1. A Project is Temporary endeavor that produces Unique product or service in a non-repetitive way that elaborates progressively.

2. Operational Works are quite opposite in nature to Projects. They are continuous, and repetitive work and never produces a unique
product.

3. Project management is the application of knowledge, skills, tools, and techniques to project activities in order to meet project
requirements

4. A Program is group of related Projects Managed in a coordinated way. A Portfolio is group of associated Programs, Projects and
other works to achieve strategic business goals. Larger Projects are divided in to more manageable sub projects

5. PMO, Project Management Office or Program Management Office is an organizational structure used to oversee management of
projects. It also can be used to provide reports, as a mentoring group for other project managers.

6. Projectized, Matrix and Functional are different types of Organizational structures. Matrix organizations can be weak Matrix
(Leaning towards functional) or Strong Matrix (leaning towards projects) or Balanced Matrix.

7. Project stakeholders are individuals or units those are directly or indirectly affected by Project outcomes. Sponsors, customers,
users, performing organizations, project team members and influencers are stakeholders.

8. At the end of each project phase, reviews against a set of metrics are performed. If the project fails to meet these metrics, the
project may not be allowed to continue. These phase end reviews are called Stage gates or Phase exits.

9. Project Management process is iterative and cyclic. 4 steps in the process are "Plan", "Do", "Check", Act".

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 10. Projects or Subprojects can be divided into discrete Phases to provide better management control or to assign specific skilled
groups. For example in a small construction project "Painting Phase".

11. Product life cycle span is much bigger than that of a Project. Organizations run many "Projects" with in a "Product".

12. Organizational cultures and styles will impact projects too.

13. At the beginning of the Project, Costs are low and Risks are High. Those percentages change as Project progresses. At the
end Costs reach maximum and Risks will be zero

14. Project documents: PMBOK suggest managers to produce at-least 3 major documents for each project

1. Project Charter
2. Project Scope Statement
3. Project Management Plan. (Notice, MS Project Plan is just one section of the bigger document)

Process Groups & Knowledge areas Please enable JavaScript to view this
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To manage Projects effectively those should be divided Phases and smallest possible sub phases. This
iterative process should go up to the level where further division creates chaos rather than helping the
project. In database terminology we call this as "Atomic" level.

Projects can be managed easily by Phased approach. PMBOK defined and explained processes to manage these sub atomic processes. As per
PMBOK3rd edition
guide there are 44 processes and grouped in to 5 major Process Groups.
5 Process groups are

1. Initiation
2. Planning
3. Executing
4. Monitoring & Control
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 5. Closing.

Certain INPUTS are given to the process. Manager’s use said TOOLS available for that process to produce OUTPUTS.
PMBOK guide also defines Knowledge Areas for the Project Managers. Managers will use these skills (Knowledge) to work on given INPUTS using
TOOLS to produce OUTPUTS. Those are

1. Project Integration Management

2. Project Scope Management
3. Project Cost Management
4. Project Time Management
5. Project Risk Management
6. Project Quality Management
7. Project HR Management
8. Project Communication Management
9. Project Procurement Management

Effective Project Management requires knowledge and skills from following 5 areas

1. The Project Management Body of Knowledge (5 process groups and 9 knowledge areas)
2. Application area knowledge, standards, and regulations
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3. Understanding the project environment
4. General management knowledge and skills
5. Interpersonal skills.

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 Monitorin and
Initiation Planning Executing Closing
Controlling
Integration 4.5 Monitor & Control
4.1 Develop Project Charter 4.7 Close
4.3 Develop Project 4.4 Direct & Manage Project Work
4.2 Develop Preliminary Project
Management Plan Project Execution 4.6 Integrated Change
Project Scope Statement
Control
5.1 Scope Planning
5.2 Scope Definition 5.4 Scope Verification
Scope
5.3 Create Work Breakdown 5.5 Scope Control
Structure (WBS)
6.1 Activity Definition
6.2 Activity Sequencing
6.3 Activity Resource
Time 6.6 Schedule Control
Estimating
6.4 Activity Duration Estimation
6.5 Schedule Development
7.1 Cost Estimating
Cost 7.3 Cost Control
7.2 Cost Budgeting
8.2 Perform Quality 8.3 Perform Quality
Quality 8.1 Quality Planning
Assurance Control
9.2 Acquire Project
9.1 Human Resources Team 9.4 Manage Project
HR
Planning 9.3 Develop Project Team
Team
10.3 Performance
10.2 Information Reporting
Communications 10.1 Communication Planning
Distribution 10.4 Manage
Stakeholders
11.1 Risk Management
Planning
11.2 Risk Identification 11.6 Risk Monitoring
Risk
11.3 Qualitative Risk Analysis and Control
11.4 Quantitative Risk Analysis 5
Integration Management Knowledge Area Please enable
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this page content
One of the major & important roles performed by Project Manager is to integrate different pieces developed by the teams of the Properly.
Project. This task will become more critical when the size of the project is getting bigger and bigger. PMBOK helps us by defining
lists of key activities those needs to be performed in this area:

Following table lists all 7 Processes in this Knowledge Area, spread across '5 Process Groups' (means life cycle of the project)

1. A Process is nothing but Steps/Activities operates on given Inputs and produces defined Outputs. Process or PM Methodology provides Tools to
operate on Inputs.

These tools can be Formulas, Spreadsheets, or Templates in word format or any thing that can control the Outcome. Don't think that Tools are
special

software that needs to be installed to perform

2. First Process in this knowledge area is “Develop Project Charter”. The name itself suggests that we need to develop some thing called Charter.
So what is the Charter? It is the document that formally authorizes the existence of the project. Specifies the reasons to do this project, justifies the
money and time that is going to be spend. Known requirements, outline of outcome. Most importantly authorizes a Project Manager to drive this
effort.
3. Will this “Project Charter” have detailed definitions of requirements? And complete specifications of the product or service of the project? No. No.

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 Don’t think that. This document is very simple and small enough to kick start the project. Project team will elaborate requirements in detail in later
phases. For example: This document tells you that you will get an Airplane once this project is completed. And top features that need to be
included, but will not explain in detail functionality or specifications of each body part.

4. Other possible sections of this document are: Description, Outline Deliverables, Business Need, Justifications, Key Project Stakeholders and their
top requirements (In software projects, in many cases stakeholders don't know what they want. Then Project Manager formulates those outline
requirements working with them), Key Assumptions.

5. Normally in project environments Stakeholders might be different than the Sponsor of the project. Charter will always be issued by Sponsor and
should be broad enough to avoid changes to that document.

6. OK, let’s talk about artifacts of this process "Develop Project Charter". As usual it has Inputs, tools and output (s). Above picture depicts all of
those.

Contract is applicable when external organizations are providing serves or products.

The Statement of Work (SOW) is description of the outcome of the Project. If Project is acquiring services from External vendors this
document might go with Contract or as the part of bidding documents. This document specifies Business need, Product Scope definitions
and Organization Strategy.

In the tools section, Project selection Methods is the first one. This tool can help the Organizations to select which project to execute. Other
inputs like Environmental Factors, Organizational Assets come handy over here. Organizational goals, Strategic plan plays major role in this
selection. There are several scientific methods available out there to prioritize projects. But all of them might fall into 2 broad categories; they
are Benefits Measurement and Mathematical models. Generally those approaches use 3 parameters: costs, Benefits and Risks.

