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13/03/2011 PMP Exam Notes ( May 08th):

PMP Exam Notes ( May 08th):

Chapter 02: Project Management Framework
What is a Project? Temporary, Unique, Progressive Elaborative
What is a program? A program is a group of projects. Their management is coordinated because they may use the same
resources, the results of one project feed into another, or they are parts of a larger “project” that has been broken down to
smaller projects.
What is the Project Management Office? Performs one of the three roles: Providing policies, methodologies and
templates for managing projects within the organization Providing support and guidance to others in the organization on
how to manage projects, training others in project management
Providing project managers for different projects and being
responsible for the results of those projects.
The PMO is an organizational structure, not a person
Triple Constraints (TCS): Time, Cost, Scope. The latest addition is Quality

PMI’s organization maturity model for project management is called OPM3

Project Expediter: acts as a staff assistant, and communications coordinator. The expeditor cannot personally make or
enforce decisions.
Project Coordinator: Similar to project expediter except the coordinator has some power to make decisions, some
authority , and reports to a higher level manager.

Understand the difference between Product Life Cycle and Project Life Cycle.

Functional Organization

Advantages Disadvantages
Easier Management of specialists People place more emphasis on their functional
speciality to the detriment of the project
Team members report to only one supervisor No career path in project management
Similar resources are centralized, the company is Project Manager has little or no authority
grouped by specialties
Clearly defined paths in areas of work

Projectized Organization

Advantages Disadvantages
Efficient Project Organization No “home” when project is completed
Loyalty to the project Lack of professionalism in disciplines
More effective communication than functional Duplication of facilities and job functions
Less Efficient use of resources

Matrix Organization

Advantages Disadvantages
Highly visible project processes Extra administration required
Improved project manager control over resources More than one boss for project teams
More support from functional organizations More complex to monitor and control
Maximum Utilization of scarce resources Tougher problems with resource allocation
Better coordination Need extensive policies and procedures
Better Horizontal and vertical dissemination of Functional Managers may have different
information than functional priorities than project managers
Team members maintain a “home” Higher potential for conflict… 1/21
13/03/2011 PMP Exam Notes ( May 08th):
You need 2 methodologies to complete a project: Project Life Cycle: What you need to do to do, Project Management
Methodology: Managing the project. The Product Life Cycle differs from the product life cycle in that the project life cycle
is different for each industry
Chapter 03: Project Management Processes
Project Management is the application of knowledge, skills, tools and techniques to project activities to meet project
Project Management Processes: Initiation, Planning, Execution, Monitor and Control, Closing
Projects are chartered by someone external to the project (Sponsor)

Initiation: Project Charter, Preliminary Project Scope Statement
Planning Process Group: Project Management Plan
Executing: Deliverables, requested changes, implemented change requests,
Monitoring and Control Process: Approved change requests, rejected change requestes , pPMP

Rita's Process Chart

Monitoring and
Initiating Planning Executing Closing
Determine how you will Measure against
Select a Project Develop closure
do planning - part of Acquire Final Team performance measurment
Manager procedures
management plans baselines
Company Culture Create Project Scope Measure according to the Complete contract
Execute the PM plan
and Existing Statement(S) management plans closure
Collect processes, Determine variances and if
Confirm work is done to
procedures and Determine Team(T) Complete Product Scope they warrant corrective
historical info action or a change
Divide large
Create WBS and WBS Recommended Changes Gain formal acceptance
projects into Scope Verfication
dictionary (W) and corrective actions of the product
Identify Send and receive Configuration Final performance
Stakeholders Create activity list (A) information Management reporting
Implement approved
Recommend changes,
Document Business Create network changes, defect repair, Index and Archive
defect repair, preventive
Need diagram (N) preventive and corrective records
and corrective actions
Determine Product Estimate Resource Integrarted change Update lessons learned
Continuous Improvements
Objectives Requirements (R) control knowledge base
Document Aprrove Changes, defect
Estimate Time and Hand off completed
assumptions and Follow Processes repair , preventive and
Cost (T) product
constraints corrective actions
Develop Project Determine Critical Path
Team Building Risk audits Release resources
Charter (C)
Preliminary Give Recognition and
Develop Schedule (S) Manage Reserves
Project Scope and rewards… 2/21
13/03/2011 PMP Exam Notes ( May 08th):
Develop Budget (B) Hold Progress meetings Use issue logs
Determine Quality
Uses work authorization Facilitate conflict
Standards, Processes
system resolution
and Metrics (Q)
Determine Roles and Measure team member
Request Seller Responses
Resp performance
Communication Select Sellers Report on performance
requirements (C)
Risk Identification (R) Create Forecasts
Iterations-Go back (I) Administer Contracts
Determine what to
Prepare procurement
Finalize "how to
execute and control"
Create process
improvement plan
Develop final PM plan

Memory Tools for the Planning Phase : TWAN-RTC-SBQC

Determine Team
Activity List
Network Diagram

Time and Cost
Critical Path


Communication Requirements
Risk Identifcation

Chapter 04: Integration Management ( Expect up to 14 questions on the exam)

What is a Project Charter?

