on Project Management and PMI


Last year I’ve passed the PMI-PMP (Project Management Professional) exam, and for those of you who are interested in achieving this goal, here’s a brief summary on the main concepts I studied in Rita Mulcahy’s PMP exam prep book. Feel free to ask questions!! 🙂

PM Framework

  • Project work (temporary, beginning-end, unique) vs. operational work
  • Process groups vs. knowledge areas
  • Project, program, portfolio
  • PMO
  • Project objectives, product objectives, MBO
  • Constraints: time, cost, risk, scope, quality, resources, customer satisfaction
  • OPM3
  • Stakeholders
  • Organizational structures: functional, projectized, matrix (weak, balanced, strong)
  • Project expediter, project coordinator
  • Product life cycle (conception, growth, maturity, decline, withdrawal) vs. project life cycle (phases, depending on industry)
  • PM processes: initiating (start), planning (plan), executing (do), monitoring & controlling (check & act), closing (end)
  • Lessons learned
  • PM is about identifying requirements, establishing clear and achievable objectives, and balancing competing demands for scope, time, cost, etc.

PM Processes

  • All projects should help meet strategic objectives: analysis to choose the ones who can reach strategic objectives with least cost, time, resources, and risk
  • Initiating (what do we want to create?):
    • project charter (document that formally authorizes a project or a phase and documenting initial requirements that satisfy the stakeholders’ needs and expectations)
    • stakeholders identification (influence, interest, relationship, cross-relations, risk tolerance) and stakeholders mgmt. strategy
    • high-level (needs into) requirements, constraints, assumptions, and risks
    • high-level planning
    • project & product objectives, final product scope & acceptance criteria
    • business case (to be reevaluated if many changes occur)
    • milestones
    • progressive elaboration (continuous defining of estimates and scope over time)
    • PM assigned
  • Planning (can the project be done? how?):
    • Should lead to a realistic, bought into, approved, and formal PM plan that is updated throughout the project to reflect approved changes
    • Process order: PM plan, requirements, project scope statement, make-or-buy, determine team, WBS & WBS dictionary, activity list, network diagram, resource requirements, time & cost, critical path, schedule, budget, quality standards, process improvement plan, roles & responsibilities, communications, risk, iterate, procurement documents, change mgmt. plan, execution & control parts of all plans, realistic & final PM plan and performance measurement baseline, formal approval, kickoff (lessons learned from past projects and establish the way people will communicate as the project work goes on)
    • rolling wave planning (in phases)
  • Executing (do the work):
    • Manage people, follow processes, distribute information
    • Work the PM plan, be proactive, manage, guide
  • Monitoring & controlling (measure [non-HR] performance against PM plan, check changes from plans, forecasts):
    • Control scope, schedule, costs, quality, risks; report performance, administer procurements
    • Control & request changes, impacts, analyze variances, measure performance against baselines, earned value analysis, workarounds, contingency & fallback plans, inspections, payments, trying to improve quality, manage time & cost reserves, formal acceptance of interim deliverables
  • Closing:
    • When closure (not product scope) is complete: paperwork, handover, verify formal acceptance, feedback on customer satisfaction, celebration, final lessons learned, add new skills acquired to team members’ HR records, etc.

Integration Mgmt.

