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Project P j t Management M t Methodology M th d l with ith PMP Exam Preparation Day 3

Aamir Thanawala PMP, Prince2 Practitioner, ITIL, CGEIT July 14, 2012

Recognizing Excellence in Project Management

Agenda
Plan Risk Management Identify Risks TEA BREAK Perform Q Qualitative Risks Perform Quantitative Risks Risk Exercises LUNCH BREAK

Recognizing Excellence in Project Management

Agenda
Plan Risk Responses Monitor and Control Risk Develop Human Resource Plan TEA BREAK Acquire Project Team Develop Project Team Manage Project Team Plan Procurement Day 3 Quiz PMP Exam Tips and Tricks

Recognizing Excellence in Project Management

PROJECT RISK MANAGEMENT

Recognizing Excellence in Project Management

Project Risk Management


P j t Risk Project Ri k Management M g t

Processes of conducting risk management planning, identification, analysis, response planning, and monitoring and control on the project

Project Risk Management Objective


To increase the probability and impact of positive events (Opportunities) Decrease the probability and impact of negative events in the project ( (Risks) )

Recognizing Excellence in Project Management

Introduction to Risk
Risk

Uncertain Events or Condition that may have positive or negative effect on the project. Risks are Inherent in Project Management. Example : Weather Risks

Risk Key Features


Has impact p on at least one p project j objective (Time / Cost / Scope / Quality) Should be approached and planned early in the planning phase can help to, Maximize the opportunities in positive risks Minimize the consequences of adverse risks

Recognizing Excellence in Project Management

Introduction to Risk
Types of Risk
Known Risks - Planning is possible Unknown Risks - Cant be managed proactively add contingencies

Ri k Tolerance Risk T l and d Attitudes Attit d


Amount or degree of risk acceptable Influencing the way Risks are responded by Individuals or Stakeholders.

Recognizing Excellence in Project Management

Project Risk Management


Monitoring & Controlling Processes Planning Processes

Enter phase/ Start project

Initiating Processes

Closing Processes

Exit phase/ End project

Executing Processes

Knowledge Area

Process Initiating Planning


Plan Risk Management Identify Risks Perform Qualitative Risk Analysis Perform Quantitative Risk Analysis Plan Risk Responses

Executing

Monitoring & Control

Closing

Risk

Monitor and Control Risks

Recognizing Excellence in Project Management

PLAN RISK MANAGEMENT

Plan Risk Management


Pl Risk Plan Ri k Management M g t

Process of deciding how to approach & plan the risk management activities for a project. Planning also important to provide sufficient resources & time for risk management p g activities

Risk Management Planning Key Points


Ensure that the degree, type and visibility of risk management are commensurate with the significance g of the project. Establish an agreed-upon basis for evaluating risk. This process should be initiated at the early stages of project planning.

Recognizing Excellence in Project Management

Plan Risk Management


Inputs Project scope Statement Cost Management Plan Schedule Management Plan Communications Management Plan Enterprise i environmental factors Organizational process assets Tools and Techniques Planning Meetings and analysis Outputs Risk Management Plan

Recognizing Excellence in Project Management

Plan Risk Management

Recognizing Excellence in Project Management

Inputs - Plan Risk Management


Enterprise Environmental Factors
Attitude towards Risk and Risk Tolerance Expressed in policy statements or Revealed in actions

Organizational Process Assets


Predefined approaches to Risk analysis and response Risk Categories Common Definition of concepts and terminologies Standard Templates Defined roles, responsibilities and authority levels for decision-making Lessons Learned Stakeholder Registers

Recognizing Excellence in Project Management

Inputs - Plan Risk Management


Project Scope Statement
Deliverables and a common understanding among stakeholders Drives Di f framework k for f Risk Ri k Management M t effort ff t

Cost Management Plan


Describes how risk budgets, contingencies, and management reserves will be communicated and accessed.

Schedule Management Plan


Describes how schedule contingencies will be communicated and assessed.

Communication Management Plan


Helps p to determine who will be available to share information on various risk and responses
Recognizing Excellence in Project Management

Tools & Techniques - Plan Risk Management


Planning Meetings & Analysis
Project team hold planning meetings to develop risk management plan. Attendees include Project P j t Manager M Project Team Leaders Key Stakeholders A Anyone responsible ibl for f planning l i and d executing activities

Risk management cost elements and schedule activities will be developed for inclusion in the project budget and schedule respectively.

Recognizing Excellence in Project Management

Outputs - Plan Risk Management


Risk Management Plan
The risk management plan is responsible for determining How risks will be identified How quantitative analysis will be completed How qualitative analysis will be completed How risk response planning will happen pp How risks will be monitored How ongoing risk management activities will happen throughout the project life cycle The Risk Management Plan does not detail the planned p to individual risks within the project p j : this is the responses purpose of the risk response plan
Recognizing Excellence in Project Management

Outputs - Plan Risk Management


Risk Management Plan includes
Methodology defines the approaches, tools, and data sources that may be used to perform risk management. Roles & Responsibilities defines the lead, support, and risk management team membership for each type of action in the plan. Budget Assigns resources and estimate costs needed for risk management for inclusion in cost baseline. Timing Describes when and how often the risk management process will be performed throughout the project life cycle. Risk Categories Provide a structure that ensures a comprehensive process of systematically identifying risk to a consistent level of detail. A risk breakdown structure (RBS) is one approach to providing such a structure.

Recognizing Excellence in Project Management

Outputs - Plan Risk Management


Risk Breakdown Structure - Example

Recognizing Excellence in Project Management

Outputs - Plan Risk Management


Risk Breakdown Structure - Example

Recognizing Excellence in Project Management

Outputs - Plan Risk Management


Risk Management g Plan includes
Definition of Risk Probability and Impact General definitions of probability levels and impact levels are tailored to individual projects. Probability and Impact Matrix Risk prioritization using combination of probability and impact. R Revised i d Stakeholder's St k h ld ' Tolerances T l Stakeholders St k h ld tolerances t l may be revised in the Risk Management Planning process, as they apply to the specific project. Reporting formats Defines how the results of the risk management processes will be documented, analyzed, and communicated to the project team and stakeholders. Tracking Documents how all facets of risk activities will be recorded. Also defines whether and how the risk management processes will be audited.
Recognizing Excellence in Project Management

Outputs - Plan Risk Management


Probability and Impact Matrix - Example

Recognizing Excellence in Project Management

Outputs - Plan Risk Management


Risk Management Plan - Example

Recognizing Excellence in Project Management

IDENTIFY RISKS

Identify Risks
Identify y Risks

Iterative process for determining which risks are likely to affect the project and documenting the characteristics of each risks.

Risk Ri k Identification Id tifi ti Key K P Points i t


Types of Risks Internal risks Things that the project team can control or influence External risks Things beyond the control or influence of the project team Identify Risks is an iterative process because new risks evolve or become know as the project progresses through its life cycle. Triggers : Early warning signs or indications that a risk to your project is about to occur.