• Formally recognizes the existence of the project, or establishes the project. This means that a project does not
exist without a project charter
• Gives the project manager authority to spend money and commit corporate resources .
• Provides high level requirements for the project
• Links the project to the ongoing work of the organization
• Issued by a project sponsor, not the project manager
• Created in the Initiating process group
• Broad enough so it does not NEED to change as the project changes
• Any change to the project charter should call into question whether or not the project should continue
What is Project Statement of Work?… 3/21
13/03/2011 PMP Exam Notes ( May 08th):
• Created by customer/sponsor and describes their needs, product scope and how the project fits into their
strategic plan
Project Selection Methods are of two types:

Comparative Approach ( Benefit Measurement Mathematical Approach ( Constrained

Approach) Optimization Methods)
Murder Board ( A panel of people who try to Linear Programming
shoot down a new project idea)
Peer review Integer Programming
Scoring Models Dynamic Programming
Economic Models Multi Objective Programming
Benefit compared to cost

Management Plans are your strategy for managing the project. Someone needs to put the whole thing together.
Management Plans when completed become part of the project management plan.
A Project Management Plan should be BARF

• Bought into
• Approved
• Realistic
• Formal
Work Authorization System: A system for authorizing work. ( 1 question in exam for sure)
Baselines: are used during project executing to measure performance and to help control the project. Forecasts of final
cost and schedule should be compared to the baselines.

Corrective Action: It is any action taken to bring expected future project performance in line with
the project management plan.
Preventive Action: Whereas corrective action involves implementing actions to deal with actual
deviations from the performance baselines, preventive action deals with anticipated or possible
deviations from the performance baselines

All changes are evaluated first.

Closing Project: There are two procedures for closing projects

• Administrative Closure procedure

• Contract closure procedure
The difference between the procedures is focus, frequency and formality. Administrative closure focuses on closing the
project or project phase. Contract closure focuses on closing a contract that is part of a project. Be sure to remember that
you always close out a project no matter the circumstances under which it stops, is terminated or completed.

Chapter 05: Scope Management

Prevention: Planning
Stakeholder involvement early: Less problems in the future
Scope Planning
Scope Definition
Create WBS

Scope Verification… 4/21
13/03/2011 PMP Exam Notes ( May 08th):
Scope Control

Product Scope: “Requirements that related to the product of the project”

Project Scope: Work you need to do to deliver the product of the project. This includes the
meetings, reports, analysis and all the other parts of the project management that become part of
the project scope management plan

Work Break Down Structure (WBS)

The WBS is a deliverable oriented hierarchical decomposition of the work to be executed by the project team, to
accomplish the project objectives and create the required deliverables. A WBS is deliverable oriented. The WBS breaks the
project into smaller and more manageable pieces. This is a top-down effort to decompose the work into smaller pieces
called work packages ( PMI does not use the word “tasks”. This is replaced by the “work package”)
Continue breaking down the project until you reach what are called Work Packages; pieces that
Can be realistically and confidently estimated

Cannot be logically subdivided

Can be completed quickly
Have meaningful conclusion and deliverable
Can be completed without interruption
Will be outsourced or contracted out.
WBS from one project may be used as the basis for the next. Therefore, the project management office should collect
WBS examples and encourage the creation of templates.
WBS is created with the inputs from the team. It helps prevent work from slipping through the cracks. It provides the
project team with an understanding of where their pieces fit into the overall project management plan and gives them an
indication of the impact of their work on the project as a whole.
The WBS is the foundation of the project. This means that almost everything that occurs in the planning process group
after the creation of the WBS is directly related to WBS. Thinks that are directly related to the WBS are:
Activity List, Network Diagram, Staffing, Estimating, Scheduling, Budgeting, Risk Management, Project Control
Remember that WBS is a
Graphical picture of the hierarchy of the project
Identifies all the work to be performed – if it is not in the WBS, it is not part of the project

Is the foundation upon which the project is built

Is VERY important
Should exist for every project
Forces you to think through all aspects of the project
Can be reused for other projects
Shows hierarchy or is the foundation of the project

Does not show dependencies

13/03/2011 PMP Exam Notes ( May 08th):
WBS Dictionary: The detailed content of the components contained in a WBS, including work packages and control
accounts can be found in a WBS Dictionary. For each WBS of work, the dictionary includes a code of account identifier, a
statement of work, responsible organization, and a list of scheduled milestones. Other information for a WBS component
includes contract information, quality requirements, and technical references to facilitate performance of the work. Other
information for a control account would be a charge number. Other information for a work package can include a list of
associate scheduled activities, resources required, and an estimate of cost.
Tricky aspects of Scope Verification:

1. Scope Verification can be done at the end of each project phase in the project cycle ( to verify the phase deliverables
along the way) and during the monitoring and controlling process group in the project management process.
2.Scope verification relates to Quality Control. Although quality control is generally done first( to make sure that the work
meets the quality requirements before meeting with the customer), scope verification and quality control can overlap. The
difference is focus .Primary focus of scope verification is customer acceptance of the deliverables while quality control
involves meeting the quality requirements specified for the deliverables and analysis of the correctness of the work.
Chapter 08: Quality Management

What is Quality?