  • Project charter, PM plan, direct & manage project execution, monitor & control project work, perform integrated change control, close project or phase
  • Charter: project title & description, Project Manager assigned & authority level, business case, resources pre-assigned, stakeholders, stakeholders requirements as known, product description/deliverables, measurable project objectives, project approval requirements, high-level project risks, sponsors’ signature
  • Project selection:
    • benefit measurement methods (comparative): murder board, peer review, scoring models, economic models (PV, NPV, IRR, payback period, cost benefit analysis)
    • constrained optimization (programming) methods (mathematical): linear, integer, dynamic, multi-objective
    • economic value added, opportunity cost, sunk costs, law of diminishing returns (after a certain point adding more input will not produce a proportional increase in productivity), working capital, depreciation (straight line, accelerated [double declining balance, sum of the years digits])
  • Constraints and assumptions
  • Project Statement of Work, Charters with Work Under Contract (for the seller)
  • Enterprise Environmental Factors: company culture and existing systems (PM information system, change control system, configuration mgmt. system, work authorization system)
  • Organization Process Assets: processes, procedures, policies, corporate knowledge base, historical information
  • 13+3 Mgmt. plans: PM processes, scope/schedule/cost (these 3 plans are developed in the Integration Mgmt. process, and not in the knowledge areas), quality, HR, communications, risk, procurement, requirements, process improvement (done as part of quality mgmt.), configuration, change + scope, schedule, and cost baselines
  • Deviation from baselines are usually due to incomplete risk identification & mgmt.
  • PM plan vs. project documents
  • Work authorization system: authorize start of WP and activities
  • Work performance information: status of deliverables being produced (output of direct & manage project execution process: deliverable status, schedule progress, costs incurred, etc.; input to Control Scope/Schedule/Cost, quality assurance, report performance, monitor & ctrl risks, administer procurements)
  • Work performance measurements: output of Control Scope/Schedule/Cost (monitoring & controlling: planned vs. actual), they’re documented & communicated to stakeholders (input to perform quality ctrl & report performance)
  • Corrective action: bring back expected future performance in line with PM plan (measure, find root cause, implement action, check if solved)
  • Preventive action: activity to reduce probability of negative consequences associated with project risks
  • Defect repair: formal identification of defect (deliverable that doesn’t meet its req.) with recommendation to repair the defect or replace the component
  • Change control board: usually with PM, customer, experts, sponsor, functional managers
  • Process of making changes (only for changes within the project charter and not already in the risk mgmt. plan)
    • evaluate impact (on time, cost, quality, risk, resources, customer satisfaction), create options, approve change request internally, customer buy-in
    • more in detail: prevent root cause, identify change, impact, create a change request, integrated change control (assess [part of charter?], look for options, change approved/rejected [thru change ctrl board], update status in change control system), adjust PM plan, manage stakeholders’ expectations, manage the project
  • (Verify) formal acceptance, final report, final lessons learned, archive project records

Scope

  • Scope mgmt. plan (part of “develop PM plan” in Integration Mgmt.): plan in advance how to determine, manage, and control scope (defined, clear, formally approved before execution: what’s in & out of the project)
  • WBS is always required
  • No gold plating (adding unrequested features to please the customer) nor scope creep (uncontrolled unapproved changes added without impact analysis) allowed
  • Scope changes cannot be allowed for work outside project charter
  • Project scope (work to deliver the product: how to manage) vs. product scope (end result: what to do)
  • Scope baseline (final, approved version of scope in PM plan):
    • project scope statement: product & project scopes, deliverables, product acceptance criteria, what’s out of scope, constraints, assumptions (figure out exactly what your stakeholders need, and turn those needs into exactly what work the team will do to give them a great product)
    • WBS: all the project scope broken down to manageable deliverables (nouns instead of actions, deliverable-oriented) up to work packages level (4 to 40 hrs. of work)
    • WBS dictionary (at WP level)
  • Scope mgmt. process:
    • Determine requirements (and assumptions) in support of the business case: they relate to solving problems or achieving objectives
    • Sort and balance needs to determine product & project scope
    • WBS
    • Scope acceptance by customer
    • Measure scope performance & adjust
  • Stakeholders register
  • Requirements:
    • data gathering techniques: interviewing, focus groups, facilitated workshops, brainstorming, nominal group technique (ranking brainstormed ideas), Delphi technique (anonymous experts consensus), mind maps, affinity diagrams, questionnaires & surveys, observation, prototypes
    • group decision-making: unanimously, dictatorship, plurality, majority, consensus
    • Requirements documentation & target for validation
    • Balancing stakeholders’ requirements & resolving competing requirements (based on business case, project charter, project scope statement, project constraints)
    • Requirements traceability matrix (+ links to objectives, other req., req. attributes, owner…)
    • Requirements mgmt. plan: how to identify, analyze, prioritize, manage, track changes
  • Product analysis: analyze the objectives and description of the product and turn them into deliverables
  • Control account: level of WBS below which I’m not interested in managing costs
  • Decomposition/deconstruction: what I’m doing to break down (WBS: means of doing it)
  • Verify scope: formal acceptance of interim deliverables by customer/sponsor (inputs: validated deliverables [quality ctrl], scope mgmt. plan, requirements documentation & traceability matrix; output: accepted deliverables, change requests, project docs updates)
  • Control scope: proactively check for scope creep & impact of scope changes