Identify Risks is concerned with opportunities (positive outcomes) as well as with threats (negative outcomes) outcomes),

Recognizing Excellence in Project Management

Identify Risks
Key Participants
Project Manager, Project Team Members Customers , End Users Subject j Matter Experts p ( (outside p project) j ) Risk Management Experts

Risk Categories
External, unpredictable: Regulatory, etc. External, predictable: Market risks I Internal, t l non-technical: t h i l Management M t Technical : Design Legal : Contractual

Recognizing Excellence in Project Management

Identify Risks
Inputs Risk Management Plan Activity Cost estimates Activity Duration estimate p baseline Scope Stakeholder register Cost Management plan Schedule Management plan Quality Management Plan Project Documents Enterprise environmental factors Organizational process assets Tools and Techniques Documentation R i Reviews Information Gathering Techniques Checklist analysis Assumptions Analysis g g Diagramming Techniques SWOT Analysis p Judgment g Expert Outputs Risk Register

Recognizing Excellence in Project Management

Identify Risks

Recognizing Excellence in Project Management

Inputs Identify Risks


Enterprise Environmental Factors
P Published bli h d information i f i including i l di commercial i l databases d b Academic studies or other industry studies. Published checklist, Benchmarking. Risk attitudes.

Organizational Process Assets


Project files including actual data Risk statement templates Organizational and project process controls Lessons learned

Activity Cost Estimates


Indicative of likely cost to complete the scheduled activity expressed as a range Width of range is indicative of degree of risk involved

Scope Baseline
Uncertainty in Project Assumptions WBS
Recognizing Excellence in Project Management

Inputs Identify Risks


Activity Duration Estimates
Schedule estimates risks

Stakeholder Register
Stakeholder list/inputs Customer interviews / participation in risk identification

Risk Management Plan


Assignment of Roles and Responsibilities Provision of Risk Management Activities in the Budget and Schedule Categories of Risks

Schedule Management Plan


Schedule management approach may generate or alleviate the risks

Cost Management Plan

Risk related to cost management approach

Recognizing Excellence in Project Management

Inputs Identify Risks


Quality Management Plan
Quality management approach may generate or alleviate the risks.

Project Documents
Assumption log Work Performance reports Earned Value reports Network Diagrams Baselines

Other project information proven to be valuable in identifying risks

Recognizing Excellence in Project Management

Tools & Techniques Identify Risks


Documentation Reviews
A structured review may be performed of project documentation.

Information Gathering Techniques


B Brainstorming i t i Goal G l is i to t identify id tif comprehensive h i list li t of f project j t risks i k using frameworks like RBS Delphi technique Way to reach a consensus of experts Interviewing SME, Experienced project stakeholders Root Cause analysis

Checklist Analysis
Organized by Source of Risk Not a complete and final list of Risk Needs to be updated at the closure for future project use
Whats the big difference between Brainstorming and the Delphi Technique? q Can you y think of a situation where one would be more useful than the other?
Recognizing Excellence in Project Management

Tools & Techniques Identify Risks


Assumption Analysis
Examines the validity of assumptions Identifies risks to the project from inaccuracy, inconsistency, or incompleteness of the assumptions

Diagramming Techniques
Cause and Effect Diagrams also known as Ishikawa or Fishbone diagrams

Recognizing Excellence in Project Management

Tools & Techniques Identify Risks


Di Diagramming i Techniques T h i
System or process flow charts - that shows the relationship between components t and d how h th overall the ll process works.

Influence diagrams graphical representation t ti of f showing h i causal l influences, time ordering events and other relationships among variables and outputs. outputs

Recognizing Excellence in Project Management

Tools & Techniques Identify Risks


Expert Judgment
Experts with relevant experience of similar projects can help identify risks.

SWOT Analysis y
Strengths, weaknesses, opportunities, and threats (also known as SWOT analysis) is a technique that examines the project from each of these perspectives to increase the breadth of identified risks by including internally generated risks. Examples,

Strengths : The technology to be installed in the project has been installed by other large companies in our industry. industry Weakness : We have never installed this technology before. Opportunities : The new technology will allow us to reduce our cycle time for time-to-market on new products. Threats : The time to complete the training and simulation may overlap with product updates, new versions, and external changes to our technology portfolio.
Recognizing Excellence in Project Management

Outputs Identify Risks


Ri k R Risk Register i t
Document that identifies and categorizes risks, potential risk responses, and their triggers, or warning signs.

Recognizing Excellence in Project Management

PERFORM QUALITATIVE RISK ANALYSIS

Perform Qualitative Risk Analysis


Perform Qualitative Risk Analysis y

Process of prioritizing risks for further analysis or actions by assessing and combining their probability of occurrence and the Impact

Qualitative Risk Analysis Key Points


Qualitative risk qualifies the risks that have been identified in the project. It examines and prioritizes the risks based on their probability of occurring and the impact on the project if the risks did occur. Improves project performance by focusing on Highy risks. Priority Rapid and cost-effective means of establishing priorities p and foundation for Perform for Plan Risk Responses Quantitative Risk Analysis.
Recognizing Excellence in Project Management

Perform Qualitative Risk Analysis


Inputs Organizational process assets Project scope statement Risk Management Plan Risk register Tools and Techniques Risk probability & impact assessment Probability and impact matrix Risk data quality assessment Risk categorization Risk urgency assessment Expert Judgment Outputs Risk register updates.

Recognizing Excellence in Project Management

Perform Qualitative Risk Analysis

Recognizing Excellence in Project Management

Inputs Perform Qualitative Risk Analysis


Organizational Process Assets
Risk Database Information on prior, similar completed projects.

Project Scope Statement


Kind of work determines the amount of risk yp have less risk Common or recurrent type State-of-the-art, first time technology, or highly complex projects have more uncertainty

Risk Management Plan Ri k R Risk Register i t


Identified Risks Evaluation of risks identified during the Identify Risks process and their potential impacts on the project

Recognizing Excellence in Project Management

Tools & Techniques Perform Qualitative Risk Analysis


Risk Probability and Impact Assessment
Risk probability - is the likelihood that a risk will occur occur. Probability and Impact are assessed for each risk. Risk consequences is the effect on project j if the risk event occurs; ; done at objectives each risk level

Recognizing Excellence in Project Management

Tools & Techniques Perform Qualitative Risk Analysis


Risk / Impact Risk Rating Matrix - Examples
Risk Probability Scale falls between 0.0 (no probability) and 1.0 certainty)
Impact Scale can be,
Ordinal scale ranked-order scale, such as very low, low, moderate, high, and very high Cardinal scale assign values to these impacts. These values are usually linear (.1/ .3/ .5/ .7/ .9) or nonlinear (.05/ .1/ .2/ .4/ .8/)

Recognizing Excellence in Project Management

Tools & Techniques Perform Qualitative Risk Analysis

Recognizing Excellence in Project Management

Tools & Techniques Perform Qualitative Risk Analysis


Risk Data Quality Assessment
A technique t h i t to evaluate l t the th d degree t to which hi h th the d data t i is useful f l Extent of understanding of the risk Data available about the risk Quality of the data Reliability and integrity of the data

Risk Categorization
Sources of Risks Area of the project affected Project Phase

Risk Urgency Assessment


Risks requiring near-term responses may need to be urgently addressed.

