PMP Concepts Comparison Flashcards
Avoid versus Transfer versus Mitigate
Avoid versus Transfer versus Mitigate
There are three strategies that can be used for negative risks (threats) identified on the project. The risk may be avoided, transferred, or mitigated.
Avoid
When you avoid the risk it means you change your plan to completely eliminate the probability of the risk occurring or the effect of the risk if it does occur.
Transfer
Risk transference occurs when the negative impact is shifted to a third party, such as through an insurance policy or penalty clause in a contract. The risk may still occur however the financial impact will be somewhat displaced.
Risk transference usually involves some type of contractual agreement.
Mitigate
Risk mitigation occurs when you proactively change the plan to minimize the impact or probability of the risk occurring. Risk mitigation does not eliminate the risk and as such there will be some residual risk remaining.
Example
We have identified a negative risk that a visitor to the model home could fall down the stairs.
To avoid the risk, the stairs are removed and an elevator is installed.
To transfer the risk, you purchase an insurance policy that would cover any injuries sustained from a guest falling down the stairs.
To mitigate the risk, you install lighting, signs, and handrails to decrease the probability that a visitor will fall down the stairs.
Summary
There are three proactive approaches to handling a negative risk, also called a threat:
Avoid – eliminate the risk
Transfer – shift the impact to a 3rd party
Mitigate – decrease the probability or impact
Enhance versus Share versus Exploit
Enhance versus Share versus Exploit
There are three proactive strategies for positive risks (opportunities). This risk may be enhanced, shared, or exploited.
Enhance
Enhancing the opportunity implies changing the plan or approach to improve the probability of the opportunity occurring or increasing the benefit of the opportunity should it occur.
Share
Sharing the opportunity occurs when you partner with another company or organization to enable achieving the benefits of the opportunity. Sharing usually involves some type of a contractual relationship.
Exploit
Exploiting the risk is taking action to ensure that the opportunity will be realized.
Example
There is an opportunity to be first-to-market with a new product resulting in significantly increased profits from the original business case.
To enhance the opportunity, you offer your team incentives to keep them motivated and focused on the work.
To share the opportunity, you enter into a contractual agreement with another company that can provide a key component required to get to market faster.
To exploit the opportunity, you fast-track and crash your schedule to ensure you will launch prior to your competitor.
Summary
There are three proactive approaches to handling a positive risk, also called an opportunity:
Enhance – increase the probability or benefit
Share – partner with a 3rd party
Exploit – ensure the opportunity will be realized
Sensitivity Analysis versus Expected Monetary Value (EMV)
Sensitivity Analysis versus Expected Monetary Value (EMV)
There are two techniques used in quantitative risk analysis: a sensitivity analysis and an expected monetary value (EMV) analysis.
Sensitivity Analysis
A sensitivity analysis determines which risks have the most potential impact on the project.
Sensitivity charts are used to visualize impacts (best and worst outcome values) of different uncertain variables over their individual ranges.
A tornado diagram is a type of sensitivity chart where the variable with the highest impact is placed at the top of the chart followed by other variables in descending impact order.
Expected Monetary Value (EMV)
Expected monetary value (EMV) analysis is a statistical concept that calculates the average outcome when the future includes scenarios that may or may not happen. An EMV analysis is usually mapped out using a decision tree to represent the different options or scenarios.
EMV for a project is calculated by multiplying the value of each possible outcome by its probability of occurrence and adding the products together.
Example
For a sensitivity analysis, the project risks are evaluated based on the potential financial impact of each individual risk and then placed in rank order.
For an EMV analysis, you are evaluating two vendors:
Vendor A has a 50% probability of being on-time, a 30% probability of being late at an additional cost of $40,000 and a 20% probability of delivering early at a savings of $20,000.
EMV: (30% x $40,000) + (20% x -$20,000) = $12,000 + ($4,000) = $8,000
Vendor B has a 30% probability of being on-time, a 40% probability of being late at an additional cost of $40,000 and a 30% probability of delivering early at a savings of $20,000.