• Quality is defined as the degree to which the project fulfils the requirements
• Degree to which a set of inherent characteristics fulfill requirements
• International Organization for Standardization (ISO):The totality of characteristics of an entity that bear on its
ability to satisfy stated or implied needs.
• Conformance to requirements
• Project’s processes and products meet written specifications
• Fitness for Use
• Product can be used as it was intended

What is Quality Management?

Quality Management includes creating and following policies and procedures in order to ensure that a project meets the
defined needs it was intended to meet. This can also mean the same thing as completing the project with no deviations
from the project requirements. Quality Management includes Quality Planning, perform Quality assurance and perform
Quality Control.
Quality Approaches:

• Deming: Quality is increased productivity at decreased cost.

• Juran: Create “quality culture” through top management commitment
• Crosby: Strive for zero defects. Constant improvement and low tolerance
• Ishikawa: Quality circles that encourage participation and involvement
• Taguchi: Quality should be designed into the project and not inspected into it.
What is Gold Plating?
Gold Plating refers to giving the customer extras ( e.g.: extra functionality, higher quality components). This practice is not
recommended, as gold plating adds no value to the project.
Some Approaches
• Action over Direction
• Prevention over inspection ( Quality must be planned in, not inspected in)
Continuous Improvements (or Kaizen) ,Just in Time (JIT),Total Quality Management (TQM)

The Project Manager has the ultimate responsibility for the quality of the product of the project, but each team member… 6/21
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must check his or her work – self inspection. Senior management has the ultimate responsibility for quality in the
organization as a whole.
Impact of Poor Quality

• Increased Costs
• Low Morale
• Low Customer Sat
• Increased Risk
• Rework
• Schedule Delays
Increase in quality can result in increased productivity and cost effectiveness and decreased cost risk

Cost of Conformance Cost of Non Conformance

Quality Training Rework
Studies Scrap
Surveys Inventory Costs
Warranty Costs
There are costs in both areas, but the cost of non conformance must be greater

Quality Planning Quality Assurance Quality Control

Identify which quality standards Applying the planned and Monitoring specific project
are relevant to the project and systematic quality activities to results to ensure that they
how to satisfy them. ensure that the project employs comply with the relevant quality
all processes needed to meet standards while identifying
requirements. ways to improve quality.
“Is everything all right in the
• Find quality standards • Quality audits • Repair defects
• Prepare quality • Correct deficiencies • Identify quality
management plan • Recommend changes improvements
and corrective actions • Measure
Mostly done during project Mostly done during project Mostly done during project
planning executing monitoring and controlling

Quality Planning
Quality Planning Tools and Techniques:

• Cost-Benefit Analysis: Trade off between cost of rework and stakeholder satisfaction.
• Design of Experiments: Helps identify which variables have the most influence on the overall outcome of a
process. E.g., Which combination of materials and equipment produce the most reliable computer chips?
• Cost of Quality: Total costs incurred by investment in preventing non-conformance to requirements, appraising
the product, and failing to meet requirements (rework).
• Benchmarking: Comparison of actual or planned project practices to those of other projects to generate ideas for

• Quality Management Plan

• Checklist
• Process Improvement Plan
• Quality Baseline
• Quality Metrics
Quality Assurance… 7/21
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Tools and Techniques:

• Quality Audits: Structured reviews of specific quality management activities to help identify lessons learned
• Process Analysis: Follows steps outlined in the process improvement plan to identify needed improvements.


• Changes to policies and processes to increase effectiveness & efficiency

• Recommended Corrective Actions
• Recommending actions to increase organizational performance.
• Organizational Process Assets
• Updated quality standards

Quality Control
Sigma is taken on both sides of the mean. Half the curve is to the right of the mean, and half the curve is to the left of the
• +/-1 sigma is equal to 68.26% which is the percentage of occurrences to fall between the two control limits
• +/-2 sigma equals 95.46%
• +/-3 sigma equals to 99.73%
• +/-6 sigma equals 99.99985%
Seven Basic Tools of Quality
1 Cause and Effect Diagram(Fishbone/Ishikawa Diagram): How various factors might be linked to potential problems.
2 Control Charts: Graphic display of data that illustrates the results of a process over time. Allow you to determine
whether a process is in control or out of control. Six-sigma quality will identify process concerns.7-run rule – if seven data
points in a row are all below the mean or above and are all increasing or decreasing, then process needs to be
examined for non-random problems.
3 Flowcharting: Helps to analyze how problems occur based on a graphical representation of a process .Can help
anticipate what and where quality problems might occur and thus, develop approaches to deal with them.
4. Histogram: Bar chart showing a distribution of variables. Each column represents an attribute or characteristic of a
5.Pareto Diagram: Specific type of histogram that shows how many defects were generated by type or category of
identified case
6. Run Chart: Line graph shows trends in a process over time, variation over time, and declines or improvements over
time. Trend analysis is performed using run charts to monitor: Technical performance, Cost and schedule performance.
7. Scatter Diagram: Shows pattern of relationships between two variables – allows for study of possible relationship
What is Quality Policy?
The intended direction of the organization with regard to quality. Must be approved by top management. Project
stakeholders must be fully aware of
Sample Quality Policy
It is the policy of ABC company to manufacture and deliver products which conform to the specifications laid down in this
manual to our customers. This includes not only manufacture to specification, but price, delivery, reliability and all
interfaces between us and our customers from enquiry to delivered goods. To achieve this policy a quality assurance
system is in place of which management gives full support