Expert Judgment
Probability / Impact Risk Metrics Definition (as seen previously)

Recognizing Excellence in Project Management

Outputs Perform Qualitative Risk Analysis


Risk Register (Updates)
Relative ranking or Priority list of Project Risks Risks Grouped by Categories C Causes of f risks / project areas requiring particular attention Risks requiring response in the near-term Risks for additional analysis and response Watch list of low priority risks Trends in Qualitative Risk Analysis results

Recognizing Excellence in Project Management

PERFORM QUANTITATIVE RISK ANALYSIS

Perform Quantitative Risk Analysis


P f Perform Q Quantitative tit ti Risk Ri k Analysis A ly i

Measuring numerically the effect of identified risk on overall project objectives.

Quantitative Risk Analysis Key Points


Performed on risks that have been prioritized y the Perform Qualitative Risk Analysis y by process as substantially impacting project objectives. Analyzes the effect of risk events and assigns numerical rating to those risks individually or to evaluate the aggregate effect of all risks affecting the project.

Perform Quantitative analysis is a more time-consuming process as compared to Qualitative analysis, and is therefore also more expensive.
Recognizing Excellence in Project Management

Perform Quantitative Risk Analysis


Quantitative Risk Analysis Goals
To ascertain the likelihood of reaching project success. To ascertain the likelihood of reaching g a particular p project objective. To determine the risk exposure for the project. To determine the likely amount of the contingency reserve needed for the Project. To determine the risks with the largest impact on the p j project. To determine realistic time, cost, and scope targets. This process should be repeated after Plan Risk response and Monitor and Control Risks to determine if overall project risk has been satisfactorily decreased. Generally this is done after Perform Qualitative Risk Analysis process. In some cases this process may not be required to develop effective risk responses.
Recognizing Excellence in Project Management

Perform Quantitative Risk Analysis


Inputs Risk register Risk Management Plan Cost management plan g Schedule management plan Organizational process Tools and Techniques Data gathering and representation techniques Quantitative risk analysis and modeling techniques Expert Judgment Outputs Risk register updates.

Recognizing Excellence in Project Management

Perform Quantitative Risk Analysis

Recognizing Excellence in Project Management

Inputs Perform Quantitative Risk Analysis


Organizational Process Assets
Risk Database Information on prior, similar completed projects.

Risk Management Plan discussed earlier Schedule Management Plan discussed earlier Cost Management Plan discussed earlier

Risk Register
Identified Risks Evaluation of risks identified during g the Identify Risks process and their potential impacts on the project

Recognizing Excellence in Project Management

Tools & Techniques Perform Quantitative Risk Analysis


Data Gathering and Representation Techniques
Interviewing
With project stakeholders and subject-matter experts to quantify the probability and consequences of risks on project objectives. Refers to Historic data too. The information needed depends upon the type of probability distributions that will be used. Documenting rationale of risk ranges and assumptions behind them them.

Probability Distributions
Continuous probability distributions represent the uncertainty in values, such as durations of schedule activities and costs of project components. Discrete distributions can be used to represent uncertain events, such as th outcome the t of fat test t or a possible ibl scenario i in i a decision d i i tree. t

Recognizing Excellence in Project Management

Tools & Techniques Perform Quantitative Risk Analysis


Quantitative Risk Analysis y and Modeling g Techniques q
Sensitivity Analysis
Helps to determine which risks have the most potential impact on the project. Tornado Diagram is one typical display of sensitivity analysis, useful for comparing relative l ti i importance t and di impact t of f variables. i bl

Expected Monetary Value (EMV) Analysis


Calculates the average outcome when the future includes scenarios that may or may not happen. EMV calculates the expected monetary value of a decision based on its risk event probability and monetary value EMV = probability ( in %) X consequences or impact EMV of opportunities are expressed as positive values, while those of threats will be negative. negative

Recognizing Excellence in Project Management

Tools & Techniques Perform Quantitative Risk Analysis


Quantitative Risk Analysis and Modeling Techniques
Decision Tree Analysis Use of a diagram that describes a decision under consideration and the implications of choosing one or another of the available alternatives. Solving the decision tree indicates which decision yields the greatest expected value when all the uncertain implications, costs, rewards, and subsequent decisions are quantified.

Recognizing Excellence in Project Management

Tools & Techniques Perform Quantitative Risk Analysis


Decision Tree and Expected Monetary Value (EMV)

Recognizing Excellence in Project Management

Tools & Techniques Perform Quantitative Risk Analysis


Decision Tree / EMV Example

Recognizing Excellence in Project Management

Tools & Techniques Perform Quantitative Risk Analysis


Modeling and Simulation
Uses a model or copy of the system to analyze the behavior or performance of the system. Monte Carlo Simulation
Perform project many times to provide a statistical distribution of calculated results Uses results to quantify the risk of various schedule alternatives, different project j t strategies, t t i different diff t paths th through th h the th network. t k Can be used to assess the range of possible cost options

Recognizing Excellence in Project Management

Tools & Techniques Perform Quantitative Risk Analysis


Modeling and Simulation Example

Recognizing Excellence in Project Management

Tools & Techniques Perform Quantitative Risk Analysis

Recognizing Excellence in Project Management

Tools & Techniques Perform Quantitative Risk Analysis


Expert p Judgment g
Subject matter experts internal or external to the organization, such as engineering or statistical experts, validate data and techniques. Interpretation of data. Tools evaluation for performing quantitative analysis given organization culture.

Recognizing Excellence in Project Management

Outputs Perform Quantitative Risk Analysis


Risk Register g Updates p
Probabilistic Analysis of the project Forecasts potential project schedule and cost results Lists the p possible completion p dates or p project j duration and costs with their associated confidence levels Probability y of achieving g cost and time objectives j Under the current project plan and with the current knowledge of the risks facing the project Prioritized list of quantified risks Risks that pose greatest threat or present the greatest opportunity to the project j together g with a measure of their impact Trends in Quantitative Risk Analysis results As analysis y is repeated, p , a trend of results may y become apparent pp

Recognizing Excellence in Project Management

PLAN RISK RESPONSES

Plan Risk Responses


Pl Risk Plan Ri k Responses R p

Process of developing options and determining actions to enhance opportunities and reduce threats to the projects objectives

Plan Risk Responses Key Points


Appropriate to the severity of the risk. Cost effective in meeting the challenge Timely to be successful. Realistic within the project context. Agreed upon by all parties involved. Owned by a responsive person.