EMV: (40% x $40,000) + (30% x -$20,000) = $16,000 + ($6,000) = $10,000
Based on the EMV, Vendor A would be a better choice as the potential cost is lower.
Summary
Two common quantitative risk analysis techniques are sensitivity and expected monetary value (EMV) analyses.
A sensitivity analysis ranks risks based on their impact (usually in a tornado diagram) and an EMV analysis quantifies the potential outcomes of risk scenarios (usually using a decision tree).
Deming versus Juran versus Crosby
Deming versus Juran versus Crosby
Three commonly cited quality management theorists quoted on the exam are: W. Edwards Deming, Joseph Juran, and Philip Crosby.
Deming
Deming was an American statistician, professor, author, lecturer, and consultant.
He believed that organizations can increase quality and reduce costs by practicing continuous process improvement and by thinking of manufacturing as a system, not as bits and pieces.
Juran
Juran was a 20th century management consultant and evangelist for quality and quality management.
He applied the Pareto principle to quality issues (80% of the problems are caused by 20% of the causes) and also developed “Juran’s Trilogy”: quality planning, quality control, and quality improvement.
Crosby
Crosby was an American businessman and author. Crosby’s response to the quality crisis was the principle of Doing It Right the First Time (DIRFT).
He applied four major principles:
The definition of quality is conformance to requirements
The system of quality is prevention
The performance standard is zero defects
The measurement of quality is the price of non-conformance
Control Chart versus Run Chart
Control Chart versus Run Chart
There are a number of charts used to evaluate and analyze quality results within a project. Two charts that are similar and often confused are a control chart and a run chart.
Control Chart
Control charts are used to determine whether or not a process is stable or has predictable performance.
Typically, control charts identify upper and lower control limits to determine the acceptable range of test results.
Control charts commonly have three types of lines:
Upper and lower specification limits
Upper and lower control limits
Planned or goal value
Control charts illustrate how a process behaves over time and defines the acceptable range of results. When a process is outside the acceptable limits, the process is adjusted.
Control charts can be used for both project and product life cycle processes. For example, for project processes a control chart can be used to determine whether cost variances or schedule variances are outside of acceptable limits.
Run Chart
A run chart is a line graph that shows data points over time. Run charts are helpful in identifying trends and predicting future performance.
Run charts are similar to control charts, plotting data results over time, however there are no defined control limits.
Example
A control chart may be used for a pharmaceutical company that is testing a new pain medication. The drug must stay effective in the system for a minimum of three hours but last no more than five hours, to prevent accidental overdose.
The mean time or goal efficacy duration would be four hours, with three hours the lower control limit and five hours the upper control limit.
A run chart may be used to plot the temperature within the manufacturing plan every day for a month to determine a trend.
Summary
While both a run chart and a control chart plot data points over time or batches, the control chart is enhanced with defined control limits and a target or goal delineation.
Histogram versus Pareto Chart
Histogram versus Pareto Chart
There are number of charts used to evaluate and analyze quality results within a project. Two charts that are similar and often confused are the histogram and Pareto chart.
Histogram
A histogram is a type of bar chart showing a distribution of variables. A histogram represents each attribute or characteristic as a column and the frequency of each attribute or characteristic occurring as the height of the column.
Pareto Chart
A Pareto chart is a specific type of histogram that ranks causes or issues by their overall influence. A Pareto chart assists in prioritizing corrective actions as the issues with the greatest impact are displayed in order. In addition, the Pareto chart includes an arc representing the cumulative percentage of the causes.
A Pareto chart is named after Pareto’s Law that states that a relatively small number of causes will typically produce a large majority of the problems or defects. This is commonly known as the 80/20 rule, where 80% of the problems are due to 20% of the causes.
Example
A histogram may be used to represent the number of students who scored between a certain score range, such as 0 to 20%, 20 to 40%, etc.
A Pareto chart may be used to analyze the causes of customer dissatisfaction. The causes would be ordered by frequency of occurring, allowing the team to focus on those issues with the biggest impact on customer satisfaction.
Summary
A histogram is a bar graph that illustrates the frequency of an event occurring using the height of the bar as an indicator.
