAM GUIDE
Process Management Process Groups
Source: A Guide to the Project Management Body of Knowledge, Fourth Edition (PMBOK Guide) 2008 Project
Management Institute, Inc. All Rights Reserved.
Project Management Process Groups
25
PMP EXAM GUIDE
Project Management Process Groups Interaction

Initiating Process Group
Conduct cost-benefit analysis

Determine and define the business needs and the project scope
Know the project boundaries and constraints
Identify high level risks
Understand the required project organization structure
Estimate budget and resource requirements
Assign a project manager
Obtain the project charter approval
Formally authorize to start a new project or phase
Planning Process Group
Determine how you will plan and develop the project management plan
Develop the project requirements in detail and agree the final scope
Determine the required project activities and their sequencing
Develop schedule using estimated resources and costs
26
PMP EXAM GUIDE
Agree what quality standards will be met by the project and how
Define how project staffing will be done
Establish the communication requirements and how it will be fulfilled
Identify what can go wrong and the plans to deal with them
Document what products or services will be acquired from outside the project
Gain formal approval and buy-in from everybody involved in the project
Executing Process Group
Execute activities in the project plan

Procure required project resources
Complete work packages
Document lessons learnt
Implement approved changes, corrective and preventive actions
Ensure processes are followed
Hold team building activities and boost morale and efficiency
Manage resource allocation and utilization
Hold progress review meetings and distribute progress reports
Keep everyone focused on the project goals
Monitoring & Control Process Group
Measure project performance using the documented technique in the plan

Identify variances and recommend corrective actions to get back on track
Approve changes, defect repair, corrective and preventive actions
Resolve conflicts and issues
Manages changes to scope, time and cost
Perform impact analysis to approve or reject changes
Obtain formal acceptance of deliverables from the customer
Monitor the status of risks and identify new risks have emerged
Measure team member performance
Closing Process Group
Confirm all project requirements are met

Obtain formal acceptance of product from the customer
Hand over the completed deliverables to the operations team
Compile lessons learnt
Measure customer satisfaction
27
PMP EXAM GUIDE
Archive project data and information for future reference

Release resources
Project Management Knowledge Areas

The 42 Processes within the 5 Process Groups, are mapped into 9 Project Management
Knowledge Areas:
28
PMP EXAM GUIDE
Processes
Initiation
Planning
Execution
Monitoring &
Control
Close Out
Develop Project
Charter
Develop Project
Management Plan
Direct and Manage

Project Execution
Monitor and
Control Project
Work
Close Project or
Phase
Knowledge
Areas
Integration
Management
Perform Integrated
Change Control
Scope Management
Scope Planning
Scope Verification
Scope Definition
Scope Control
Create WBS
Time Management
Activity Definition
Schedule Control
Activity Sequencing
Activity Resource
Estimating
Activity Duration
Estimating
Schedule Development
Cost
Estimate Costs
Cost Control
Management
Estimate Budgets
Quality Management
Quality Planning
Perform Quality
Assurance
Perform Quality
Control
Human Resource
Human Resource
Planning
Acquire Project
Team
Manage Project
Team
Management
Develop Project
Team
Manage Project
Team
29
PMP EXAM GUIDE
Communication
Management
Identify
Stakeholders
Communications
Planning
Information
Distribution
Report Performance
Manage
Stakeholders
Expectation
Risk
Risk Management
Planning
Monitor & Control

Risk
Management
Risk Identification
Qualitative Risk Analysis
Quantitative Risk
Analysis
Risk Response Planning
Plan Procurement
Procurement
Management
Conduct
Procurement
Administer
Procurements
Close
Procurement
Project Integration Management
Processes that integrates the different elements of project management

Coordinates the project work is done correctly and in the right order
Ensures changes are properly controlled and managed
Comprises of the following processes:
Develop Project Charter

Develop Project Management Plan
Direct and Manage Project Execution
Monitor and Control Project Work
Perform Integrated Change Control
Close Project or Phase
Project Scope Management
Ensures project includes all of the work and only the work required
Identifies, defines and controls the project work
Verifies that the deliverables meet the specified criteria
Comprises of the following five processes:
30
PMP EXAM GUIDE
Collect Requirements
Define Scope
Create WBS
Verify Scope
Control Scope
Project Time Management
Processes concerning with the timely completion of the project

Determines the time and the order in which project work will be done
Controlling to ensure everything gets done on time
Comprises of the following six processes:
Define Activities
Sequence Activities
Estimate Activity Resources
Estimate Activity Durations
Develop Schedule
Control Schedule
Project Cost Management
Processes to ensure the project stays within the budget

Determines the project budget
Controls the changes to the project budget
Comprises of the following three processes:
Estimate Costs
Determine Budget
Control Costs
Project Quality Management
Processes that ensures the project will satisfy the agreed quality standards
Identifies the relevant standards and how they will be met
Assurance activities to ensure the agreed processes are followed
Monitoring project results to determine compliance
Comprises the following three processes:
Plan Quality
31
PMP EXAM GUIDE
Perform Quality Assurance

Perform Quality Control
Project Human Resource Management
Processes that organize and manage the project team

Identifies the required roles on the project
Obtains the human resources needed to complete the work
Enhance competencies and performance
Comprises of the following four processes:
Develop Human Resource Plan
Acquire Project Team
Develop Project Team
Manage Project Team
Project Communication Management
Processes to ensure timely distribution of project information

Determines the information needs of the project stakeholders
Makes the information available in timely manner
Collecting and distributing project performance information
Identify Stakeholders
Plan Communications
Distribute Information
Manage Stakeholder Expectations
Report Performance
Project Risk Management
Processes to deal with the unexpected when it does happen

Identifying events that might affect the project
Developing plan and actions to deal with those event
Comprises of the following six processes:
Plan Risk Management

Identify Risks
Perform Qualitative Risk Analysis
Perform Quantitative Risk Analysis
Plan Risk Responses
Monitor and Control Risks
32
PMP EXAM GUIDE
Project Procurement Management
Processes to purchase or acquire the products and services

Selecting who will supply the required products and services
Planning and administering the contracts
Plan Procurements
Conduct Procurements
Administer Procurements
Close Procurements
Professional Responsibility
A PMP must follow the Project Management Institute Code of Ethics and
Professional Conduct
The responsibilities includes:
Doing the right things

Making good choices
Keep learning and getting better
Respecting others culture
Covers legal, ethical and professional behavior of a PMP
33
PMP EXAM GUIDE
34
PMP EXAM GUIDE
Chapter 2
Project Integration
Management
Project Integration
Framework

35
PMP EXAM GUIDE
Project Integration
Management
Learning Objectives
able to:
List the various processes of Project Integration
Management
Describe the process of Develop Project Charter
Describe the process of Develop project plan
Describe the process of Direct and Manage Project
Execution.
Describe the process of Monitor and Control Project
Work
Describe the process of Perform Integrated Change
Control
Describe the process of Close Project Or Phase
Explain the various project selection methods
Explain the components of a project management plan
36
PMP EXAM GUIDE
Definition Project Integration Management includes the processes and activities needed
as per
to identify, define, combine, unify, and coordinate the various processes and
PMBOK project management activities within the Project management process Groups.
Guide
Project Integration Management: Process Groups
Project Integration
Framework

37
PMP EXAM GUIDE
Definition The process of developing a document that formally authorizes a project or a

as per
phase and documenting initial requirements that satisfy the stakeholder's
PMBOK needs and expectations.
Guide
Key Points about Project Charter
The approved Project Charter formally initiates a project.

The Project Manager should be preferably assigned during creation of the Project
Charter.
Project Charter gives the project manager authority to spend and commit corporate
resources
It provides high-level requirements for the project.
Inputs: Develop Project Charter
Project statement of work A project statement of work (SOW) is a narrative

description of products, services, or results to be supplied. The SOW is provided by
the sponsor. In case of external customer, the SOW can be part of Request for
Proposal (RFP), Request for Information (RFI) or the contract. The SOW provides
the information on business need, product scope and how the project fits into the
strategic plan.
Business case: The business case document explains the importance of the project from
business standpoint. It involves cost-benefit analysis to find whether the project is worth
doing or not.
Contract: This is the input if project is being done for an external customer.
Enterprise environmental factors: These include organization structure, market

conditions, and so on.
Organization process assets: These include policies and procedures, templates,

historical information, and lessons learned database.
38
PMP EXAM GUIDE
Tools & Techniques: Develop Project Charter
Expert Judgment: Involves talking to all the experts on the project to identify inputs to
the charter. These can include the subject matter experts, external consultants, PMO and
other important stakeholders.
Outputs: Develop Project Charter
Project Charter: The Project Charter documents the business need and the following
information:
o Project purpose
o Project objectives and success criteria
o High-level requirements, project description, and risks
o Summary milestone schedule
o Summary budget
o Assigned project manager
o Name of the sponsor authorizing the charter
Project Selection Methods
Benefit Measurement Model (also called Comparative approach )
Payback Period
Cost Benefit Analysis
Scoring Models
Net Present Value (NPV)
Internal Rate of Return (IRR)
Mathematical Models (also called Constrained Optimization)

Use linear, dynamic, non-linear, multi-objective programming to solve problem
1. Payback period the amount of time to recover your cost. It compares the initial
investment to the cash inflows expected over the life of the product.
o For example, Initial investment on a project is Rs. 4,00,000, Expected cash
inflows: Rs. 50,000 per quarter for first two years, Rs. 100,000 per quarter
thereafter.
39
PMP EXAM GUIDE
What is the payback period?
Cash inflows = Rs. 50,000 x 4 (quarters in a year) = Rs. 2, 00,000 per year for
first two years. Hence, year 1 inflow = Rs. 2, 00,000, year 2 inflow = Rs. 2,
00,000. Total Rs. 4, 00,000 in 2 years
o So payback is reached in 2 years.
2. Benefit Cost Ratio (BCR) or profitability Index: This is the ratio of project benefit and
the project cost.
o BCR = Revenue / Cost
o Select the project with a higher BCR
3. Present Value (PV): is the expected future cash flows expressed in todays monetary
value
o PV = FV / (1+r) n
o For example, Calculate the Present Value of $ 100,000 received three years from
now. The interest rate is 10 percent.
o PV = 100000 / (1+10/100)3 = $ 75,131
4. Net Present value (NPV) is the sum total of the Present Value of Cash Inflows
Present Value of Cash Outflows
o If NPV > 0, accept the project
o Or select the project with the greater NPV
5. Internal Rate of Return: The rate of interest at which the revenues and costs are equal.
o Select the project with a higher IRR.
40
PMP EXAM GUIDE
6. Return on Investment (ROI): A return ratio that compares the net benefits of a project/
product, verses its total cost.
o ROI = Operating Income / Investments
41
PMP EXAM GUIDE
Definition Develop Project Management Plan is the process of documenting the actions
as per
necessary to define, prepare, integrate, and coordinate all subsidiary plans.
PMBOK
Guide
Inputs: Develop Project Management Plan
Project charter: explained earlier
Outputs from planning processes: Outputs from other project management planning
areas are used as an input to the project management plan. These include scope, cost,
time, quality, risk, human resource, communication, and procurement plans.
Enterprise environmental factors: explained earlier

Organizational process assets: explained earlier
Tools & Techniques: Develop Project Management Plan
Expert Judgment: explained earlier
Outputs: Develop Project Management Plan
Project management plan: The project management plan is a combination of subsidiary

plans. There is one sub subsidiary plan for each of the knowledge areas. These include
o Project scope management plan
o Schedule management plan
o Cost management plan
o Quality management plan
o Human resource management plan
o Communication management plan
o Risk management plan
o Procurement management plan
Note: The Project Management Plan is not the same thing as a project schedule.
42
PMP EXAM GUIDE
Definition Direct and manage Project Execution is the process of performing the work
as per
defined in the project management plan to achieve the project's objectives.
PMBOK
Guide
Inputs: Direct and Manage Project Execution
Project management plan: The project management plan is a combination of subsidiary

plans.
Approved change requests: These are authorized and documented changes to the
project scope.