Recognizing Excellence in Project Management

Plan Risk Responses


Inputs Risk management plan Risk register Tools and Techniques Strategies for negative risks or threats Strategies for positive risks or opportunities Contingent C ti t response strategies Expert Judgment Outputs Risk register updates Risk related contract decisions Project management plan updates p p Project document updates

Recognizing Excellence in Project Management

Plan Risk Responses

Recognizing Excellence in Project Management

Inputs Plan Risk Responses


Risk Management Plan (described earlier)

Risk Register
Identified Risks Evaluation of risks identified during the Identify Risks process and their potential impacts on the project

Recognizing Excellence in Project Management

Tools & Techniques Plan Risk Responses


Strategies for Negative Risks or Threats
Avoid Transfer Mitigate p Accept

Strategies g for Positive Risks or Opportunities pp


Exploit Share Enhance Accept

Recognizing Excellence in Project Management

Tools & Techniques Plan Risk Responses


Response Strategies for Threats
Avoidance Changing the project management plan to eliminate the threat posted by an adverse risk. To isolate the p project j objectives j from the risks impact, or to relax the objective that is in jeopardy. Examples: p Change the Implementation strategy Do it ourselves (do not subcontract) Reduce scope to avoid high risk deliverables Adopt a familiar technology or product

Recognizing Excellence in Project Management

Tools & Techniques Plan Risk Responses


Response Strategies for Threats
Transfer Shifting the negative impact of a threat along with ownership of the response, to a third party. Most effective in transferring financial risk exposure. Examples Insurance Warranties Guarantees (a fixed-price p contract has least risk with the buyer) y ) Contracts (

Recognizing Excellence in Project Management

Tools & Techniques Plan Risk Responses


Response Strategies for Threats
Mitigate Reduction in the probability and/or impact of an adverse risk event to an acceptable threshold. Be proactive: Take early actions to reduce impact/probability and dont wait until the risk hits your project Examples: Staging - More testing Prototype Redundancy planning Use more qualified resources Implementing new course of action
Recognizing Excellence in Project Management

Tools & Techniques Plan Risk Responses


Response Strategies for Threats
This strategy indicates that the project team has decided not to change the project management plan to deal with a risk risk, or is unable to identify any other suitable response strategy. Used when project plan cannot be changed & other risk response strategy cannot be used Active Acceptance
Develop a contingency plan to execute if the risk occur Contingency plan = be ready with Plan B

Accept

Passive Acceptance
Deal with the risks as they occur = No Plan B prepared

Contingency Allowance / Reserve


Established amount of reserve (e.g.: time and/or money) to account for the identified known risks. Amount A t is i decided d id d based b d on probability b bilit and d impact. i t

Recognizing Excellence in Project Management

Tools & Techniques Plan Risk Responses


Response Strategies for Opportunities Exploit
Eliminate the uncertainty associated with a particular upside risk by making the opportunity definitely happen Example : Assigning organization most talented resources to t the th project j t to t reduce d cost lower than originally planned.

Share
Allocating ownership to a third party who is best able to capture the opportunity for the benefit of the project. Example : Joint ventures, special-purpose companies

Recognizing Excellence in Project Management

Tools & Techniques Plan Risk Responses


Response Strategies for Opportunities Enhance
Modifies the size of an opportunity by increasing probability and/or positive impacts, and by identifying and maximizing key drivers of these positive impact risks. Example : Adding more resources to finish early.

Accept
Accepting opportunity is being willing to take
advantage of it, if it comes on but not actively pursuing it

Recognizing Excellence in Project Management

Tools & Techniques Plan Risk Responses


Contingent Response Strategies
Some responses are designed to execute only if certain events occur. For some risks it is appropriate for project team to make a response plan which will be executed under certain predefined conditions.

Expert Judgment
Expert inputs for handling a risk event or planning for responding to risk event. event

Recognizing Excellence in Project Management

Tools & Techniques Plan Risk Responses

Recognizing Excellence in Project Management

Outputs Plan Risk Responses


Risk Register g Updates p
A description of the risk, what area of the project it may affect, the causes of the risk, and its impact on project objectives The identities of the risk owners and their assigned responsibilities The outputs of qualitative and quantitative analysis Agreed upon response strategy The actions necessary to implement the responses The budget and schedule for risk responses Both the contingency and fallback plans Residual Risks and Secondary Risks Contingency Reserves

Risk related Contractual Decisions


Such as agreements for insurance, services, and other items as appropriate, can be prepared to specify each partys responsibility for specific ifi risks, i k should h ld th they occur.
Recognizing Excellence in Project Management

Outputs Plan Risk Responses


Project j Management g Plan updates p
All sections of project management plan needs to be revisited and updated as applicable as per changes required as per risk response planning p g or information that was made available as p part of risk response.
Schedule, Cost and quality management plans Procurement and Human resource management plans Work breakdown structure Cost performance baseline Schedule baseline

Project Document Updates


Assumption log updates As new information is available as part of risk response, assumption log needs to be revisited. Technical documentation update - technical approaches and physical deliverables might change as per risk response planned., so this needs to be updated.
Recognizing Excellence in Project Management

Plan Risk Response

Recognizing Excellence in Project Management

Plan Risk Response

Recognizing Excellence in Project Management

Plan Risk Response

Recognizing Excellence in Project Management

Plan Risk Response

Recognizing Excellence in Project Management

MONITOR AND CONTROL RISKS

Monitor & Control Risks


Monitor & Control Risks Process of implementing risk response plans, tracking identified risks, monitoring residual risks, identifying new risks, and evaluating risk process effectiveness throughout the project

Monitor & Control Risks Key Points


Keeping track of the identified risks Monitoring M it i residual id l risks i k Identifying new risks Ensuring the Implementation of risk response plans Evaluating their effectiveness in reducing risk In addition, used to determine if:
Project assumptions are still valid Risk management policies and procedures are being followed Contingency reserve of cost or schedule should be modified in alignment with current risk assessment.
Recognizing Excellence in Project Management

Monitor & Control Risks


I Inputs t Project management plan Risk register Work performance information Performance reports Tools T l and d Techniques T h i Risk assessments Risk audits Variance and trend analysis Technical performance measurement Reserve analysis Status Meetings O t t Outputs Risk register updates g p process Organizational assets updates Change requests Project management plan updates Project document updates

Recognizing Excellence in Project Management

Monitor & Control Risks

Recognizing Excellence in Project Management

Inputs Monitor & Control Risks


Project Management Plan as discussed earlier Risk Register as discussed earlier Work Performance Information
Deliverable status Schedule S h d l P Progress Cost incurred

Performance Reports
Variance Analysis Earned Value Analysis Forecasting F ti data d t

Recognizing Excellence in Project Management

Tools & Techniques Monitor & Control Risks


Risk Assessment
Identification of new risks and reassessment of identified risks and closing of outdated ones.

Risk Audits
Examine and document the effectiveness of risk responses Examine and document the effectiveness of the Risk management Process

Variance and Trend Analysis


Earned Value Analysis (discussed later)

Technical Performance Measurement


Compares technical accomplishments during project execution to the project plan schedule of technical achievement

Recognizing Excellence in Project Management

Tools & Techniques Monitor & Control Risks


R Reserve A Analysis l i
Compares amount of contingency reserves remaining to amount of risk remaining at any time in the project, to determine if the contingency reserve is adequate.

Status Meetings g
Should be an agenda item in periodic status meetings.