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 Few popular non-numeric models are: Sacred cow, Operating necessity approach, Competitive necessity approach, Comparative benefits
model.

Few mathematical approaches are: Payback method, Accounting rate of return, Internal rate of return, NPV (net Present Value), Profitability
Index.

7. OK, let’s talk about artifacts of this process "Develop Preliminary Project Scope Statement". As usual it has Inputs, tools and output (s). Above
picture depicts all of those.

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8. OK, let’s talk about artifacts of this process "Develop Project Management Plan". As usual it has Inputs, tools and output (s). Above picture
depicts all of those.

9. OK, let’s talk about artifacts of this process "Direct and Manage Project Execution". As usual it has Inputs, tools and output (s). Above picture
depicts all of those.

10. OK, let’s talk about artifacts of this process "Monitor and Control Project Work". As usual it has Inputs, tools and output (s). Above picture
depicts all of those.

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11. OK, let’s talk about artifacts of this process "Integrated Change Control". As usual it has Inputs, tools and output (s). Above picture depicts all
of those.

12. OK, let’s talk about artifacts of this process "Close Project". As usual it has Inputs, tools and output (s). Above picture depicts all of those.
o As much as PMI recommends to Start Project formally, it also recommends to Close Project in similar fashion. ‘Close Project’ process
establishes procedures to verify Project results and other artifacts. Even if the project should terminate abruptly Project Managers are supposed
to close the Project properly and formally. Need to document reasons to terminate the project. In case of multi Phased Project, Closure Process
is mandatory at end of each Phase.
o Administrative Closure: Like Collect Project Records, Project Analysis (Success or failure), and Documented Lessons Learned. One of
the outputs of this Process is Administrative Closure Procedure, which explains how a Project Team would close their project.
o Contract Closure: All exit criteria for both parties to come out of terms and conditions. A contract in first place defines acceptance criteria,
Product/Service verification methods, or steps to take to early terminate the project. Contract should always detail terms and conditions to
operate the project and acceptance criteria. The out come of this process provides steps to close those terms and conditions in formal
way.

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Scope management Please enable JavaScript to
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Monitoring
Initiatio Executio
Planning & Closing
n n
Control

Scope
Planning Scope
Scope Verification
Definition Scope
Create Control
WBS
ment

1. Scope Management is the process of defining what work is to be done and making sure only that work is done nothing extra (Gold Plating) is
done
2. Product scope is not Project scope. A Product can have multiple projects
3. Project Scope: The work that you need to deliver. Includes meetings, reports, analysis which becomes project scope management plan
4. Scope baseline: Consists of Project scope statement, WBS, WBS Dictionary. If scope baseline is met then project is successful.
5. Scope Planning: - "How will I do this?" - results into Project Scope Management Plan
6. Scope management plan should contain - How will scope be planned, executed and controlled
7. Scope Definition: Take Preliminary scope statement from initiation process group and develop full blown scope statement. Includes all the
needs to stakeholders, constraints and assumption - results into Project Scope Statement
8. Stakeholders Analysis: Convert their needs, wants and expectations into requirements
9. Product analysis is to analyze objective said by customer and turn them into tangible requirements.
10. Work Breakdown Structure: WBS: It breaks project into smaller and more manageable pieces called "Work Packages". This is known as Top-
Down approach
11. Work packages are divided further into Scheduled activities.
1. WBS is hierarchical Chart
2.

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 Identify the work needs to be performed. If it is not in WBS then it is not in Project

3. Can be reused to other projects

4. Does not show dependencies
12. Control Account: While calculating costs, we don't and can't calculate up to work package level. A level above the work package is known as
Control Account
13. WBS Dictionary provides a description of the work to be done for each WBS work package.
14. Manager uses this tool to avoid scope creep.
15. WBS Dictionary contains
1. A number identifier
2. Related control account
3. A statement of the work to be done
4. Who is responsible
5. Any schedule mile stones
6. Interdependencies

16. WBSD can be uses as the part of work authorization system

Project Time Management Please enable JavaScript

(For PMP Certification Exam preparation, based on PMBOK 3rd Edition) to view this page content
properly.
In this tutorial I explain, Project Time Management that provides a basis to activity definition, Sequencing them in an order,
Estimate Resource and Duration, Develop schedule and control it.

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 Intiation Planning Execution Montitoring and Controlling Closing

Activity Definition
Activity Sequencing
Activity Resource Estimation
Processes Schedule Control
Activity Duration Estimation
Schedule Development

In a simplest way to understand the Project, it is a collection of different Activities/Tasks those are needed to be performed in an order to achieve
projected results. To execute/perform those tasks certain resources (material or/and labor) are required for a period of time. And those resources
should operate in a Controlled way. All of these specifications are achieved by Time Management Knowledge Area of PMBOK Guide. Look at
Processes listed in the above table, they exactly satisfy these requirements. Even those names are self explanatory. The Major out come of this
Knowledge Area will be Time Management Plan which is part of the big Project Plan document. (Please note the difference between the MS Project
Plan and PMI Project Plan. MS Project Plan that we lay down to run the project is just sub-set of the Project Plan suggested PMI. PMI Project Plan is
an elaborative document constituting all strategies to run the project)
6.1 Activity Definition Process
Inputs Tools Outputs
Enterprise environmental Factors
Decomposition
Organizational Process Assets Activity List
Templates
Scope Statement Activity attributes
Rolling wave planning
WBS Milestone List
Expert judgment
WBS Dictionary Requested Changes
Planning component
Project Management Plan

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5 Process Monitoring and
Initiation Planning Executing Closing
Groups Controlling

5. Monitor and control

1. Develop Project Charter
Project work
3. Develop Project 4. Direct and Manage 7. Close
Processes
2. Develop Preliminary Project Management Plan Project execution Project
6. Integrated change
Scope statement
control

Apart from all other factors involved to make a Successful Project, Tight Schedule is the foundation for well managed project. Schedule can be
treated as a tool that identifies and organizes different required project tasks in a sequence and presented in the form of a Plan.

Schedule Management Plan is one of Plans part of the big Project Management Plan is major out come of this Knowledge Area. (“Click here”
to see all other documents part of Project Management Plan).

Benefits of Schedule Management: (few them are listed below)

• It can be used as basis for monitoring, controlling and tracking.

• How to use resources effectively and in most efficient way
• Which activities are crucial to finish the project (Critical Path)

To develop a proper schedule we need to breakdown bigger work packages of WBS (Work Breakdown structure) to Activities. Activities are
should be at such a granular level where further breakdown is meaning less.

Schedule Management Software: For scheduling purposes we can use Computer based software. I used many
Scheduling and Tracking software. But out of all I like Microsoft Project. Now it is available in Server Edition to track
Enterprise Projects. I bet this is the best software in the world for this purpose. (Disclaimer: I’m no where associated with
Microsoft. I just showed my affection towards the best software)

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Rolling Wave Planning: When we start breaking down the Work packages of WBS into Activities we might know details for few work
packages. At that time we might leave those work packages as it is at higher level and plan accordingly. When we really come to execute
those work packages then we can further break down in to activity level. Estimating at higher level needs lot of "Expert Judgment" techniques.

Milestone List: Project can't be tracked against single end point. There should be some intermediate control points (significantly
distinguishable). Management can check the Project performance against those intermediate Milestones. Examples: Ground level design
completion, First pass build completion, .. so on. One should not mistake milestones with Phases. Milestones are intermediate touch points
within a Phase.