Time

  • Schedule mgmt. plan (part of “develop PM plan” in Integration Mgmt.): methodology, how estimates are stated, baseline, performance measurements to be used, how variances are managed, schedule change ctrl procedures, reporting formats
  • Activities are usually defined together with WBS (activity list + activity attributes), then are sequenced (network diagram), resources estimated, duration estimated, and critical path + schedule
  • Milestone list: events of duration = zero (output of Define Activities)
  • Sequencing: Precedence Diagramming Method (PDM or AON: FS, SS, FF, SF), ADM, GERT
  • Dependencies: mandatory (hard), discretionary (soft), external
  • Leads (start in advance) and lags (waiting time)
  • The person who does the work estimates (the estimate is not just accepted by management) + historical info + sanity check; record estimates assumptions + formulate a reserve (estimates can be decreased by reducing risks)
  • no padding allowed
  • RBS (resource breakdown structure): resources to be used, organized by category & type
  • Estimating techniques:
    • 1-point estimating
    • analogous estimating (top-down)
    • parametric estimating (regression analysis [scatter diagram], learning curve]), heuristics (rule of thumb)
    • PERT (3-point estimating [for cost and time]): EAD ± SD; total SD = √Σvar on critical path
  • Reserve analysis (revised after risk mgmt. is performed): contingency reserves + mgmt. reserves
  • Schedule network analysis:
    • CPM (critical path method): critical path (can be more than one but increases risk; it’s where the PM focuses his attention during the project), near-critical path, float (total, free, project; total float = LS – ES = LF – EF); the PM manages the float!
    • Schedule compression (if negative float, without changing project scope): fast tracking (parallel activities: chance of rework and more risk & more communication), crashing (extra cost and resources); never use overtime, try to 1st look for risks and reestimate
    • What-if scenario analysis: Monte Carlo
    • Resource leveling: resource-limited schedule
    • Critical chain method (takes into account activities and resources, it usually changes the critical path): manage buffers and bottlenecks (path convergence) starting as late as possible
  • Schedule baseline: network diagram (interdependencies), milestone chart (senior mgmt.), bar chart (Gantt [no interdependencies]: report to team & track progress)
  • Control schedule: measure + correcting & preventive actions (if completion date is not achievable anymore, project might be terminated beforehand), adjust future work rather than ask for an extension, adjust metrics

Cost

  • Cost mgmt. plan (part of “develop PM plan” in Integration Mgmt.): how estimates are stated, level of accuracy, reporting formats, rules for cost performance measurements, direct/indirect costs, baseline, ctrl thresholds (amount of variation allowed before taking action), cost change ctrl procedures
  • Life cycle costing: reduce overall project + operations + maintenance costs
  • Value analysis: find the less costly way to do the same work
  • Cost(-related) risk: used to assign risk in procurements (e.g. FP: seller has the cost risk)
  • Cost of quality
  • Estimate:
    • only the cost
    • inputs: scope baseline, project schedule, HR plan (labor rates, rewards…), risk register, organizational process assets, enterprise environmental factors, PM costs
    • same techniques as Time, + bottom-up estimating (very detailed)
  • Types of cost: variable/fixed, direct/indirect
  • Reserve analysis
  • Accuracy of estimates:
    • Rough Order of Magnitude (ROM): in project initiating (±50%)
    • Budget: in project planning (–10% ÷ +25%)
    • Definitive: in project execution (–5-10% ÷ +10%)
  • Cost budget: time-phased spending plan + cash flow (funding limit reconciliation); (from activities to WP to control account to project costs) + sanity check of budget (experts, historical records, parametric estimates…) & justify significant differences in estimates
  • Budget = cost baseline (cost + contingency reserves) + mgmt. reserves
  • Cost control:
    • progress reporting
    • 50/50 or 20/80 or 0/100 rule
    • Earned Value Measurement (EVM): EV, PV, AC, BAC, EAC, ETC, VAC; SV, SPI, CV, CPI, (negative and <1 is bad), TCPI (<1 is good: it’s the minimum CPI to stay within budget). EV comes first in every formula
  • Trainings are part of the project costs

