PMP PPTs PMBOK 5th Edition - Author Pankaj Sharma, PMP,PMI-ACP

Connoisseur Solutions
Process Framework
Pankaj Sharma, 9810996356
Author - Pankaj Sharma

Definition as per PMBOK® Guide
A project is a temporary endeavor undertaken to
create a unique product or service.
Definition of Project

 A temporary endeavor – means that every project has a definite
beginning and end.
 Unique means that the product or service or result is different from
other product or service or result.
 Progressively elaborated - proceeding in steps
Project Definition

 Building a Software
 A Major Enhancement to the software
 Filming a Motion Picture
 Building a new office
 Designing a new product or service
 Creating an advertisement campaign
 Creating a new process with a business unit
 Moving from one building to another
 Designing a space vehicle
Examples of Project

PROJECTS OPERATIONS
Temporary Ongoing
Unique Repetitive
Closes after attaining the objectives Objective is to sustain business
Prototyping the new car model Assembly line production
Project vs Operation

Project Constraints
Source: A Guide to the Project Management Body of Knowledge, Fourth Edition (PMBOK® Guide) ©2008 Project
Management Institute, Inc. All Rights Reserved.
 Risk
 Scope
 Budget
 Resources
 Quality
 Schedule
Quality
CostScope
Schedule
PM Triangle

Why Projects Fail ?
 Lack of clearly defined purpose
 Inexperienced project Managers
 Poor estimation of duration and cost
 Cultural and ethical misalignment
 Poor requirements and scope management
 Lack of coordination of resources and activities
 Poor communication
 Inadequate planning of scope, schedule, resources, cost, risk and
quality
 Lack of progress and quality control

What Is Project Management ?
Project management is the application of knowledge, skills, tools
and techniques to project activities to meet the project requirements
- PMBOK® Guide 4th edition (Glossary)

Project Management Benefits

Project Management Process Groups
 Process Groups
 Project management processes have been bundled into 5 groups and these
groups are called project management process groups
 Initiating
 Planning
 Executing
 Monitoring and controlling
 Closing
 These process groups are common to most of the projects across various
domains – construction, technology, IT, life sciences etc.
 Process groups are different than the Phases
 Process groups may overlap / repeat based on the activities in the project

Initiating Process Group
 Processes within this group launches the project or a project phase
 Key activities associated with Initiation includes:
 Identifying business needs
 Creating a feasibility study
 Creating a Product description
 Creating Detailed Business Case
 Creating a Project Charter
 Selecting a Project Manager

Planning Process Group
It involves creation of Project Management Plan that acts as a
roadmap for project execution
Key activities would include:
 Collect Requirements
 Define Scope
 Create Work Breakdown Structure
 Define and Sequence Activities
 Estimate Activity Resource Requirement and Duration
 Creating Schedule
 Estimate Cost and Determine Budget
 Planning Human Resource, Quality, Communications
 Identify, Analyze and Prepare Risk Response Plan
 Planning Procurement

Executing Process Group
 Executing process group consists of processes to complete the work in
each of the phases
 Helps the PM coordinate and direct project resources to meet the
objectives of the project plan
 Key activities would include:
 Direct and manage project execution
 Acquire project team
 Perform quality assurance
 Manage Stakeholders Expectation
 Distributing project information
 Develop and Manage project team
 Conduct Procurement

Monitoring and Controlling Process Group
 Controlling processes are the activities that
 ensure that the project goes according to plan
 the actions to implement when project is not going as per the plan
 Variances from the project baselines are identified and necessary
corrective measures are undertaken
 Ensuring Quality Control
 Providing scope verification
 Implementing change control
 Configuration management
 Controlling key parameters like cost, schedule and scope
 Monitor and Control Risks

Closing Process Group
 This process group includes all processes to close all activities in a
project or project phase
 Closing activities to be performed even for the aborted / terminated
projects
 Auditing procurement documents
 Scope verification
 Closing vendor contracts
 Closing administrative duties
 Submitting final reports
 Archiving project records
 Celebrating!!!

Process Group Interaction
Level
Of
Activity
Initiating
Processes
Planning
Processes
Executing
Processes
Closing
ProcessesControlling Processes
Phase
Finish
Phase
Start Time

 Projects are divided into phases
 The project will have at least a beginning, intermediate and ending phase
 Number of phases depends on complexity and size of the project
 Reviews are conducted at the end of each phase to measure performance
 Phase end reviews allows to decide if the project should continue
 The collection of phases is called project life cycle
 The project life cycle defines the beginning and end of a project
Project Life Cycle

 The completion of one or more deliverables marks the project phase
 Deliverables are reviewed and formally accepted by customer at
phase end
 Phase end reviews are also called phase exits, stage gates or kill
points
 Rolling wave planning summarizes the future phases at high level
Characteristics of Project Phase

Characteristic of Project Life Cycle
Source : PMI PMBOK® Fifth Edition

Project Management Knowledge Areas
 There are 10 Knowledge Areas covered in PMBOK® Guide 5th edition
 These 10 Knowledge Areas are:
 Project Integration management
 Project Scope Management
 Project Time Management
 Project Cost Management
 Project Quality Management
 Project Human Resource Management
 Project Communications Management
 Project Risk Management
 Project Procurement Management
 Project Stakeholder Management

 Individuals and organizations involved in the project
 Those who will be directly or indirectly impacted
 Stakeholders should be identified throughout the project
 They may have a positive or negative influence on the outcome
 Stakeholder influence goes down as the project progresses
Project Stakeholders

 Key stakeholders include:-
 Project Manager
 Customer / User
 Performing organization
 Project team members
 Project management team
 Sponsor
 Influencers
 PMO
Project Stakeholders

Project Manager – Skill Set
 Communication Skills
 Organizational and Planning skills
 Budgeting Skills
 Conflict Management Skills
 Negotiation and Influencing Skills
 Leadership Skills
 Team Building and Motivating skills

 Programs
 Collection of related projects
 Controls are implemented and managed in a coordinated way
 Collective benefits are realized
 Each project has a project manager
 Portfolios
 Collection of programs and projects
 Projects meet a specific business goal or objective
 Includes weighing the value of each project against the portfolios
strategic objective
Project, Program & Portfolio Management

 Project Management Office [PMO]
 Centralized units to oversee project and programs within the organization
 Establishes and maintains the standards of project management
methodologies
 Support managers in planning, estimating, risk management and provide
trainings
Project Management Office (PMO)

Organization Type - PM Influence
Source: A Guide to the Project Management Body of Knowledge, Fifth Edition.Pankaj Sharma, 9810996356

Organization Type – Functional Organization
Source: A Guide to the Project Management Body of Knowledge, Fifth Edition.

Organization Type – Weak Matrix

Organization Type – Balanced Matrix

Organization Type – Strong Matrix

Organization Type – Projectized

Organization Type – Composite

Organization Types – Advantages & Disadvantages

PM Knowledge Area – Process Mapping
Source: A Guide to the Project Management Body of Knowledge, Fifth Edition

Project Integration Management

Processes and activities needed to identify, define, combine, unify,
and coordinate the various processes and project management
activities within the Project Management Process Groups

 Develop Project Charter—the process of developing a document that formally
authorizes a project or a phase and documenting initial requirements that satisfy the
stakeholder’s needs and expectations.
 Develop Project Management Plan—the process of documenting the actions
necessary to define, prepare, integrate, and coordinate all subsidiary plans.
 Direct and Manage Project Work—the process of performing the work defined in the
project management plan to achieve the project’s objectives.
 Monitor and Control Project Work—the process of tracking, reviewing, and
regulating the progress to meet the performance objectives defined in the project
management plan.
 Perform Integrated Change Control—the process of reviewing all change requests,
approving changes, and managing changes to the deliverables, organizational process
assets, project documents, and the project management plan.
 Close Project or Phase—the process of finalizing all activities across all of the Project
Management Process Groups to formally complete the project or phase.