Tools & Techniques: Direct and Manage Project Execution
Expert judgment: explained earlier
Project management information system: An information system consisting of the

tools and techniques used to gather, integrate, and disseminate the outputs of project
management processes. It is used to support all aspects of the project from initiating
through closing, and can include both manual and automated systems.
Outputs: Direct and Manage Project Execution
Deliverables: are anything that you produce during the course of project activities.
Work performance information: refers to the information generated as the project

progresses: These include status reports, progress reports and so on.
Change requests: Change requests are issued when there are issues during project.
These can result in change in scope, time, cost, quality and other factors.
43
PMP EXAM GUIDE
Project management plan updates: Update to the various subsidiary plans
Project document updates: Update to the various project documents.
44
PMP EXAM GUIDE
Definition Monitor and Control project Work is the process of tracking, reviewing, and
as per
regulating the progress to meet the performance objectives defined in the
PMBOK project management plan.
Guide
Inputs: Monitor and Control Project Work
Project management plan: explained earlier

Performance reports: explained earlier
Tools & Techniques: Monitor and Control Project Work
Outputs: Monitor and Control Project Work
Change requests: explained earlier

Project management plan updates: explained earlier
Project documented updates: explained earlier
45
PMP EXAM GUIDE
Definition Perform Integrated Change Control is the process of reviewing all change
as per
requests, approving changes and managing changes to the deliverables,
PMBOK organizational assets, project documents, and the project management plan.
Guide
Change Control Systems
Every documented change request must be either approved or rejected by an authorized

person.
Some changes require approval by the Change Control Board (CCB).
Any approved changes may required adjusting the scope, time, and resource requirements
Configuration Management
Configuration management system provides a standardized, effective, and efficient way to
centrally manage approved changes and baselines within the project.
Inputs: Perform Integrated Change Control

Work performance information: explained earlier
Tools & Techniques: Perform Integrated Change Control

Change control meetings: A change control board is responsible for meeting and
reviewing the change requests and approving or rejecting those change requests.
46
PMP EXAM GUIDE
Outputs: Perform Integrated Change Control
Change request status updates: Change requests, if approved are implemented and the
status is updated in change request log.
Project management plan updates: : explained earlier

Project document updates: : explained earlier
47
PMP EXAM GUIDE
Definition Close Project or Phase is the process of finalizing all activities across all of the
as per
project Management Process Groups to formally complete the project or
PMBOK phase.
Guide
Inputs: Close Project or Phase

Accepted deliverables: The deliverables that have been accepted as part of Verify
Scope.
Tools & Techniques: Close Project or Phase
Outputs: Close Project or Phase
Final product service or results transition: Refers to the final product, service or result
that the project was authorized to produce.
Organizational process assets update: This includes updates to the various

organizational process assets that include the project files, project or phase closure
documents and lessons learned database.
48
PMP EXAM GUIDE
Chapter 3
Project Scope
Management
Project Scope
Management
Define Scope
Create WBS
Verify Scope
Control Scope
49
PMP EXAM GUIDE
Project Scope
Management
Learning Objectives
able to:
List the processes for project scope management

Describe the process of requirements gathering
Describe the process of defining project scope
Decompose project scope into work breakdown structure
Describe the process of verify scope
Describe how to control the project scope changes
50
PMP EXAM GUIDE
Definition Project Scope management includes the processes required to ensure that the
as per
project includes all the work required, and only the work required, to complete
PMBOK
the project successfully.
Guide
Project Scope Management: Process Groups
Project Scope
Management
Define Scope
Create WBS
Verify Scope
Control Scope
The term scope may refer to:
Product Scope: The features and functions in a product, service, or result.

Project Scope: The work that needs to be done in order to deliver a product, service or
result with the specified features and functions.
The product scope is measured against the requirement and project scope is measured against the
project plan.
The success of the project is dependent on how well the requirements are captured. These
requirements include the product requirements as well as the project requirements. Product
requirements include the technical and other specifications of the product whereas project
requirements include the business and project management requirements.
51
PMP EXAM GUIDE
Definition Collect Requirements is the process of defining and documenting stakeholders'

as per
needs to meet the project objectives.
PMBOK
Guide
Inputs: Collect Requirements
Project charter: The Project Charter is a summary document of what the project is
supposed to accomplish. This serves as key document to create the requirements
document.
Stakeholder register: Is the list of all the stakeholders. You need to gather requirements
from the all the stakeholders using different techniques such as interviews,
questionnaires, surveys and so on.
Tools & Techniques: Collect Requirements
Interviews: This is a one-to-one interaction with the stakeholders to understand the exact
needs.
Focus groups: This involves a group of people to discuss their needs with you.
Facilitated workshops: This is a structured technique where a moderator leads a group

through brainstorming together. The cross-functional teams work together and decide on
a common understanding and goals.
For example, Joint Application Development (JAD) sessions are used in the software
development industry. In manufacturing sector, Quality Function Deployment (QFD) is
used to arrive the critical characteristics of anew product.
Group creativity techniques: Some of the group creativity techniques include:

1. Delphi Technique: In Delphi Technique, a group of anonymous users is asked to
provide answers to specific questions. A moderator shares the ideas with everybody
and the iterations continue to settle down on a list of requirements from all.
52
PMP EXAM GUIDE
2. Mind maps: This is a excellent technique to visualize how the ideas relate to each
other.
3. Affinity Diagrams: This is a way to group same kind of ideas together in a group.
4. Brainstorming: This is the most common way of collecting the requirements where a
group of people sit down together to think of new ideas.
5. Nominal Group technique: This is a way of brainstorming where you write down
the ideas and then all vote for the best ones.
Group decision making techniques: There are various methods of arriving at a decision.
These include:
1.
2.
3.
4.
Unanimity: Everyone agrees in this case.

Majority: More than half of the people decide.
Plurality: The idea that gets the most votes.
Dictatorship: One person decides here.
Questionnaires and surveys: Use this method to elicit response from a larger set of
people.
Observations: Sometimes just observing the users gives an idea of the needs or how to
solve the problem.
Prototypes: Prototypes are scaled down versions of the product.
Outputs: Collect Requirements
Requirements documentation: Requirements documentation includes the business

need, project objectives, functional requirements, non-functional requirements, and
quality and acceptance criteria. It also includes the assumptions and constraints.
Requirements management plan: The requirements management plan describes how

the requirements will be managed through the project.
Requirements traceability matrix: This document describes where the requirements

came from. This document helps in creation of specific test cases.
53
PMP EXAM GUIDE
Define Scope
Definition Define Scope is the process of developing a detailed description of the project
as per
and product.
PMBOK
Guide
Inputs: Define Scope
Project charter: explained earlier

Requirements documentation: explained earlier
Tools & Techniques: Define Scope

Product analysis: It involves better understanding the product or the project.
Alternatives identification: This is about exploring different ways to do the project

work. This might include licensing some part or outsourcing some part of the project to
external vendors.
Facilitated workshops: explained earlier
Outputs: Define Scope
Project scope statement: The scope statement tells you what to do (and what not to do).
The scope statement covers the following important items:
Project Objectives
Product Scope Description
Project Requirements
Exclusions
Deliverables
Acceptance Criteria
Constraints
Assumptions
Project document updates: Any updates to the project documents.

54
PMP EXAM GUIDE
Progressive Elaboration Versus Scope Creep
Progressive elaboration should not be confused with scope creep.
Progressive elaboration: Adding more details to the already defined scope and
not increasing the project scope.
Scope creep: Adding features and functionality (project scope) without

addressing the effects on time, costs, and resources, or without customer
approval.
55
PMP EXAM GUIDE
Create WBS
Definition The process of subdividing project deliverables and project work into smaller,
as per
more manageable components.
PMBOK
Guide
Work Breakdown Structure (WBS): Deliverable-oriented hierarchical decomposition of work.
It organizes and defines the total scope of the project.
Work Package: The lowest level WBS components that contain planned work. A work package
can be schedules, cost estimated, monitored and controlled.
Note: Work outside the WBS is outside the scope of the project.
Project
Phase 1 Phase 2 Phase 3

Figure: Work Breakdown Structure (WBS)
56
PMP EXAM GUIDE
Inputs: Create WBS
Project scope statement: explained earlier

Requirement documentation: explained earlier
Tools & Techniques: Create WBS
Decomposition: Decomposition is the subdivision of project deliverables into smaller,

more manageable components until the work and deliverable are defined at the work
package level.
Outputs: Create WBS
Work breakdown structure: is a deliverable-oriented hierarchical decomposition of

work. It organizes and defines the total scope of the project. The WBS is decomposed
into smaller, more manageable components until the work and deliverable are defined at
the work package level. It is the lowest level WBS components that contain planned
work.
Control accounts are established at work package level. Control account is used to
integrate scope, cost and schedule. It is also used for earned value measurement.
Work breakdown structure dictionary: WBS dictionary provides detailed description

of each WBS element.
Scope baseline: An approved version of the detailed scope statement, work breakdown
structure (WBS), and its associated WBS dictionary.
Project document updates: explained earlier
57
PMP EXAM GUIDE
Verify Scope
Definition The process of formalizing acceptance of the completed project deliverables

as per
PMBOK
Guide
Inputs: Verify Scope

Requirements traceability matrix: explained earlier
Tools & Techniques: Verify Scope
Inspection: Inspection includes measuring and verifying to determine whether work and
deliverables meet requirements and product acceptance criteria.
Outputs: Verify Scope
Accepted deliverables: Deliverables that meet the acceptance criteria are signed-off by
the customer.
Change requests: If the deliverables that are not accepted, a change request is raised.
The change request goes for approvals.
Project document updates
58
PMP EXAM GUIDE
Control Scope
Definition The process of monitoring the status of the project and product scope and
as per
managing changes to the scope baseline.
PMBOK
Guide
Inputs: Control Scope

Requirements traceability matrix: explained earlier
Tools & Techniques: Control Scope
Variance Analysis: Variance analysis is used to measure the variation of key parameters
from the original scope baseline.
Outputs: Control Scope
Work performance measurements: explained earlier

Organizational process assets updates: explained earlier
59
PMP EXAM GUIDE
Chapter 4
Project Time
Management
Project Time
Management
Define Activities
Sequence Activities
Estimate Activity Duration
Develop Schedule
Control Schedule
60
PMP EXAM GUIDE
Project Time
Management
Learning Objectives
After the completion of this chapter, the learner will be able to:
List the various time management process

Describe the process of Define Activities
Describe the process of Sequence Activities
Describe the process of Estimate Activity Resources
Describe the process of Estimate Activity Durations
Describe the process of Develop Schedule using various tools
Describe the process of Control Schedule
Apply Critical Path Method to create schedule
61
PMP EXAM GUIDE
Definition Project Time Management includes the processes required to manage timely
as per
completion of the project.
PMBOK
Guide
Project Time Management: Process Groups
Project Time
Management
Define Activities
Sequence Activities
Develop Schedule
Control Schedule
62
PMP EXAM GUIDE
Define Activities
Definition Define Activities is the process of identifying the specific actions to be

as per
performed to produce the project deliverables.
PMBOK
Guide
Inputs: Define Activities
Scope Baseline: The scope baseline consists of project deliverables, assumptions and
constraints which are important inputs to the activities.
Enterprise Environmental Factors: explained earlier
Organizational Process Assets: It includes various templates and the lessons learned
databases.
Tools & Techniques: Define Activities
Decomposition: Decomposition refers to subdividing the work-packages to activities.
Rolling Wave Planning:

o Rolling wave planning is the process of planning for a project in waves as the
project becomes clearer and unfolds. It is a multi-step, intermittent process,
like waves - because we cannot provide the details very far out in our
planning.
o Work packages that are further in the future are planned at only a high level.
o Work packages that are closer in time are planned in detail.
o We end up saving a lot of planning time by not planning things that have a
relatively high chance of never reaching execution.
o Helpful in large or long-term projects where there is some uncertainty about
continuing with the project beyond a certain point in time.
Templates: Templates refers to using the WBS of the similar projects that are being
used in the organization.
Expert Judgment: using the opinion of the project managers who have done similar
projects earlier.
63
PMP EXAM GUIDE
Outputs: Define Activities
Activity List: This is the list of activities that need to be done to complete the project.
Activity Attributes: Activity attributes comprise of the information required for each
activity. This includes the description of each activity, predecessor activities, successor
activities, and any constraints.
Milestone List: A milestone is an important event in a project. These are important from
the point of tracking the project.
64
PMP EXAM GUIDE
Sequence Activities
Definition Sequence Activities is the process of identifying and documenting relationships

as per
among the project activities.
PMBOK
Guide
Inputs: Sequence Activities
Activity List: explained earlier

Activity Attributes: explained earlier
Milestone List: explained earlier
Project Scope Statement: explained earlier
Organizational Process Assets: explained earlier
Tools & Techniques: Sequence Activities
Precedence Diagramming Method (PDM):

o Also called Activity on Node (AON)
o Uses boxes or rectangles as Nodes to represent Activities
o Connect boxes with Arrows which represent Dependencies
o Does not use dummy activities
o Includes all 4 relationships (FF, FS, SS, & SF)
These four relationships include:

1. Finish-to-Start. The initiation of the successor activity depends upon the completion
of the predecessor activity.
2. Finish-to-Finish. The completion of the successor activity depends upon the
completion of the predecessor activity.
3. Start-to-Start. The initiation of the successor activity depends upon the initiation of
the predecessor activity.
4. Start-to-Finish. The completion of the successor activity depends upon the initiation
of the predecessor activity.
In PDM, finish-to-start is the most commonly used type of precedence relationship. Startto-finish relationships are rarely used.
65
PMP EXAM GUIDE
Task Relationships
Dependency Determination:
1. Mandatory dependencies are those that are inherent in the nature of the work being
done. They often involve physical limitations. For example, Superstructure after the
foundation.
Mandatory dependencies are also called hard logic dependencies.
2. Discretionary dependencies are those that are defined by the project management
team.
Discretionary dependencies are usually defined based on knowledge of:
o Best practices within a particular application area.
o Some unusual aspect of the project where a specific sequence is desired, even
though there are other acceptable sequences.
o Discretionary dependencies may also be called preferred logic, preferential logic,
or soft logic.
3. External dependencies are those that involve a relationship between project
activities and non-project activities.
o For example, Regulatory dependencies
66
PMP EXAM GUIDE
Applying Leads and Lags: A lead allows acceleration of the successor activity
whereas, lag allows a delay in the successor activity.
Schedule Network Templates: Standard schedule network templates can be used for
expediting the creation of schedule network templates.
Outputs: Sequence Activities
Project Schedule Network Diagrams: Project schedule network diagrams are

schematic displays of the projects schedule activities and the logical relationships
among them, also referred to as dependencies.
o Can be produced manually or by using project management software.
o Can include full project details, or have one or more summary activities.
o Summary narrative accompanies the diagram and describes the basic approach
used to sequence the activities
Project Document Updates: Updates to any project documents.
67
PMP EXAM GUIDE
Definition Estimate Activity Resources is the process of estimating the type and quantities
as per
of material, people, equipment or supplies required to perform each activity.
PMBOK
Guide
Inputs: Estimate Activity Resources

Resource Calendars: It includes the availability of the resources during various time
periods of the project.