Activity Definition: Team has to break big chunks of work packets into smaller activities which are manageable in all sense like scheduling,
resourcing and tracking. In this process Activity List is on of major outcomes.

after this Activity Sequencing is next process, and following table shows inputs, tools and outputs of that process.

6.2 Activity Sequencing Process

Inputs Tools Outputs
Project Scope Statement Arrow Diagram Method
Project Schedule Network Diagram
Activity List Precedence Diagram Method
Activity List (Updates)
Activity Attributes Schedule Network Templates
Activity Attributes (Updates)
Approved CRs Dependency Determination
Requested Changes
Milestone List Applying leads and lags

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Triple Constraints: Time, Cost, Scope are initially known as Triple constraints. Which means if you change one of these three there will be
direct impact on other 2. As project Management methodology is evolving Quality and Risk were also added to those constraints.

Activity Sequencing: All Activities those defined and listed can't start at one time. (At least resourcing wise it would be impossible). Normally
there will dependencies between activities. One activity will occur after other activity. Putting activities on Activity List in a Sequence is major
purpose of this process. This can be in tabular format by showing successors and predecessors (MS Project has this feature). More
commonly it can be represented in pictorial format. It is similar to "Flow Chart". See following diagram.

Activity Dependencies: There are 4 types of Activity dependencies

1. Finish to Start: Preceding activity must finish before successor starts.

2. Finish to Finish: Preceding activity must finish to finish successor activity.
3. Start to Start: Preceding Activity must start to Start Successor
4. Start to Finish: Preceding Activity must Start before successor can finish. For example, Get an approval to start constructing a house.
But in this dependency we start construction and get an approval before finishing the construction. Rarely used dependency.

These dependencies can be Categorized as Hard dependencies or Soft Dependencies. Hard Dependencies are mandatory to follow where
as Soft Dependencies are good to follow but they are not mandatory.
Drawing Sequencing Diagrams also called Network Diagrams: Many methods are provided but 2 methods are most common and another
method is worth mentioning.

1. Activity on Node
2. Activity on Arrow

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Activity on Node (AON) or Precedence Diagram Method (PDM): Nodes represent activities and draw arrows to show the dependencies.
The above Sequence diagram is an example of this method.

Activity on Arrow (AOA) or Arrow Diagram Method (ADM): Nodes are transition points (Dependencies) and Arrows represents the
activities. Some time this is so confusing to understand. In those cases those nodes are given a names and activities are treated as
processes.

6.3 Activity Resource Estimating Process

Inputs Tools Outputs
Activity List
Alternatives Analysis Resource Breakdown Structure
Activity Attributes
Published Estimating Data Activity Attributes (updates)
Resource Availability
Bottom-up Estimating Activity Resource Requirements
Project Management Plan
Project Management Software Resource Calendar (updates)
Enterprise Environmental factors
Expert Judgment Requested Changes
Org. Process Assets

Activity Resource Estimation:

By now you might have completed listing all activities in the projects and sequenced those. Now you have to identify what kind of resources is
required to execute those activities those can be People, equipment, or material. The goal of this process is to generate Activity Resource
Requirement. We are not yet ready for effort estimation yet. In this process we are identifying only required resources.

Bottom-up Estimating is a tool used here. This technique is used in various processes in different contexts. Here if we are using this to identify
what kind of resources are needed at Activity level so that similar kind of activities can be assigned to same resource. So when you ask for

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cross team resources you can tell exact number or quantity.

Resource Breakdown Structure (RBS): This is another hierarchy structure used for projects. It helps you to group similar resources at a place
that way you can build specialty teams with in project. It defines assignable resources such as personnel, from a functional point of view; it
identifies "who" is doing the work. The total resources define the Top Level, and each subsequent level is a subset of the resource category (or
level) above it. Each descending (lower) level represents an increasingly detailed description of the resource until small enough to be used in
conjunction with the Work Breakdown Structure (WBS) to allow the work to be planned, monitored and controlled.

6.4 Activity Duration Estimation Process

Inputs Tools Outputs
Project Scope Statement
Activity List
Activity Attributes
Activity Resource Requirements Analogous Estimating
Resource Calendar Parametric Estimating
Activity Duration Estimates
PM Plan Three-point Estimating
Activity Attributes (Updates)
- Risk Register Reserve Analysis
- Activity Cost Estimates Expert Judgment

Enterprise Env. Factors

Org. Process Assets

The main goal for “Activity Duration Estimating” process is to provide effort estimation for all activities developed in during Activity Definition
Process. Also know as Effort estimation, means how many hours/days are required to complete an activity. Duration is totally different than the
work effort

• Effort: Just effort to complete an activity. We will not consider how many resources are working on this activity or when they are start or
when they finish.

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 • Duration: The effort which was estimated above can be split among several resources or span across multiple days. For example, the
effort for an activity is estimated as 24 hours. This is typically 3 working 8 hour days. If you assign 3 resources to perform this activity
the duration will be just 1 day. Or you assign only one resource and estimate 1 hour work per day then the duration would be 24
business days which might even longer calendar days considering weekends and holidays.

There are several techniques are used in real world to estimate the effort. Out of all Expert judgment is the most important technique. Which is
the core technique used in all other forms. Some subject matter expert should know what it takes to do it. PMBOK suggest few other
techniques to refine the Expert judgment

• Analogous Estimating
• Parametric Estimating
• Three-point estimating
• Reserve Analysis

Analogous Estimating: Comparing to similar activity on the other project is the concept of this technique. This particular technique requires
historical data to compare. In cases where there is no historical data, you would rely on other techniques and can’t perform Analogous
Estimating

Parametric Estimating: Dependent on various parameters used for an activity. Multiplication of base unit of a parameter times of parameter
size would give effort. For example 100 lines of code can be developed in 8 hours; then to develop 1000 lines of code it will take 80 hours.
And if you need this in a week’s duration you will assign 2 resources.

Three-point estimation: Here you take pessimistic, optimistic, and realistic estimates for an activity. This approach can produce most close
estimate than single Expert Judgment estimate. Normally average of these 3 estimates and Standard deviation are used.

Activity duration estimates are major outcome of above "Activity Duration Estimating" process

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6.5 Schedule Development Process
Inputs Tools Outputs
Project Scope Statement
Schedule Network Analysis Project Schedule
Activity List
CPM (Critical Path Method) Schedule Model Data
Activity Attributes
Schedule Compression Schedule Baseline
Project Schedule Network Diagrams
What-If Scenario Analysis Resource Requirements (Updates)
Activity Resource Requirements
Resource Leveling Activity Attributes (Updates)
Resource Calendars
Critical Chain Method Project Calendar (Updates)
Activity Duration Estimates
Adjusted Leads and Lags Requested Changes
PM Plan
Schedule Model Schedule Management Plan (Updates)
- Risk Register
Applying Calendars - PM Plan (Updates)
PM Software
Org. Process Assets

Schedule Development

Schedule in simplest form is a plan for an activity or event. We make schedules for every event of our life. The major ingredients are Activity
list and when those occur. Project Schedule development is no different than that. We identify when each and every activities occur. We
defined activities and sequenced them in earlier phases. So we provide Calendar dates to all of those activities and that sums up to the project
start and end dates too.

While developing Schedule development networking diagrams are very useful, this is a key input for this process.

Slack or Float: a float is amount of time you can use with out disturbing other planned activities. It tells how much of flexibility you have with in
the project schedule. It is important to have flexibility. There are 2 types of internal slacks and one external slacks for any project.