Develop Project Charter
Inputs Tools and Techniques Outputs
 Project statement of work
 Business case
 Agreements
 Enterprise environmental
factors
Organizational Process
Assets
 Expert Judgment
 Facilitation Techniques
 Project Charter

Project Charter
 Project Title and Description
 Measurable project objectives and related success criteria,
 High-level requirements
 Assumptions and Constraints
 High level project descriptions and boundaries
 High Level Risks
 Summary milestone schedule
 Summary budget
 Stakeholder list
 Project Approval Requirements( i.e. What constitutes the project
success, who decide that the project is successful, and who signs off
the project)
 Project Manager Assigned and Authority Level (Who is given authority
to lead the project, and can he / she determine, manage and approve
changes to budget, schedule, staffing, etc.?)
 Name and Authority of the sponsor or other persons authorizing the
project charter.
.

Numeric Methods
 Benefit Measurement Model (also called Comparative
approach )
• Payback Period
• Cost Benefit Analysis
• Scoring Models
• Net Present Value (NPV)
• Internal Rate of Return (IRR)
 Mathematical Models (also called Constrained Optimization)
• Use linear, dynamic, non-linear, multi-objective programming
to solve problem
Project Selection Methods

Non Numeric Method
Sacred cow
Operating necessity
Murder Board
Competitive necessity

 Payback period – the amount of time to recover your cost. It
compares the initial investment to the cash inflows expected over
the life of the product.
• For example, Initial investment on a project is Rs. 4,00,000,
Expected cash inflows: Rs. 50,000 per quarter for first two
years, Rs. 100,000 per quarter thereafter.
• What is the payback period?
• Cash inflows = Rs. 50,000 x 4 (quarters in a year) = Rs. 2,
00,000 per year for first two years. Hence, year 1 inflow = Rs. 2,
00,000, year 2 inflow = Rs. 2, 00,000. Total Rs. 4, 00,000 in 2
years
• So payback is reached in 2 years.

 Benefit Cost Ratio (BCR) or profitability Index . This is the ratio of project benefit
and the project cost.
• BCR = Revenue / Cost
• Select the project with a higher BCR

 Present Value (PV) is the expected future cash flows expressed in
today’s monetary value
PV = FV / (1+r) n
• For example, Calculate the Present Value of $ 100,000
received three years from now. The interest rate is 10
percent.
• PV = 100000 / (1+10/100)3 = $ 75,131

 Net Present value (NPV) is the sum total of the Present Value of
Cash Inflows – Cash Outflows
NPV of the Project is 353-291 = 62
Select the project with higher NPV
TIME PERIOD INCOME/REVENUE PRESENT VALUE AT
10% INT RATE
COSTS PRESENT VALUE AT
10% INT RATE
0 0 0 200 200
1 50 45 100 91
2 100 83 0 0
3 300 225 0 0
TOTAL 353 291

 Internal Rate of Return (IRR): The rate of interest at which the revenues and
costs are equal.
• Select the project with a higher IRR.
 Return On Investment (ROI) – A return ratio that compares the net benefits of
a project/ product, verses its total cost.
• ROI = Operating Income / Investments

Scoring Model Weighted Criteria (example, using
scale of 1-5)
Item
Criteria
4 5 3
2 3 5
5 4 2
4 4 5
Good ROI 3 12 15 9 0 0
Weight Project A Project B Project C
CEO Likes It 5 10 15 25 0 0
Provide
Better
Service
4 20 16 8 0 0
Match New
Initiatives of
Competition
3 12 12 15 0 0
0 0 0 0 0
Total: 0Total: 54 Total: 58 Total: 57 Total: 0
Our Winner!!
(hmmmm…)

Sacred Cows and Pressing Needs
 “Sacred Cow” selection—Senior Management wants it!
(it may often turn out well; many visionary projects
start here)
 Business opportunity (make more $$$)
 Savings potential (save $$$)
 Keeping up with competition (example, many e-
commerce projects were in response to competitor’s
initiatives)
 Risk management (examples: disaster recovery
initiatives, Y2K)
 Government or regulatory requirements
URGENT!

Murder Board
“Murder Board" is a term often used for the team created to see if
they can push hard on a project plan to see where it will break.
This process is called by other names as well, depending on the
subject of the scrutiny and type of firm in which it is employed. For
a hard review of a proposal, it is usually called a "red team." Some
consulting firms call final briefing reviews "gauntlet drills."

Method Project A Project B Which One?
Scoring Model 17 20 B
Payback Period 24 Months 25 months A
Benefit Cost Ratio 3.5 4.5 B
Net Present Value
(NPV)
£95,000 £80,000 A
IRR 9.5% 11.5% B
Exercise 1: Which Project Will You Select

Project Management Plan
The project management plan defines how the
project is executed, monitored and controlled, and
closed. The project management plan content will
vary depending upon the application area and
complexity of the project.

Develop Project Management Plan
 Project Charter
 Outputs from other
Process
 Enterprise
environmental factor
 Organizational
Process Assets
 Expert Judgment
 Facilitation techniques
 Project
Management Plan

 Requirements Management Plan
 Scope management plan
 Schedule management plan
 Cost management plan
 Quality management plan
 Process improvement plan
 Human Resource management plan
 Communication management plan
 Risk management plan
 Procurement management plan
 Stakeholder management plan
 Project baselines (include but not limited to scope, schedule and
cost baselines)
Components of Project Management Plan

The project management plan may also include the following.
 Life cycle selected for the project and the processes that will be
applied to each phase
 Details of the tailoring decisions specified by the project
management team as follows
 Project management processes selected by the project management team
 Level of implementation for each selected process
 Description of the tools and techniques to be used for accomplishing those
processes and
 Description of how the selected processes will be used to manage the specific
project, including the dependencies and interactions among those processes and
the essential inputs and outputs.
 Description of how work will be executed to accomplish the
project objectives
 Change management plan that documents how the changes will
be monitored and controlled
 Configuration management plan that documents how the
configuration management will be performed

 Description of how the integrity of the project baselines will be
maintained
 Requirements and techniques for communicating among
stakeholders
 Key management reviews for the content, the extent of, and
timing to address, open issues and pending decisions

Direct and Manage Project Work
Direct and Manage Project Work is the process of performing
the work defined in the project management plan and
implementing approved changes to achieve the project’s
objectives.

Activities in Direct and Manage Project Work
The activities include, but are not limited to:
 Perform activities to accomplish project requirements;
 Create project deliverables
 Staff, train, and manage the team members assigned to the project
 Obtain, manage, and use resources including materials, tools,
equipment, and facilities

Activities in Direct and Manage Project Work
The activities include, but are not limited to:
 Establish and manage project communication channels, both external
and internal to the project team
 Generate project data, such as cost, schedule, technical and quality
progress, and status to facilitate forecasting
 Issue change requests and adapt approved changes into the project’s
scope, plans, and environment
 Manage risks and implement risk response activities
 Collect and document lessons learned, and implement approved process
improvement activities

Direct and Manage Project Work-
 Project Management
Plan
 Approved Change
Requests
 Enterprise
environmental factor
 Organizational Process
Assets
 Expert Judgment
Information System
 Meetings
 Deliverables
 Work Performance
Data
 Change Requests
 Project
Management Plan
updates
 Project Document
Updates

Monitor and Control Project Work
Monitor and Control Project Work is the process of tracking,
reviewing, and regulating the progress to meet the
performance objectives defined in the project management
plan.
Continuous monitoring gives the project management team
insight into the health of the project, and identifies any
areas that may require special attention. Control includes
determining corrective or preventive actions or re-planning
and following up on action plans to determine if the actions
taken resolved the performance issue.