Tools & Techniques: Estimate Activity Resources

Alternatives Analysis: Alternatives analysis refers to the evaluation of various
alternatives available of estimating activity resources. These can include skill and
experience of the resources and also the different tools available for project execution.
Published Estimating Data: This includes published data for estimation available for
different industries.
Bottom-up Estimating: Involves subdividing large subset into smaller activities and ity
estimating each activity. Aggregation of all the activity estimates leads to the final
estimate.
Project Management Software: Involves estimating using software tools such as

spreadsheets and other automated tools.
68
PMP EXAM GUIDE
Outputs: Estimate Activity Resources
Activity Resource Requirements: It is the type and number of resources required for
each activity.
Resource Breakdown Structure: It is the hierarchical structure of resource category and

resource type. For example for labour category, high-skilled and medium-skilled.
Project document Updates: Updates to various related project documents.
69
PMP EXAM GUIDE
Definition Estimate Activity Durations is the process of approximating the number of

as per
work periods needed to complete individual activities with estimated resources.
PMBOK
Guide
Inputs: Estimate Activity Duration

Activity Resource Requirements: explained earlier
Resource Calendars: explained earlier
Organizational Pocess Assets: explained earlier
Tools & Techniques: Estimate Activity Duration

Analogous Estimating: explained earlier
Parametric Estimating: Parametric modeling involves using project characteristics in a

mathematical model to calculate project costs. These models can be simple or complex
depending on the project.
Three - point Estimates: Also called Program Evaluation and Review Technique
(PERT). PERT uses three estimates to arrive at a range for activity time.
o Most Likely - The activity duration based on the realistic effort assessment.
o Optimistic - The activity duration based on the best-case scenario for the
activity.
o Pessimistic - The activity duration based on the worst-case scenario for the
activity.
Expected Time = (Optimistic + 4 * Most Likely + Pessimistic) / 6
70
PMP EXAM GUIDE
Reserve Analysis: Reserve analysis means keeping some reserve time or buffer for time
overruns. This duration is the percentage of overall duration and called contingency
reserve.
Outputs: Estimate Activity Duration
Activity Duration Estimates: are the quantitative assessments of the likely number of
work periods that will be required to complete an activity.
Project Document Updates: Updates to various related project documents.
71
PMP EXAM GUIDE
Develop Schedule
Definition Develop Schedule is the process of analyzing activity sequences, durations,

as per
resource requirements, and schedule constraints to create the project schedule
PMBOK
Guide
Inputs: Develop Schedule

Project Schedule Network Diagrams: explained earlier
Activity Duration Estimates: explained earlier
Organizational Process Assets : explained earlier
Tools & Techniques: Develop Schedule
Schedule Network Analysis: It is a analytical technique that uses critical path method,
critical chain method, what-if analysis, and resources leveling to calculate the early and
late start and finish dates for the uncompleted portions of project activities.
Critical Path Method: Critical Path is the path with the longest duration. A delay in any
one of the activities on the critical path activities leads to the delay in the entire project.
Float: The float for an activity is the amount that its duration can slip without causing the
project to be delayed. The float for any activity on the critical path is zero.
Calculate the early start, early finish, late start, and late finish using forward pass and
backward pass.
When two paths intersect, for the forward pass use the larger value, and for the
backward pass use the smaller value.
72
PMP EXAM GUIDE
Critical Chain Method: Critical chain is a schedule network analysis technique that
modifies the project schedule to account for limited resources.
Resource Leveling: Resource leveling is necessary when resources have been overallocated, has been assigned two activities at the same time, or a critical resource is
available only during certain times.
Resource leveling causes the critical path to change in most cases.
What-if Scenario Analysis: What-if analysis involves using various scenarios and
finding their impact on the schedule.
Applying Leads and Lags: explained earlier
Schedule Compression: Schedule compression involves shortening the project schedule

without affecting the project scope. The techniques are:
1. Crashing: This is done by adding more resources along the critical path. Crashing
does not always produce a viable alternative and often results in increased cost.
2. Fast-tracking: It involves doing activities in parallel that would normally be done in
sequence. Fast tracking often results in re-work and increase risk.
Scheduling Tool: Using scheduling tools and software programs to create network
diagrams.
Outputs: Develop Schedule
Project Schedule: It includes the project start and end dates and provides the prediction
of duration of the entire project. Project schedule can be represented in tabular form or
the following graphical formats:
o Milestone Chart
o Bar Chart
o Schedule Network Diagram
Schedule Baseline: It is an approved version of the schedule that is used to compare the
planned and actual progress.
73
PMP EXAM GUIDE
Schedule Data: Schedule data includes the supporting data apart from the milestones,
activities, assumptions and constraints.
Project Document Updates: Updates to the various project documents.
74
PMP EXAM GUIDE
Network Diagram Development
Critical Path Method
Forward Pass Early Start, Early Finish
75
PMP EXAM GUIDE
Backward Pass Late Start, Late Finish
Critical Path Longest Path, Zero Float
76
PMP EXAM GUIDE
Control Schedule
Definition Control Schedule is the process of monitoring the status of the project to
as per
update project progress and managing changes to the schedule baseline.
PMBOK
Guide
Inputs: Control Schedule
Project Management Plan: explained earlier

Project Schedule: explained earlier
Work Performance Information: This includes the project status and progress reports.
Tools & Techniques: Control Schedule
Performance Reviews: Performance reviews involve measuring the Earned Value

Calculations Schedule Variance (SV) and the Schedule Performance Index (SPI).
These values provide valuable information on the performance of the project.
Variance Analysis: This involves comparing the planned versus actual dates. This is
very important. In case of any problems, corrective action can be taken.
Project Management Software: explained earlier

Resource Leveling: explained earlier
What-if Scenario Analysis: explained earlier
Adjusting Leads and Lags: explained earlier
Schedule Compression: explained earlier
Scheduling Tools: explained earlier
Outputs: Control Schedule
Work Performance Measurements: explained earlier

Organizational Process Assets Updates: explained earlier
Change Requests: explained earlier
77
PMP EXAM GUIDE
Project Management Plan Updates: explained earlier

Project Document Updates: explained earlier
78
PMP EXAM GUIDE
Chapter 5
Project Cost
Management
Project Cost
Management
Estimate Costs
Determine Budget
Control Costs
79
PMP EXAM GUIDE
Project Cost
Management
Learning Objectives
List the various cost management process

Describe the process of Estimate Costs
Describe the process of Determine Budget
Describe the process of Control Costs
Apply the concept of Earned Value Management in given scenarios
80
PMP EXAM GUIDE
Definition Project Cost Management includes the processes involved in estimating,

as per
budgeting, and controlling costs so that the project can be completed within the
PMBOK
approved budget.
Guide
Project Cost Management: Process Groups
Project Cost
Management
Estimate Costs
Determine Budget
Control Costs
Project Cost Management Plan
Subsidiary plan of the Project Management Plan

Produced during Develop Project Management Process
Defines how the project costs will be planned, managed and controlled
Documents how the cost management processes will be planned
Provides guidance on how the cost estimates should be developed
Determines how cost performance will be measured
Defines how cost variances will be determined and managed
Identifies how costs progress reporting will be done
Documents cost change control procedure
81
PMP EXAM GUIDE
Estimate Costs
Definition Estimate Costs is the process of developing an approximation of the monetary

as per
resources needed to complete project activities.
PMBOK
Guide
Inputs: Estimate Costs
Scope baseline: The scope statement lists the project objectives and deliverables along
with other information required for the project. The information is required in creating
the cost estimate.
Project schedule: The project schedule provides the information on the duration of the
project, which is another input for cost estimate.
Human resource plan: Information about the cost of various resources adds to the cost
estimate.
Risk register: Keeping track of the risks and hence the costs required to tackling them.
Enterprise environmental factors: Published commercial information, supplier

databases help in the costing for various material and resource costs.
Organizational process assets: Historical information about projects and company

costing policies are used in estimating the project costs.
Tools & Techniques: Estimate Costs
Expert judgment: Expert judgment involves using historical information as well as

talking to experts on the subject matter.
Analogous estimating: Also called Top-down Estimating. In bottom-up estimating,

first you break down the project into activities and then add them up. Top-down is the
opposite of this. You compare the project as a whole with a similar project and arrive at a
cost estimate. This is less accurate than bottom-up estimation.
82
PMP EXAM GUIDE
Parametric estimating: Parametric modeling involves using project characteristics in a

mathematical model to calculate project costs. These models can be simple or complex
depending on the project.
Bottom-up estimating: This involves adding up the cost of individual activities or work
packages and rolling up to get the total costs. This is a much more accurate estimating
method than analogous estimating.
Three - point estimates: Also called Program Evaluation and Review Technique
(PERT). PERT uses three estimates to arrive at a range for activity cost.
o Most Likely - The cost of activity based on the realistic effort assessment.
o Optimistic - The cost of activity based on the best-case scenario for the activity.
o Pessimistic - The cost of activity based on the worst-case scenario for the activity.
Expected Cost = (Optimistic + 4 * Most Likely + Pessimistic) / 6
Reserve Analysis: Reserve analysis means keeping some reserve cash for cost overruns.
These costs that are the percentage of overall costs are also called contingency costs.
Cost of Quality: Cost of quality refers to the costs associated with quality related
activities.
PM Estimating Software: Project Mangers also use specialized estimating software like
spreadsheets to calculate costs.
Vendor Bid Analysis: Vendor bid analysis is required when projects are awarded based
on bids under competitive processes. Arriving at a cost estimate for individual modules /
sub-projects becomes important if part of the project is being outsourced to a vendor.
Outputs: Estimate Costs
Activity Cost Estimates: This is the cost of all the activities in the project. It includes the
cost of labor as well as the material costs.
Basis Of Estimates: This lists the rates and reasoning for arriving at various cost
estimates for the resources.
83
PMP EXAM GUIDE
Project Document Updates: The project plan documents are updated with the cost
estimates.
Some Important Cost Definitions

1. Benefit Cost Ratio: This is the ratio of project benefit and the project cost.
2. Net Present Value (NPV): NPV takes the time value of money into account and is
used to decide if it is worth doing the project.
3. Opportunity Cost: When there is a decision to be made between two opportunities, the
opportunity cost is the value / money forgone for the not doing the project.
4. Internal Rate of Return: The amount of money the project will return to the company
funding it.
5. Depreciation: This is the rate at which the project loses value over time.
6. Lifecycle Costing: Life Cycle Costing takes into account not just the cost of
development of a project but also the cost of supporting during the lifecycle.
Rough Order of Magnitude (ROM) The cost estimation with an accuracy of + 50 %, -50 %.
Types of Cost
Direct Cost- any cost that is identified specifically with a particular final cost objective.
Indirect Cost: any cost not directly identified with a single, final cost objective (more
than one project).
Fixed Cost: A periodic charge that does not vary with business volume.
Variable Cost : Cost that fluctuates based on the business volume
84
PMP EXAM GUIDE
Determine Budget
Definition Determine Budget is the process of aggregating the estimated costs of

as per
individual activities or work packages to establish an authorized cost baseline.
PMBOK
Guide
Inputs: Determine Budget
Activity Cost Estimates: explained earlier

Basis Of Estimates: explained earlier
Scope Baseline: explained earlier
Resource Calendars: Resource calendars provide information on the resources

availability. This is also used to arrive at project duration.
Contracts: If the project work is contracted, then contract is an important input to the
budget.
Tools & Techniques: Determine Budget
Cost aggregation: The individual activity estimates are rolled up into work package
levels which are further rolled till the project level. This is used to arrive at the project
budget.
Reserve analysis: Budget reserve analysis can help in arriving at both the management
and the contingency reserve.
Historical relationships: Historical relationships (for example used in Parametric