Chapter 09: Human Resource Management

HR Planning
Responsibility Management Matrix does not show when people will do their jobs (time)

Organization Charts and Position Descriptions

Resource Histogram: Is a graph that shows the number of resources used per time period and is displayed in a
bar chart format. The chart shows where there is a spike in the need for resources.
Remember that acquiring team occurs during the executing process group… 8/21
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Halo Effect
Ground Rules
A project manager must exercise -Honesty, Integrity, Loyalty (HIL) with his/her team, counterparts and customers

Powers of Project Manager

Formal or legitimate: getting people to do things based on position of authority.
Reward Power – using incentives to induce people to do things.
Penalty or Coercive Power – punishment, threats, or other negative approaches to get people to do things they don
not want to do.
Expert Power – using one’s personal knowledge and expertise to get people to change their behavior.
Referent Power – using individual’s personal charisma
Best Forms of Power are : EXPERT and Reward
Penalty is the worst choice

Formal, Reward and Penalty are powers derived from the project manager's position in the company
Expert power is earned on you own.
Conflict Resolution
Confronting (Problem Solving): Win-Win
Compromising :Lose-Lose situation ( Second best)

Withdrawal: ( Avoidance)
Smoothing: Emphasizing agreement rather than differences of opinion.
Forcing: Pushing one view point at the expense of another.

HR Planning
Responsibility Management Matrix does not show when people will do their jobs (time)

Organization Charts and Position Descriptions

Resource Histogram: Is a graph that shows the number of resources used per time period and is displayed in a bar
chart format. The chart shows where there is a spike in the need for resources.

Remember that acquiring team occurs during the executing process group
Halo Effect
Ground Rules
A project manager must exercise -Honesty, Integrity, Loyalty (HIL) with his/her team, counterparts and customers
Powers of Project Manager
Formal or legitimate: getting people to do things based on position of authority.

Reward Power – using incentives to induce people to do things.

Penalty or Coercive Power – punishment, threats, or other negative approaches to get people to do things they don
not want to do.… 9/21
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Expert Power – using one’s personal knowledge and expertise to get people to change their behavior.
Referent Power – using individual’s personal charisma
Best Forms of Power are : EXPERT and Reward

Penalty is the worst choice

Formal, Reward and Penalty are powers derived from the project manager's position in the company
Expert power is earned on you own.
Conflict Resolution
Confronting (Problem Solving): Win-Win
Compromising :Lose-Lose situation ( Second best)

Withdrawal: ( Avoidance)
Smoothing: Emphasizing agreement rather than differences of opinion.
Forcing: Pushing one view point at the expense of another.

Chapter 10: Communications Management

WBS is a communication tool

Non Verbal: About 55% of all communications are non verbal

Para lingual : Pitch and Tone
Feedback: Saying things like “Do you understand what I have explained”?
Communication Methods:
Formal Written, Formal Verbal, Informal Written, Informal Verbal
Channels can be calculated using the formula: N (N-1)/2

Performance Reporting

Status Report: Describing where the project now stands regarding performance measurement
baselines in cost, schedule, scope and quality

Progress Report: Describing what has been accomplished

Trend Report: Examining project results over time to see if performance is improving or

Forecasting: Predicting future project status and performance

Variance Report: Comparing actual results to baselines

Earned Value: Integrating scope, cost and schedule measures to asses project performance . This
report makes use of the terms described in the cost chapter

Lessons Learnt

Chapter 12: Procurement Management

Procurement Management
Contract management and change control required to administer contracts or purchase orders. Processes include: (… 10/21
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( Plan

 Plan Purchases and Acquisitions

• Determining what to purchase, when, and how.

 Plan Contracting

• Documenting project requirements and identifying potential sellers

 Request Seller Responses

• Obtaining quotations, bids, offers, or proposals

 Select Sellers

• Review offers, choose sellers, and negotiate contracts

 Contract administration

• Managing the contract and relationship with the seller

 Contract Closure

• Completion and settlement of the contract, including resolution of any open items.

Role of a PM in Procurement Management

• The negotiation of contracts between companies and/or individuals

• The fulfillment of the terms and conditions of the contracts that have been entered into between these parties
• The process of obtaining goods and/or services from vendors, suppliers, and/or subcontractors to assist in
fulfilling a contract
Centralized Contracting vs. Decentralized Contracting:

Plan Purchases and Acquisitions

Identifies which project needs can be best met by purchasing or acquiring products, services, or results outside the
organization. The Plan Purchases & Acquisition process can significantly influence the project plan and schedule – should
be integrated with Schedule Development and estimating
Tools and Techniques

Make-or-Buy Analysis Analysis of costs, competency fit, and strategic opportunity.