Quality

  • Understanding what is considered acceptable (procedures [assurance], requirements and standards [ctrl]) and making sure you produce and deliver according to metrics
  • Quality = degree to which the project fulfills requirements
    • Planning: determine how I’ll assure and control quality on product & project + plan for continuous improvement on processes; define quality & how it’ll be achieved (outputs: quality mgmt. plan, metrics, checklist, process improvement plan)
    • Assurance: follow quality processes as planned
    • Control: make sure deliverables are checked to fulfill req. & standards
  • Juran (80/20 principle, fitness for use), Deming (plan-do-check-act cycle), Crosby (prevention over inspection, conformance to req.)
  • Do not gold plate, prevention over inspection
  • Marginal analysis: point where benefits from improving quality = incremental cost to achieve it (limit where extra quality doesn’t produce added value)
  • Continuous improvement (kaizen): continuous small improvements
  • Just in Time: 0 inventory
  • TQM
  • Responsibility for Quality: senior mgmt. is responsible for the organization quality, the PM is ultimately responsible for the quality of the product of the project, team members should inspect the work done before submitting the deliverable
  • Poor quality: increases costs, low morale, low customer satisfaction, increased risk, rework, schedule delays
  • Tools to plan quality:
    • Cost benefit analysis: also used in project selection, planning, assessing procurements
    • Cost of quality (COQ): cost of conformance (training on quality, studies, surveys, processes) / nonconformance (rework, scrap, inventory & warranty costs, lost biz). The cost of conformance should be lower than the cost of nonconformance
    • Benchmarking: measure against benchmark
    • Design of experiment (DOE): to statistically determine all the variables (important factors) that will improve quality (or have the lower impact)
  • Tools to plan (determining how to measure) and control (measuring) quality:
    • Control charts: (organizations’) upper & lower control limits < (customer’s) specification limits, mean. Assignable cause/special cause variation (out of control): data outside control limits, rule of 7
    • Statistical sampling: if it takes too much, costs too much, or is too destructive
    • Flowcharts
    • Checklists
  • Quality control (also on PM deliverables) tools: cause & effect (fishbone) diagram, histogram, Pareto chart, run chart (for trends), scatter diagram
  • Quality assurance (also on PM processes) tools: all the others from planning and from controlling + quality audits (to improve effectiveness & efficiency of policies, practices, and procedures) & process analysis (improving future processes by analyzing past ones)
  • mutual exclusivity, 6-sigma (68%, 95%, 99%, etc.)