Monitoring and Control Project Work
 Project Management Plan
 Schedule Forecasts
 Cost Forecasts
 Validated Changes
Information
 Enterprise environmental
factors
Assets
Expert Judgment
Analytical techniques
Project Management
Information Systems
Meetings
 Change requests
Reports
 Project management
plan updates
 Project document
updates

Perform Integrated Change Control
Perform Integrated Change Control is the process of review
in all change requests, approving changes and managing
changes to the deliverables, organizational process assets,
project documents and the project management plan.
The Perform Integrated Change Control process is conducted
from project inception through completion. The project
management plan, the project scope statement, and other
deliverables are maintained by carefully and continuously
managing changes, either by rejecting changes or by
approving changes thereby assuring that only approved
changes are incorporated into a revised baseline.

Perform Integrated Change Control
 Project management Plan
 Work performance
reports
 Change requests
factors
 Organizational process
assets
 Expert judgment
 Meetings
 Change control tools
 Approved change
requests
 Change log
plan updates
 Project documents
updates

Close Project or Phase
Close Project or Phase is the process of finalizing all
activities across all of the Project Management Process
Groups to formally complete the project or phase.
When closing the project, the project manager will review
all prior information from the previous phase closures to
ensure that all project work is complete and that the
project has met its objectives.

Close Project or Phase
 Accepted Deliverables
Assets
Expert Judgment
Analytical techniques
Meetings
Final product, service,
or result transition
Organizational process
assets updates

Revising Key Terms
Exercise 2: Integration Management
1. The project management plan is the collection of
______ Plans
2. Work Culture and company policies are called
Enterprise__________ Factors
3. ___________ is a document that gives the
project manager authority over the team

Revising Key Terms
Answer to Exercise 2: Integration Management
1. The project management plan is the collection of
Subsidiary Plans
2. Work Culture and company policies are called Enterprise
Environmental Factors
3. Project Charter is a document that gives the project
manager authority over the team

QUIZ !

Project Scope Management

Project Scope Management includes the processes
required to ensure that the project includes all the
work required, and only the work required, to
complete the project successfully. Managing the
project scope is primarily concerned with defining
and controlling what is and is not included in the
project.

Why Manage Project Scope?
 Some of the issues faced in projects
 Project teams believe the additional work is a change request, but
the client insists it is part of the original scope
 The project suddenly finds itself crunched for time. A number of
additional requirements are coming up along with the continuing
development work
 The client talks about a high level vision which the project is
expected to achieve, but the stakeholders are either unable to
articulate this vision in concrete objectives and deliverables or
provide conflicting views
 Contradicting requirements. Different interpretation of the same
statement by different people
 Commitment made to the customer without understanding the
application portfolio

 Plan Scope Management – The process of creating a scope
management plan that documents how the project scope will be
defined , validated and controlled
 Collect Requirements—The process of defining and documenting
stakeholders’ needs to meet the project objectives
 Define Scope—The process of developing a detailed description of the
project and product
 Create WBS—The process of subdividing project deliverables and
project work into smaller, more manageable components
 Validate Scope—The process of formalizing acceptance of the
completed project deliverables
 Control Scope—The process of monitoring the status of the project
and product scope and managing changes to the scope baseline

Plan Scope Management
Plan Scope Management is the process of creating a scope
management plan that documents how the project scope will
be defined , validated and controlled.
The key benefit of this process is that it provides guidance
and direction on how scope will be managed throughout the
project.

Plan Scope Management
 Project Charter
factors
 Organization process
assets
 Expert Judgment
 Meetings
 Scope
Management Plan
 Requirements
Management Plan

Scope Management Plan
The scope management plan is a component of the project or
program management plan that describes how the scope will be
defined, developed, monitored, controlled, and verified. The scope
management plan is a major input into the Develop Project
Management Plan process, and the other scope management
processes.

Scope Management Plan
The components of a scope management plan include:
• Process for preparing a detailed project scope statement
• Process that enables the creation of the WBS from the detailed
project scope statement
• Process that establishes how the WBS will be maintained and
approved
• Process that specifies how formal acceptance of the completed
project deliverables will be obtained and
• Process to control how requests for changes to the detailed project
scope statement will be processed.

Requirements Management Plan
The requirements management plan is a component of the project
management plan that describes how requirements will be analyzed,
documented, and managed.

Requirements Management Plan
Components of the requirements management plan can include, but
are not limited to:
• How requirements activities will be planned, tracked, and reported;
• Configuration management activities such as: how changes to the
product will be initiated, how impacts will be analyzed, how they will
be traced, tracked, and reported, as well as the authorization levels
required to approve these changes;
• Requirements prioritization process;
• Product metrics that will be used and the rationale for using them;
and
• Traceability structure to reflect which requirement attributes will be
captured on the traceability matrix.

Collect Requirements
(Planning Process Group)
Collect Requirements is the process of defining and
documenting stakeholders need to meet the project
objectives
Many organizations categorize requirements into project
requirements and product requirements. Project
requirements can include business requirements, project
management requirements, delivery requirements, etc.
Product requirements can include information on technical
requirements, security requirements, performance
requirements etc.

Product Scope: The features and functions in a product,
service, or result.
Project Scope: The work that needs to be done in order
to deliver a product, service or result
with the specified features and
functions.
Product Scope and Project Scope

Collect Requirements
 Scope management plan
 Requirements
management plan
 Stakeholder management
plan
 Project Charter
 Stakeholder Register
 Interviews
 Focus Groups
 Facilitated Workshop
 Group Creativity Techniques
 Group Decision Making
Techniques
 Questionnaires and surveys
 Observations
 Prototypes
 Benchmarking
 Context Diagrams
 Document analysis
 Requirements
Documentation
 Requirements
Traceability Matrix

Collect Requirements – Requirement Traceability Matrix

Define Scope
Define Scope is the process of developing a detailed
description of the project and product. The preparation
of a detailed project scope statement is critical to project
success and builds upon the major deliverables,
assumptions, and constraints that are documented during
project initiation.

Define Scope -
.
 Scope management
plan
 Project Charter
 Requirements
Documentation
Assets
 Expert Judgment
 Product Analysis
 Alternatives Identification
 Facilitated Workshops
 Project Scope
Statement
Updates

Project Scope Statement
 Project Objectives
 Product scope description
 Project requirement
 Project boundaries
 Project deliverables
 Product acceptance criteria
Project scope statement describes, in detail, the project’s
deliverables and the work required to create those deliverables
Project constraints/assumptions
 Initial identified risk
 Schedule milestones
 Initial project organization
 Fund limitation
 Configuration management
requirement
 Approval requirement

Create WBS
Create WBS is the process of subdividing project
deliverables and project work into smaller, more
manageable components.
The planned work is contained within the lowest level WBS
components, which are called work packages. A work
package can be scheduled, cost estimated, monitored, and
controlled.