Expert Judgment To define requirements and evaluate offers and proposals made by
Contract Types There are generally three types of contracts
• Cost Reimbursable ( CR)
• Time and Material ( T&M)
• Fixed Price (FP)

Contract Type What is it ?

Cost Reimbursable • Reimbursement for seller’s actual costs + fee for profit.
• Buyer has most cost risk
• Simple Contract SOW
• Requires auditing seller’s invoice
• Requires more work for the buyer to manage
• Seller writes detailed contract statement of work… 11/21
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Cost-Reimbursable Contracts: Reimbursement for seller’s actual costs
+ fee for profit.
Cost-Plus-Fee: Fee varies with the actual costs.
Cost-Plus-Fixed Fee: Fee does not vary with actual costs unless the
scope changes.
Cost-Plus-Incentive Fee: IF final costs are less than expected costs,
both buyer and seller benefit from the saving.
Time and Material ( • Usually used for small dollar accounts
T&M) • Buyer has a medium amount of risk
• Hybrid. Full value of agreement and exact quantity of items
are not defined, but unit rates can be pre
• Good Choice when you are hiring “bodies” or people to
augment your staff
Fixed-Price or Lump- • Fixed total price for a well-defined product.
Sum Contracts: • Buyer has least risk, borne by the seller
• Seller is most concerned about SOW


You need work to begin right away T&M

You want to buy expertise in determining what CR
needs to be done
You know exactly what needs to be done FP
You are buying the services of a programmer to T&M
augment your staff
You need work done but don’t have time to audit FP
invoices on this work

Who has the highest risk in a cost reimbursable contract, buyer or seller? Buyer
Who has the cost risk in a fixed price contract ? Seller
Contract statement needs to be

• Clear
• Complete
• Concise as possible
• Describe all the work and activities the seller is required to complete
( All because the key is to prevent contract problems)

Plan Contracting
This process consists primarily of putting together the procurement documents that will be sent to prospective sellers
describing the buyer’s need , how to respond and the criteria by which the buyer will select a seller.

Procurement Documents

• Request for proposal (RFP): Requests a price , but also a detailed proposal on how the work will be accomplished
, who will do it, resumes, company, experiences etc
• Invitation for BID: Requests one price to do all the work
• Request for Quotation: Requests a price quote per item, hour or foot

Procurement Documents Contract Type Contract Statement of Work

Request for Proposal CR Performance or Functional
Invitation for BID FP Design
Request for Quotation T&M Any

• Non Disclosure Agreement… 12/21
13/03/2011 PMP Exam Notes ( May 08th):
• Standard Contract
• Special Provisions
• Terms and Conditions
• Evaluation Criteria
Letter of Intent: You should understand this is normally NOT a contract but simply a letter, without legal binding, that says
the buyer intends to hire the seller
Privity: Means a contractual relationship. You should understand the following because it explains privity and shows you
how questions on this topic are asked.
Request Seller Responses
This process consists of getting the procurement into the hands of sellers, answering the sellers questions and the sellers
preparing the proposals
Tools and Techniques

• Bidder Conferences: Buyer invites the sellers to attend a meeting where they can tour the buyer’s facilities and
ask questions about the procurement. The questions and answers are written down and sent to all prospective
bidders to make sure that all prospective sellers have the same information. This meeting is also an opportunity for
the buyer to discover anything that is missing
• Advertising
• Qualified Sellers List

Select Sellers
Tools and Techniques

• Weighting System
• Independent Estimate
• Screening System
• Contract Negotiation
• Seller Rating System
• Expert Judgment
• Proposal Evaluation Techniques
What is a Contract?
A contract is a legally binding document. Therefore, all terms and conditions in the contract must be met. One cannot
chose to not conform or to not do something required in the contract. Change to the contract are made formally in writing
What needs to be in the contract?

• An offer
• Acceptance
• Consideration ( Something of value, not necessarily money)
• Legal Parties
• Legal Purpose
A contract , offer of acceptance may be oral or written, though written is preferred.
Contract Administration ( Important)
Contract administration consists of assuring that the performance of both parties to the contract meets contractual
requirements. This is an important are on the exam.

• Contract Change Control System: Defines the process by which the contract can be modified.
• Buyer-Conducted Performance Reviews: Structured review of seller’s progress according to time, scope, cost,
and quality.… 13/21
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• Inspections and Audits: Contractual agreement to identify weaknesses in the seller’s processes and deliverables.
• Performance Reporting: Seller-reported statement of achievement according to contractual objectives.
• Claims Administration: Contested changes (claims or disputes) that are documented and managed through
arbitration or litigation if necessary.
• Records Management System: Used by project manager to manage contract documentation and records (e.g., a
spreadsheet that states what each sponsor has contractual rights to for each football game).
Contract Closure
Contract Closure is done:

• When a contract ends

• When a contract is terminated before work is completed

All contracts must be closed out no matter the circumstances under which they stop, are terminated or completed. Closure
provides value to the performing organization and the customer and should be eliminated under any circumstances.