HR

  • Done in executing process, related to training, recognition & rewards, roles & responsibilities, motivating, conflict resolution, resource availability, team building, team performance
  • Roles & responsibilities:
    • sponsor: provides financial resources, protector of the project, provides req., SoW, initial scope, milestones, and priorities between constraints & in projects, gives PM authority (charter), provides risks, monitors progress, approves final PM plan, enforces quality, provides expert judgment, evaluates trade-offs, resolves issues, approves changes, formal acceptance
    • team (PM + PM team + project team): complete the work, identify stakeholders, req., constraints & assumptions, create the WBS & activities & their dependencies, time & cost estimates, risks, comply with quality & comm. plans, enforce ground rules, attend meetings, process improvement, recommend changes
    • stakeholders: who can influence the project (customer, users, PM, team, sponsor, PMO, functional mgr., program & portfolio mgrs., etc.), involved in planning, charter, scope, PM plan, constraints, req., risk & risk response owners
    • functional mgr.: owns resources, assigns them to projects, approves final schedule
    • PM (and PM team): manages the project to meet project objectives, in charge of project (but not of resources), influences the interactions, selects processes, analyses constraints & assumptions, leads planning, enforces responsibilities, delivers quality, measures performance, variances & trends, focused on risks, integrates the project, proactive, accountable for success/failure, project closing, delegates
    • portfolio mgr.: governance, strategy
    • program mgr.: manages a group of related projects, adjusts them to program’s benefits
  • Organization charts & position descriptions (activities to be completed, reporting req., attendance to meetings…):
    • RAM (responsibility assignment matrix: team vs. activities) and RACI (only 1 is accountable)
    • Organizational Breakdown Structure (responsibilities by department: WBS rearranged by dept.)
    • Resource Breakdown Structure (WBS rearranged by type of resource)
  • Staffing mgmt. plan: plan for staff acquisition (where from), resource calendars (when), staff release plan, training needs, recognition & rewards (what they are & criteria), compliance (of project to HR rules), safety (policies), resource histogram (number of resources used per time period: where spikes need to level)
  • HR plan: roles & responsibilities + project organization charts + staffing mgmt. plan
  • Motivate the person, not the team; have non-competitive rewards
  • Each (new) project team member should give inputs to what needs to be done, when, cost, and risks BEFORE starting to work
  • Pre-assignment, confirm availability of resources during execution, negotiate best (w.r.t. project needs [not best overall if not needed]) resources (what’s in it for the functional mgr.?), hire, outsource, virtual teams & war room/co-location, halo effect (good in technical assumed to be good in managing)
  • Team-building activities (e.g. WBS creation, parties, celebrations)
  • Forming, storming, norming, performing, adjourning
  • Training
  • Ground rules: honesty, conflict resolution, interruptions, meetings attendance, consequences, comm. to customer/mgmt., etc.
  • Team performance assessment: effectiveness of team as a whole (during executing, done by PM in Develop Team)
  • Project performance appraisals: individual (during executing, done by supervisors in Manage Team)
  • Lack of trust, poor recognition & reward system, no involvement in planning cause low cooperation
  • Observation and conversation (to manage team)
  • Issue log: to manage stakeholders (list of their needs to be considered)
  • Powers of PM: formal/legitimate (as PM), reward (as PM: greater power), penalty/coercive (as PM: worst power), expert (from expertise: greatest power), referent (from respect, trust, fame & charisma)
  • Mgmt. & leadership styles: directing (at the beginning), facilitating + coaching + supporting (during execution), autocratic, consultative, consultative-autocratic, consensus, delegating, bureaucratic, charismatic, democratic/participative, laissez-faire, analytical, driver, influencing
  • Conflict mgmt.: conflict is inevitable and can be beneficial, resolved thru openness (identifying causes & problem solving [in the best interest of the customer] by people involved [don’t escalate except for professional & social responsibility conflicts]). PM must try to avoid conflict by informing the team clearly, planning properly, and S.M.A.R.T. goals
  • Sources of conflict (in order): schedules, project priorities, resources, technical opinions, admin procedures, cost, personality
  • Conflict resolution techniques: confronting/problem solving (usually best), compromising (some satisfaction only), withdrawal/avoidance (postpone), smoothing/accommodating (emphases agreement), collaborating (multiple view points to consensus), forcing (worst)
  • Problem solving method: define real or root problem, analyze, solutions, choose one, implement, review the solution to confirm the problem is solved
  • Expectancy theory (productive if believed that efforts lead to performance and rewards meet expectations), arbitration (neutral party to resolve conflict), perquisites/perks (special rewards), fringe benefits (standard benefits: indirect [overhead] costs)
  • Motivation theories
    • McGregor’s theory of X (L incapable employees) and Y (J employees want to achieve)
    • Maslow’s hierarchy of needs: physiological, safety, social, esteem, self-actualization
    • David McClelland’s theory of needs (acquired needs theory): achievement (want recognition), affiliation (seek approval), power (like to organize and influence others)
    • Herzberg’s theory: hygiene factors (working condition, salary, personal life, relationship at work, security, status: needed only up to a fair level to not demotivate) and motivating agents (responsibility, self-actualization, professional growth, recognition: needed to motivate)