Free Slack: The amount of time an activity can be delayed by not affecting successor activity.

Total Slack: The amount of time an activity can be delayed with out delaying the end of project.

Project Slack: The amount of time a project can delay with out delaying other projects with in program

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In the above network diagram there are 3 possible paths

I) Start -> A -> C -> E -> END --- 5 + 3 + 2 = 10 DAYS

II) Start -> B -> D -> E -> END --- 4 + 6 + 2 = 12 DAYS
III) Start -> B -> D -> F -> END --- 4 + 6 + 6 = 16 DAYS

Out of those 3 paths Path III is the longest path which needs 16 days to deliver all 3 Activities in it. We call this one as Critical path.

In the above network diagram For E both D and C are predecessors. It need 10 days to complete B+D and to reach E. And it just takes 8 days
for A+C to complete to start E. So even if gets 2 days of delay the start date of E will not be changed. So activity “C” has 2 days of Free Slack.
Path I) has 6 days of Total slack and still won’t impact Project’s end date.

The above process is called as Critical Path Method of Estimation. Observe that Activities on Critical Path doesn’t have flexibility that is ZERO
SLACK.

Other tool provided by PMBOK guide is Schedule Compression.

The above network diagram has total of 6 activities and just 3 activities in longest path. Imagine a real project with many activities and longer
critical path. Some times you might get delayed in early stages and would like to shrink activities in later phases. We call it as Schedule
compression. We have to compress Critical Path activities only. We have 2 types of compression techniques.
- Crashing: adding more resources to any activity on Critical path activities.
- Fast Tracking: re-sequencing activities in the network diagram to gain time benefit.

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6.6 Schedule Control Process
Inputs Tools Outputs
Schedule Model Data (Updates)
Progress Reporting Schedule Baseline (Updates)
Schedule Management Plan Schedule Change Control System Performance measurements
Schedule Baseline Performance Measurement Requested Changes
Performance Reports Variance Analysis Recommended Corrective Actions
Approved Change Requests Schedule Compression Bar Charts Activity List & Attributes (Updates)
PM Software PM Plan (Updates)
Org. Process Assets (Updates)

Schedule Control has most important Tools and out puts for the projects which can be rolled up to Programs, Portfolios to Executive
Management. That is Performance measurement and Variance analysis. This process iterative process through out the project execution.
When changes are requested you have to monitor those using schedule Change Control System and recommended changes are suggested.
Project Cost Management Please enable JavaScript to view this page content properly.
(PMP Certification Preparation notes. Based on PMBOK 3rd Edition)

Cost is one of 3 Triple constraints of the project. Managing costs of the

project is very crucial and hardest part of the project. It spans across
all phases of the project right from conception to closure of the project.

Cost Management is not just controlling “Costs”, it involves definitive planning and preparing budgets. Collecting cost associated data.
Comparing the data to prepared budgets and taking appropriate actions when needed.

Following table lists all 3 Processes in this Knowledge Area, spread across '2 out of 5 Process Groups'

5 Process Groups Intiation Planning Execution Monitoring and control Closing

1. Cost Estimating
Processes 3. Cost Control
2. Cost Budgeting
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7.1 Cost Estimating Process
Inputs Tools Outputs
Enterprise environmental factors
Analogous estimating
Organizational process assets
Determine resource cost rates
Project Scope Statement
Bottom-up estimating Activity cost estimates
Work breakdown structure
Parametric estimating Activity cost estimate supporting detail
WBS dictionary
Project management software Requested changes
Project management plan
Vendor bid analysis Cost management plan (updates).
- Schedule management plan
Reserve analysis
- Staffing management plan
Cost of quality
- Risk register

There are 3 different types of estimation techniques listed over here under Tools section of Cost Estimation.
- Analogous Estimation techniques
- Bottom-up approach technique
- Parametric approach technique

Both Analogous and parametric take Top-to-Down approach unlike Bottom-up approach.

Analogous estimation is mainly based on Expert Judgment or based on similar previous Projects. This approach is very useful in early
stages of the project where WBS and work packets are completely defined. The expert judgment success factor depends on similarity of
previous projects too. The main disadvantage is that it is good for ball-park figures but not for precise project cost.

Parametric Estimation considers different project characteristics to calculate total costs of the project. For example, in the Telephone wire
digging project, if we know cost per meter we can estimate it to whole project. For a house construction, if we know cost to construct per
square feet, we can estimate total house project. For complex projects there will be multi dimensional parameters involved. When historic
information is available these parametric estimation will be more accurate.

Bottom-up approach is elaborative estimation technique. We start estimating from the bottom most part of WBS hierarchy which is work
package. Work packages are divided into activities. Summing up work packages to modules or groups, summing up different modules to
stages, summing up different stages to project is the bottom-up approach method. The people who will actually do this work should create the
estimates.

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7.2 Cost Budgeting Process
Inputs Tools Outputs
Project scope statement
work breakdown structure
WBS Dictionary
Cost aggregation Cost baseline
Activity cost estimates
Reserve Analysis Project funding requirements
Activity cost estimate supporting detail
Parametric estimating Cost management plan (updates)
Project schedule
Funding limit reconciliation Requested changes
Resource calendars
Contract
Cost management plan
Cost budgeting

The main goal of this process is to develop Cost Baseline. At the starting point of this Process, you should have finished Project Cost
Estimation and have a complete list of estimates of individual activities.

You use Cost Aggregation tools to sum up those low level activity costs to Work package to higher levels of WBS hierarchy.

Cost Budgeting is time-based approach to project’s actual costs. Once you prepare this time based planning you baseline it. The baseline is
a reference point for the project to compare time to time. You will monitor and control project costs comparing to the baseline and report any
variations. Costs at work package level are tied to financial systems using Chart of Accounts. Chart of accounts show cost allocation
categories.

Project manager is allowed to allocate extra resources (time or money) as a buffer for known unknowns; we call it as Contingency Reserve.

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7.3 Cost Control Process
Inputs
Cost baseline
Project funding requirements
Performance reports
Work performance information
Approved change requests
Project management plan
Tools Outputs
Cost estimate (Updates)
Cost baseline (Updates)
Const change control system
Performance measurements
Performance measurement analysis
Forecasted competition
Forecasting
Requested changes
Project performance reviews
Recommended Corrective actions
Project management software
Organizational process assets (updates)
Varience management
Project management plan (updates)

Cost control:
Once you estimate Project costs and baseline those and prepare a Budget, you will be on cruise mode to control the costs. That doesn’t mean
it is easy there after. No not at all. You have to monitor your cost so closely. Your work performance information is key input for this process.
You should have clear set templates to report the work progress. Otherwise all unwanted junk data might ruin the soup.

Cost Change Control System is from “Tools and Techniques” section of this Process. It is part of overall Change Control process of you
Project Management Organization but only oversees those changes which are directly affect costs. Changes are very important to watch out.
Uncontrolled changes can ruin whole projects with out mercy. So what is been asked to change and how much it would cost should be
managed.

Project performance review is another Tools & Techniques provided. You will review project progress with your baseline plans and will provide
what you’ve earned against what you have planned. This is known as Earned Value Analysis and helps you to track your day to day progress.
3 possible scenarios are: you are progressing ahead of plan that means you are getting more than what you have planned, or progress is as
per the plan or not getting enough worth for your investment. Based on these 3 scenarios you can take according corrective actions.
Corrective actions are what you are supposed to do in this process.