A Pareto chart is a special type of histogram that represents the Pareto philosophy (the 80/20 rule) through displaying the events by order of impact.
Responsibility Assignment Matrix (RAM) versus Organization Chart
Responsibility Assignment Matrix (RAM) versus Organization Chart
Two excellent tools for communication and team management are the responsibility assignment matrix (RAM) and the project org chart.
Responsibility Assignment Matrix (RAM)
A RAM is a matrix-based chart that is used to illustrate the connections between the work that needs to be done and project team members. A RAM can be developed at varying levels of detail, commonly at the activity or deliverable level.
Typically, the list of deliverables or activities are on the left-hand column with the team member names across the top. Each deliverable or activity will be assigned to the appropriate individuals. This will aid in communication amongst the team members and help expose any gaps that may exist.
A common RAM is a RACI (responsible, accountable, consult, inform) RAM format.
Organization Chart
A project organization chart is a hierarchical chart used to show positions and relationships in a graphic, top-down format.
Project org charts display the project team members and their reporting lines within the project and to the overall organization. This ensures that team members and stakeholders are aware of who is participating in the project and what the reporting structure looks like.
Summary
Both org charts and RAMs are helpful in most project team settings. The RAM clarifies roles and responsibilities while the org chart communicates the team members participating in the project and the reporting structure both within the project and to the broader organization.
Interactive versus Push versus Pull Communication
Interactive versus Push versus Pull Communication
It is estimated that communication is 90% of a project manager’s job. There are a number of ways to communicate but they all fall within three general categories: interactive, push, and pull.
Interactive Communication
Interactive communication is the most efficient method of communication to ensure a common understanding as it is real time.
Interactive communication should be used when an immediate response is required and when the communication is sensitive or likely to be misinterpreted.
Push Communication
Push communication is communication that is delivered by the sender to the recipients. While the communication can be confirmed that it was sent, it does not necessarily mean it was received and understood.
Push communication should be used when the recipients need the information but it does not require an
immediate response and the communication is non-urgent or sensitive in nature.
Pull Communication
Pull communication is a communication method that provides access to the information however the receiver must proactively retrieve the information.
Pull communication should be used when the communication is informational only. If the recipients don’t read it, it will not affect the project.
Example
Interactive communication methods include:
Meetings Phone calls Video conferences Push communication methods include: Email, Voicemail, Postal mail
Pull communication methods include posting information to: A website, A knowledge repository, A bulletin board,
Summary
Although there are an unlimited number of methods for communicating information on the project, all communication generally falls into one of three categories: interactive, push, and pull.
The project manager must balance the amount of information with the needs of the project and the recipients to determine the most appropriate method to utilize.
Residual Risk versus Secondary Risk
Residual Risk versus Secondary Risk
Risk management is an integral component of project management. Risk management includes not only managing identified risks but also the residual and secondary risks.
Residual Risk
Residual risk is the risk that remains after a risk response has been taken.
The degree of risk tolerance should be considered to ensure that the amount of residual risk is acceptable. If not, additional risk actions may need to be taken to try and further reduce the risk.
Secondary Risk
A secondary risk is a risk that arises as the result of implementing a risk response. If the risk response was not taken, the secondary risk would not exist.
Secondary risks should be evaluated for appropriate action. The severity of the secondary risk or risks may eliminate the risk response as an option if the secondary risk falls outside of the project risk tolerance.
Example
You are planning the annual employee recognition event. It will be an outdoor luau-themed event. Because there is a chance of rain, you decide to mitigate the risk of the employees getting wet and not having fun by putting up a tent.
There is still some residual risk that the employees will get wet walking from the parking lot to the tent.
There is also a secondary risk that someone will trip over the tent poles and get injured.
Summary
Risk identification and analysis should also include residual risks (those risks that remain after an action has been taken) and secondary risks (those risks that arise as a result of implementing a risk response).
Fallback Plan versus Contingent Response Strategy
Fallback Plan versus Contingent Response Strategy
In project risk management, both fallback plans and contingent response strategies may be developed associated with certain identified risks. Both are planned and developed in advance of the risk event occurring.