Modeling and Analogous Estimates) are also used in budget estimates.
85
PMP EXAM GUIDE
Funding limit reconciliation: Since the funds are limited, the project manager needs to
complete the project within the budget. If this cannot be achieved, a scope change might
be required or funding limit increased.
Outputs: Determine Budget
Cost performance baseline: This is a snapshot of the planned budget. The cost
performance baseline is used to compare the actual performance against the baseline.
Project funding requirements: The total funding requirements are the baseline cost and
the management reserve. It is important for the project manager to understand the funding
requirements during different phases of the project and how to secure them as well.
Project document updates: The various documents such as the cost management plan
need to be updated.
86
PMP EXAM GUIDE
Control Costs
Definition Control Cost is the process of monitoring the status of the project to update
as per
project budget and managing changes to the cost baseline.
PMBOK
Guide
Inputs: Control Costs

Project funding requirements: explained earlier
Tools & Techniques: Control Costs
Earned value management: EVM is used to measure the performance of the project
against the plan. (explained under the section EVM)
Forecasting: Forecasting uses the EVM numbers to decide on preventive or corrective
actions.
To-complete performance index (TCPI): TCPI calculation is used to figure out how
well the project needs to perform in future to stay within the planned budget.
Performance reviews: These are project team meetings where the various variances are
analyzed. EVM is used to calculate the variances.
Variance analysis: The variance between the planned the actual project performance.
Project management software: There are software available that help the project
manager to keep track of their budgets.
Outputs: Control Costs
Work performance measurements: These include the CV, SV, SPI, and CPI.
Budget forecasts: Estimate at Completion (EAC) value is calculated for budget forecast.
87
PMP EXAM GUIDE
Organizational process assets updates: explained earlier

Earned value Management (EVM)

EVM is used to measure the performance of the project against the plan.
Important Terms
Planned Value (PV) also called Budgeted Cost of Work Scheduled (BCWS)
Earned Value (EV) also called Budgeted Cost of Work Performed (BCWP)
Actual Cost (AC) also called Actual Cost of Work Performed (ACWP)
88
PMP EXAM GUIDE
EVM Formulas List
Name
Formula
What is it?
BAC
Budget at Completion
No formula its the

project budget
How much money youll

spend on the project
PV
Planned Value
PV = BAC* Planned %
Complete
What your schedule says

you should have spent
EV
Earned Value
EV = BAC * Actual %
Complete
How much of the projects

value youve really earned
AC
Actual Cost
What youve actually spent

on the project
How much youve actually

spent so far
SPI
Schedule Performance
Index
SPI = EV/PV
Whether youre behind or

ahead of schedule
SV
Schedule Variance
SV = EV-PV
How much ahead or behind

schedule you are
CPI
Cost Performance Index
CPI = EV/ AC
Whether youre within

your budget or not
CV
Cost Variance
CV = EV AC
How much above or below

your budget you are
EAC
Estimate at Completion
EAC = BAC/ CPI
ETC
Estimate to Complete
ETC = EAC AC
How much more money

you will spend on the
project
VAC
Variance at Completion
VAC = BAC EAC
Predicts what your

variance will be when the
project is done
89
PMP EXAM GUIDE
Interpreting EVM Numbers

Variance Analysis
1. Schedule Variance (SV): SV = EV PV
If SV is positive, the project is ahead of schedule, and

If SV is negative, the project is behind schedule
2. Cost Variance (CV): CV = EV AC
If CV is positive, the project is under budget, and

If CV is negative, the project is over budget
Indices
1. Schedule Performing Index (SPI): SPI = EV / PV
The project is ahead of schedule, if earned value is more than planned value.
That means, if SPI > 1, the project is ahead of schedule, and
If SPI < 1, the project is behind schedule
2. Cost Performing Index (CPI): CPI = EV / AC
The project is under budget, if earned value is more than actual cost.
That means, if CPI > 1, the project is under budget, and
If CPI < 1, the project is over budget
Forecasting
1. Estimate at Completion: EAC = AC + ETC
2. EAC forecast for ETC work performed at budgeted rate
EAC = AC + (BAC - EV)
3. EAC forecast for ETC work performed at present CPI
EAC = BAC / CPI
4. EAC forecast for ETC work considering both SPI and CPI factors
90
PMP EXAM GUIDE
EAC = AC + [(BAC - EV)/(CPI * SPI)]
To-complete Performance Index (TCPI)
Equation of TCPI based on the BAC: (BAC - EV) / (BAC - AC)

Equation of TCPI based on the EAC: (BAC - EV) / (EAC - AC)
91
PMP EXAM GUIDE
Chapter 6
Project Quality
Management
Project Quality
Management
Plan Quality
92
PMP EXAM GUIDE
Project Quality
Management
Learning Objectives
able to:
List the various quality management process

Describe the various quality tools
Describe the various quality principles
Describe the process of Plan Quality
Describe the process of Plan Quality Assurance
Describe the process of Plan Quality Control
93
PMP EXAM GUIDE
Definition
as per
PMBOK
Guide
Project Quality management includes the processes and activities of the

performing organization that determine quality policies, objectives, and
responsibilities so that the project will satisfy the needs for which it was
undertaken.
Project Quality Management: Process Groups
Project Quality
Management
Plan Quality
94
PMP EXAM GUIDE
Quality Management Principles
Customer Satisfaction
The product should not just satisfy the stated needs but also the some of the unstated needs of the
customer. Such requirements are common sense requirements like a product should not be made
from toxic stuff.
Fitness for Use

Fitness for use is about making sure that the product is fit for the customer needs. This concept
was propagated by Joseph Juran.
Conformance to requirements
This is one of the most important concepts for defining quality. This means that that the product
should meet the customer requirements. This also means that the product is as good as the stated
requirements. This highlights the importance of the requirements gathering.
Prevention over Inspection

Quality is concerned with Prevention over Inspection. Inspection is typically used to prove that
the system works (because youve put good quality practices in place), rather than a way to reject
the failures. A good point to remember is, Quality should be planned in not inspected in
because the cost of rework can be very high.
Quality and Grade

Quality is the sum of the characteristics of a product that allow it to meet or exceed the
expectations of the customer. Grade is a category or rank given to entities having the same
functional use but different technical characteristics. High-grade product will typically cost more
than the low-grade product.
95
PMP EXAM GUIDE
Plan Quality
Definition Plan Quality is the process of identifying quality requirements and/or

as per
standards for the project and product, and documenting how the project will
PMBOK demonstrate compliance.
Guide
Inputs: Plan Quality
Scope baseline: Scope baseline lists the requirements which include the product
specifications as well. This document also had the acceptance criteria that includes the
quality parameters listed.
Stakeholder register: Stakeholders register has the list of stakeholders who are
interested in the quality of the product.
Cost performance baseline: used to measure cost performance.
Schedule baseline: used to measure schedule performance.
Risk register: Risk register helps to identify risks that might affect quality.
Enterprise environmental factors: These include organization and government rules

and regulations related to quality.
Organizational process assets: This would include the company quality policy.
Tools and Techniques: Plan Quality
Cost-Benefit Analysis: A cost benefit analysis is required to check as to how much

quality activities will cost with respect to the gain for the company.
Cost of Quality (COQ): Cost of quality refers to the costs incurred during the life cycle
of the product. These include the cost of preventing nonconformance to requirements as
well as the cost of appraising the product or service for conformance to requirements.
o Conformance Costs: These include Prevention costs as well as Appraisal Costs
o Nonconformance Costs: These include Internal Failure Costs as well External
Failure Costs.
96
PMP EXAM GUIDE
Conformance Costs
Nonconformance Costs
Training
Processes
Testing and
Inspection
Audits
Rework
Fast tracking
Warranty
Product recalls
Control Charts: Are used to find out which process is contributing to quality problems.
This is generally used in manufacturing industry for repetitive processes.
There is an upper control limit and a lower control limit. There is also a mean. If the data
points are outside the limits, the process is out of control. This means the process needs
adjusting.
Benchmarking: In this, a reference point from another similar project from within or
outside company is used to compare the results. This is generally done for best practices
and improvement of products.
Design of experiments: is a statistical method to analyze the results of the experiments.

These results are used to find out how the deliverables can best meet the requirements.
For example, Project Managers might want to test what combination outsourcing work
and in-hour
Statistical sampling: This technique involves taking a representative sample for

inspection.
Flowcharting: It is a graphical representation of processes to find the areas where

defects can occur.
Proprietary quality management methodologies: these Include Six Sigma, Lean Six
Sigma. CMMI etc.
Additional quality planning tools: These include:
o Brainstorming
o Affinity Diagrams
o Nominal Group Techniques: brainstorming in small groups
o Matrix Diagrams: tables, spreadsheets that help analyze complex relationships
o Prioritization Matrices: diverse sets of issues are analyzed for priority.
97
PMP EXAM GUIDE
Outputs: Plan Quality
Quality management plan: The Quality management plan describes how the project
management team addresses quality.
Quality metrics: are the measurements that are taken throughout the project. These
measurements are used to measure the quality. For example, schedule variance or defect
density.
Quality checklists: Checklists are defect prevention tools that use a list of characteristics
/ specifications in a product. Mostly used during inspection.
Process improvement plan: is a plan for improving the process. The process is
monitored and checked for defects to create a improvement plan.
Project document updates: any updates are made to the subsidiary plans of the project
plan.
98
PMP EXAM GUIDE
Definition Perform Quality Assurance is the process of auditing the quality requirements
as per
and the results from quality control measurements to ensure appropriate
PMBOK quality standards and operational definitions are used.
Guide
Inputs: Perform Quality Assurance

Quality metrics: explained earlier
Work performance information: This includes various performance reports such as

project progress reports, status reports, and variance reports. These reports serve as
important inputs for quality assurance.
Quality control measurements: These include the records of quality testing. These are
used for analysis.
Tools & Techniques: Perform Quality Assurance
Plan Quality and Perform Quality Control Tools & Techniques: The include the Plan
Quality and Perform Quality Control Tools & Techniques
Quality Audits: Quality Audits are conducted for the projects in a company to check
whether the projects are following the companies processes or not. These are structured
reviews with the objective to:
o Improve performances of the project
o Incorporate the best practices
o Identify nonconformance to processes and procedures
Quality audits can be done by internal auditors or third-party agencies.
Process Analysis: This is often utilized to understand and improve the processes.
Outputs: Perform Quality Assurance
Organizational Process Assets Updates

99
PMP EXAM GUIDE
Change Requests: Change requests can be used for corrective action / preventive action
/ defect repair.
Project Management Plan Updates: This is would include update to various subsidiary
plans that are part of the project management plan.
Project Document Updates; The documents such as quality audit reports, quality
processes and so on might require updates.
100
PMP EXAM GUIDE
Definition Perform Quality Control is the process of monitoring and recording results of
as per
executing the quality activities to assess performance and recommend
PMBOK necessary changes.
Guide
Some Important Quality Terms
Prevention is keeping errors out of the process and Inspection is keeping errors out of
the hand of the customer.
Attribute Sampling is the result conforms, or it does not, whereas, Variable Sampling
is when the result is rated on a continuous scale that measures the degree of conformity.
Special causes are unusual events and Random causes are because of normal variation.
Tolerances means the result is acceptable if it falls within the range specified and,
Control Limits means that the process is in control if the result falls within the control
limits.
Inputs: Perform Quality Control

Quality Metrics: explained earlier
Quality Checklists: explained earlier
Work Performance Measurements: explained earlier
Approved Change Requests: Approved change requests can include changes such as
defect repair.
Deliverables: explained earlier
Tools & Techniques: Perform Quality Control

(The first seven are the seven basic tools of quality)
Cause and Effect Diagram: Also called Fishbone and Ishikawa diagrams. You list
all the possible causes of a defect.
101
PMP EXAM GUIDE
Cause A
:
explain
ed
earlier
Cause B
Cause C
explain
ed
earlier
:
explain
ed
earlier
111
Defect
111
111
Cause D
Cause E
explain
ed
earlier
111
Control Charts: explained earlier

Flowcharting : explained earlier
Histogram: A histogram is a vertical bar chart showing how often a particular variable
state occurred.
No. of defects in Software

20
15
10
5
0
Critical
High
Medium
Low
Pareto Chart: Also called the 80 / 20 Rule 80% of the defects are because of 20%
causes. Pareto charts help in figuring out the most important causes of the defects.
102
PMP EXAM GUIDE
Pareto diagram is a histogram, ordered by frequency of occurrence that shows how many
results were generated by type or category of identified cause.
Run Chart: These charts depict the trends in data as a line chart.
16
14
12
10
8
6
4
2
0
Critical
High
Medium
Low
Scatter Diagram: Scatter diagrams show the relationship two different variables. One
variable is plotted on the x-axis and the other is plotted on the y-axis. The pattern of their
intersecting points can graphically show relationship patterns.
3.5
3
2.5
2
1.5
1
0.5
0
0
103
PMP EXAM GUIDE
Statistical Sampling: explained earlier
Inspection: explained earlier
Approved Change Requests Review: All approved change requests should be reviewed
to verify that they were implemented as approved.
Outputs: Perform Quality Control
Quality Control Measurements: explained earlier