Recognizing Excellence in Project Management

Outputs Monitor & Control Risks


Risk Register Updates
Outcome O t of f risk i k reassessments, t risk i k audits dit and d periodic i di risk reviews Closing risks that are no longer applicable Part of Project Closure Documents

Change Requests
Managed through Integrated Change Control Process Recommended corrective action Recommended R d d preventive ti action ti

Organization g Process Asset Updates p


Templates changes including probability and impact matrix and risk register. Risk breakdown structure & lessons learned from project risk management activities.
Recognizing Excellence in Project Management

Outputs Monitor & Control Risks


Project Management Plan updates
Approved changes requests impacting risk management process gets updated

Project j Document Updates p


Same as Plan risk responses process

Recognizing Excellence in Project Management

PROJECT HUMAN RESOURCE MANAGEMENT


Recognizing Excellence in Project Management

Project Human Resource Management


Monitoring & Controlling Processes Planning Processes

Enter phase/ Start project

Initiating Processes

Closing Processes

Exit phase/ End project

Executing Processes

Process Knowledge Area Initiating Planning Executing Monitoring & Control Closing

Human Resource

Develop Human Resource Plan

Acquire Project Team Develop Project Team Manage Project Team

Recognizing Excellence in Project Management

DEVELOP HUMAN RESOURCE PLAN

Recognizing Excellence in Project Management

Develop Human Resource Plan


Develop p Human Resource Plan

Process of identifying and documenting project roles, responsibilities, and required skills, reporting relationships, and creating a staffing management plan

Develop Human Resource Plan Key Points


Individuals and groups may be part of the organization performing the project or may be external to it. Internal groups are often associated with a specific functional department, such as engineering, marketing, or accounting. accounting Staffing Management Plan can include how and when the team members are acquired acquired, release criteria criteria, training needs needs, plans for recognition and rewards and so on
Recognizing Excellence in Project Management

Develop Human Resource Plan

Recognizing Excellence in Project Management

Develop Human Resource Plan


I Inputs t Activity resource requirements Enterprise environmental factors Organizational process assets t T l and Tools d Techniques T h i Organization charts and position descriptions Networking Organizational theory O t t Outputs Human resource plan

Recognizing Excellence in Project Management

Inputs Develop Human Resource Plan


Activity Resource Requirements
Preliminary P li i requirements i t regarding di th the people l and d competencies t i are progressively elaborated as part of human resource planning process

Enterprise Environmental Factors


Organizational culture and structure Existing Human Resources Personnel Administration Policies Market Place conditions

Organizational Process Assets


Organizational g standard p processes and p policies and standardized role descriptions Templates for organizational charts and position descriptions. Historical information on organizational structures for previous projects

Recognizing Excellence in Project Management

Tools & Techniques Develop Human Resource Plan


Organization Chart and position Descriptions

Role and responsibility definitions or reporting relationship formats


Hierarchical Matrix based Text oriented

Project Management Responsibilities from


Risk Register Communication Plan Quality Plan

Whatever methods are used, the objective is to Ensure that each work package has an unambiguous owner All team members have clear understanding of their roles & responsibilities
Recognizing Excellence in Project Management

Tools & Techniques Develop Human Resource Plan


Networking
Formal and Informal Interactions with others in organization or industry to understand the political or interpersonal factors,
Pro-active Pro active correspondence Luncheon meetings Informal conversations Trade conferences

Organization Theory
Describes the behavior of people, teams and organizational units Application of these proven principles shortens the HR Planning time and improve the effectiveness of the plan While concentrated networking for a project is a useful technique, networking regularly even without a project is also very useful

Recognizing Excellence in Project Management

Outputs Develop Human Resource Plan


Human Resource Plan
Roles & Responsibilities
Define roles and responsibilities clearly using the following four elements
Role Authority Responsibility Competency

Project Organization Charts Graphic display of project reporting relationships

Staffing Management Plan


Describes
Staff Acquisition Internal ,External or contracted, Staff Locations, Cost associated with the acquisition Resource Calendars - Resource On-boarding and Off-boarding criteria and timelines Resource Histogram Staff release Plan & Training needs Recognition R iti and dR Rewards d Compliance strategies and safety related policies and procedures
Recognizing Excellence in Project Management

Outputs Develop Human Resource Plan


Staffing g Management g Plan

Recognizing Excellence in Project Management

ACQUIRE PROJECT TEAM

Recognizing Excellence in Project Management

Acquire Project Team


A q i Project Acquire P j t Team T

Process of confirming Human Resource availability and obtaining human resources required to complete the project

Acquire Project Team Key Points


Effective negotiation to obtain required human resources resources. Identifying risks on the availability of human resources and update of necessary plans. plans Identifying alternative resources in case of constraints. The project management may or may not have control over team members selected for the project based on various factors such as organizational structure, collective bargaining agreements t ,external t l environmental i t l factors f t etc t
Recognizing Excellence in Project Management

Acquire Project Team

Recognizing Excellence in Project Management

Acquire Project Team


Inputs Project management plan Enterprise environmental factors O Organizational i ti l process assets Tools and Techniques Pre-assignment Negotiation Acquisition Virtual teams Outputs Project staff assignments Resource calendars Project management plan l updates d t

Recognizing Excellence in Project Management

Inputs Acquire Project Team


Project j Management g Plan (described ( earlier) Human Resource Plan
Identifying, staffing, managing controlling and release criteria Roles and Responsibilities p Project organization charts Staffing management plan with resource histogram s og a Identifies the time periods each project team member will be needed Requires q use of project p j schedule information also to determine the above A graphical representation of the time periods each project team member will be needed is known as Resource Histogram
Recognizing Excellence in Project Management

Inputs Acquire Project Team


Enterprise Environmental Factors
Resources Previous Experience Personal Interests Availability Working well with others Competency Levels and Ability Cost

Organizational Process Assets


Policies, Guidelines or Procedures governing staff assignments. The interaction between support functions such as the HR department, recruitment and Learning.

Recognizing Excellence in Project Management

Tools & Techniques Acquire Project Team


Pre-assignment
Due to promises in the proposal. Defined in the project charter. Due to specific expertise needs of the project. With Functional Managers or other project j t management t teams. t To ensure receiving appropriate resources within required time frames.

Negotiation

Acquisition
People outside the organization obtained by way of Subcontracting Hiring individual consultants Organizational dynamics as well as the ability of project management tt team t to i influence fl others th plays l an important i t t role l in negotiations
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Tools & Techniques Acquire Project Team


Virtual Teams
Groups of people with a shared goal with no time spent meeting g face to face. Increased importance for communications plan. Time needs to be invested in Setting up expectations Developing protocols for conflict resolution Including people in decisionmaking Sharing credit for successes

Recognizing Excellence in Project Management

Outputs Acquire Project Team


Project Staff Assignments
Appropriate people assigned to work on the project as needed. Other important documentation which includes
Project team directory Memos to team members Organization charts and schedules etc., updated with names of the team members

Resource Calendars
Useful in creating the final schedule

Project Management Plan Updates


Updates in staffing management plan are required to take care of many events such as
Retirements, promotions, illnesses, performance issues etc. Non-availability of resources to fully meet the needs
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DEVELOP PROJECT TEAM

Recognizing Excellence in Project Management

Develop Project Team


Develop p Project j Team

Process of improving the competencies, team interaction and overall team environment to enhance project performance.