You can use Project Management software of your choice to help you in this regard. MS Project is popular one or even you can simply use
well planned out Excel sheets to track those costs.

First you will find variances and report those using Variance analysis. The terms you use over here are Cost Variance (CV) and Schedule
Variance (SV). From that point you might required to forecast rest of the project. This involves estimating rest of the work. You use terms like
Estimation to Completion (ETC) and Estimate at Complete (EAC). Those names are telling what you have to Estimate.

25
Other terms you use here are Cost Performance Index (CPI) and SPI (Schedule Performance Index)

Project Quality Management Please enable JavaScript to view this page content properly.
(Based on PMBOK 3rd Edition. For PMP Certification Exam
preparation)

5 Groups Initiation Planning Execution Monitoring and Control Closing

Processes 8.1 Quality Planning 8.2 Perform Quality Assurance 8.3 Perform Quality Control

Project quality management involves making sure the project meets the needs that it was originally created to meet, or in other words, that
stakeholder expectations were met.
Quality is the result of meeting the triple constraints. A guide to the Project Management Body of Knowledge (PMBOK Guide) states that
quality management ensures "that the project will satisfy the needs for which it was undertaken," not just to meet or exceed the requirements.
The PMBOK Guide also says, "Quality is the degree to which a set of inherent characteristics fulfill requirements." This statement means that
both stated and implied needs are understood through stakeholder analysis and then addressed in project scope management.

The three processes of Project Quality Management knowledge area can be explained as below:

8.1 Quality Planning – identifying which quality standards are relevant to the project and determining how to satisfy them.
8.2 Perform Quality Assurance – applying the planned, systematic quality activities to ensure that the project employs all processes needed to
meet requirements.
8.3 Perform Quality Control – monitoring specific project results to determine whether they comply with relevant quality standards and
identifying ways to eliminate causes of unsatisfactory performance.

Quality Planning:

Quality Planning typically receives the least attention and yet is the most critical element of Project Quality Management. This lack of attention
primarily occurs due to insufficient understanding about quality and how it is an integral part of a project. The lack of an adequate Quality Plan
inhibits the success of Quality Assurance and Quality Control efforts. This idea needs to be stressed: Quality is planned into projects to prevent
26
errors rather than relying on inspections to catch them.

Project participants need to be encouraged to devote sufficient time to Quality Planning. Quality Planning must not be taken lightly and
management must be in full support of it.

Inputs Tools & Techniques Outputs

Quality management plan

Enterprise environmental
factors
Organizational process assets
Project scope statement
Project management plan
Cost- benefit analysis
Quality metrics
Benchmarking
Quality checklists
Design of experiments
Process improvement plan
Cost of quality (COQ)
Quality baseline
Additional quality planning tools
Project management plan (updates)

The Cost of quality includes all the costs to conform to the required quality of the project, including the cost to ensure conformance to
requirements as well as the cost of nonconformance and finding the right balance. Modern quality management philosophy emphasizes
preventing mistakes rather than detecting them later because the cost of nonconformance
The costs associated with the cost of quality are:

• Prevention costs: Costs associated with keeping defective product away from the customer: Examples could include quality training,
quality planning, reliability engineering, test engineering, or data analysis.
• Appraisal costs: Costs associated with checking the product to make sure it is conforming, such as inspection testing, calibration,
studies, or surveys.
• Failure costs: Nonconformance that is found while the product is still within the performing organization is called internal failure costs,
and includes things like rework or scrap. Nonconformance found when the product is at the customer is called external failure costs and
includes repair or returns. The cost of nonconformance can also be classified as direct or indirect. Direct failure costs would include
scrap, warranty costs, rework, engineering changes, liability insurance, or inventory costs. Indirect failure costs include fewer sales, lost
customers, increased costs to get customers back, decreased team morale, or decreased project efficiency.

8.2 Perform Quality Assurance

• Perform Quality Assurance is all the planned and systematic activities implemented within the quality system to provide confidence that
27
 the project will satisfy the relevant quality standards.
• It should be performed throughout the project.
• May be performed by an internal or external organization, or designated members of the project team.
• Prevention-oriented

Tools &
Inputs Outputs
Techniques

Quality management plan

Quality metrics
Process improvement plan
Work performance information
Approved change request
Quality control measurements
Implemented change request
Implemented corrective actions
Implemented defect repair
Implemented preventative
actions
Quality planning tools & Requested changes
techniques Recommended corrective actions
Quality audits Organizational process assets
Process analysis (updates)
Quality control tools and Project management plan (updates)
techniques

8.3 Quality Control

• Involves
o Monitoring specific project results to determine if they meet quality standards
o Identifying ways to eliminate causes of unsatisfactory results
• Is about prevention, not inspection
• Focuses on process
• Primary purpose is to prevent a process from producing a poor quality product or service
• Is continuously producing results that are fed back to the appropriate process or processes

28
 • Is performed throughout the life of the project
• Is not the quality control organization

Inputs Tools & Techniques Outputs

Cause and effect diagrams Quality control measurements

Control charts Validated defect repairs
Quality management plan
Flowcharts Quality baseline (updates)
Quality metrics
Histograms Recommended corrective actions
Quality checklist
Pareto diagrams Recommended preventive actions
Organizational process assets
Run charts Requested changes
Work performance information
Scatter diagrams Recommended defect repairs
Approved change request
Statistical sampling Organization process assets (updates)
Deliverables
Inspections Validated deliverables
Defect repair review Project management plan (updates
•
Project Human Resource Management Please enable JavaScript to view this page content properly.
(Based on PMBOK 3rd Edition. For PMP Certification Exam
preparation)

The first thing that comes to the mind when you say Management is
People Management. No matter what when you say that you are a
manager, you will be gauged based on your people skills. If you want
to be a successful project manager you need to have better people
management skills.
First and foremost task for the project manger is to understand roles and responsibilities of the team and links to the team and should able to
communicate that to all affected people. Few important roles associated with Project are: Sponsor, Management Team, executive/leadership
team, Project Team, Project Manager, functional manager.

The Project Human Resource Management processes include the following:

9.1 Human Resource Planning – Identifying and documenting project roles, responsibilities, and reporting relationships, as well as creating
the staffing
management plan.
29
9.2 Acquire Project Team – Obtaining the human resources needed to complete the project.

9.3 Develop Project Team – Improving the competencies and interaction of team members to enhance project performance.

9.4 Manage Project Team – Tracking team member performance, providing feedback, resolving issues, and coordinating changes to enhance
project
performance

Those above 4 processes can e organized into Process Groups as follows:

5 Process Groups Intiation Planning Execution Monitoring & Control Closing

9.2 Acquire Project Team

Processes 9.1 Human Resources Planning 9.4 Manage Project Team
9.3 Develop Project Team

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9.1 Human Resource Planning
Inputs Tools Outputs
Enterprise environmental factors
Organization charts and position descriptions Roles and responsibilities
Organizational process assets
Networking Project organization charts
Project management plan
Organizational theory Staffing management plan
-Activity resource requirements

30
9.2 Acquire Project Team
Inputs Tools Outputs
Enterprise Environmental factors
Pre-assignment
Organizational process assets Project staff assignments
Negotiation
roles and responsibilities Resource availability
Acquisition
Project organization charts Staffing management plan (Updates)
Virtual teams
Staffing management plan

9.3 Develop Project Team

Inputs Tools Outputs
General management skills
Training
Project staff assignments
Team-building activities
Staffing management plan Team performance assessment
Ground rules
Resource availability
Co-location
Recognition and rewards