Contract Closure occurs first. All contracts must be closed out before the project is closed out.
Therefore, at the end of the contract, the project manager performs a procurement audit for each
contract, administratively closes out the contract and then administratively closes the project and
the whole project is completed.
Administrative Closure may be done at the end of each project phase and at the end of the project
as a whole. Contract closure is done only once , at the end of each project.
Administrative Closure uses the word “Lessons learned” and contract closure uses the world
“procurement audit”

Project Cost and Schedule cannot be finalized without completing risk

The term Gantt Chart is not used, only bar chart
Percent complete is an almost meaningless number
The project manager should be assigned during project initiation.
Work on prevention than on correction
You are required to understand that people must be compensated for their work.
A project manager creates a reward system during the planning process group
The exam makes a habit of not telling you what form of organization you are in. When it does not say, assume matrix.
Stake Holders can be identified throughout the project management process groups. However, the earlier the stakeholders
are identified, the better for the project.
MBO works if management believes in it.
Activity List
Network Diagram
Resource Requirements
Time and Cost
Critical Path
Keep the phrases “Work to the project management plan”, “Be Proactie”, “Adjust and Guide” in mind as you take the exam
to make sure you are thinking like PMI
The Project Manager is making sure that the product of the project has been completed according to the project management… 14/21
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plan. What part of the project management process is he in ? CLOSING
Company Culture is called the enterprise environmental factors
Work authorization system can be used to “manage what time and in what sequences work is done”
The Work Beakdown structure can be BEST be thought as an effective aid for stakeholder communications
The WBS Dictionary describes each element in the WBS. Therefore, descriptions of the work package are in the WBS
Marginal Analysis: The concept of optimal quality level is reached at the point where the incremental revenue from product
improvement equals the incremental cost to secure it.
A Control chart shows seven data points in a row on one side of the mean. What should be done ? Find an assignable cause.
Even if the customer was happy, the project is unsuccessful if it has been gold plated.
The most common causes of conflict on a project are schedules, project priorities and resources
Resource histogram and Responsibility Matrix do not show time
The primary objective of contract negotiation is to protect the relationship.
Contract Closure is different from administrative closure in that contract closure occurs before administrative closure.
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Centralized Structure
Advantages Disadvantages
Increased expertise in contracting One contract person may work on many
A contracting department will provide is May be more difficult to obtain contracting help
employees with continuous improvement , when needed
training and lessons learned
Contracting professionals have a clearly defined
career path in the contracting profession
Advantages Disadvantages
Easier access to contracting expertise because No home department for the contracts person to
contract experts are on the team return to after the project is complete
More loyalty to the project Difficult to maintain a high level of contracting
resources across projects
More focussed contracting experience Little standardization of contracting practices
from one project to the next
Tendency to have a lack of defined career path
in the contracting profession
CHAPTER 13: Professional and Social Responsibility
o Do the right thing
o Follow the right process
o Act ethically, fairly and professionally towards team and resource owners
o Watch for conflicts of interest
o Report Violations
o Deal with problems
o Put the project’s needs before your own
o Share lessons learned
o Enhance your competence.
CHAPTER 07: Cost Management
A large project might be where costs might be more practical to estimate and control at a higher level. This is called a control
account and is one of the level higher than the work package in the WBS.
Estimating should be done by the person doing the work whenever possible.
Padding is not an acceptable project management practice
The Steps
o Cost Management Plan
o Cost Estimating… 15/21
13/03/2011 PMP Exam Notes ( May 08th):
o Cost Budgeting
o Cost Control
COST Management Plan:
Life Cycle Costing: Look at the concept of the whole life of the product and not just the cost of the project.
Value analysis: Finding a less costly way to do the same work.
Variable Costs Fixed Costs
Eg: Supplies, Cost of material, Wages Set up, rental