Communications

  • PM spend up to 90% of their time communicating (and managing expectations)
  • PM = orchestra leader, stakeholders: provide technical expertise and req.
  • Stakeholders: identify ALL of them, determine ALL req., determine their expectations, interests, level of influence, plan how to communicate with them, communicate with them, manage their expectations & influence
  • Stakeholder analysis, register, mgmt. strategy: influence, interest, relationship, cross-relations, req., risk tolerance, agreement, expectations, expertise, comm. preferences, R&R, activity/risk owner/supervisor
  • Comm. should be efficient (only the info needed) and effective (info in right format/time): ask stakeholders what they prefer & when, confirm info is received & understood
  • Types of comm.: formal/informal written/verbal
  • Comm. model: sender, message (encoded/decoded), receiver, noise, feedback
  • Comm. factors: verbal, nonverbal, paralingual
  • Effective listening: watching speaker’s gestures, thinking before speaking, confirming message, expressing agreement/disagreement, clarifying
  • Means of comm.: verbal, phone, e-mail…
  • Comm. methods: interactive (reciprocal, feedback), push (broadcast, 1-way, no feedback, e.g. status reports, e-mailed updates), pull (download, unknown if read, e.g. large documents)
  • Meetings: time limit, agenda (beforehand & stick to it), schedule, purpose, R&R in advance, only the right people, regularly but not too often, ground rules, deliverables assigned with time limits, document minutes
  • Status meetings: not about what people is doing, but about risks & new project info
  • Comm. channels: N x (N-1) / 2
  • Comm. mgmt. plan: what, why, who, method, responsible, when/how often
  • Comm. blockers (miscommunication): noise, distance, hostility, language, culture…
  • Performance reports: status (where’s the project), progress (what’s been accomplished), trend (results over time to see improvement), forecasting (predicts future), variance (comparison actual-baselines), earned value (project performance), lessons learned
  • Solicit feedback on reports (so they’re read) to ensure the project still meets the biz need

Risk

  • PM focuses on preventing problems, not on dealing with them
  • Risk = uncertain event (threats & opportunities)
  • 90% of threats can be eliminated if identified & investigated, 10% are unforeseeable
  • Risk factors: probability, impact, timing, frequency
  • Risk averse, risk tolerance & thresholds
  • With a risk mgmt. plan the PM can instead focus on: monitor & control deviations & trends, implement a reward system, keep stakeholders informed, stay ahead (instead of fire-fighting)
  • Risk process: plan risk mgmt., identify risk, analyze (qualitative, quantitative), response plan (contingency + fallback), monitor & control
  • Risk mgmt. plan: methodology (also based on project priority), R&R (who will do what), budgeting (cost of risk mgmt.), timing, risk categories (internal, external, technical, unforeseeable; or by cause: customer, PM effort, stakeholders, suppliers, culture, etc.; or by source: schedule, cost, quality, scope, resources, customer satisfaction), definition of probability & impact (matrix: to be standardized), stakeholder tolerances (to be uncovered), reporting formats, tracking (audits & documentation)
  • RBS (risk breakdown structure): risks organized (WBS-like)
  • Types of risk: business risk (gain or loss), pure (insurable) risk (only loss, e.g. fire)
  • Everyone should be involved in risk identification: documentation reviews, info gathering techniques (brainstorming, Delphi, interviewing, root cause analysis), SWOT (risks in OT), checklist analysis (specific risks in each category), assumptions analysis, diagramming techniques (Ishikawa & flowcharts)
  • Risk register: where all the risk info (identification, analysis, response plan) is kept (it’s the only output of these risk processes: identify, plan responses)
    • Identification: List of risks, List of potential responses, Root cause of risks (due to the fact… this event might occur… that will have this impact…), Updated risk categories
    • Qualitative analysis: Overall project risk ranking compared to other projects (used also to see whether to select, continue, or terminate project), List of prioritized risks, List of risks for quantitative analysis/response plan, Watchlist (non-critical risks), Trends
    • Quantitative analysis: Prioritized list, Contingency (time & cost) reserves, Milestones & costs with confidence levels, Probability of meeting project objectives, Trends
    • Risk response plan: Residual risks, Contingency plans, Risk response owners, Secondary risks, Risks triggers (early warning signs), Contracts (PM is involved before procurement signature), Fallback plans, Reserves (contingency)
  • Qualitative risk analysis (subjective judgments): standardized matrix needed + risk data quality assessment (sanity check) –> short-list of prioritized risks to be quantitatively analyzed or to plan responses
  • Risk categorization: regroup by categories, WP, causes…
  • Risk urgency assessment: which should go thru the process first
  • Quantitative risk analysis (numbers): risk assessment of probability distribution, sensitivity analysis (which risks have most impact), value of risks
  • Determining probability & impact: interviewing, cost & time estimating, Delphi, historical records, experts, expected monetary value analysis (EMV = P x I), Monte Carlo analysis, decision trees
  • After the response plans, overall project analysis can be redone to see how effective PM is!
  • Risk response/mitigation strategies:
    • Avoid: eliminate the cause
    • Mitigate: decrease probability/impact
    • Transfer (deflect, allocate): insurance, bonds, warranties, outsourcing (procurement)
    • Accept: active (contingency plans), passive (workarounds if occurs)
    • Exploit: add work to make it happen
    • Enhance: increase probability/impact
    • Share: allocate ownership to a 3rd party (partnership, joint venture)
  • Contingency plan: activities if the risk happens + risk trigger + risk owner
  • Fallback plan: activities if contingency plans are not effective
  • Workaround: if risk occurred, we make up a response on-the-fly
  • Residual risk: not eliminated/eliminable risks (risk response strategy: accept passively)
  • Secondary risk: new risk created by a response plan
  • Accepted risks must be communicated to stakeholders
  • Don’t spend more money preventing than if it occurs (EMV)
  • More than one responses can be used per risk, one response can eliminate many risks, involve all in selecting a strategy
  • Known unknowns: contingency reserves (managed by PM) are calculated
  • Unknown unknowns: management reserves (approved by management) are estimated (e.g. 5% of project cost)
  • Risk reassessments (of risk mgmt. plan), risk audits, reserve analysis (a contingency reserve can be used only for the specific risk it was set aside for), status meetings (focus on risks), closing of risks no longer applicable (return reserve to company)
  • Be specific in risk identification, facts are not risks, use combinations of techniques to identify risks, look for many responses to same risk, sign contracts after risk mgmt.