9.4 Manage Project Team

Inputs
Organizational process assets
Project staff assignments
Roles and responsibilities
Project organization charts
Staffing management plan
Team performance assessment
Work performance information
Performance reports
Tools
Observation and conversation
Project performance appraisals
Conflict Management
Issue Log
Outputs
Requested Changes
Recommended Corrective Actions
Recommended Preventative Actions
Organizational Process Assets (updates)
Project Management Plan (updates)
31
Project Communications Management Please enable JavaScript to view this page content properly.
(Based on PMBOK 3rd Edition. For PMP Certification Exam
preparation)

5 Process Monitoring and

Initiation Planning Execution Closing
Groups Control

10.3 Performance
10.1 Communication 10.2 Information Reporting
Processes
Planning Distribution 10.4 Manage
Stakeholders

10.1 Communications Planning

Inputs Tools Outputs
Enterprise Environmental Factors
Organizational Process Assets
Project Scope Statement Communications Requirements Analysis
Communications Management Plan
Project Management Plan Communications Technology
- Constraints
- Assumptions

32
10.2 Information Distribution
Inputs
Communications Management Plan
10.3 Performance Reporting
Inputs
Work Performance Information
Performance Measurements
Forecasted Completion
Quality Control Measurements
Project Management Plan
- Performance Measurement
Baseline
Approved Change Requests
Deliverables
10.4 Manage Stakeholders
Inputs
Communications Management Plan
Organizational Process Assets
Tools Outputs
Communications Skills
Information Gathering and Retrieval Systems Organizational Process Assets (updates)
Information Distribution Methods Requested Changes
Lessons Learned Process
Tools Outputs
Status Review Meetings
Performance Reports
Time Reporting Systems
Forecasts
Cost Reporting Systems
Requested Changes
Information Presentation Tools
Recommended Corrective Actions
Performance Information Gathering and
Organizational Process Assets
Compilation
(updates)
Tools Outputs
Resolved Issues
Approved Change Requests
Communication Methods
Approved Corrective Actions
Issue Logs
Organizational Process Assets (updates)
Project Management Plan (updates)
33
Project Risk Management Please enable JavaScript to view this page content properly.
(Based on PMBOK 3rd Edition. For PMP Certification Exam
preparation)

As per PMBOK - "The whole point of undertaking a project is

to achieve or establish something new, to venture, to take
chances, to risk." Risk can be 2 type which gives a positive
effects or to give negative effects on the endeavors. Positive
risks are Opportunities and negative risks are losses,
remember both risks are uncertain. Risk Management
purpose is to manage (Plan and implement) these
uncertainties. Successful managers differentiate themselves
by identifying these uncertainties way before. That is what
the Expert Judgment means.
Following are processes defined in Risk Management Knowledge Area:

5 Process Groups Initiation Planning Execution M&C Closing

11.1 Risk Management Planning

11.2 Risk Identification
11.6 Risk Monitoring and Control
Processes 11.3 Qualitative Risk Analysis
11.4 Quantitative Risk Analysis
11.5 Risk Response Planning

Let us talk about negative risks … it is a multiplication of Probability of occurrence and impact of that event. For example: Consider chances
for an event to occur is at 95% and impact would be very minimal say $100. The impact would be 95/100 * 100 = 95. Consider chances for
other event to occur is at 10% but the impact is $10000. Then the impact is 10/100*10000 = 1000. Quite a high when compared to firs one.
So the whole project risk is summation of these impacts.

Project Risk = Sum Of (Events * Probabilities * Impacts)

After evaluating risks, one can choose a path of risk avoidance or risk mitigation and management. If we understand the risks on a project, we
can decide which risks are acceptable and take actions to mitigate or forestall those risks. If our project risk assessment determines risks are
excessive, we may want to consider restructuring the project to within acceptable levels of risk. One way to reduce risk is to gather
information about relevant issues to lower the level of uncertainty. Then we can look for ways to reduce probabilities of failures or to reduce
34
My Certificates:|PMI|Stanford Advanced Project Management|Prince 2|& -- PMP Training
All rights reserved.

11.1 Risk Management Planning

11.1 Risk Management Planning

Inputs Tools Outputs

Enterprise Environmental
Factors
Organizational Process Assets Planning Meetings and Analysis Risk Management Plan
Project Scope Statement
Project Management Plan

Risk Management Plan

There is only one output of risk management planning, and that is the risk management plan. The plan describes how the risk process will be
performed during the project life cycle.

Methodology: Describes the approaches, tools, and data sources to be used when doing risk management.

• Roles and responsibilities: Defines the team of people responsible for managing the identified risks and responses and outlines their
roles. People outside of the project team may be named, to keep the risk analysis unbiased.
• Budgeting: Defines the budget for risk management for the project. This is included in the cost baseline.
• Timing: Defines when and how often the risk management process will be performed. This process should begin early in the project life
cycle and be revisited throughout project execution.
• Risk categories: A good way of providing the structure necessary to identify risks consistently is to outline the categories of risks in a
RBS (Risk Breakdown Structure), which is further defined in the Figure 274. The risk categories could also simply be listed.
• Definitions of risk probability and impact: Outlines the scales that will be used during qualitative risk analysis to assess the probability
and impact of the risks that have been identified for a particular project. Scales could be qualitative, from "very low" to "very high," or
quantitative, like a scale from 1 to 5.

35
 • Probability and impact matrix: The combination of each risk's probability and impact will lead to an overall risk rating, which allows the
risks to be prioritized. The combinations that lead to a risk with "high" importance vs. "low" is tailored for the specific project.
• Revised stakeholder tolerances: Stakeholder tolerances will be defined and revised as necessary as they pertain to the specific
project.
• Reporting formats: This component defines the risk register and other risk reports. Outlines how they will be created and distributed.
• Tracking: This component defines how risk will be recorded for the benefit of this project and future projects, as well as if and how the
risk processes will be audited.

11.2 Risk Identification

11.2 Risk Identification

Inputs Tools Outputs

Enterprise Environmental
Documentation Reviews
Factors
Information Gathering Techniques
Organizational Process Assets
Checklist Analysis Risk Register
Project Scope Statement
Assumptions Analysis
Risk Management Plan
Diagramming Techniques
Project Management Plan
11. 3 Qualitative Risk Analysis

11. 3 Qualitative Risk Analysis

Inputs Tools Outputs

Risk Probability and Impact Assessment

Organizational Process Assets
Probability and Impact Matrix
Project Scope Statement
Risk Data Quality Assessment Risk Register (updates)
Risk Management Plan
Risk Categorization
Risk Register
Risk Urgency Assessment
11.4 Quantitative Risk Analysis
36
 11.4 Quantitative Risk Analysis

Inputs Tools Outputs

Organizational Process Assets

Project Scope Statement
Risk Management Plan
Risk Register Data Gathering and Representation Techniques
Risk Register (updates)
Project Management Plan Quantitative Risk Analysis and Modeling Techniques
- Project Schedule Management
Plan
- Project Cost Management Plan

{{ Overview - 11.1 - 11.2 - 11.3 - 11.4 - 11.5 - 11.6 }}

11.5 Risk Response Planning
11.5 Risk Response Planning

Inputs Tools Outputs

Strategies for Negative Risks

Strategies for Positive Risks Risk Register (updates)
Risk Management Plan
Strategies for Both Project Management Plan (updates)
Risk Register
Contingent Response Risk Related Contractual Agreements
Strategy