Create WBS -
 Scope management
plan
 Project Scope
Statement
 Requirements
Documentation
 Enterprise
environmental factors
Assets
Decomposition
Expert judgment
 Scope Baseline
Updates

Create WBS
 The Work Breakdown Structure breaks down deliverables
 Work Packages are deliverables / work packages, NOT activities
AsampleWBSforacarmanufacturingproject

Phase-Based WBS
Partial WBS for Software Project Based on Phase
Planning
Reporting
Administration
Meetings
Documentation Planning
Project Management
Client Interviews
Review of Current Workflows
Business Objectives
Preliminary Test Planning
Training Requirements
Requirements
Process Models
Use Cases
Logical Data Models
Logical Design
Process Models
Use Cases
Physical Data Models
Logical Design
Design
etc.
Build
Customer Relationship Management System

Component-Based WBS
Partial WBS for Luxury Townhouse Complex by Component
Planning
Reporting
Administration
Meetings
Project Management
Townhouse Units
Clubhouse
Gatehouses
Pro Shop
Maintenance Staffing Requirements
Permits and Inspections
Buildings
Water and Sewers
Roads and Access Lanes
Retention Ponds
18-Hole Golf Course
Permits and Inspections
Land Planning
Advertising
Association Declarations
General Legal
Sales and Marketing
IYHTAYCAI* Village Project
(*If you have to ask, you can't affort it)

WBS Dictionary Template
WBS Dictionary
Project Name: WBS Name:
Start Date:WBS Owner:
WBS Detail:
WBS Element Description:
Acceptance Criteria:
Assumptions:
Resources Assigned:
WBS dependencies:
Cost:
Approved by: Date:
End Date:
Parent Id:WBS Id:

 Definition: An approved specific version of the detailed scope statement,
work breakdown structure (WBS), and its associated WBS dictionary
 When finalizing scope baseline, the items that are eliminated from the project
must be formally documented as exclusions to the project.
 If their exclusion is not properly documented, they may return again and
again as new requirements to be considered.
Scope Baseline

Validate Scope
Validate Scope is the process of formalizing acceptance of
the completed project deliverables. This process includes
reviewing deliverables with the customer or sponsor to
ensure that they are completed satisfactorily and obtaining
formal acceptance of deliverables by the customer or
sponsor.

 Once the scope of the project has been defined
and delivered, the scope of the project delivered must be verified.
 This means getting approval of the delivered scope of the project from all of the
stakeholders.
 It is a good practice to get the stakeholders to agree to the acceptance criteria at
the beginning of the project rather than at the end of it.
 A set of acceptance criteria is drawn up and the acceptance criteria are agreed to
when the project scope is accepted by the stakeholders.
Validate Scope

Validate Scope
 Requirements
Documentation
 Requirements Traceability
Matrix
 Verified Deliverables
 Work performance data
Inspection
Group decision making
techniques
 Accepted deliverables
 Change requests
information
updates

Control Scope
(Monitoring and Controlling Process Group)
Monitoring the status of the project and product scope and
managing changes to the scope baseline.

Control Scope
(Monitoring and Controlling Process Group )
 Requirements
Documentation
 Work Performance Data
 Requirements Traceability
Matrix
Assets
Variance Analysis  Work Performance
Information
 Change Requests
Plan Updates
Updates
 Organization Process
Assets Updates

Arrange the following activities in correct order
Exercise 1: Correct Order
Define
scope
Collect
Requirements
Create
WBS
Validate Scope

Revising Key Terms : Complete the following
Exercise 2: Scope Management Crossword
1. ____________ Scope means the features or functions of the thing or
service that you are building
2. The process where you write the project scope statement is called
_________ Scope

Revising Key Terms : Complete the following
Exercise 2: Scope Management Crossword
1. Product Scope means the features or functions of the thing or service that
you are building
2. The process where you write the project scope statement is called Define
Scope

Project Time Management

Project Time Management
Project Time Management includes the processes required to manage timely completion of
the project.
Plan schedule management – The process of establishing the policies, procedures and
documentation for planning, developing, managing, executing and controlling the project schedule
Define Activities—The process of identifying the specific actions to be performed to produce the
project deliverables.
Sequence Activities—The process of identifying and documenting relationships among the project
activities.
Estimate Activity Resources—The process of estimating the type and quantities of material, people,
equipment, or supplies required to perform each activity.
Estimate Activity Durations—The process of approximating the number of work periods needed to
complete individual activities with estimated resources.
Develop Schedule—The process of analyzing activity sequences, durations, resource requirements,
and schedule constraints to create the project schedule.
Control Schedule—The process of monitoring the status of the project to update project progress
and managing changes to the schedule baseline.

Plan Schedule Management
Plan schedule Management is the process of establishing the policies,
Procedures, and documentation for planning, developing, managing
and controlling the project schedule
The key benefit of this process is that it provides direction on how the
project schedule will be managed throughout the project.

plan
 Project charter
 Enterprise Environment
Factors
Assets
 Expert Judgment
 Analytical techniques
 Meetings
 Schedule
management plan

The schedule management plan can establish the following:
• Project schedule model development. The scheduling methodology and the
scheduling tool to be used
• Level of accuracy. The acceptable range used in determining realistic activity
duration estimates is
.
• Units of measure. Each unit used in measurements (such as staff hours, staff
days, or weeks for time
• Organizational procedures links. The WBS provides the framework for the
schedule
.
• Project schedule model maintenance. The process used to update the status
and record progress of

• Control thresholds. Variance thresholds for monitoring schedule performance
may be specified to indicate
An agreed-upon amount of variation to be allowed before some action needs to be taken.
Thresholds are typically expressed as percentage deviations from the parameters
established in the baseline plan.

Define Activities
Define Activities is the process of identifying and documenting the
specific actions to be performed to produce the project deliverables.
The key benefit of this process is to break down work packages into
Activities that provide a basis for estimating, scheduling, executing,
Monitoring , and controlling the project work.

Define Activities
 Schedule management
plan
 Scope Baseline
 Enterprise Environment
Factors
Assets
 Decomposition
 Rolling Wave Planning
 Expert Judgment
 Activity List
 Activity Attributes
 Milestone List

Define Activities : Inputs
Schedule Management Plan - provides direction on how the project schedule will
be managed throughout the project.
Scope Baseline provides the project deliverables, assumptions and constraints
Enterprise Environmental Factors that can influence the Define Activities process
include, but are not limited to, the project management information system (PMIS).
Organizational Process Assets that can influence the Define Activities process
include, but are not limited to:
 Existing formal and informal activity planning-related policies, procedures, and
guidelines, such as the scheduling methodology, that are considered in developing the
activity definitions, and
 Lessons-learned knowledge base containing historical information regarding
activities lists used by previous similar projects.

Define Activities : Tools and Techniques
Decomposition involves subdividing the project work packages into smaller, more
manageable components called activities.
Rolling Wave Planning is a form of progressive elaboration planning where the work
to be accomplished in the near term is planned in detail and future work is planned at
a higher level of the WBS.
Templates is a standard activity list or a portion of an activity list from a previous
project is often usable as a template for a new project. The related activity attributes
information in the templates can also contain other descriptive information useful in
defining activities.

Define Activities : Outputs
Activity List is a comprehensive list including all schedule activities required on the
project.
Activity attributes depicts the multiple components associated with each activity
 Activity ID, WBS ID, Activity Name, activity description, predecessor activities,
successor activities, logical relationships, leads and lags, resource requirements,
imposed dates, constraints, and assumptions.
 Activity attributes can be used to identify the person responsible for executing the
work, geographic area, or place where the work has to be performed, and activity type
such as level of effort (LOE), discrete effort, and apportioned effort (AE).
Milestone List identifies all milestones and indicates whether the milestone is
mandatory, such as those required by contract, or optional, such as those based upon
historical information.

Sequence Activities
Sequence Activities is the process of Identifying and documenting
relationships among the project activities.
The key benefit of this Process is that it defines the logical sequence of
Work to obtain the greatest efficiency given all project constraint.

Sequence Activities
plan
 Activity List
 Milestone List
Project Scope Statement
Factors
Assets
 Precedence Diagramming
Method (PDM)
 Dependency determination
 Leads and Lags
 Project Schedule
Network Diagrams
Updates

Sequence Activities - Inputs
Schedule Management Plan - provides direction on how the project schedule will be
managed throughout the project.
Activity List – Output of Define Activities process
Activity Attributes – Output of Define Activities process
Milestone List - Output of Define Activities process
Project Scope Statement – Output of Define Scope Process
Organizational Process Assets - The organizational process assets that can
influence the Sequence Activities process include, but
are not limited to, project files from the corporate knowledge base used for scheduling
methodology.