Validated Changes: explained earlier
Validated Deliverables: Every deliverable on the project needs to be inspected to make

sure it meets the quality standards.
Organizational Process Assets Updates: These include the lessons learned database as
well as the completed checklists.
Project Management Plan Updates: The various plans including the quality
management plan need to be updated.
Project Document Updates: The various documents need to be updated.
104
PMP EXAM GUIDE
Chapter 7
Project Human
Resource Management
Project Human Resource

Management
Develop HR Plan
Manage Project Team
105
PMP EXAM GUIDE
Project Human
Resource Management
Learning Objectives
List the various processes in Project Human Resource management

Describe the process of Develop Human Resource Plan
Describe the process of Acquire Project Team
Describe the process of Develop Project Team
Describe the process of Manage Project Team
Describe the various organizational development theories
106
PMP EXAM GUIDE
Definition Project Human Resource Management includes the processes that organize,
as per
manage, and lead the project team.
PMBOK
Guide
Project Human Resource Management: Process Groups
Project Human Resource

Management
Develop HR Plan
Manage Project Team
107
PMP EXAM GUIDE
Develop HR Plan
Definition Develop Human Resource Plan is the process of identifying and documenting
as per
project roles, responsibilities, and required skills, reporting relationships, and
PMBOK creating a staffing management plan.
Guide
Inputs: Develop HR Plan
Activity Resource Requirements: The preliminary human resources requirements come

from the various activities in the WBS.
Enterprise environmental factors: These include the culture of the organization,

existing resource pools and the market conditions.
Organizational process assets: These include the hiring practices, organization

structure, and, and so on.
Tools & Techniques: Develop HR Plan
Organizational charts and Positional Descriptions: Various formats exist within

organizations. These include hierarchical, matrix-based or text-based formats. One can
use any of these or a combination. The most important thin is that the team members
should be very clear about their roles and responsibilities.
RACI chart is one such implementation of matrix-based formats.
108
PMP EXAM GUIDE
Person
Phase
Project Mgt
Analysis
Design
Develop
Testing
Tom
Peter
Sofia
Joseph
Kelly
R- Responsible, A- Accountable, C- Consult, I - Inform
Table: RACI Chart

Networking: Networking refers to the formal and informal interactions within the
company and outside to keep updated.
Organizational Theory: Various organization theories (to be discussed later in the

chapter)
Outputs: Develop HR Plan
Human Resource Plan: The human resource management plan includes the following:
o Staffing Management Plan: The staffing management plan is the most important
part of the HR plan. It includes the following:
1. Resource Histogram
2. Training Needs
3. Rewards and Recognition Program
4. Release Criteria
5. Acquisition Plan, and more
109
PMP EXAM GUIDE
o Roles and Responsibilities: Using RACI charts and other templates. (explained
above)
o Project Organization Charts: explained above
110
PMP EXAM GUIDE
Definition Acquire Project Team is the process of confirming human resource availability
as per
and obtaining the team necessary to complete project assignments
PMBOK
Guide
Inputs: Acquire Project Team

Tools & Techniques: Acquire Project Team
Pre - Assignment: In some cases, the project team members are assigned in the
beginning itself and they dont need to be negotiated. This is called pre-assignment.
Negotiation: Some resources are required from different functional teams and you need
to negotiate with the functional managers for assignment. Negotiation skills are required
for the same.
Acquisition: means getting teams from external vendors outside the company.
Virtual Teams: are teams that do not work at the same locations. The teams might be
located in different countries and time zones.
Outputs: Acquire Project Team
Project Staff Assignments: This is when you secure a team member and assign to a
specific role.
Resource Calendars: These provide information as to when the team member will be
working on the project.
111
PMP EXAM GUIDE
Project Management Plan Updates: The various documents related to HR plan need to
be updated based on the project information.
112
PMP EXAM GUIDE
Definition Develop Project Team is the process of improving the competencies, team
as per
interaction, and the overall team environment to enhance project performance
PMBOK
Guide
Inputs: Develop Project Team
Project Staff Assignments: explained earlier

Staffing Management Plan: explained earlier
Tools & Techniques: Develop Project Team
Interpersonal Skills: The soft-skills or the interpersonal skills are very important for
solving problems in the team.
Training: Training is very important for building the competencies in the domain /
technology required for the project success.
Team Building Activities: keeping the team together is the key to project success. Team
building can be formal training sessions and status meeting to informal off sites and lunch
together with the team.
Ground Rules: Ground rules are the expectations from team members regarding their
behavior within the team. These can be as simple as being on time in the meetings and
standards on quality and productivity.
Co-location: refers to team being located together in the same location to increase
communication and productivity.
Recognition and Rewards: Again, rewards and recognition is a important tool to

improve team morale. Rewards and recognition should be part of the complete project
cycle and not just on the completion of the project.
113
PMP EXAM GUIDE
Outputs: Develop Project Team
Team Performance Assessment: The project management teams do performance

assessments of the team members. These assessments can go as inputs for performance
appraisals and also for more trainings or coaching.
Enterprise Environmental Factors Updates: These would include updates to employee

training and skill records.
114
PMP EXAM GUIDE
Manage Project Team
Definition Manage Project Team is the process of tracking team member performance,
as per
providing feedback, resolving issues, and managing changed to optimize
PMBOK project performance
Guide
Inputs: Manage Project Team
Project staff assignments: explained earlier

Team performance assessment: explained earlier
Performance reports: explained earlier
Tools & Techniques: Manage Project Team
Observation and Conversation: part of the communication skills, you need to use
observation and conversation to effectively manage the team.
Project Performance Appraisals: Project appraisals are important for giving feedback
to the team members, clarifying the role conflicts if any, and also rewarding the good
work. This becomes more important in case of projects which are longer in duration. The
team should be aware of the issues so that they can work towards the common goal of
project success.
Conflict Management: Conflict management is an important skill required by a project

manager. There can be various reasons of conflicts within a project team. Few of the
important ones include.
o Schedule
o Cost
o Resources
o Personality conflicts
o Project priorities
There are six general techniques of resolving conflict:

o Collaborating: taking view of all; leads to consensus
o Problem-solving: taking an approach of examining alternatives; win-win solution
for all
115
PMP EXAM GUIDE
o
o
o
o
Compromising: trying to satisfy all by an agreement acceptable to all.

Forcing: making your own decisions by using power
Smoothing: temporary solution to please all; no lasting solution
Withdrawing: avoiding the situation; no solution
Issues Log: is a document list of issues with the resolution dates and responsibilities.
Interpersonal Skills: explained earlier
Outputs: Manage Project Team

Organizational process assets update: explained earlier
116
PMP EXAM GUIDE
Types of Power
Legitimate Power
o Also known as Formal Power or Positional Power
o Power comes from being formally in charge of the project and the people
Reward Power
o Your ability to give award a bonus or another kind of reward in order to motivate
team members.
Expert Power
o You are the subject matter expert
o The team respects you for your expertise in a specific area, and gives you
credibility because of that
Referent Power
o You are standing in for someone who has more position or power in the company
o Also comes from the charismatic personality of the project manager
o Can also come when you ally with a powerful person
Punishment Power
o You correct a team member for poor behavior. Always remember to do this oneon-one and in private.
117
PMP EXAM GUIDE
Organization Theories
Maslows Hierarchy of Needs: People are driven by a hierarchy of their needs. If your
lower level needs are satisfied, you tend to be motivated by higher level needs.
o
o
o
o
o
Self-actualization: Self-fulfillment, growth

Esteem: Respect, attention, appreciation
Social: Love, affection, approval
Safety: Security and freedom from harm
Physiological: Need for food, housing and clothing
Self
Actualization
Esteem
Social
Safety
Physiological
Herberzbergs Theory: also called Herzbergs Hygiene Theory because it deals with
Hygiene factors and motivating factors.
Hygiene factors
Salary
Compensation
Positive work conditions
Job security
Status
Company policy
Motivating Factors:
Responsibility
Work itself
Recognition
118
PMP EXAM GUIDE
Professional growth
Achievements
Self-actualization
Macgregors Theory X and Theory Y

Theory X - People are incapable and avoid responsibility. So, they need supervision to
do work
Theory Y - People are capable and motivated and ready to work without supervision.
Expectancy Theory
You need to give people an expectation of a reward in order to motivate them
The rewards or awards should be achievable, if they are impossible to achieve,

they will de-motivate them
People are motivated by achievements
People expect to be rewarded for achievements
McLellands Achievement Theory: People need achievement, power and affiliation to

be motivated.
Achievement is when someone performs well and is recognized for it
Power means he or she has a lot of control or influence in the company
Affiliation , a strong sense from being a part of a working team and having good
relationships with coworkers
Ouchis Theory
Formulated from Quality movement and Quality circles
Both Management and Workers need to be involved, and they should trust each
other
119
PMP EXAM GUIDE
Some important Human Resources Related Terms
Halo Effect
Extending the impression of a particular outstanding trait to influence the total

judgment of a person
For Example: Technical Architect to Management
120
PMP EXAM GUIDE
Chapter 8
Project Communication
Management
Management
Plan Communications
Report Performance
121
PMP EXAM GUIDE
Management
Learning Objectives
After the completion of this chapter, the learner will be able
to:
List the processes for Project Communication Management

Describe the process Determine Stakeholders
Describe the process Plan communication
Describe the process Distribute Information
Describe the process Manage Stakeholder Expectation
Describe the process Report Performance
122
PMP EXAM GUIDE
Definition It includes the processes required to ensure timely and appropriate generation,
as per
collection, distribution, storage, retrieval, and ultimate disposition of project
PMBOK information.
Guide
Project Communication Management: Process Groups
Management
Plan Communications
Report Performance
123
PMP EXAM GUIDE
Definition Identify Stakeholders is the process of identifying all people or organizations

as per
impacted by the project, and documenting relevant information regarding
PMBOK their interests, involvement, and impact on project success.
Guide
Stakeholders identification is crucial to the success of the project. The key stakeholders include:
Project manager
Sponsor
Customer
Project team members
Performing organization
Inputs: Identify Stakeholders
Project Charter: This document provides the information on sponsor of the project.
Procurement documents: The vendors and suppliers in the contract are the key
stakeholders.
Enterprise environmental factors
Organizational process assets
Tools & Techniques: Identify Stakeholders
Stakeholder analysis: This is a critical tool that involves interviewing the stakeholders.
One can divide the stakeholders into groups based on their involvement and need of
communication.
Expert Judgment: Involves talking to all the experts on the project to identify more
stakeholders
124
PMP EXAM GUIDE
Outputs: Identify Stakeholders
Stakeholder register: This document provides information on what value each

stakeholder gets out of the project.
Stakeholder management strategy: This involves creating a list of stakeholders and

their responsibilities, goals, expectations and concerns.
Stakeholder analysis involves the following steps:
List all the stakeholders

Classify all the listed stakeholders in the Power / Interest Grid with Stakeholders
(Figure on next page). The expectations of the stakeholders needs to be met as per
below:
o People with High Power and High Interest need to be closely managed as they
are the decision makers.
o People with High Power and Low Interest need to be satisfied.
o People with High Interest and Low Power should be kept informed.
o People with Low Interest and Low Power: they require the least amount of
attention.
High
Keep
Satisfied
Manage
Closely
Monitor
Keep
Informed
Power
Low
Low
Interest
High
Figure: Power / Interest Grid with Stakeholders

125
PMP EXAM GUIDE
Plan Communication
Definition Plan Communications is the process of determining the project stakeholder

as per
information needs and defining a communication approach.
PMBOK
Guide
Inputs: Plan Communication
Stakeholder register
Stakeholder management strategy
Enterprise environmental factors
Organizational process assets
Tools & Techniques: Plan Communication
Communications requirement analysis: This means analyzing the type of information

required by the stakeholders to make correct decisions. This means providing the right
amount of reports and not just sending too much information.
Communications technology: This has impact on how stakeholders are involved in the
project. This includes the factors such as:
1. Urgency of information: How frequently is the reporting required
2. Technology availability: Are the systems in place for the reporting requirements.
For example, are the web-based systems available if the reporting is time critical.
3. Project staffing: Are the team members trained on communication technology
available.
4. Project duration: Will the technology remain same throughout the project.
Communication models: In the basic communication model, the sender sends a message
to the receiver across a medium.
Sender
Receiver
Medium
Feedback
Noise
Encode
The person who needs to initiate the communication