{{ Overview - 11.1 - 11.2 - 11.3 - 11.4 - 11.5 - 11.6 }}

11.6 Risk Monitoring and Control

37
 11.6 Risk Monitoring and Control

Inputs Tools Outputs

Risk Reassessment
Risk Management Plan Risk Register (updates)
Risk Audits
Risk Register Requested Changes
Variance and Trend Analysis
Approved Change Requests Recommended Corrective Actions
Technical Performance Information
Work Performance Information Recommended Preventative Actions
Organizational Process Assets (updates)
Reserve Analysis
Performance Reports Project Management Plan (updates)
Status Meetings

{{ Overview - 11.1 - 11.2 - 11.3 - 11.4 - 11.5 - 11.6 }}

Project Procurement Management Please enable JavaScript to view this page content properly.
(Based on PMBOK 3rd Edition. For PMP Certification Exam
preparation)

Projects many times need services or products from the 3rd parties to fulfill the needs. 3rd parties mean external to the Project, either other
department with in the organization / company or completely outside of the company. Here we are talking about external vendor who is
providing services to the Project. And we need to assume those vendor services are not resource augmentation.

Just like Project life cycle Procurement management has its own lifecycle. We plan, execute and properly close the services or product
acquisition. Most of the Procurement time will fall under Planning Process group as Execution is done by the vendor. Monitoring is required
to control costs and changes.

Following table shows 6 processes of this knowledge area and groups they belong to

38
 5 Process
Initiation Planning Execution Monitoring & Control Closing
Groups

-Plan Purchases and

-Request Seller -Contract
Processes acquisitions -Contract
Responses Closure
-Plan Contracting Administration
-Select Sellers

In Procurement 3 objects are very important. In short they are SBC. (Seller – Buyer – Contract.)

Seller is the person or contracting company who sells products or services for the project. In general terms staff augmentation will also fall
in this category. Here PMI doesn’t deal that case for the project. PMI in this particular chapter treats seller as any 3rd party who provides
products or services from outside of the organizations

Buyer: Is you, the project manager who purchases the services from Seller. Unless and otherwise it is asked the exam’s perspective is
testing you the project manager. So in this particular case you will become buyer, so all exam questions are on buyer perspective only.

Contract: need not to say, a legal document which is a connecting point between Buyer and Seller. Both have to abide by that. You can
add any required clauses to the contract but following are important. To remember those use “CCOLA”

Capacity: The authorities those will be provided to Seller to do the work.

Consideration: Clauses those will be considered by the Buyer
Offer: Is provided to make a contract or deal.
Legal Purpose: Jurisdiction and legal bondage.
Acceptance: The time limit that the buyer has to make an agreement.

Lets discuss all 6 processes of this knowledge aera. Click on respective numbers below to see those processes one after other:

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39
12.1 Plan Purchasing and Acquisition
Project Procurement
Management - PMI
(Based on PMBOK 3rd
Edition. For PMP
Certification Exam
preparation)

Plan Purchasing and Acquisition ITTO

Inputs Tools Outputs

Enterprise Environmental Factors

Organizational Process Assets
Project Scope Statement
Work Breakdown Structure
WBS Dictionary Make or Buy Analysis Procurement Management Plan
Project Management Plan Expert Judgment Contract Statement of Work
- Risk Register Contract Types Make-or-Buy Decisions
- Risk Related Contractual Agreements Requested Changes

- Resource Requirements
- Project Schedule
- Activity Cost Estimates
- Cost Baseline

Various contract types are tools for “Plan Purchasing and acquisition" process. Which means when you the Project Manager is buying some
services or Products for you Project you can use these techniques to negotiate better options for your project. PMI categorizes contracts into 3
types.

Fixed prices contracts: This type of contracts has a fixed total price for the service or Product. Which means the Buyer pays EXACT amount
which was agreed at the beginning to the Seller. Incentives and Awards bring little bit variations to Fixed price contracts. Seller bears the risk in
fixed price contracts.
Time and Material contracts: These are cusp between FP and CR and have features of both. Work will quoted as per unit price or charges for

40
per hour service and costs for materials will be reimbursed. Sellers and Buyers share the risk.
Cost reimbursable contracts: Buyer will reimburse all costs spent by the seller for the project. This is open ended contract type means seller
don’t know the total price of the work at the beginning. So seller bears the risk. Awards, incentives bring variances in this category.

Following diagram shows types of contracts and who bears the risk

• FP: Fixed Price

• FPI: Fixed Price Incentive: In this type of contract and addition incentive will be given to the seller when he beats the project
expectations. Either it can be time, quality or features. So Seller will be motivated to deliver better product in shorter time
• FPEPA: Fixed Price Economic Price Adjustment: These types of contracts are used for long term projects. Buyer bears the extra burden
of Economic fluctuation which is a risk.
• CR: Cost Reimbursable
• CPF Cost plus Fee or CPPC “Cost plus Percent of Cost”: These types of contracts are illegal and not permissible for US Govt. In these
contracts, Buyer is supposed to reimburse all costs plus will add some additional fee to the seller. So Seller has no motivation to control
costs or to deliver the product. Seller’s margin or profit is depending on the costs he puts on the project.
• CPFF Cost plus fixed fee: Buyer reimburses all expenses to the seller and adds a fixed fee as a seller’s profit.
• CPIF Cost plus Intensive fee: Buyer reimburses all expenses to the seller and adds an incentive for higher.
• CPAF Cost plus Award fee: These types of contract are very similar to CPIF, but the award is fixed amount instead of percentage.

Following table shows major difference between above three types of contracts

41
 Work Risk Term

FP Known Seller Short

T&M UnKnown Both Short

CR UnKnown Buyer Long

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12.2 Plan Contracting
Project Procurement Management - PMI
(Based on PMBOK 3rd Edition. For PMP Certification
Exam preparation)

12.2 Plan Contracting

Inputs Tools Outputs

Procurement Management Plan

Contract Statement of Work
Make-or-Buy Decisions
Project Management Plan
Procurement Documents
- Risk Register Standard Forms
Evaluation Criteria
- Risk Related Contractual Agreements Expert Judgment
Contract Statement of Work (updates)
- Resource Requirements
- Project Schedule
- Activity Cost Estimates
- Cost Baseline

Plan Contracting is next step in procurement process after planning for purchase and acquisition (12.1 the previous process). For every
company there will be few pre-defined forms or policies to acquire products/services or engaging vendors. Those “Standard Forms” will be
42
used as “Tools” in this process. As usual Expert judgment will be counted for this process too.

The major outcome or the intent of this process is to generate Planning Documents and developing your own evaluation criteria. In de-
centralized procurement organizations Project Manager (you) will directly engage vendors. So in this process you have to develop the
evaluation criteria, measures to evaluate vendor responses.

Procurement Documents:
These documents are useful for the Buyer (You the Project Manager) to communicate the need in most possible efficient way to all
prospective sellers. If Sellers can understand your needs, your process and clauses, they can clearly quote and meet your expectations.

Following are few documents you prepare:

- RFP (Request for Proposal) in this document you can ask for detailed plan for project execution and price. If it is a long term project and
the scope is not developed completely you can use these types of documents.
- IFB (Invitation for Bid) or RFB (Request for Bid): You have developed the scope and you know the work and willing to get it done by vendor
then you will use this type of documents
- RFQ (Request for Quotation): This is Price per item or hour labor.