Sequence Activities – Tools and Techniques
Precedence Diagramming Method (PDM)- Also known as activity on node (AON)
as the activities are represented on nodes and the logical relationship between
activities is represented through arrows
The relationship in the figure below represents that the Activity B is dependent on
Activity A.i.e. Activity B can only start after the completion of activity A
BA

Types of dependencies in PDM
Finish – to – Start (FS) – This relationship means Task A must complete before Task
B can begin. This is the most common relationship.
Finish – to – Finish (FF) - Finish of successor activity depends on finish of the
predecessor
Start-to-Start (SS) – Start of a successor activity depends on start of a predecessor
activity.
Start- to – Finish (SF) – Finish of Successor depends on the start of preceding
activity.

Dependency Determination
There are three kinds of dependencies, Mandatory dependency, Discretionary
dependency and external dependency
Mandatory dependencies referred as hard logic are natural order of activities or
which are contractually required.
Discretionary dependencies referred as preferred logic, soft logic or preferential
logic are defined as best practices and are considered the preferred choice among the
other alternatives.
External dependencies are external to the project and are not in project’s control.
E.g. Deliverable from other project or expected new law etc

Estimate Activity Resources
Estimate Activity Resources is the process of estimating the
type and quantities of material, human resources,
Equipment, or supplies required to perform each activity.
The key benefit of this process is that it identifies the type,
Quantity, and characteristics of resources required to
Complete the activity which allows more accurate cost and
duration estimate

Estimate Activity Resources
 Schedule Management
Plan
 Activity List
 Resource Calendars
 Risk Register
 Enterprise Environmental
Factors
Assets
 Expert judgment
 Alternatives analysis
 Published estimating data
 Bottom-up estimating
 Project management software
 Activity resource
requirements
 Resource
breakdown structure
 Project
management
updates

Estimate Activity Resources - Inputs
Schedule Management Plan – Identifies the level of accuracy and the units of
measure for the resource to be estimated
Activity List – Identifies the activities which will need resources
Activity Attributes – Provide the primary data input for use in estimating those
resources required for each activity in the activity list.
Resource Calendar – Resource calendars specify when and how long identified
project resources will be available during the project
Enterprise Environmental Factors- The enterprise environmental factors that can
influence the Estimate Activity Resources process include but are not limited to
resource availability and skills
Organizational Process Assets – that influence this process include but are not
limited to; Policies and Procedures related to staffing, policies and procedures related
to rental purchase of supplies and equipments, Historical information regarding types
of resources used for similar work on previous projects

Estimate Activity Resources –Tools and Techniques
Expert Judgment is often required to assess the resource-related inputs to this
process. Any group or person with specialized knowledge in resource planning and
estimating can provide such expertise.
Alternatives Analysis
Many schedule activities have alternative methods of accomplishment. They include
using various levels of resource capability or skills, different size or type of machines,
different tools (hand versus automated), and make-or-buy decisions regarding the
resource.
Published Estimating Data
Several companies routinely publish updated production rates and unit costs of
resources for an extensive array of labor trades, material, and equipment for different
countries and geographical locations within countries.

Bottom-Up Estimating When an activity cannot be estimated with a reasonable
degree of confidence, the work within the activity is decomposed into more detail. The
resource needs are estimated. These estimates are then aggregated into a total
quantity for each of the activity’s resources. Activities may or may not have
dependencies between them that can affect the application and use of resources. If
there are dependencies, this pattern of resource usage is reflected and documented in
the estimated requirements of the activity.
Project Management Software Project management software has the capability to
help plan, organize, and manage resource pools and develop resource estimates.
Depending on the sophistication of the software, resource breakdown structures,
resource availability, resource rates and various resource calendars can be defined to
assist in optimizing resource utilization.
Estimate Activity Resources –Tools and Techniques

Estimate Activity Resources – Outputs
Activity Resource Requirements identifies the types and quantities of resources
required for each activity in a work package. These requirements can then be
aggregated to determine the estimated resources for each work package. The amount
of detail and the level of specificity of the resource requirement descriptions can vary
by application area. The resource requirements documentation for each activity can
include the basis of estimate for each resource, as well as the assumptions that were
made in determining which types of resources are applied, their availability, and what
quantities are used.
Resource Breakdown Structure is a hierarchical structure of the identified
resources by resource category and resource type. Examples of resource categories
include labor, material, equipment, and supplies. Resource types can include the skill
level, grade level or other information as appropriate to the project. The resource
breakdown structure is useful for organizing and reporting project schedule data with
resource utilization information.
Project Documents may be updated include, but are not limited to:
 Activity list,
 Activity attributes, and
 Resource calendars.

Estimate Activity Duration
Estimate Activate Durations is the process of estimating the
Number of work periods needed to complete individual
Activities with estimated resources.
The key benefit of this process is that it provides the
amount of time each activity will take to complete, which is
a major input to Develop schedule process.

Estimate Activity Duration
plan
Activity List
 Activity Resource
Requirements
 Project Scope Statement
 Risk Register
 Resource Breakdown
Structure
 Enterprise Environmental
Factors
Assets
 Expert judgment
 Analogous Estimating
 Parametric Estimating
 Three point estimates
 Group decision making
techniques
 Reserve Analysis
Activity duration
updates
Project document
updates

Estimate Activity Duration - Inputs
Schedule Management Plan – defines the method used and the level of accuracy
along with other criteria required to estimate activity durations including the project
update cycle.
Activity List – Defines activity list that will need duration estimates.
Activity Attributes- Output of Define Activities process
Activity Resource Requirements –The number of resources allocated will impact
the duration of most of the activities.
Resource Calendars - can include the type, availability, and capabilities of human
resources. The type, quantity, availability, and capability, when applicable, of both
equipment and material resources, which could significantly influence the duration of
schedule activities, are also considered. Examples such as Existing conditions,
Availability information and length of the reporting periods. Examples of constraints
include , Available skilled resources and contract terms and requirement.

Estimate Activity Duration - Inputs
Project Scope Statement- The assumptions and constraints from the project scope
statement are considered when estimating the activity durations. This includes
 Existing conditions
 Availability of information
 Length of the reporting periods
Examples of constraints include, but are not limited to
 Available skilled resources
 Contract terms and requirements
Enterprise Environmental Factors that can influence the Estimate Activity
Durations process include, but are not limited to: Duration estimating databases and
other reference data, Productivity metrics, and Published commercial information.
Organization Process Assets that can influence the Estimate Activity Durations
process include but are not limited to: Historical duration information, Project
calendars, Scheduling methodology and Lessons learned.

Expert Judgment guided by historical information, can provide duration estimate
information or recommended maximum activity durations from prior similar projects.
Expert judgment can also be used to determine whether to combine methods of
estimating and how to reconcile differences between them.
Analogous estimating uses parameters such as duration, budget, size, weight, and
complexity, from a previous, similar project, as the basis for estimating the same
parameter or measure for a future project.
Parametric Estimating Parametric estimating uses a statistical relationship between
historical data and other variables (e.g., square footage in construction) to calculate
an estimate for activity parameters, such as cost, budget, and duration.
Reserve Analysis include contingency reserves, (sometimes referred to as time
reserves or buffers) into the overall project schedule to account for schedule
uncertainty. The contingency reserve may be a percentage of the estimated activity
duration, a fixed number of work periods, or may be developed by using quantitative
analysis methods.
Estimate Activity Duration – Tools and Techniques

Estimate Activity Duration – Tools and Techniques
Three-Point Estimates (PERT) is based on statistical methods in particular normal
distribution. The estimation of activity duration is done based on the following three
points
Most likely (M). The duration of the activity, given the resources likely to be
assigned, their productivity, realistic expectations of availability for the activity,
dependencies on other participants, and interruptions.
Optimistic (O). The activity duration is based on analysis of the best-case scenario
for the activity.
Pessimistic (P). The activity duration is based on analysis of the worst-case scenario
for the activity.
PERT analysis calculates an Expected (E) activity duration using a weighted average
of these three estimates:
Double Triangular or Beta Distribution - E = O + 4M + P/6 , Standard Deviation -
SD= P-0/6
Triangular Distribution – E= 0+M+P/3 ,
Standard Deviation =√ 02+M2+P2-OM-MP-PO/18