The person who gets the message
The thing used to transmit the message
A response to a message
Something that interferes with the message
Modify a message so that it can be sent
126
PMP EXAM GUIDE
Decode
Modify a message that has been sent so that it can be understood
Communication methods: These include:

o Interactive communication
o Push
o Pull
Outputs: Plan Communication
Communication management plan: This is a subsidiary of the project plan and can be
highly detailed and complex. It can include details such as frequency of various reports,
the methods of communication, report formats, and more.
Project document updates: The various project documents requiring updates.
127
PMP EXAM GUIDE
Definition Distribute Information is the process of making relevant information available

as per
to project stakeholders as planned.
PMBOK
Guide
Inputs: Distribute Information
Project management plan: It includes the communication plan
Performance reports: Includes the status reports.
Organizational process assets: It includes policies and procedures, any historical

information, and templates.
Tools & Techniques: Distribute Information
Communication methods: Communication methods can be formal or informal, verbal

or written.
Information distribution tools: Information can be distributed through electronic

communication (emails), web-based tools (Project Management Systems), or hard-copy
reports.
Outputs: Distribute Information

Organizational process assets updates: The updates include project reports and records,
stakeholder notifications, and lesson learned documentation.
128
PMP EXAM GUIDE
Additional Information
Nonverbal Communication
Means gestures, facial expressions, and physical appearance while
you are communicating your message
Para lingual Communication

Is the tone and pitch of your voice when you are telling people
whats going on with your project
Feedback
Is when you respond to communication
Active listening
When you give feedback to someone who is speaking
129
PMP EXAM GUIDE
Definition Manage stakeholder expectations is the process of communicating and working

as per
with stakeholders to meet their needs and addressing issues as they occur.
PMBOK
Guide
Inputs: Manage Stakeholder Expectations
Stakeholder register: This includes the list of stakeholders for the project.
Stakeholder management strategy: The document lists the goals and objectives of the
various stakeholders.
Project management plan: The Project management Plan contains the Communication
Plan. The communication plan lists the expectations of the stakeholders.
Issue log: The list of issues that happen during the project.
Change log: Is the list of changes that happen during the project. These changes and their
impact should be communicated to the right stakeholders.
Organizational process assets: These include various processes such as change control
procedures and historical information from earlier projects.
Tools & Techniques: Manage Stakeholder Expectations
Communication methods: Push, pull, and interactive. (explained earlier)
Interpersonal skills: Also referred as soft skills are used to keep the stakeholders
informed and working towards the common goal.
Management skills: Management is the act of directing and controlling a group of

people to achieve a common goal. The various management skills are: negotiating,
writing, speaking, and more.
130
PMP EXAM GUIDE
Outputs: Manage Stakeholder Expectations
Organizational process assets updated: Any lessons learned are updated.
Change requests: These are any changes to the project plan or other documents that
involve stakeholder communication.
Project management plan updates: Any approved changes need to be updated in the
communication plan, which is part of the project management plan.
Project document updates: Project documents requiring updates can include the
stakeholder register, stakeholder management strategy and issue log.
131
PMP EXAM GUIDE
Report Performance
Definition Report Performance is the process of collecting and distributing performance

as per
information, including status reports, progress measurements, and forecasts.
PMBOK
Guide
Inputs: Report Performance
Project management plan: Includes information on the project baselines.
Work performance information: Includes information such as deliverable dates and the
schedules.
Work performance measurement: Includes the metrics on planned versus actual of

the schedule and cost among others.
Budget forecasts: Is an important input for the project reports.
Organizational process assets: These can include various report templates.
Tools & Techniques: Report Performance
Variance analysis: Analyzing the performance data with respect to the baseline.
Forecasting methods: Use Earned Value and other forecasting methods to check
whether the project is within budget and schedule.
Communication methods: Decide on pull, push or interactive methods of

communication.
Reporting systems: A system to keep track of time and money spent on the work.
132
PMP EXAM GUIDE
Outputs: Report Performance
Performance reports: These reports provide the status and the progress of work
compared to the baseline. Common formats include bar charts and variance analysis. The
details can include issues and risks, work completed during the current period and also
work planned for the next period and more.
Organizational process assets updates: Lessons learned are updated so that they
become part of historical database.
Change request: Change requests are generated when you report performance. You need
to recommend Corrective and Preventive actions to the team.
Channels of Communication
Number of Communication Channels
Channels = n(n-1)/2 , where n is the number of people on the project
If there are five people on the project, then we have 10 communication channels.
This is calculates as follows: 5*(5-1) /2 = 10
Number of Communication Channels
133
PMP EXAM GUIDE
Chapter 9
Project Risk
Management
Project Risk
Management

Identify Risks
Plan Risk Responses
134
PMP EXAM GUIDE
Project Risk
Management
Learning Objectives
able to:
List the various risk management processes
Describe the process of Identifying Risks
Describe the process of Perform Qualitative Risk
Analysis
Describe the process of Perform Quantitative Risk
Analysis
Describe the process of Plan Risk Responses
Describe the process of Monitor and Control Risks
135
PMP EXAM GUIDE
Definition Project Risk Management includes the processes of conducting risk

as per
management planning, identification, analysis, response planning, and
PMBOK
monitoring and control on a project.
Guide
A Risk is any uncertain event or condition that might affect your project. Risk might have a
positive as well as a negative outcome.
The objectives of Project Risk Management are to increase the probability and impact of positive
events, and decrease the probability and impact of negative events in the project.
Project Risk Management: Process Groups
Project Risk
Management

Identify Risks
Plan Risk Responses
136
PMP EXAM GUIDE
Definition Plan Risk Management is the process of defining how to conduct risk
as per
management activities for a project.
PMBOK
Guide
Inputs: Plan Risk Management
Project scope document: The project scope statement contains the details of project
deliverables and their acceptance criteria. This document is an important document for
identifying the risk.
Cost management plan: It includes the processes involved in estimating, budgeting, and
controlling costs so that the project can be completed within the approved budget.
Schedule management plan: This document defines how schedule contingencies will be
reported and assessed.
Communications management plan: This document defines the interactions that will
occur on the project and determines who will be available to share information on various
risks and responses at different times
Enterprise environmental factors: Factors include the company culture and existing
systems that are dealt with and used by the project manager to run the project. The other
factors that can influence this process are risk attitudes and tolerances that describe the
degree of risk that an organization will withstand.
Organizational process asset: that can influence this process include risk categories,
common definitions of concepts and terms, risk statement formats, standard templates,
roles and responsibilities, authority levels for decision making, lessons learned and
stakeholder register.
Tools & Techniques: Plan Risk Management
Planning Meetings and Analysis: This involves meetings with the project stakeholders
to identify the risks. These meetings should keep happening throughout the project.
137
PMP EXAM GUIDE
Outputs: Plan Risk Management
Risk Management Plan: describes the various risk management processes that will be
implemented, monitored and controlled throughout the project lifecycle. It can include
the following:
Methodology Defines the approaches, tools and the data sources that may be used
to perform risk management on the project
Roles and Responsibilities Defines the lead, support and risk management team
membership for each type of activity in the risk management plan, assigns people to
these roles and clarifies their responsibilities
Budgeting - Assigns resources and estimates costs needed for risk management for
inclusion in the project cost baseline
Timing Defines when and how often the risk management process will be
performed through out the project life cycle and establishes risk management
activities to be included in the project schedule.
Risk Categories provides a structure that ensures a comprehensive process of
systematically identifying risks to a consistent level of detail and contributes to the
effectiveness and quality of Identify risks process. An organization can use a
previously prepared categorization of typical risk. A risk breakdown structure (RBS)
is one approach to providing such a structure, but it can also be addressed by simply
listing the various aspects of the project. The risk categories may be revisited during
the Identify risks process. A good practice is to review the risk categories during the
Risk Management Planning process prior to their use in Identify risks process. Risk
categories based on prior projects may need to be tailored, adjusted or extended to
new situations before those categories can be used on the current project.
Risk Probability and Impact: This helps you figure out how big is the impact of
risk. The classification for risks from very low to very high can be used.
Revised stakeholder tolerances should be documented.
Reporting Formats: Describes the format and the content of the risk response plan.
Tracking: Documents if and how risk processes will be audited.
138
PMP EXAM GUIDE
Identify Risks
Definition Identify Risks is the process of determining which risks may affect the project
as per
and documenting their characteristics.
PMBOK
Guide
Inputs: Identify Risks
Risk management plan: explained earlier
Activity cost estimates: provide a quantitative assessment of likely cost to complete

schedule activities and ideally are expressed as a range, with the width indicating the
degree of risk
Activity duration estimates: are useful in identifying risks related to the time
allowances for activities or project as a whole, with the width of the ranges of these
estimates indicating the relative degree of risk.
Scope baseline: baseline is a component of scope statement which should be evaluated

as potential causes of project risk.
Stakeholder register: contains information on stakeholders, which will be useful in

interviewing the key stakeholders for their inputs to this process.
Cost management plan: contains information related to cost management which is an

important input to Identify risk process as the project specific approach may generate or
alleviate risk by its nature or structure.
Schedule management plan: contains information related to the schedule management

plan which is an important input to Identify risk process as the project specific approach
may generate or alleviate risk by its nature or structure
Quality management plan: contains information related to the quality management plan
which is an important input to Identify risk process as the project specific approach may
generate or alleviate risk by its nature or structure.
139
PMP EXAM GUIDE
Project documents: that may be useful while identifying risks are assumptions log, work
performance reports, network diagrams, baselines and other project information that may
be useful in identifying risks.

Tools & Techniques: Identify Risks
Documentation Reviews: includes structured review of the project documentation,

which may include project files, project plans, assumptions, historical information, and
other information from the project level as well as individual activity level. It is also
essential to identify the quantity of plans and the consistency between the plans.
Information Gathering Techniques:

o Brainstorming session is conducted by a facilitator and a group of Subject
Matter Expert (SMEs), who perform brainstorming and arrive at a comprehensive
list of project risks. Identified risks are categorized by the type of risks. A risk
breakdown structure (RBS) can be used as a framework for risk identification.
o Delphi Technique is conducted by a facilitator and a group of experts, who are
given a questionnaire to fill. The results are collected and summarized and the
results are again circulated to get feedback from the experts.
o Interviewing is one of the main sources of risk gathering techniques where
experienced project managers, stakeholders and subject matter experts are
interviewed for risk identification.
o Root Cause identification involves identifying the causes of risks and improves
the understanding of the risk. It sharpens the definition of the risk and allows
grouping risks by causes. Effective risk response can be developed if the root
cause of the risk is addressed
Checklist Analysis: can be based on historical information gathered from earlier similar
projects. The lowest level of Risk Breakdown Structure (RBS) can also be used as a
checklist. Checklists can be updated at the end of the project completion to add new risks,
if any. Checklists are not a very much efficient method of identifying risks.
Assumption Analysis: reviews the validity of assumptions defined in the project to

ensure that risks are not missed due to inaccuracy or incompleteness of the assumption.
140
PMP EXAM GUIDE
Assumptions are tested for their validity. The consequences that might occur if the
assumptions were false are also analyzed. In such cases the assumptions are considered as
risks.
Diagramming Techniques: These may include:

o Cause and effect diagrams (also known as Ishikawa or fishbone diagrams):
useful for identifying the causes of risks.
o System or Process flowcharts: Show how various elements of a system
interrelate and the mechanism of causation.
o Influence diagrams, which are graphical representation of situations showing
causal influences
SWOT Analysis: This lets you analyze the Strengths, Weaknesses, Opportunities and
Threats to identify the probable risk events
Outputs: Identify Risks
Risk Register: The identified risks are mentioned in the document called a Risk Register,
which becomes a component of the project management plan. Following items can be
included in the Risk Register.
List of identified risks The list can state the EVENT that may occur, the IMPACT
and if CAUSE, EVENT may occur, then listing of EFFECT. Root causes of the risk
events can also be listed
List of potential responses If identified during the process of risk identification,
responses should be documented and it may be a useful input to the plan Risk
Responses process
Identified Risks
Potential Responses
Risk Register
141
Root causes
PMP EXAM GUIDE
Definition Perform Qualitative Risk Analysis is the process of prioritizing risks for
as per
further analysis or action by assessing and combining their probability of
PMBOK occurrence and impact.
Guide
Inputs: Perform Qualitative Risk Analysis
Risk Register: explained earlier