Develop Project Team Key Points


Improving the skills of team members as well as improving the trust and cohesiveness among team members in order to enhance project performance. Improve feelings of trust and agreement g team members. among Create dynamic and cohesive team culture to improve both individual and team productivity p y, team cooperation p and to allow cross-training and Mentoring. Team development efforts have greater benefit when conducted d t d early, l but b t should h ld take t k place l throughout th h t the th project j t life cycle
Recognizing Excellence in Project Management

Develop Project Team


Inputs Project staff assignments g Project management plan Resource calendars Tools and Techniques Interpersonal skills Training Team-building activities Ground G d rules l Co-location Recognition and Rewards Outputs Team performance assessments Enterprise environmental factors updates

Recognizing Excellence in Project Management

Develop Project Team

Recognizing Excellence in Project Management

Inputs Develop Project Team


Project Staff Assignments
Developing the team starts with the list of team members.

Project Management Plan


Identify training strategies needed to develop the team. On going team performance assessments Rewards and Recognitions Feedback Additional training Disciplinary actions

Resource Calendars
Identifies the times that the team members can participate in team development activities.

Recognizing Excellence in Project Management

Tools & Techniques Develop Project Team


Interpersonal skills
Soft skills such as empathy, influence, creativity and group facilitation.

Training
All activities for improvement of team member competencies & performance. Scheduled training as per the project plan. Unplanned training as a result of observation, conversation and project performance appraisals.
Recognizing Excellence in Project Management

Tools & Techniques Develop Project Team


Ground Rules
Clear expectations regarding acceptable behavior by project team members. Responsibility p y lies with team members for enforcing g the rules once they are established.

Co-location
Locating many or all of the team members at one location either temporarily or for the full project duration.

Rewards and Recognition


Recognizing and rewarding the desirable behaviors Plans to reward are developed during the Develop HR Plan process. Award decisions are made while managing g g the p project j team by y using g the performance
Only desirable behavior should be rewarded. Win-Lose rewards such as Team member of the month can hurt cohesiveness. Rewarding win-win behavior tends to increase the cohesiveness
Recognizing Excellence in Project Management

Tools & Techniques Develop Project Team


Team Building Activities
Activities that enhance the cohesiveness amongst the team members. Could be an informal 5 minute item or a well planned offsite experience. Five stages of development that teams may go through: Forming Storming Norming g Performing Adjourning

Recognizing Excellence in Project Management

Tools & Techniques Develop Project Team


Stages of Team Development
Forming Initial stages of team development. Everybody is on their best behavior behavior, but are mostly focused on themselves. Storming Different ideas come from the team on the way y they y want to solve the problems, the leadership and management style they are amenable to etc. The Th team t members b open out t to t each h other and usually confrontation occurs at this stage.

Recognizing Excellence in Project Management

Tools & Techniques Develop Project Team


Stages of Team Development
Norming Team members adjust their behavior to each other other. Norming rules govern the work environment. Performing The team is in a mature stage and team members are interdependent interdependent. Ideal stage for the team to be in. Adjourning and Transforming Team completes the task and breaks up. Transformational management can produce major changes in performance through synergy.
Recognizing Excellence in Project Management

Tools & Techniques Develop Project Team


McGregors McGregor s Motivation Theory X and Theory Y
Attempts to explain how different managers deal with team members

Recognizing Excellence in Project Management

Tools & Techniques Develop Project Team


Motivation Theory : Maslows Maslow s Hierarchy of Needs
Higher Level of Needs

Basic Needs

Recognizing Excellence in Project Management

Tools & Techniques Develop Project Team


Herzbergs Motivation Hygiene Theory
Job dissatisfaction due to lack of hygiene factors Job satisfaction due to motivation factors
Hygiene Factors
- Working g conditions - Salary - Personal life - Relationship at work - Security - Status

Motivation Factors
- Responsibility - Self actualization - Professional growth - Recognition

Recognizing Excellence in Project Management

Outputs Develop Project Team


Team Performance Assessment
Assessed based on project objectives like schedule, budget etc. Improvements in individual skills Improvements in team competencies and sentiments Reduced Staff Turnover Rate Increased team cohesiveness to improve overall project performance

Enterprise Environmental Factors


Personnel administration records Employee records Team development has multiple stages. Understanding these and motivation moti ation theories helps to plan for a better team development
Recognizing Excellence in Project Management

MANAGE PROJECT TEAM

Recognizing Excellence in Project Management

Manage Project Team


Manage g Project j Team

Process of tracking team member performance, providing feedback, resolving issues & coordinating changes to enhance project performance

Manage Project Team Key Points


Team management requires high degree of communication skills including negotiations, conflict resolution. Additionall Additionally, good observations obser ations skills are very important. M Management t of f the th project j t team t is i complicated when team members are accountable to both a functional manager and the project manager.

Recognizing Excellence in Project Management

Manage Project Team


Inputs Project staff assignments g Project management plan Team performance assessments Performance reports Organizational process assets Tools and Techniques Observation and conversation Project performance appraisals Conflict Management Issue log Interpersonal skills Outputs Enterprise environmental factors updates Organizational process assets updates Change requests Project management plan updates

Recognizing Excellence in Project Management

Manage Project Team

Recognizing Excellence in Project Management

Inputs Manage Project Team


Project Staff Assignments
List of the project team members to be evaluated during this monitoring and controlling process.

Project Management Plan


Human resource plan containing R Roles l and d responsibilities ibiliti Project organization and Staffing management plan

Team Performance Assessment (described earlier)

Recognizing Excellence in Project Management

Inputs Manage Project Team


Performance Reports
Documentation of performance against the project management plan, Schedule Control Cost control Quality control p verification Scope Procurement Audits

Organization Process Assets


Organizational processes, policies, guidelines and systems for rewarding the resources Certificates of appreciation Bonus Structures Corporate Appraisals etc

Recognizing Excellence in Project Management

Tools & Techniques Manage Project Team


Observation and Conversation
Two key elements for the management to stay in touch with the work and attitudes of the team members. Indicators Progress towards deliverables Accomplishments of team members Interpersonal issues

Project Performance Appraisals


Can be formal or informal. Depends on The length and complexity of the Appraisal Organizational policy Labour contract requirements The amount of regular and quality communication.
Recognizing Excellence in Project Management

Tools & Techniques Manage Project Team


Project j Performance Appraisals pp
Some of the key objectives are Re-clarification of roles and responsibilities. Structured feedback sessions and discovery y of unknown/unresolved issues. Development of individual training plans and establishment of specific goals.

Recognizing Excellence in Project Management

Tools & Techniques Manage Project Team


Conflict Management
Sources of conflict include scarce resources, scheduling priorities and personal work styles. styles Team ground rules, group norms, and solid project mgt. practices like communication planning role definition reduce the amount of planning, conflict. Characteristics of conflict and conflict management process are: Conflict is natural Conflict is a team issue Openness resolves conflict Conflict resolution should focus on issues, not personalities Conflict resolution should focus on present, not the past.
Recognizing Excellence in Project Management

Tools & Techniques Manage Project Team


Conflict Management
Conflict is unavoidable because of the: Nature of projects trying to address the needs and requirements of many stakeholders stakeholders. Limited powers of the project manager (depending on the organizational structure). Necessity of obtaining resources from functional managers managers.

Recognizing Excellence in Project Management

Tools & Techniques Manage Project Team


Conflict Management General techniques for resolving conflict
Forcing Pushing ones viewpoint at the expense of others; Offers only winlose solutions.
Behaviors th hat focused on self

Collaborating Incorporating multiple viewpoints and insights from differing perspectives; Leads to consensus and commitment.