Develop Schedule
Develop schedule is the process of analyzing activity
sequences, durations, resource requirements, and
schedule constraints to create the project schedule model.
The key benefits of this process is that by entering schedule
activities , durations, resources, resource availabilities and
Logical relationships into the scheduling tool , it generates a
schedule model with planned dates for completing project
activities

Develop Schedule
 Activity List
 Activity attributes
 Project schedule
network diagrams
 Activity resource
requirements
 Resource calendars
 Activity duration
estimates
 Project scope
statement
 Project staff
assignments
 Resource Breakdown
Structure
 Risk Register
 Enterprise
 Organizational
Process Assets
 Schedule network analysis
 Critical path method
 Critical chain method
 Resource optimization techniques
 Modeling techniques
 Leads and lags
 Schedule compression
 Scheduling tool
Project schedule
Schedule baseline
Schedule data
 Project Calendars
Plan updates
Project document
updates

Schedule Management Plan – Identifies the scheduling method and tool used to
create the schedule and how schedule is to be calculated.
Activity List – Identifies the activities that will be included in the schedule model
Activity attributes – Provide the details used to build the schedule model.
Project schedule network diagram – contains logical relationship between
predecessor and successor that will be used to build the schedule.
Activity resource requirements – Identify the types and quantities of resources
required for each activity used to create the schedule model.
Resource calendars- specify when and how long identified project resources will be
available during the project
Activity duration estimates contain the quantitative assessment of the likely
number of work periods that will be required to complete an activity that will be used
to calculate the schedule.
Develop Schedule - Inputs

Project scope statement- contains assumptions and the constraints that can impact
the development of the schedule.
Enterprise Environmental Factors that can influence the Develop Schedule process
include, but are not limited to, a scheduling tool that can be used in developing the
schedule.
Organizational Process Assets The organizational process assets that can influence
the Develop Schedule process include, but are not limited to:
Scheduling methodology and Project calendar.
Develop Schedule - Inputs

Develop Schedule Tools and Techniques
The critical path method calculates the theoretical early start and finish
dates, and late start and finish dates, for all activities without regard for
any resource limitations, by performing a forward and backward pass
analysis through the schedule network.
Critical Chain Method is a schedule network analysis technique that
modifies the project schedule to account for limited resources. The
resource-constrained critical path is known as the critical chain. The critical
chain method adds duration buffers that are non-work schedule activities to
manage uncertainty.

Resource Optimization Techniques – that can be used to Adjust the
schedule model due to demand and supply of resources include.
Resource Levelling - Is necessary when resources have been over-
allocated, such as when a resource has been assigned to two or more
activities during the same time period, when shared or critical required
resources are only available at certain times or are only available in limited
quantities. Resource leveling can often cause the original critical path to
change.
Resource Smoothing – A technique that adjusts the activities of a
schedule model such that the requirements for resources on the project do
not exceed certain predefined resource limits. There is no change in the
project completion date the activities may only be delayed within their free
and total float.

Modeling Techniques include
What-If Scenario Analysis- A schedule network analysis is performed
using the schedule to compute the different scenarios, such as delaying a
major component delivery, or introducing external factors, such as a strike
The outcome of the what if scenario analysis can be used to assess the
Feasibility of the project schedule under adverse conditions
Simulation involves calculating multiple project durations with different
sets of activity assumptions. The most common technique is Monte Carlo
Analysis in which a distribution of possible activity durations is defined for
each activity and used to calculate a distribution of possible outcomes for
the total project.

Applying Leads and Lags - Leads and lags are refinements applied during network
analysis to develop a viable schedule.
Schedule Compression
Crashing. A schedule compression technique in which cost and schedule tradeoffs are
analyzed to determine how to obtain the greatest amount of compression for the least
incremental cost. Examples of crashing could include approving overtime, bringing in
additional resources, or paying to expedite delivery to activities on the critical path.
Crashing only works for activities where additional resources will shorten the duration.
Crashing does not always produce a viable alternative and may result in increased risk
and/or cost.
Fast tracking. A schedule compression technique in which phases or activities
normally performed in sequence are performed in parallel. An example is constructing
the foundation for a building before completing all of the architectural drawings. Fast
tracking may result in rework and increased risk. Fast tracking only works if activities
can be overlapped to shorten the duration.

Scheduling Tool - Automated scheduling tools expedite the scheduling
process by generating start and finish dates based on the inputs of
activities, network diagrams, resources and activity durations. A scheduling
tool can be used in conjunction with other project management software
applications as well as manual methods.

Develop Schedule Outputs
Schedule Baseline - is a real or theoretical construct that captures the approved
schedule. It is used to provide a comparison or contrast with the actual progress of
work against the schedule and to determine if performance to date is within
acceptable parameters.
Project schedule displays the start and end dates of all the activities in the project
and the same for overall project. It can be represented in the form of Gantt Chart,
Milestone Chart or a project network diagram.
Schedule data is the data on the basis of which schedule was developed. It includes
resource requirements by time period, alternative schedules such as best-case or
worst case, not resource leveled or resource leveled with, or without imposed dates
and scheduling of contingency reserves

Develop Schedule Outputs
Project Calendars – A project calendar identifies working days and shifts that are
available for scheduled activities. It distinguishes time period in days or part of days
that are available to complete scheduled activities from time period that are not
available.
Project Management Plan Updates – Elements of the project management plan
that may be updated include
 Schedule baselines
 Schedule management plan
Project document updates includes updates to resource requirement, activity
attributes, risk registers and calendars

For the network diagram below find Critical Path, float for activity A and E
Exercise : Critical Path

Exercise : Forward and Backward Pass

Complete the following Project Network Diagram

Based on the portion of network diagram shown below find ES and LF for
activity F

Control Schedule
(Monitoring and Controlling Process Group)
Control Schedule is the process of monitoring the status of the
project to update project progress and manage changes to the
schedule baseline.

Control Schedule
Control Schedule is the process of monitoring the status of
project activities to update project progress and manage
changes to the schedule baseline to achieve the plan.
The key benefit of this process is that it provides the means
to recognize deviation from the plan and take corrective
action and preventive actions and thus minimizes risk.

Control Schedule
plan
 Project schedule
 Work performance data
 Organizational process
assets
 Performance reviews
Software
 Resource optimization
techniques
 Modeling techniques
 Leads and lags
 Schedule compression
 Scheduling tool
information
 Schedule forecasts
 Change Requests
Plan updates
updates
asset updates

Control Schedule- Inputs
Project Management Plan is a formal, approved document that defines how the
project is executed, monitored and controlled.
Project Schedule is the primary input to this process, since it is the source against
which the results are controlled.
Work Performance Data details the work that is being executed, recently
completed, and next steps. This information is gathered from the Direct and Manage
Project execution process.
Project Calendars - A schedule model may require more than one project calendar
to allow for different work periods for some activities to calculate the schedule
forecasts.

Control Schedule- Inputs
Schedule Data will be reviewed and updated in the Control Schedule process.
Organizational Process Assets can be a system for formally evaluating schedule
change, or a software system to help detect changes or measuring variance

Control Schedule- Tools and Techniques
Performance Reviews keeps project manager updated on how project is progressing
against the base lined schedule. Some of the techniques that can be used for
performance reviews are :
 Trend analysis – examines project performance over time to determine whether
performance is improving or deteriorating.
 Critical path method – Comparing the progress along the critical path can help
determine schedule status. The variance on the critical path will have a direct impact
on the project end data. Evaluating the progress of activities on near critical paths can
identify schedule risk.
 Critical Chain method- Comparing the amount of buffer remaining to the amount
of buffer needed to protect the delivery date can help determine schedule status. The
difference between the buffer needed and the buffer remaining can determine whether
corrective action is appropriate.
 Earned Value Management - Measurements such as SV and SPI helps you to
know whether you are ahead or behind in terms of the schedule.