Procurement

  • Procurement mgr. (the only one with authority to change the contract): type of procurement document (RFP [detailed], IBF [price], RFQ [quotation], RFI [info])
  • PM (both of buyer and of seller!) involved in the negotiations (after risk analysis), to protect the relationship with the seller
  • All contract req. (product, project, legal, etc.) must be met, final procurement audit + lessons learned
  • Contract change control system included in the contract, contracts should diminish project risk
  • Centralized/decentralized contracting (expertise vs. availability)
  • Procurement mgmt. process: plan (make-or-buy, plan, SoW, type of contract, documents, source selection criteria), conduct, administer, close
  • Make-or-buy: “make” if idle workforce, to retain control, if IPR
  • Types of SoW: performance (what product should accomplish), functional (end purpose of product), design (precisely what needs to be done: for construction & equipment purchasing)
  • Contract types:
    • Fixed price (FP: clear SoW, low buyer risk, issue of seller cutting scope or quality for cost overruns, check for overprice and understanding of SoW, less mgmt.): FPIF (extra on performance, e.g. to do things ASAP), FPAF (capped), FPEPA (future economic changes), PO (unilateral [acceptance by performance of seller], for commodities)
    • Time and material (T&M: get concrete deliverables, needs day-to-day direction): unit price, quick to create, no incentives to do it quickly, buyer oversights work daily (used for a small time)
    • Cost reimbursable (CR: unclear SoW, high buyer risk, for R&D, more mgmt., costs auditing, less cost than FP, check for useless gold plating and changes in resources): CC (only cost), CPF/CPPC (worst), CPFF (fixed fee), CPIF (fixed fee + shared extra cost/saving), CPAF (fixed fee + bonus on performance [capped])
  • Incentives: used to align buyer’s (cost, performance, schedule) and seller’s (profit) objectives
  • Risk (from low to high for the buyer): FP, FPIF, FPEPA, T&M, CPIF, CPAF, CPFF, CPPC
  • Terms: price, profit (fee), cost, target price, sharing ratio, ceiling price, point of total assumption (PTA, for FPIF: when sellers bears all the loss of a cost overrun)
  • Procurement doc/contract type/SoW:
    • RFP – CR – performance/functional
    • IFB – FP – design
    • RFQ – T&M – performance/functional/design
  • Nondisclosure agreement, teaming agreement (joint venture), master service agreement/retainer contract (framework contract for future work), standard contract, special provisions (special conditions to standard contract)
  • Terms & conditions (PM must know what’s in the contract and why): acceptance, agent, arbitration, assignment, authority, bonds, breach/default, changes, confidentiality, dispute resolution, force majeure (delay by buyer, costs by seller + insurance), incentives, indemnification (liability), independent contractor, inspection, intellectual property, invoicing, liquidated damages, mgmt. req., material breach (so big the contract is terminated), notice, ownership, payments, procurement SoW, reporting, retainage (5-10% of payment not done to guarantee completion), risk of loss, site access, termination, time is of essence, waivers (giving away rights), warranties, work for hire (work owned by buyer)
  • Letter of intent (before contract is signed, NOT binding: the buyer will hire the seller), privity (contractual relationship)
  • Noncompetitive forms of procurement (when in a hurry, or unique): single source (seller already known, risk he’s not able to perform), sole source (only 1 seller, with lots of negotiation power)
  • Conducting procurements: advertising, (pre)qualified seller list, bidder conference, seller proposal/bid/price quote, proposal review, weighting system, independent estimates (PM makes sure the proposed bids are acceptable: costs under control), screening system (eliminating sellers below minimum req.), past performance history, presentations