Direct Costs Indirect Costs

Team travel, team wages, recognition, cost of Taxes, Fringe benefits, janitorial services
Cost Estimates:
Analogous Testing ( Less accurate but quick)
Bottom Up Testing ( More accurate but time consuming)
Rough Order of Magnitude Estimate ( ROM) Definitive
This type of estimate is usually made during the Later during the project, the estimate could
initiating process ad in the range of -50 percent become more refined to a range of -5 percent to
to +100 percent from actual +10 percent from actual
There are two types of reserves added:
Contingency Reserve: is for risks reserved remaining after risk response planning
Management Reserve: is any extra amount of funds to be set aside to cover unforeseen risks or changes in the project.
The COST Baseline will contain the contingency reserve and the COST BUDGET will include the management reserve.
Check the diagram below:
Cost Budget
Management Reserve
Cost Baseline
Contingency Reserve
Control Account
Work Packages
Cost Control
Use Earned Value Technique is a better method because it integrates cost, time and the work done ( scope) and can be used to
forecast future performance and project completion dates and costs
Name Formula Interpretation ( as of today)
Cost Variance EV –AC Negative is over budget
Schedule Variance EV-PV Negative is behind schedule
CPI EV/AC We are getting ---- worth for
every $1 spent.
SPI EV/PV We are progressing at ---
percent of the rate originally
Estimate at Completion (EAC) BAC/CPI As of now, how much do we
AC + ETC expect the total project to cost
AC + (BAC-EV) -
Estimate to complete EAC-AC How much more will the project
Variation at Completion ( VAC) BAC-EAC How much over or under
budget will we be at the end of
the project
Project Selection Methods… 16/21
13/03/2011 PMP Exam Notes ( May 08th):
Net Present Value Project
$95000A Project B
$75000 Which do you go for?
IRR 13% 17% B
Payback Period 16 months 21 months B
Benefit Cost Ratio 2.79 1.3 A
Present Value = FV/( 1+R)**n
The number of years is not relevant as it would have taken into account in the calculation of your NPV.
Understand the following
= st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Opportunity Cost
Sunk Costs
Law of Diminishing Returns
Working Capital
Depreciation: Straight Line OR Accelerated Depreciation ( Double declining balance and sum of the years digits)
Analogous Estimating uses TOP-DOWN approach
Main focus of life costing is to consider operations and maintenance costs in making project decisions.

CHAPTER 11: Risk Management

Risk Management includes risk management planning, identification, analysis, response planning and monitoring and control. The
purpose of risk management is to increase the probability and impact of the positive events, and decrease the probability ad ompace
of negative events on the project.
Uncertaininty: Lack of knowledge about an event that reduces confidence in conclusion drawn from the data.
When looking at risk, one should determine:
Probability that it will occur ( what)
The range of possible outcomes ( impact or amount at stake)
Expected timing ( when) in the project life cycle
Anticipated frequency of risk events from that source ( how often)
Remember the following:
Risk Management Planning
Risk Identification
Qualitative Risk Analysis
Quantitative Risk Analysis
Risk Response Planning
Risk Monitoring and control
Risk Identification:
Who should be involved in risk identification, the best answer is everyone. Everyone has a different perspective of the project.
What are the different types of Risk Identification techniques?
Brain Storming: one idea helps generate another
Delphi Technique: used to build consensus of experts who participate anonymously. The technique can also be used for
estimating time and cost
Interviewing :
Root Cause Analysis
Risk Register: The risk register is the place where most of the risk information is kept. Think of it as one document for the whole risk
management process that will be constantly updated with information as risk identification and later risk management processes are
completed. The risk register becomes part of the project management plan and is also included in historical records which will be
used for future projects. Risk register in the only output of the risk management process. At this point, risk register would include
a) List of risks
b) List of potential responses
c) Root causes of risks
d) Updated Risk Categories
When in the risk management process are responses documented?
o The answer is risk identification and risk response planning
Qualitative Risk Analysis
o Probability and Impact Matrix… 17/21
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o Risk Data Quality Assessment
o Risk Categorization
o Risk Urgency assessment
Quantitative Risk Includes
- Further investigation into the highest risks on the project
- Determination of the type of probability distribution that will be used e.g triangular , normal, beta, uniform or log normal
- Sensitivity analysis: Determining which risks have the most impact on the project.
- Determining how much quantified risk the project has through expected monetary value or Monte Carlo analysis
Quantitative Risk Analysis Tools:
Monte Carlo Analysis
Cost and time estimating
Delphi Technique
Use of historical records from previous projects
Expert Judgement
Expected Monetary Value analysis
Monte Carlo Analysis
Monte Carlo Analysis: Simulation is all about. It uses the network diagram and estimates to “perform” the project many times and to
stimulate the cost or schedule results of the project. Remember the following about Monte Carlo Technique:
- Evaluates the overall risk of the project
- Provides the probability of completing the project on any specific day , or for any specific amount of cost
- Provides the probability of any activity actually being on the critical path
- Takes into account path convergence ( places in the network diagram where many paths converge into one activity)
- Translates uncertainties into impacts to the total project
- Can be used to asses cost and schedule impacts
- Is usually done with a computer based Monte Carlo program because of the intricacies of the calculations
- Results in a probability distribution
Risk Response Planning
Contingency Plans Do something if the risk happens
Fall back plans Do something if contingency plans are not
Risk Response Strategies for Threats
Avoid Eliminate the threat by eliminating the cause (e.g
Remove the work package or person)
Mitigate Reduce the probability or the impact of a threat ,
thereby making it a smaller risk and removing it
from the list of top risks on the project
Transfer Make another party responsible for the risk
through purchasing of insurance, performance
bonds, warranties, guarantees or outsourcing the
Risk Response Strategies for Opportunities
Exploit ( Reverse of avoid) Add work or change the project to make sure
the opportunity occurs
Enhance Increase the likelihood , probability and positive
impacts o the risk event
Share Allocate ownership of the opportunity to a third
party ( forming a partnership, team or joint
venture) that is best able to achieve the
Response strategy for both threat and opportunities:… 18/21
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Accept : Do nothing.
Residual Risks: It is these risks which remain after risk response planning, and those that have been accepted for which contingency
plans and fallback plans can be created.
Description of Strategy Name of Risk Response Strategy
Remove a work package or activity from the AVOID
Assign a team member to visit the seller’s MITIGATE
manufacturing facilities frequently to learn about a
problem with delivery as possible
Move a work package to a date when a more EXPLOIT
experienced resource is available to assigned to
the project
Begin negotiations for the equipment earlier than ENHANCE
planned so as to secure a lower price
Outsource a work package so as to gain an SHARE
Notify management that there could be a cost ACCEPT
increase if a risk occurs because no action is
being taken to prevent the risk.
Remove a troublesome resource from the AVOID
Provide a team member who is less experienced MITIGATE
with additional training
Train the team on conflict resolution strategies MITIGATE
Outsource difficult work o a more experienced TRANSFER
Ask the client to handle some of the work TRANSFER
Prototype a risky piece of equipment MITIGATE
Contingency Reserves: “Known Unknown”
Management Reserves: “Unknown Unknown”
What do you do with the non critical tasks ?
Document in a watch list and revisit periodically
What risk management activities are done during the execution of the project?
Watching out for watchlisted ( non-critical) risks that become more important
Risk should be a major topic in Status Meetings
Work around: Whereas contingency responses are developed in advance, work around are unplanned responses developed to deal
with the occurrence of unanticipated risk events
Risks will be identified during which risk management process:
- Risk identification and risk monitoring and control
An output of risk response planning is RESIDUAL RISKS
Before you do anything on the risk, you have to analyze it and see how much of an impact happens ( How well does it qualify)
- Estimating should be based on a WBS to improve accuracy
- Activity Definition
There are two ways to draw Network diagram:
-Precedence Diagramming Method (PDM) or Activity on Node (AON)
Finish to Start An activity must finish before the successor can start ( Most common)
Start to Start An activity must start before the successor can start
Finish to Finish An activity must finish before the successor can finish
Start to Finish An activity must start before the successor can finish
Finish to Start: You must finish digging a hole before you can start the next activity, planting a tree… 19/21
13/03/2011 PMP Exam Notes ( May 08th):
Start to Start: You must start design and wait for two weeks lag before you can start coding
Finish to Finsh: You must finish testing before you can finish documentation
Start to Finish: Rarely used
- Arrow diagramming method ( ADM)
Types of dependencies:
Types Of Estimate
- One Time Estimate:
- Analogous Estimate:
Analogous Estimating is a one time – top down estimate. Form of expert judgement
Parametric Estimating: Mathematical Model
Heuristics is a rule of thumb
P= Pessimistic, O= Optimistic, M= Most Likely
Formula Standard Deviation of an activity Variance of an activity
(P+4M+O)/6 (P-O)/6 SD **2