Project Management Software automates the other tools and techniques in control
schedule
Resource optimization techniques involves the scheduling of activities and
resources required by those activities while taking into consideration both the resource
availability and the project time.
Modeling techniques are used to review various scenarios guided by risk monitoring
to bring the schedule model into alignment with the project management plan and
approved baseline.

Leads and lags have impact on the schedule and as the project progresses lead and
lags need to be adjusted to reflect reality so as to provide the most realistic view of
the schedule possible
Schedule compression includes shortening the duration of the plan through
Crashing and Fast tracking
Scheduling tool provides various features (Views, reports etc) that helps in
managing the schedule

Control Schedule- Outputs
Work Performance Information– The updated schedule performance index (SPI)
, Schedule variance (SV) and other earned value measurements relevant to the
schedule need to be calculated and communicated out.
Change Requests – Any change in the schedule due to change in scope or due to
any other valid reason requires Change Request.
Project Management Plan Updates - As the schedule changes, the project
management plan is updated.
Project Document Updates – This includes any project document (Other than
project management plan) that has changed as a result of Control Schedule. For
example Scheduled data such as revised planned start and finish dates, Project
schedule and the Risk register
Organization Process Updates – Any times a lesson is learned in Control Schedule,
it becomes a reusable asset for the performing organization.

Complete the following
Exercise 3: Time Management
1. Adding more resources to a project so you can get it done
faster is called____________ .
2. _________ is the process where you put the activities in
order.

Answers to Exercise 3: Time Management
1. Adding more resources to a project so you can get it done
faster is called Crashing .
2. Sequence Activities is the process where you put the
activities in order.

QUIZ !

Project Cost Management
pankaj sharma, 9810996356

Project Cost Management
Project Cost Management includes the processes involved in estimating,
budgeting, and controlling costs so that the project can be completed
within the approved budget.

Cost Management Processes
Process Process Group
Plan Cost Management Planning
Estimate Costs Planning
Determine Budget Planning
Control Costs Monitoring and Controlling

Estimate Costs
Estimate Costs is the process of developing an approximation of the
monetary resources needed to complete project activities. The table below
shows five different types of estimates that can be used based on the need.
Estimate Type Range
Order of Magnitude Estimates -50% to +50%
Conceptual Estimate -30% to +50%
Preliminary Estimate -20% to +30%
Definitive Estimate -15% to +20%
Control Estimate -10% to +15%

 Direct Cost- Any cost that is identified specifically with a particular final
cost objective.
 Indirect Cost- Any cost not directly identified with a single, final cost
objective (more than one project)
 Fixed Cost - Periodic charge that does not vary with business volume
 Variable Cost - Cost that fluctuates based on the business volume
 Opportunity Cost: When there is a decision to be made between two
opportunities, the opportunity cost is the value / money forgone for the not
doing the project.
Types of Cost

• Lifecycle Costing: Takes into account cost of development of a project
and also the cost of supporting during the lifecycle.
• Sunk Cost - Cost already incurred which cannot be recovered regardless
of future events
Types of Cost

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

Plan Cost Management
Plan
 Project Charter
Enterprise
Assets
 Expert Judgment
 Analytical Techniques
 Meetings
 Cost Management
Plan

Plan Cost Management- Inputs
Project Management Plan component that is important for this process are
primarily the scope and cost baselines.
Project Charter provides the summary budget from which the detailed project costs
are developed . It also defines the project approval requirements that will influence
the management of the project costs.
Enterprise Environmental Factors include factors such as Organization
structure/culture, Market conditions, currency exchange rates (for project sourced
from more than one country) that influence the project cost.
Organizational Process Assets include financial control procedures , historical
information . Existing formal and informal cost estimating and budgeting related
policies, procedures and guidelines.

Plan Cost Management- Tools and Techniques
Expert Judgment – Guided by historical information, provides valuable insight about
the environment and information from prior similar projects. Judgment based upon
expertise in an application area, knowledge area , discipline, industry can be useful in
this process.
Analytical Techniques – Some of the techniques payback period, return on
investment, internal rate of return, discounted cash flow and net present value can be
useful in this process
Meetings - Project teams may hold meetings planning meetings to develop the cost
management plan. These meetings may include, project sponsor, project manager,
selected team members , selected stakeholders, anyone with responsibility for project
costs.

Plan Cost Management- Outputs
Cost Management Plan – is a component of the project management plan and
describes how the project costs will be planned, structured , and controlled. The cost
management plan can establish the following.
 Units of measure - Each unit of measure for each resource.
 Level of precision – The degree to which activity cost estimates will be rounded up
or down.
 Level of accuracy - The acceptable range (e.g. +_ 100%) used in determining
realistic activity cost estimates is specified , may include an amount for contingencies.
 Control threshold – Variance threshold for monitoring cost performance may be
specified to indicate an agreed – upon amount of variation to be allowed before some
action need to be taken.

Plan Cost Management- Outputs
The cost management plan also contains.
 Rules of performance measurement – Earned value management (EVM) rules of
performance measurement are set. For example
 Define the points in the WBS at which measurement of control accounts will be
performed
 Establish the earned value measurement techniques (e.g. weighted
milestones, fixed formula, percent complete, etc) to be used and
 Specify tracking methodologies and the earned value management
computation equations for calculating projected estimate at completion (EAC)
forecasts to provide a validity check on the bottom-up EAC

Estimate Cost
Estimate cost is the process of developing an approximation of the
monetary resources needed to complete project activities. The key
benefit of this process is that it determines the amount of cost
required to complete project work.

Estimate Costs
 Cost Management Plan
 Human Resource
Management Plan
 Scope baseline
 Risk Register
 Enterprise
Assets
 Expert Judgment
 Analogous Estimating
 Parametric estimating
 Bottom-up estimating
 Three-point estimates
 Cost of Quality
estimating software
 Vendor bid analysis
 Group decision – making
techniques
 Activity Cost
estimates
 Basis of estimates
updates

Estimate Costs - Inputs
Cost management plan – The cost management plan defines how project costs will
be managed and controlled . It includes the method used and the level of accuracy
required to estimate activity cost.
Human Resource Plan provides detail on Project staffing attributes, personnel rates,
and related rewards/recognition, these are necessary components for developing the
project cost estimates.
Scope baseline include inputs from scope statement, Work Breakdown Structure and
WBS dictionary.
Project Schedule provides detail on the type and quantity of resources and the
amount of time which those resources are applied to complete the work of the project,
all these factors directly impact the cost
Risk Register provides input related to costs associated with risk response

Estimate Costs - Inputs
Enterprise Environmental Factors include availability of resources, published
commercial information
Organizational Process Assets – include cost estimating policies, historical
information, cost estimating templates and lesson learned

Estimate Costs -Tools and Techniques
Expert Judgment guided by historical information, provides valuable
insight about the environment and information from prior similar projects. Expert
judgment can also be used to determine whether to combine methods of estimating and
how to reconcile differences between them.
Analogous Estimating relies on historical information (Previous projects executed by
the organization) to predict the cost of current project. This is a top-down approach is
good for fast estimates to get a general idea of what the project may cost. The accuracy
depends upon how similar the two projects actually are.
Parametric estimating uses a mathematical model based on known parameters to
predict the cost of a Project. A parameter can be cost per unit, cost per cubic yard etc.
Two Parametric estimating techniques are Regression Analysis and Leaning curve.