Risk Management Plan: explained earlier
Tools & Techniques: Perform Qualitative Risk Analysis
Risk Probability and Impact Assessment: It examines the likelihood that each specific
risk will occur and evaluates the potential effect of any of the project objectives such as
time, cost, scope or quality. It also evaluates the positive opportunities and negative
threats. To assess the probability and impact of each risk, a meeting or interview with
subject matter experts either internal or external to the organization is conducted where
levels are assigned to each risk and also the potential effects of these risks is evaluated in
case the risk occurs
Probability and Impact Matrix: assigns ratings to each risk and classifies them for
either performs quantitative risk analysis or plan risk responses. Ratings are assigned to
risks based on the combination of probability and impact. The risk may guide in
providing risk responses as indicated below:
Risks that have a negative impact on the project objectives if they occur (threats) and
that are in the high risk (black zone of the matrix), may require priority action and
aggressive response strategies.
Threats in low risk (medium gray zone) may not require proactive management
action beyond being placed on a watch list or adding a contingency reserve.
For opportunities, those in the high-risk (black zone) that can be obtained most easily
and offer the greatest benefit should, therefore be targeted first Opportunities in the
low-risk (Medium gray zone) should be monitored
142
PMP EXAM GUIDE
Risk Data Quality Assessment: It involves determining the quality or usefulness of the
data collected to evaluate the risk as per the risk management plan. It involves examining
degree to which the risk is understood, and the accuracy, quality, reliability and integrity
of the data about risk. If data quality is unacceptable, it may be necessary to gather
higher-quality data.
Risk Categorization: Project risks can be categorized by the source of risk (e.g., using
the RBS), areas of the project affected (e.g. ,using the WBS) or other useful category
(e.g. , project phase, etc.) to determine areas of the project most exposed to the effects of
uncertainty. Grouping risks by common root causes can lead to developing effective risk
responses.
Risk Urgency Assessment: determines how soon the potential risks may occur, and it
also identifies near- term responses for those risks.
Outputs: Perform Qualitative Risk Analysis
Risk register updates: Risk register is initiated during identify risk process, and is
updated with information from Perform Qualitative Risk Analysis.
143
PMP EXAM GUIDE
Following are the updates from Perform Quantitative Risk Analysis:

o Relative ranking or priority list of the project risks. The probability and
impact matrix can be used to classify risks according to their individual
significance. The project manager can then use the prioritized list to focus
attention on those items of high significance to the project, where responses can
lead to better project outcomes. Risk may be listed by priority separately for cost,
time, scope and quality as organizations may value one objective over another. A
description of the basis for the assessed probability and impact should also be
included for the assessed risks.
o Risk grouped by categories can reveal common root cause of the risk or project
areas requiring particular attention.
o Cause of risk or project areas requiring particular attention. Discovering
concentrations of risk may improve the effectiveness of risk.
o List of risks requiring response in the near-term. Those risks that require an
urgent response and those that can be handled at a later date may be put into
different groups.
o List of risks for additional analysis and response. Some risks might warrant
more analysis , including perform qualitative risk analysis as well as response
action
o Watch-lists of low priority risks. Risks that are not assessed as important in the
Qualitative Risk Analysis process can be placed on a watch-list for continued
monitoring
o Trends in qualitative risk analysis results. As the analysis is repeated , a trend
for particular risks may become apparent and can make risk response or further
analysis more or less urgent/important
144
PMP EXAM GUIDE
Definition Perform Quantitative Risk Analysis is the process of numerically analyzing the
as per
effect of identified risks on overall project objectives.
PMBOK
Guide
Inputs: Perform Quantitative Risk Analysis

Cost Management Plan: explained earlier
Schedule Management Plan: explained earlier
Tools & Techniques: Perform Quantitative Risk Analysis
Data gathering and representation techniques:

o Interviewing: Experienced project managers, stakeholders and subject matter experts
are interviewed to quantify the probability and impact of risks on project objective.
During interviewing different kind of probability distribution are used. In case a
triangular one is used then the three values for 3 point estimates are taken as input
from the SMEs which is used to quantify risk for each element.
o Probability distributions: Are commonly of two types Continuous distribution and
Discrete distributions
Quantitative risk analysis and modeling techniques: Commonly used techniques in

Quantitative Risk Analysis and Modeling techniques include:
o Sensitivity analysis. This aid in determining which risks have the most potential
impact on the project. It examines the extent to which the uncertainty of each project
element affects the objective being examined when all other uncertain elements are
held at their baseline values. Sensitivity analysis can be done by using the Tornado
diagram.
145
PMP EXAM GUIDE
o Expected monetary value (EMV) analysis is a statistical concept that calculates the
average outcome when the future includes scenarios that may or may not happen (i.e.
analysis under uncertainty). The EMV of opportunities will generally be expressed as
positive values while those of risks will be negative. EMV is calculated by
multiplying the value of each possible outcome by its probability of occurrence and
adding them together.
Source: A Guide to the Project Management Body of Knowledge, Fourth Edition (PMBOK Guide) 2008 Project Management
Institute, Inc. All Rights Reserved.
146
PMP EXAM GUIDE
o Modeling and Simulation: A project simulation uses a model that translates the
uncertainties or potential risks specified at a detailed level of the project into their
potential impact on project objectives.
Simulation techniques compute the project model using the inputs such as cost or
schedule to determine the probability distribution. Simulation techniques should be the
preferred one for predicting schedule or cost risks as compared to other techniques
Simulations are typically performed using the Monte Carlo technique. In a simulation, the
project model is computed many times (iterated) with the input values randomized from a
probability distribution function (e.g. cost of project elements or duration of schedule
activities) chosen for each iteration from the probability distribution of each variable. A
probability distribution is then calculated.
Outputs: Perform Quantitative Risk Analysis
Risk Register Updates: The register initiated in the Identify Risks process and is
updated in Perform Qualitative Risk Analysis process. The risk register is a component of
the project management plan. Updates include the following components:
o Probabilistic analysis of the project. Estimates are made of potential project
schedule and cost outcomes, listing the possible completion dates and costs with their
associated confidence levels. This output typically expressed as a cumulative
distribution is used with stakeholder risk tolerances to permit qualification of the cost
and time contingency reserves
o Probability of achieving cost and time objectives. With the project facing the risks,
the probability of achieving project objectives under the current plan can be estimated
using quantitative risk analysis results
o Prioritized list of quantified risks. This list of risks includes those that pose the
greatest threat or present the greatest opportunity to the project. These include the
risks that require the greatest cost contingency and those that are most likely to
influence the critical path.
o Trends in quantitative risk analysis results. As the analysis is repeated a trend
may become apparent that leads to conclusions affecting risk responses
147
PMP EXAM GUIDE
Plan Risk Responses
Definition Plan Risk Responses is the process of developing options & actions to enhance
as per
opportunities and to reduce threats to project objectives
PMBOK
Guide
Inputs: Plan Risk Responses

Tools & Techniques: Plan Risk Responses
Strategies for Negative Risks or Threats:

o Avoid. Risk avoidance involves changing the project management plan to
eliminate the threat posed by an adverse risk, to isolate the project objectives from
the risks impact or to relax the objective that is in jeopardy, such as extending the
schedule or reducing scope. Some risks that arise early in the project can be
avoided by clarifying requirements, obtaining information, improving
communication or acquiring expertise.
o Transfer. Risk transference requires shifting the negative impact of a threat,
along with ownership of the response to a third party. Transferring the risk simply
gives another party responsibility for its management, it doesnt eliminate it. Risk
transference nearly always involves payment of a risk premium to the party taking
on the risk. Transference tools can be quite diverse and can include but are not
limited to the use of insurance, performance, bonds, warranties, guarantees etc.
o Mitigate. Risk Mitigation implies a reduction in the probability and impact of an
adverse risk event to an acceptable threshold. E.g. Conducting more tests, a more
stable supplier etc
o Accept. This includes passive or active acceptance. Passive acceptance requires
no action , the most common active acceptance strategy is to establish a
contingency reserves, including amounts of money or resources to handle known
or unknown threats/ opportunities
Strategies for Positive Risk or Opportunities:
148
PMP EXAM GUIDE
o Exploit .This strategy may be selected for risks with positive impacts where the
organization wishes to ensure that the opportunity is realized. This strategy seeks
to eliminate the uncertainty associated with a particular upside risk by making the
opportunity definitely happen. Directly exploiting responses include assigning
more talented resources to the project to reduce time to completion or to provide
better quality than originally planned.
o Share. Sharing a positive risk involves allocating ownership to a third party who
is best able to capture the opportunity for the benefit of the project. E.g. forming
risk-sharing partnerships, teams, special-purpose companies or joint ventures,
which can be established with the express purpose of managing opportunities.
o Enhance . This strategy modifies the size of an opportunity by increasing
probability and /or positive impacts and by identifying and maximizing key
drivers of these positive-impact risks. Seeking to facilitate or strengthen the cause
of the opportunity and proactively targeting and reinforcing its trigger conditions,
might increase the probability
o Accept. Accepting an opportunity is being willing to take advantage of it if it
comes along, but not actively pursuing it.
Contingent Response Strategy: Some responses are designed for use only if certain
events occur. For some risks, it is appropriate for the project team to make a response
plan that will only be executed under certain predefined conditions, if it is believed that
there will be sufficient warning to implement the plan. Events that trigger the
contingency response such as missing intermediate milestones or gaining higher priority
with a supplier, should be defined and tracked.
Outputs: Plan Risk Responses
Risk Register Updates: Components of the Risk register at this point include:
o Identified risks their descriptions, areas of the project (e.g. WBS element) affected,
their causes (e.g. RBS element) and how they may affect project objectives
o Risk owners and their assigned responsibilities
o Output from the Perform Qualitative and Perform Quantitative Risk Analysis
processes, including prioritized lists of project risks and probabilistic analysis of the
project
o Agreed upon response strategies
o Specific actions to implement the chosen response strategy
o Symptoms and warning signs of risks occurrence
o Budget and schedule activities required to implement the chosen responses
149
PMP EXAM GUIDE
o Contingency reserves of time and cost designed to provide for stakeholders risk
tolerance.
o Contingency plans and trigger that call for their execution
o Fallback plans for use as a reaction to a risk that has occurred and the primary
response proves to be inadequate
o Residual Risks that are expected to remain after planned response have been taken as
well as those that have been deliberately accepted
o Secondary risks that arise as a direct outcome of implementing a risk response
o Contingency reserves that are calculated based on the quantitative analysis of the
project and the organizations risk thresholds.
Risk Related Contract decision: Contractual agreements, such as agreements for

insurance, services and other items as appropriate can be prepared to specify each partys
responsibility for specific risks, should they occur.
Project Document Update: explained earlier
150
PMP EXAM GUIDE
Definition Monitor & Control Risks is the process of implementing risk response plans,
as per
tracking identified risks, monitoring residual risks, identifying new risks, and
PMBOK evaluating risk process effectiveness throughout the project.
Guide
Inputs: Monitor and Control Risks

Work Performance Information: explained earlier
Performance Reports: explained earlier
Tools & Techniques: Monitor and Control Risks
Risk reassessment indicates reassessing the identified risks and identification of new
risks as defined in the risk management plan. Project risk reassessment should be
performed regularly and it can be included as an agenda item at the project status
meetings.
Risks audits are scheduled audits that document the effectiveness of risk responses with
respect to their dealing with identified risks and their associated root causes. This aids in
determining the effectiveness of the risk management process.
Variance and trend analysis Performance data provides the data for variance and trend
analysis. Using this data and applying the earned value analysis and similar methods of
project variance and trend analysis; it is possible to monitor the overall project
performance.
Technical performance measurement. This involves identifying the variance in the

technical performance from the planned technical schedule. Any variance from the
defined milestone(s) can aid the project team to forecast the degree of success in
achieving the projects scope.
Reserve analysis. During the planning phase, contingency reserves are defines as a part
of risk response plan. During execution some of the reserves get exhausted. This tool
determines if the remaining reserves are sufficient to tackle the remaining risks.
Status meetings. Status review meetings help in monitoring the risks

151
PMP EXAM GUIDE
Outputs: Monitor and Control Risks
Risk Register [Updates]: An updates risk register contains:

o Outcomes of risk reassessments, risk audits, and periodic risk reviews. These
outcomes may include updates to probability, impact, priority, response plans,
ownership and other element of the risk register. Outcomes can also include closing
risks that are no longer applicable.
o The actual outcomes of the projects risk and of risk responses that can help project
manager plan for risk throughout the organization as well as on future projects. This
completes the record of risk management on the project and it is an input to the close
project process, and becomes a part of the project closure documents.
Organizational Process Assets Updates: explained earlier

Project Document Updates: explained earlier
152
PMP EXAM GUIDE
Chapter 10
Project Procurement
Management
Project Procurement
Management
Plan Procurements
Conduct Procurement
Close Procurements
153
PMP EXAM GUIDE
Project Procurement
Management
Learning Objectives
able to:
List the various procurement management processes

Describe the process of Plan Procurements
Decide between make versus buy situations
Describe the process of Conduct procurements
Describe the process of Administer Procurements
Describe the process of Close Procurements
List various types of contracts
Create various procurement related documents
154
PMP EXAM GUIDE
Definition Project Procurement Management includes the processes necessary to

as per
purchase or acquire products, services, or results needed from outside the
PMBOK
project team
Guide
Project Procurement Management: Process Groups
Project Procurement
Management
Plan Procurements
Conduct Procurement
Close Procurements
155
PMP EXAM GUIDE
Plan Procurements
Definition Plan procurements is the process of documenting project purchasing decisions,

as per
specifying the approach and identifying potential sellers.
PMBOK
Guide
Inputs: Plan Procurements
Scope Baseline: explained earlier

Requirements Documentation: explained earlier
Teaming Agreements: Teaming agreements are legal contractual agreements between

two or more entities to form a partnership of joint venture, or some other arrangement as
defined by the parties.