Compromising Searching for solution that bring some degree of satisfaction to all parties parties.

Confronting & Problem Solving Treating conflict as problem to be solved by examining alternatives; Requires a give and take attitude and open dialogue.

Withdrawing/Avoiding Retreating from an actual or potential conflict situation.

Smoothing/Accommodating Emphasizing areas of agreement rather than areas of difference.

Behaviors that focused on others

Recognizing Excellence in Project Management

Tools & Techniques Manage Project Team


Conflict Management Techniques
Avoiding / Withdrawing - No winners, no losers Retreating from an actual or potential conflict situation. "Let's "L t' deal d l with ith thi this i issue next t week. k Fundamental premise: This isn't the right time or place to address this issue

Forcing - I win, you lose P Pushing hi one's ' viewpoint i i t at t th the expense of f others; th offers ff only l win-lose i l solutions "Do it my way! Fundamental premise: Associates "winning" winning a conflict with competition

Recognizing Excellence in Project Management

Tools & Techniques Manage Project Team


Conflict Management Techniques
Compromising - You bend, I bend re lose-lose Searching for solutions that bring some degree of satisfaction to all parties "Let us do a little of what both of you suggest. Fundamental premise: Winning something while losing a little is OK

Smoothing/Accommodating I loose, you win Emphasizing E h i i areas of f agreement t rather th than th areas of f difference diff "Let's calm down and get the job done! The smoothing technique does not usually result in a permanent solution F d Fundamental t l premise: i W ki toward Working t d a common purpose is i more important than any of the peripheral concerns; the trauma of confronting differences may damage fragile relationships

Recognizing Excellence in Project Management

Tools & Techniques Manage Project Team


Conflict Management Techniques
Collaborating I win, you win Incorporating multiple viewpoints and insights from differing perspectives; leads to consensus and commitment. Fundamental premise: Teamwork and cooperation help everyone achieve their goals while also maintaining relationships Confronting/Problem C f ti /P bl Solving S l i Solving S l i the th real l problem bl It seems to me that the real problem here is not a lack of communication, but a lack of knowledge of what each activity costs. Here is a copy of the WBS and the cost estimate estimate. It gives you the cost information that you need to know. Problem Solving Process: Define the cause of the problem, not just the symptoms Analyze the problem Identify solutions Implement a decision Review the decision and confirm that the decision solved the problem
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Conflict Management - Exercise


Description It seems that the real problem here is not a lack of communication, but a lack of knowledge of what needs to be done and when. Here is a copy of the project schedule. It should help you understand what you need to know. "Do it my way!" "Let's calm down and get the job done!" Let us do a little of what both of you suggest Let's deal with this issue next week" Sandy and Amanda, both of you want this project to cause as little distraction to your departments as possible. With that in mind, I am sure we can come to an agreement on the purchase of equipment and what is best for the project." We have talked about new computers enough. I do not want to get the computers, and that is it!" "Sandy, you say that the project should include the purchase of new computers, and Amanda, you say that the project can use existing equipment. I suggest we perform the following test on the existing equipment to determine if it needs to be replaced." Let's what everyone thinks, and try to reach a consensus Type of Resolving Confronting

Forcing Smoothing Compromising Withdrawal Smoothing

Forcing Confronting

Collaborating

Recognizing Excellence in Project Management

Tools & Techniques Manage Project Team


Issue Log g
Should identify specific persons as responsible for resolving specific conflicts by a target date. Helps the team monitor the actions for closure. closure

Interpersonal Skills
Leadership Team Building Motivation Communication Influencing Decision Making Political and Cultural awareness Negotiation

Recognizing Excellence in Project Management

Outputs Manage Project Team


Enterprise Environmental Factors updates
Inputs to Organizational Performance appraisals Personnel skill updates

Organization Process Assets updates


Lessons Learned documentation Templates and standard processes

Project Management plan updates


Changes to staffing management plan including new project team member roles, additional training and reward decisions.

Recognizing Excellence in Project Management

Outputs Manage Project Team


Change Requests
Items such as Staffing changes Additi Additional l training t i i disciplinary di i li actions ti Rewards and Recognitions etc. Cross-training Additi Additional l role l clarification l ifi ti Added personal time in anticipation of extra work

Recognizing Excellence in Project Management

PROJECT PROCUREMENT MANAGEMENT

Recognizing Excellence in Project Management

Project Procurement Management


Project j Procurement Management g

Project Procurement Management includes the processes to purchase or acquire the products, services, or results needed from outside the project team to perform the project work

You have to remember the definition

Plan Procurements - Planning Processes: Conduct Procurements Executing Administer Procurements Monitoring and Controlling Close Cl P Procurements t - Closing Cl i
Recognizing Excellence in Project Management

Project Procurement Management


Monitoring & Controlling Processes Planning Processes

Enter phase/ Start project

Initiating Processes

Closing Processes

Exit phase/ End project

Executing Processes

Process Knowledge Area Initiating Planning Pl Procurements Plan P t Executing Conduct C d t Procurements Monitoring & Control Administer Ad i i t Procurements Closing Close Cl Procurements

Procurement

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PLAN PROCUREMENTS

Recognizing Excellence in Project Management

Plan Procurements
Plan Procurements

Identifying which project needs can be best met by procuring products or services outside the project organization and how the procurement will be managed

Plan Procurements Key Points


Involves considering Whether to procure or not? What to procure? When to procure? How to procure? How much to procure? Types of contracts most appropriate to project needs Identifying potential sellers & their selection criteria Risks involved in make-or-buy decisions

Recognizing Excellence in Project Management

Plan Procurements
Inputs
Scope baseline

Tools and Techniques


Make or Buy Analysis Expert Judgment Contract Types

Inputs
Procurement Management Plan

Requirements documentation Teaming agreements Risk registry g y Risk-related contract decisions Activity resource requirements Project schedule Activity cost estimates Cost p performance baseline Enterprise environmental factors Organizational process assets

Procurement Statement of Work (SOW) Make or Buy Decisions Procurement documents Source Selection criteria Change requests

Recognizing Excellence in Project Management

Plan Procurements

Recognizing Excellence in Project Management

Inputs - Plan Procurements


Scope Baseline
Scope Statement Product scope, scope service description, description list of deliverables, acceptance criteria WBS Relationship among all components of project and project deliverables. WBS Dictionary Identifies deliverables and description of work within each WBS

R Requirements i t D Documentation t ti
Information about Project requirements that is considered during procurement planning Requirements with contractual and legal implications
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Inputs - Plan Procurements


Teaming Agreements
Legal contractual agreements between two or more entities

Risk Register
Contains Identified Risks, Risk owners and Risk Responses.

Risk-Related Contract decisions


Agreements including insurance, bonding, services.

Activity Resource Requirements


Information on specific needs i.e. i e people, people equipment equipment.