The longest duration path through a network diagram and determines the shortest time to complete the project
- Helps prove how long he project will take
- Helps the project manager determine where best focus her project management efforts
- Helps determine if an issue needs immediate attention
- Provides a vehicle to compress the schedule during project panning and whoever there are changes.
- Provides a vehicle to determine which activities have float and therefore can be delayed without delaying the project.
More critical paths increase risk
Would you leave the project with a negative schedule? No, you would compress the schedule
Activities on the critical path always have zero float. Critical path activities that are delayed or have dictated dates can result in
negative float.
Float (Slack)
Total Float: The amount of time an activity can be delayed without delaying the project ed date or an intermediary milestone. This is
the key type of float, but there are others.
Free Float: The amount of an activity that can be delayed without delaying the early start date of its successor
Project Float: The amount of time a project can be delayed without delaying the externally imposed project completion date required
by the customer, management or previously committed to by the project manager
Schedule Compression
Fast Tracking: Doing critical path activities in parallel that were originally planned in series. Fast Tracking often results in rework,
usually increases risk and requires more attention t communication
Crashing: Making cost and schedule tradeoffs to determine how to obtain the greatest amount of schedule compression for the
latest incremental cost wile maintaining the project scope. Crashing, by definition, almost always results in increased costs.
Option General Impacts of the Project
Fast Track Adds Risk
May add management time for the project manager
Crash Almost always adds cost
May add management time for the project manager
Reduce Scope Could save cost and time
May negatively impact customer satisfaction
Cut Quality Could save cost and resources
May increase risk
Requires good metrics
Monte Carlo Analysis: relates to “What if Analysis”
This method of estimating uses a computer to stimulate the outcome of a project making use of the three time estimates ( optimistic,… 20/21
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pessimistic, most likely) for each activity and the network diagram. The simulation can tell you
- The probability of completing the project on any specific day
- The probability of completing the project for any specific amount of cost
- The probability of any activity actually being on the critical path
- The over all project tisk
Under what circumstances would you use a network diagram instead To show
of a bar chart interdependencies
between activities
Under what circumstances would you use a milestone chart instead of To report to senior
a bar chart management
Under what circumstances would you use a bar chart instead of a To track progress an d
network diagram report to the team… 21/21