Bottom-up estimating produces a separate estimate for each scheduled activity. The
detailed cost is then summarized or “rolled up” to higher levels for subsequent reporting
and tracking purposes. The cost and accuracy of bottom-up cost estimating is typically
influenced by the size and complexity of the individual activity or work package.
Three-point estimates concept originated with the program evaluation and review
technique (PERT). PERT uses three estimates to define an approximate range for an
activity’s cost:
Triangular Distribution
Estimated Cost = Optimistic + Most Likely + Pessimistic)/ 3
Beta Distribution
ESTIMATED COST = (Optimistic + 4*(Most Likely) + Pessimistic) / 6

Reserve Analysis adds reserve amount (Contingency) to the cost. This is done to take
care of uncertainties in the project.
Cost of Quality includes assumptions related to Cost of Quality
Project management software is helpful in performing calculations, Organizing and
storing large amount of information needed for preparing cost estimates and for
reporting purpose
Vendor bid analysis may include analysis of what the project should cost, based on the
responsive bids from qualified vendors.
Group Decision Making Techniques Team – based approaches , such as
brainstorming, the Delphi or nominal group techniques, are used for engaging team
members to improve estimate accuracy and commitment to the emerging estimates.

Estimate Costs - Outputs
Activity Cost estimates details how much it would cost to complete each schedule
activity on the project
Basis of estimates include supporting documentation of the cost estimates and it
may include documentation of the basis of estimates , documentation of all
assumptions made , documentation of any known constraint , indication of the range
of possible estimates and indication of the confidence level of the final estimates
Project document updates include project risk register and cost management plan

Revise Tools to Estimate Cost
Exercise : Estimate Cost
1. You figure out a best case scenario and , a likely scenario and a worst
case scenario. Then you use a formula to come up with an expected cost
for the project. The tool used by you is ________
2. John creates a document with all the historical information from similar
project he had done in past and also takes input from a contractor who
provides his input. The tool used by John is_________

Revise Tools to Estimate Cost
Answers to Exercise : Estimate Cost
1. You figure figures out a best case scenario and , a likely scenario and a
worst case scenario. Then you use a formula to come up with an
expected cost for the project. The tool used by you is Three-point
estimate
2. John creates a document with all the historical information from similar
project he had done in past and also takes input from a contractor who
provides his input. The tool used by John is Expert Judgment

Determine Budget
Determine Budget is the process of aggregating the estimated costs of individual
activities or work packages to establish an authorized cost baseline. This baseline
includes all authorized budgets, but excludes management reserves.

Determine Budget
 Cost management
plan
Activity cost estimates
 Basis of estimate
 Scope baseline
 Risk register
 Agreements
Assets
 Cost Aggregation
 Expert Judgment
 Historical relationship
 Funding limit reconciliation
 Cost baseline
 Project funding
requirements
updates

Cost Management Plan - describes how the project costs will be managed and
controlled
Scope baseline refers to collection of approved project scope statement and its
associated WBS and WBS dictionary.
Activity cost estimates of a work package is a summation of the activity cost
estimates of activities under the work package
Basis of estimate includes supporting detail for cost estimates contained in the basis
for estimates should specify any basic assumptions
Project Schedule helps in mapping the cost back to time for planning purpose
Determine Budget - Inputs

Resource Calendars along with Project schedule will help plan for when the costs will
be incurred
Agreements Applicable agreement information and costs relating to products,
services or results that have been or will be purchased are included when determining
the budget.
Organizational Process Assets include cost budgeting policies procedures ,
guidelines and reporting method
Determine Budget - Inputs

Determine Budget – Tools and Techniques
Cost Aggregation involves aggregating the costs of individual activities to work
packages that are further aggregated to higher levels of WBS and finally into the
project cost
Reserve Analysis include contingency reserve and management reserves for the
project. Contingency reserves are allowances for response plan strategized for the
identified risks. These are also known as “known unknowns” . Management reserves
are allowance for unplanned changes to thee project scope and cost. The are also
known as “unknown unknowns”. Reserves are not the part of the project cost baseline.
Expert Judgment can be taken from experienced consultant in the project application
area. This can be from an internal organizational resource or external sources

Determine Budget – Tools and Techniques
Historical relationship result in parametric estimates or analogous estimates that
involve parameter to develop mathematical models to predict total project costs.
Funding limit reconciliation refers to reconciliation of planned spending with the
funding limit

Determine Budget – Outputs
Cost performance baseline is an authorized time-phased budget at completion
(BAC) used to measure, monitor, and control overall cost performance on the project.
It is developed as a summation of the approved budgets by time period and is
typically displayed in the form of an S-curve, as is illustrated in Figure below
(Reference PMBOK 4th edition). In the earned value management technique the cost
performance baseline is referred to as the performance measurement baseline (PMB).
Reference PMBOK 5th Edition

Determine Budget – Outputs
Project funding requirements are derived from cost baselines. Total funding
requirement is sum of cost baseline and management reserve.
Project document updates include updates to risk register, cost estimates and
project schedule

Project Budget Components

Revise Tools to Determine Budget
Exercise 2: Determine Budget
Monika reads a newspaper article that says there has been sharp increase in steel
cost recently. She knows this was not in her contractor’s original plan and decides to
put a few hundred dollars aside to deal with the price hike if it should happen. The
tool used by Monika is
• Parametric estimating
• Reserve analysis
• Cost aggregation
• Fund Limit Reconciliation

Revise Tools to Determine Budget
Answers to Exercise 2: Determine Budget
Monika reads a newspaper article that says there has been sharp increase in steel
cost recently. She knows this was not in her contractor’s original plan and decides to
put a few hundred dollars aside to deal with the price hike if it should happen. The
tool used by Monika is
• Parametric estimating
• Reserve analysis
• Cost aggregation
• Fund Limit Reconciliation

Control Costs
Control Costs is the process of monitoring the status of the project
to update the project budget and managing changes to the cost
baseline.

Control Costs
plan
 Project Funding
Requirements
data
Assets
□ Earned value management
□ Forecasting
□ To-complete performance
index TCPI
□ Performance reviews
□ Project management software
□ Reserve analysis
Information
 Cost forecasts
 Change Requests
 Project
management plan
updates
updates
 Organizational
Process assets
updates

Project Management Plan contains Cost management plan and Cost performance
Baseline, these are helpful in controlling the cost.
Project Funding Requirements As explained earlier include projected expenditures
plus anticipated liabilities
Work Performance Data provides information on the status and cost of project
activities and ensures that the project goals and objectives are met as per the project
management plan
Organizational Process Assets that can influence this process include cost
budgeting policies, procedures, guidelines , cost budgeting tools and reporting
methods
Control Costs - Inputs

Control Costs – Tools and Techniques
Earned value management is used to measure the performance of the project, It
integrates project scope, cost, and schedule measures to help the project management
team assess and measure project performance and progress. The EVM technique
involves evaluating the planned value , Earned Value and the Actual cost for each
schedule activity , work package or control account.
1. Planned Value (PV) is the authorized budget assigned to the scheduled work to be
accomplished for a schedule activity or work breakdown structure component. It is
also known as Budgeted Cost of Work Scheduled (BCWS)
2. Earned Value (EV) is the value of work performed expressed in terms of the
approved budget assigned to that work for a schedule activity or a WBS
component. It is also known as Budgeted cost of Work Performed (BCWP)
3. Actual Cost (AC) is the total cost actually incurred and recorded in accomplishing
work performed for an activity or work breakdown structure component.

PMP PPTs PMBOK 5th Edition - Author Pankaj Sharma, PMP,PMI-ACP

PMP PPTs PMBOK 5th Edition - Author Pankaj Sharma, PMP,PMI-ACP

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PMP PPTs PMBOK 5th Edition - Author Pankaj Sharma, PMP,PMI-ACP