Project Schedule
Information on required timelines.
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Inputs - Plan Procurements


Activity Cost Estimates
To evaluate the rationale of the bids or proposals

Cost Performance Baseline


Detail on the Planned budget over time

Enterprise Environmental Factors


Conditions of market place Products, services or results that are available in the market place Suppliers, including past performance or reputation. Terms and conditions Unique local requirement

Recognizing Excellence in Project Management

Inputs - Plan Procurements


Organization Process Assets
Formal procurement Policies, Procedures, Guidelines Management systems An established multi-tier system of pre-qualified sellers based on prior experience.

Recognizing Excellence in Project Management

Tools & Techniques Plan Procurements


Make or Buy Analysis
Make or buy results Purchase or rent Should consider Life cycle costs for the analysis Budget constraints influence make-or-buy decisions

Expert Judgment
Expert technical judgment Expert p p purchasing gj judgment g Expert legal judgment

Recognizing Excellence in Project Management

Tools & Techniques Plan Procurements


Contract Types
Different types of contracts are more or less appropriate for different types of purchases purchases. The type of contract used and the specific contract terms and conditions set the degree of risk being assumed by both buyer and seller. Types of Contracts Fixed price or lump-sum contracts (FP) Cost-reimbursable contracts (CR) Time and material contracts (T & M)

Recognizing Excellence in Project Management

Tools & Techniques Plan Procurements


Contact Types
Firm Fixed Price contracts (FFP) Most common form of contracts A fixed total price for a well defined product and cost not to change unless the scope of work changes. Fixed Price Incentive Fee (FPIF) contracts Fixed price plus financial incentives for achieving performance targets. Same as FFP contracts except that there are incentives for meeting or exceeding selected project objectives (for example, project schedule targets) Example: Finish project early and receive $10,000 per month for every month below the contract finish date

Recognizing Excellence in Project Management

Tools & Techniques Plan Procurements


Contact Types
Fixed Price Economic Price Adjustment (FPEPA) Are the same as fixed-price contracts except that there are price adjustments based on a formula that has been agreed to in advance by both the buyer and the contractor. This type of contact is used for multi year projects. Example: EPA adjustment if the CPI goes over above a specific value

Recognizing Excellence in Project Management

Tools & Techniques Plan Procurements


Contact Types
Cost plus Incentive Fee (CPIF) contracts This is the type of contract in which the buyer reimburses the seller f the for th sellers ll allowable ll bl costs t and di includes l d an i incentive ti f for exceeding the performance criteria laid out in the contract. Contract = Cost + Incentive Fee Example : Suppose you have a CPIF contract with the incentive fee pegged on the final cost of the contract. The pre negotiated savings share of the incentive bonus formula is 85/15, (85 percent for the buyer and 15 percent for the supplier).The expected cost of a project is $100,000 and the fee is $10,000. Suppose the final cost of the project is $80,000. What would be the total payment to the contractor? t t ? The final payment to the contractor will be: $80 000 + 15% of $20 $80,000 $20,000 000 (100K (100K-80K) 80K) + $10 $10,000 000 fee = $93 $93,000 000

Recognizing Excellence in Project Management

Tools & Techniques Plan Procurements


Contact Types
Cost plus Fixed Fee (CPFF) contracts Cost plus fixed fee (CPFF) contracts charge back all allowable project j t costs t to t the th seller ll and di include l d a fi fixed df fee upon completion l ti of f the contract. Contract = Cost + Fixed Fee Example : Suppose the expected cost of a project is $100,000. The fixed fee to the contractor is $10,000. If the final cost of the project i $120 is $120,000. 000 The final payment to the contractor will be: $ $120,000 +$ $10,000 = $ $130,000

Recognizing Excellence in Project Management

Tools & Techniques Plan Procurements


Contact Types
Cost plus Award Fee (CPAF) contracts The buyer pays all costs and an apportionment of a bonus based on subjective determination of seller performance. This is similar to the CPIF contract except the award amount is determined in advance and apportioned out depending on performance. Contract = Cost + Award Fee Example : The buyer may say that there is a $50,000 award fee available. It will be apportioned out at the rate of $5,000 for every month is the project surpasses certain monthly targets by an agreed amount.

Recognizing Excellence in Project Management

Tools & Techniques Plan Procurements


Contact Types
Time and Material contracts Hybrid type of contract with aspects of Fixed (i.e. costs not to exceed and time limits) and Cost reimbursable (value of agreement not defined). Priced on per hour or per item basis plus a fixed price for materials The buyer Th b bears b the th biggest bi t risk i ki in thi this t type of f contract.

Recognizing Excellence in Project Management

Tools & Techniques Plan Procurements


Contact Types vs. vs Risks

Low
Fixed Price FFP FPIF Time and Materials Cost Reimbursable CPIF CPFF CPF CPPC

High

BUYER RISK

SELLER RISK

T&M can be a high risk for buyer if contract does not include a total not-to-exceed (NTE)

High

Low

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Tools & Techniques Plan Procurements


Contact Types Contract Type Selection

Recognizing Excellence in Project Management

Outputs - Plan Procurements


Procurement Management Plan
Describes how the procurement processes will be managed It includes, managed. includes Types of contracts to be used Estimate preparation and evaluation Standardized procurement document Coordinating procurement with scheduling and performance reporting Constraints and assumptions Identifying performance bonds or insurance contracts to mitigate project risks Format to be used for contract statement of work Procurement metrics to be used to manage contract and evaluate sellers

Recognizing Excellence in Project Management

Outputs - Plan Procurements


Procurement Statement of Work
Describes the procurement items in sufficient detail for prospective sellers to determine if they are capable of providing the item Describes products, products services or results to be supplied by seller Includes specifications, quantity desired, quality levels work location etc. Should include a description of any collateral services required for the procured item te

Recognizing Excellence in Project Management

Outputs - Plan Procurements


Make-or-Buy decisions
What project products, services or results will be either acquired or will be developed by project team. Make-or-buy decisions document includes a short justification for decision. decision

Recognizing Excellence in Project Management

Outputs - Plan Procurements


Procurement Documents
Used to seek proposals from prospective sellers., Bids, tender, quotation when seller selection decision is based on price. Proposal When seller selection is done based on technical skill or approach Common names for different types of procurement documents are Invitation for bid (IFB) Request for proposal (RFP) / quotation (RFQ) Tender notice Invitation for negotiation Contractor initial response Procurement document Procurement documents should include: The relevant statement of work Description p of the desired response p Required contractual provisions
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Contract Type yp CR FP T&M

RFP IFB RFQ

Outputs - Plan Procurements


Exercise Contract Calculation
In this cost plus incentive fee contract, the cost is estimated at $210,000 and the fee at $25,000. The project is over, and the buyer has agreed that the costs were, in fact, $200,000. Because the seller's costs came in lower th than the th estimated ti t d costs, t the th seller ll shares h in i the th savings: i 80 percent tt to the buyer and 20 percent to the seller. Calculate the final fee and final price. Target cost Target fee Target g p price Sharing Ratio Actual cost Fi l f Final fee 210,000 25,000 235,000 , 80/20 200,000 210,000 210 000 200,000 200 000 = 10 10,000 000 10,000 x 20% = 2,000 25,000 (target fee) + 2,000 = 27,000 200 000 + 27,000 200,000 27 000 = 227 227,000 000

Final price

Recognizing Excellence in Project Management

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