In these procurement documents you can include

- Your company information
- Project information
- Criteria which are important for the project and on which you will evaluate
- Terms and conditions for the project, legal implications
- Contract terms

Other documents you will need to develop are:

NDA (Non-Disclosure agreement): To perform the Project work buyer has to disclose some confidential information to the sellers or even
prospective sellers. Sellers/Prospective sellers are bound by this document to protect Buyers confidential information.

Letter of Intent: This document intention is to communicate that the buyer, you are intended to purchase services or products from the seller.
But this document is not legally binding document, means you can even decline to purchase in future date based on your changing criteria.

Privity of contract: The doctrine of privity in contract law provides that a contract cannot confer rights or impose obligations arising under it
on any person or agent except the parties to it. Privity of contract occurs only between the parties to the contract, most commonly contract of
sale of goods or services. Horizontal privity arises when the benefits from a contract are to be given to a third party. Vertical privity involves a

43
contract between two parties, with an independent contract between one of the parties and another individual or company. (From Wiki)

In a simple example: You hired a contractor A, and the contractor hires another sub-contractor B to deliver part of your work. Even though B
is performing your work, he/she is contractually not bound to you, because B contractually bound to “A” only.

12.3 Request Seller Responses

Project Procurement Management
(Based on PMBOK 3rd Edition. For
PMP Certification Exam
preparation)

12.3 Request Seller Responses

Inputs Tools Outputs

Organizational Process Assets Bidder Conferences

Qualified Sellers List
Procurement Management Advertising
Procurement Document Package
Plan Develop Qualified Sellers
Proposals
Procurement Documents List

Developing Qualified Sellers list & Proposals are the main goals of "Request Seller Responses" process. Bidder conference and Advertising
are major tools provided in this area.

Advertisement is very much required to attract more bidders for your project. You should advertise extensively to gather more responses. Few
of known formats are - internet, local papers, different print media like magazines, Conferences, vendor shows and so on. But all of those
might not be necessary together. As advertisement is cumbersome and expensive normally companies establish preferred vendors list over
the time.

Bidders Conference: Once you advertise and collected many responses from various bidders you should organize a conference to bring all
bidders to same understanding page. You should clarify all technical questions. Each bidder will be beneficiary of other questions and can

44
understand your requirements much better.
Bidder’s conference benefits both Bidders and you the project manager. You should document all questions and answers and send those to
all bidders. In the bidder conference you should watch for Collusion. Collusion is secret agreement between bidders. And even you should
watch for bidders who are not asking any types of questions either.

You should prepare your own Qualified Sellers list which is one of the out puts of this process.

Buyer prepares few documents for bidders. Few of those are

- RFP (Request for Proposal)
- IFB (Invitation for Bid) or RFB (Request for Bid)
- RFQ (Request for Quotation)
These documents can be used with different contract types as follows
FP IFB / RFB

T&M RFQ

CR RFP

Usage of documents as shown above even makes sense. For Unit price contracts you will ask a quotation at unit level. And you would ask
bidders for a proposal where scope is not yet prepared or unknown.

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12.4 Select Seller
Project Procurement
Management
(Based on PMBOK 3rd Edition.
For PMP Certification Exam
preparation)

45
 12.4 Select Sellers

Inputs Tools Outputs

Organizational Process Assets

Procurement Management Plan Weighting System
Selected Sellers
Evaluation Criteria Independent Estimates
Contract
Procurement Document Package Screening System
Contract Management Plan
Proposals Contract Negotiation
Resource Availability
Qualified Sellers List Seller Rating Systems
Procurement Management Plan (updates)
Project Management Plan Expert Judgment
Requested Changes
- Risk Register Proposal Evaluation Techniques
- Risk Related Contractual Agreements

As we discussed all of 6 processes of this knowledge area occur sequentially. It follows traditional waterfall model. By the time of this process
you the Project Manager might have completed Procurement & contract planning and might have requested and collected Seller Responses
(Quotations/Bids/Proposals).

Tip: Bids are for– FP; Quotations are for – T&M; Proposals are for – CR;

The major goal/purpose of this process is Selecting Sellers for your project and making a contract with them. PMI provided several Tools and
Techniques to fulfill this requirement.

• Weighing System: Ranking all filtered prospective sellers.

• Independent Estimate: Few companies call this estimation group as Shadow IT. Rough estimate with in your company.
• Screening System: Weed out Sellers who doesn’t even meet bare minimum criteria
• Seller Rating System: Is an aid to Weighing System. You will provide your own rating system based on your project environment.
Seller’s financial stability might be important aspect for a long term Project but that might not be true for a smaller project which will
finish in 6 months. So each project has to establish its own rating system.
• Proposal Evaluation techniques: This is also another aid for weighing system.
• Expert Judgment: You will inherit this quality based on your experience and exposure.

Example of Weighing System:

46
 Criteria 1 Criteria 2

Grand Total
Scor Scor
Weight Sub Total-1 Weight Sub Total-2
e e

Seller 1 2 3

Seller 2 2 3

1. Step1 you will define what all criteria are important for your project.
2. Then you will quantify those criteria by giving a weight, based on a scale 1-5. These weights go in respective colunms
3. By using different evaluation techniques and rating system, you will provide a score to seller and enter those in to appropriate cells.
4. By multiplying score and weight you will arrive sub total for the seller.
5. By adding all sub totals for a particular seller you will get Grand total for that seller.

Finally you will prepare a list of Selected Sellers and Ranks next to them. You have to keep this list as you company asset to use it for next
time. But rankings on this list will not stay the same over years. You need to reevaluate all your sellers based on situation and time. The best
Seller will not remain the best all the time. They might change their policies or another best seller might emerge. But having a company asset
is easy to start.

Contract Management Plan: This is one on PMI’ isms which we all are advocating. You will write a document which will say how you
manage this area. What all are your approaches, observations, pitfalls. In the modern era every thing should be documents. Nothing should
be kept in the mind. Organizations and Projects precede individuals. Project managers need not be powerful warlords. Organizations should
able replace them easily.
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12.5 Contract Administration

47
 Project Procurement Management
(Based on PMBOK 3rd Edition. For PMP
Certification Exam preparation)

12.5 Contract Administration

Inputs Tools Outputs

Contract Change Control System

Buyer-Conducted Performance Contract Documentation
Contract
Reviews Requested Changes
Contract Management Plan
Inspections and Audits Recommended Corrective Actions
Selected Sellers
Performance Reporting Organizational Process Assets (updates)
Performance Reports
Payment System Project Management Plan (updates)
Approved Change Requests
Claims Administration - Procurement Management Plan
Work Performance Information
Records Management System - Contract Management Plan
Information Technology

Contract Administration is important function of Procurement management and as a Project Manager you have greater responsibilities to
manage activities under this process. You the Project manager needs to monitor the progress of your investment and see if you are getting
what you are paying for.

Requested changes to the contract and Recommended corrective actions are 2 of expected out come of this process. Tools like Change
control system helps to monitor this process. As I have been explaining all along Changes need to be monitored all across either for
schedule, or for scope or for costs or contracts. Those needed to be evaluated thoroughly and see how they are affecting other aspects of
the project. Should be well documented and should be approved by key stakeholders.

In the following image “Control Change” covers CCB, the Change Control Board gate keepers of inflowing changes. Even though the
change is great and wonderful, the impact on the project needed to be assessed first.

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Typically Project Manager will be performing following jobs depicted in the picture

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