  • Negotiations (obtain a fair & reasonable price, develop a good relationship with the seller): attacks, personal insults, good guy/bad guy, deadline, lying, limited authority, missing man, fair & reasonable, delay, extreme demands, withdrawal, fait accompli
  • Main items to negotiate:
    • in order of importance: scope, schedule, price (what by when for how much)
    • responsibilities, authority, applicable law, PM processes, payment schedule
  • Contract = agreement between parties, to define R&R, mitigate/allocate risk, to make it binding. A contract needs: an offer, acceptance, consideration (something of value), legal capacity, legal purpose (nothing illegal)
  • Conflict: procurement mgr. controls the contract, PM proposes changes to SoW
  • Procurement performance review (during Administer Procurements in Monitoring & Controlling), claims administration (buyer hurt the seller who asks for compensation = seller change request), records mgmt. system (needed especially for insurance)
  • Payments to seller are made during Administer Procurements
  • Contract interpretation (based on the intent of the parties): contract language supersedes memos prior to signature & SoW, common definitions over intended meaning, industry use of term over common, special provision over general, handwritten initialed over typed-over, words over numbers, detailed terms over general
  • Termination: buyer can terminate contract when he wants or for seller’s default. Seller paid for work completed, for work in progress only if terminated by convenience
  • Close procurement: buyer provides formal notice the contract is completed, verifies & accepts work & deliverables (procurement audit + issue formal acceptance [seller asks for customer satisfaction]), financial closure, finalizes claims, lessons learned, contract performance reporting, procurement files

Professional & Social responsibility

  • Responsibility (ownership of decisions and actions): best interests of the company, accept only what I’m qualified for, protect IP (don’t copy without permission), report unethical behavior
  • Respect: attitude of mutual cooperation, respect cultural differences, engage in good faith negotiations (negotiate what you intend to honor), be direct in dealing with conflict, don’t influence others with my position power for my benefit
  • Fairness: act impartially without bribery (permissible if without it you can’t do biz AND doesn’t violate fundamental international rights), look for conflicts of interest, don’t discriminate, don’t use my position for personal gain
  • Honesty: try to understand the truth, be truthful in communications and create an environment where others tell the truth
  • Ethics: always have a charter & a WBS, loyalty to PMI

PMP exam tips

  • Functional manager = people-related issues
  • Change = scope, stakeholders, requirements not defined
  • Risk process: identify, analyze, response plan + fallback plan
  • Generalizations are usually incorrect
  • Answers saying that PM is good/great/experienced are usually correct
  • Assume large projects and proper PM is done
  • Guess where you are in the process before answering
  • Status reports are usually a wrong answer (PM is not about reporting status)
  • When in doubt: evaluate impact (risk-related), look for options, choose the action more proactive and ethical and with the least (negative) impact. Determine the immediate problem to address, deal with the root cause first, deal with the problem with the greatest negative impact first, solve the problem that occurred the earliest, look for a proactive solution
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