Risk-related Contract Decisions: explained earlier
Activity Cost Estimates: explained earlier
Cost Performance Baseline: explained earlier
Tools & Techniques: Plan Procurements
Make-or-Buy Analysis: Make-or-buy analysis is required when the organization

needs to decide whether to do the work in-house or through external agencies or
vendors. There are number of factors that need consideration. The factors include the
costs as well as the in-house capability.
When decisions are made to buy versus leasing options, both the direct as well as
indirection costs related to purchase are taken into consideration.

Contract Types: There are different types of contracts.
o Fixed Price Contracts
Fixed Price (FFP) means that you are going to pay one amount regardless
of how much it costs the contractor to do the work
156
PMP EXAM GUIDE
Fixed Price Plus Incentive Fees (FPIF) means that you are going to pay
a fixed price for the contract and give a bonus based on some performance
goal
Fixed Price with Economic Price Adjustment (FP EPA) This type
of contract is used in case of long term contracts, where pre-defined
adjustments are made every year based on some reliable financial index.
o Cost Reimbursable Contracts
Cost Plus Fixed Fee (CPFF) you pay the seller back for the costs
involved in doing the work, plus you agree to an amount that you will pay
on top of that.
Cost Plus Award Fee (CPAF) you agree to pay the legitimate costs but
the majority of the fee is based on performance of the seller based on the
subjective criteria set in the contract. This cannot be subject to appeals.
Cost plus incentive fee (CPIF) means you will reimburse costs on the
project and pay a pre-determined incentive fee based upon performance
goals set in the contract.
o Time and Materials
Time and Materials (T&M) means that you will pay a rate for each of
people working on your project plus their material costs. The Time part
means that the buyers pay a fixed rate for labor.
Outputs: Plan Procurements
Procurement Management Plan: It is a subsidiary element of the Project Management

Plan. The Project Procurement Management Plan comprises of the following key
information:
o
o
o
o
o
o
Standard procurement documents that need to be used

Make versus buy decisions
The contract types
Any constraints and assumptions for the contract
List of pre-qualified sellers to be used, and
More
A procurement plan may be formal or informal, highly detailed or broadly framed, based
on the needs of the project.
Procurement Statement of Work: This is the detail of the work to be contracted.
157
PMP EXAM GUIDE
Make-or-Buy Decisions: Decision of make-or-buy analysis
Procurement Documents: Procurement documents are used to solicit proposals from

prospective sellers. The terms bid, quotation, and tender are used when the source
selection criteria is based on price. Other common names for different procurement
documents include:
o Invitation for Bid (IFB) - A type of procurement document whereby the buyer
requests a potential seller to provide various pieces of information related to a product
or service or seller capability.
o Request for Proposal (RFP) - A type of procurement document used to request
proposals from prospective sellers of products or services. In some application areas,
it may have a narrower or more specific meaning.
o Request for Quotation (RFQ) - A type of procurement document used to request
price quotations from prospective sellers of common or standard products or services.
Sometimes used in place of request for proposal and in some application areas, it may
have a narrower or more specific meaning.
o Invitation for negotiation
o Invitation for sellers initial response
The procurement documents should always include the relevant procurement SOW,
description of the desired form of the response, and any contractual provisions.
Source Selection Criteria: Source selection criteria are used to select the seller.
158
PMP EXAM GUIDE
Conduct Procurements
Definition The process of obtaining seller responses, selecting a seller and awarding a
as per
contract.
PMBOK
Guide
Inputs: Conduct Procurements

Procurement Documents: explained earlier
Source Selection Criteria: explained earlier
Qualified Seller List: explained earlier
Seller Proposals: This includes the proposals by the sellers in response to the RFQs
and RFIs.
Project Documents: explained earlier
Make-or-Buy Decisions: explained earlier
Teaming Agreements: explained earlier
Organizational Process Assets : explained earlier
Tools & Techniques: Conduct Procurements
Bidder Conferences: These are also called vendor conferences or pre-bid conferences.
These involve the meetings with prospective sellers before submission of proposal. The
objective of the meeting is for clear understanding of the requirements and to avoid any
preferential treatment.
Proposal Evaluation Techniques: This would involve evaluating sellers responses to

check if the proposal is appropriate for the work.
Independent Estimates: In some cases, the buyer would create the estimates themselves
and also by the third-parties. These would be compared with the sellers responses for
final selection.
159
PMP EXAM GUIDE
Advertising: This involves placing an advertisement for getting in touch with sellers. In
government-funded projects, this is a requirement.
Internet Search: Using internet to search for approximate price range of the product is
also a practice. This is not useful in case of complex procurement.
Procurement Negotiations: This involves negotiating with the sellers on the various
terms of the contract. The project managers do not do the negotiations themselves. They
work closely with the legal department of the company for these negotiations.
Outputs: Conduct Procurements
Selected Sellers: The selected sellers are the list of sellers who have qualified based on
their proposals.
Procurement Contract Award: A procurement contract is awarded to each seller in the

form of a purchase order or some other document. This is a legal binding agreement and
has all the details for the contract.
Resource Calendars: This includes the contracted staff resource calendars.

Project Documents Updates: : explained earlier
160
PMP EXAM GUIDE
Definition The process of managing procurement relationships, monitoring contact

as per
performance, and making changes and corrections as needed.
PMBOK
Guide
Inputs: Administer Procurements
Procurement Documents: explained earlier

Procurement Management Plan: explained earlier
Contract: explained earlier
Performance Reports: explained earlier
Approved Change Requests: explained earlier
Work Performance Information: explained earlier
Tools & Techniques: Administer Procurements
Contract Change Control System: This involves process to change the procurement
contract. It can involve the approvals, paperwork and the dispute resolution
mechanism required for the change control.
Procurement Performance Reviews: These include the structured review of seller

with respect to the terms in the contract. It can involve quality reviews of the product
as well audits of the sellers processes.
Inspection and Audits: Inspections and audits are conducted by the buyer to ensure
quality of the procurement as defined in the contract. Nonconformance can be raised
and the supplier can be penalized based on the terms in the contract.
Performance Reporting: This includes the performance reports by the seller which
are used by the buyer to monitor the project work.
Payment Systems: Payment system refers to how the payments are made to the
seller. The Accounts Payable system of the buyer makes the payments after the
payments are validated and authorized.
Claims Administration: Claims arise when there is some dispute between the buyer
and the seller. The contracts have terms and conditions on how the disputes should be
resolved and since the contract is a legal document, the claims need to be settled as
per the terms in the contract.
161
PMP EXAM GUIDE
Record Management System: There are a lot of documents or records generated by

a contract. These can include timesheets, invoices, receipts, memos, emails and so
on. There should be a system in place to store these.
Outputs: Administer Procurements
Procurement Documentation: Procurement documentation includes the documents that

are maintained in the record management system. It not just includes the documents
detailed above but also technical documentation, warranties etc.
Organizational Process Assets Updates: This includes updated to various documents

related to procurement documentation.
Project Management Plan Updates: Updates to the various subsidiary plans.
162
PMP EXAM GUIDE
Close Procurements
Definition The process of completing each project procurement.

as per
PMBOK
Guide
Inputs: Close Procurements
Project Management Plan: explained earlier.

Procurement Documentation: explained earlier.
Tools & Techniques: Close Procurements
Procurement Audits: This refers to the structured review of the complete process of
procurement. It is used to document the lessons learned database and also for the future
contacts.
Negotiated Settlements: All the terms of the contract need to be completed. This
includes any claims or disputes arising of the contract.
Record Management System: explained earlier
Outputs: Close Procurements
Closed Procurements: Close procurements involves buyer providing the seller with a
formal written notice that the contract has been completed.
Organizational Process Assets Updates: This includes updated to the lessons learned
database and procurement file.
163
PMP EXAM GUIDE
Negotiations Techniques
Deadline: imposing a deadline to reach an agreement
Stalling: one party may claim that an agreement cannot be finalized

because of his limited authority
Fair and Responsible: a negotiator may claim that the price for a
product is equitable because thats what another company is paying.
Delay: are useful when tempers are beginning to flare, to divert from a
subject, etc (Ex: arrival of refreshments, request for recess etc)
Withdrawal: one party may attack an issue, then retreat
Arbitration: a third party may be brought in when agreement cannot be

reached. (out of court settlement)
Fait Accompli: a party may claim that what is being asked for has
already been accomplished and cannot be changed
164
PMP EXAM GUIDE
Chapter 11
And Ethics
And Ethics
Project Management Institute Code of
Ethics and Professional Conduct
Ensure Integrity
Contribute to PM Knowledge Base
Respect Diversity
165
PMP EXAM GUIDE
And Ethics
Professional Responsibility and Ethics
Learning Objectives
able to:
Understand Project Management Institute Code of Ethics
and Professional Conduct.
Understand Professional Responsibility and Ethics
166
PMP EXAM GUIDE
Introduction
Everyone who is a PMP must follow the Project Management Institute Code of Ethics and
Professional Conduct.
Professional responsibility and ethics involves:
Ensure Integrity
Contribute To PM Knowledgebase
Respect Diversity
Ensure Integrity
Follow the right processes and procedure.

You must identify stakeholders and understand their requirements.
Do not put personal gain over the needs of the project.
Tell truth in reports, conversations, and other communications.
Follow copyright and other applicable laws, report violations.
Do not divulge organizational data to unauthorized parties.
Prevent conflict of interest or appearance of conflict of interest.
Do not give or take bribe, or inappropriate gifts.
Do the right thing and follow right process.
Determine and understand needs of all stakeholders.
Look for competing or conflicting needs and interests and reconcile differences.
Determine options for fair resolution of conflicts among the stakeholders.
Contribute to PM Knowledgebase and Community
Perform research on the project done within your organization for the purpose of
discovering best practices.
Share lessons learned.
Write articles on Project Management.
Support education of the project team members and other stakeholders.
Coach and mentor team members.
167
PMP EXAM GUIDE
Gain knowledge of project management best practices and other technical and people
management skills.
Look for new information and practices that help the organization or its projects.
Continue to learn about the industry where you work.
Understand your weaknesses and strengths, plan your own professional development, and
continue to learn.
Respect Diversity
Understand cultural differences.

Understand communication preferences of the stakeholders, work ethics and practices of
the team members belonging to different regions, and nations.
Prevent cultural shock by training and advance research.
Provide training to the team members from different cultural backgrounds in order to
help them.
Understand each other and work like a cohesive group.
Follow the practices of other countries as long as they do not violate laws and human
rights.
168

PMP Exam Guide

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

PMP Exam Guide

Uploaded by

Copyright:

Available Formats

2011

PMP EXAM GUIDE

PMP EXAM GUIDE

Project Management Body of Knowledge , Fourth Edition (PMBOK Guide) 2008

PMP EXAM GUIDE

ABOUT THE AUTHOR

PMP EXAM GUIDE

Introduction to PMP Examination _______________________________________________ 7

Project Management Framework _______________________________________________ 15

Project Integration Management _______________________________________________ 36

Project Scope Management ____________________________________________________ 50

PMP EXAM GUIDE

Project Time Management ____________________________________________________ 61

Project Cost Management _____________________________________________________ 80

Project Quality Management __________________________________________________ 93

Project Human Resource Management _________________________________________ 106

Project Communication Management __________________________________________ 122

PMP EXAM GUIDE

Plan Communication _____________________________________________________________ 126

Project Risk Management ____________________________________________________ 135

Project Procurement Management _____________________________________________ 154

Professional Responsibility and Ethics___________________________________________ 166

PMP EXAM GUIDE

PMP EXAM GUIDE

PMI is headquartered in USA, founded in 1969

Worlds leading not-for-profit project management association

Over 288,000 Members across 170 countries

Advocates Best Practices in Project, Program and Portfolio Management

Certified Associate in Project Management (CAPM)

Project Management Professionals (PMP)

Program Management Professional (PgMP)

PMI Risk Management Professional (PMI-RMP )

PMI Scheduling Professional (PMI-SP )

Purpose of PMBOK Guide

The SUM of knowledge within the profession of project management

Includes widely applied practices and innovations

The knowledge and practices are applicable to most projects

PMBOK Guide is used as a reference for professional development programs

Structure of PMBOK Guide

Section I The Project Management Framework

Section II The Standard for Project Management of a Project

Section III The Project Management Knowledge Areas

PMP EXAM GUIDE

Program based on Newly Launched Fourth Edition of PMBOK Guide

Why Become a Certified PMP

Widely recognized Project Management Certification

Worldwide Recognition of your knowledge of Project Management

Demonstrates Proof of Professional Achievement

Improves the way you manage your Projects

Increases your Marketability

Displays your willingness to pursue Growth

Increases Customer Confidence

Valued Globally across Industry Verticals & Companies

PMP EXAM GUIDE

Source: PMI Credential Handbook

PMP Examination Type of Questions

Using attached illustrations such as Network Diagram

Fill in the Blanks

Formulas and Computing

PMP EXAM GUIDE

Negative descriptors such as Except

Two likely Answers

Roadmap to Become a PMP