Fallback Plan
A fallback plan is developed in advance of a risk event occurring and is designed to be used when the primary risk response proves not to be effective.
Think of the fallback plan as the “Plan B”.
Having it documented in advance will ensure that the project team is able to react to the risk in an expedient manner while hopefully minimizing any type of negative impact.
Contingent Response Strategy
A contingent response strategy is developed in advance and designed to be used only if the risk event occurs. As with a fallback plan, the contingent response strategy is a critical communication tool to ensure that all team members know what actions to take when the specified risk event occurs.
Example
You are managing the annual employee recognition event: an outdoor luau. There is a risk of rain on the day of the event but it’s a low probability. As such, you decide not to take proactive action on the risk but rather develop a contingent response strategy should it be raining on the day of the event.
The park where the event will be held has a gymnasium. Your contingency response strategy will be to move the event into the gymnasium should it start raining. For the fallback plan you have the park office designated as a secondary location, should the gymnasium be unavailable.
Summary
Risk management may not always involve taking proactive action. Certain risks may be more appropriate for a contingent response strategy, designed to only be implemented if the risk event occurs. If the primary response is ineffective, a fallback plan, also developed in advance, may be implemented.
Fixed Price Contracts
Fixed Price Contracts
Fixed price contracts involve a fixed total price for the product and may also include incentives for meeting or exceeding selected project objectives. The simplest form of a fixed price contract is a purchase order.
Fixed price contracts place more risk on the seller, as if there is any type of price increase, the seller would be responsible for the increased costs and cannot pass them on to the buyer.
There are three common types of fixed price contracts: firm fixed price (FFP), fixed price incentive fee (FPIF), and fixed price with economic price adjustment (FP-EPA)
Firm Fixed Price (FFP)
The FFP is the most commonly used contract type and is favored by most organizations because the price is set and is not subject to change unless the scope of work changes. Any cost increases due to adverse performance would be the responsibility of the seller.
Fixed Price Incentive Fee (FPIF)
A FPIF contract gives the buyer and seller some flexibility in that it allows for deviation from performance, with a financial incentive for achieving certain metrics. Generally the incentives are related to cost, schedule, or the technical performance of the seller. A price ceiling is set and any costs above that ceiling are the responsibility of the seller.
Fixed Price with Economic Price Adjustment (FP–EPA)
FP-EPA contracts are used for long-term contracts and they allow for pre-defined adjustments to the contract price due to changed conditions. This could include inflation changes or increased or decreased costs for specific commodities. The contract is intended to protect both the buyer and seller from external conditions over which they have no control.
Examples
You purchase 10 books from the publisher for $19.99 each. The PO is a firm fixed-price contract.
You hire an instructor to come onsite and deliver a PMP exam prep course using a fixed-price incentive fee contract. The contract states that the instructor will receive $2,000 to facilitate the course. In addition, the company will pay the instructor an extra $500 for each student that successfully completes their PMP exam.
You are in a long-term contract with a trucking company using a fixed-price with economic price adjustment contract. The contract states that the trucking company will be paid $1,000 per week. If the price of fuel increases or decreases by more than 10%, the weekly pay will increase or decrease by 5% accordingly.
Cost Plus Contracts
Cost Plus Contracts
Cost-reimbursable (or cost-plus) contracts involve payment to the seller for seller’s actual costs, plus a fee typically representing seller profit. Cost-reimbursable contracts place more risk on the buyer.
Three common types: cost plus fixed fee (CPFF), cost plus incentive fee (CPIF), and cost plus award fee (CPAF)
Cost Plus Fixed Fee (CPFF)
In a CPFF contract the seller is reimbursed for allowable costs for performing the work and also receives a fixed fee payment that is calculated as a percentage of the initial estimated project costs. The fee amount would only change if there was a change to the project scope.
Contract value = actual costs + fixed fee
Cost Plus Incentive Fee (CPIF)
In a CPIF contract the seller is reimbursed for allowable costs and the seller receives an incentive fee based on achieving certain performance objectives.
If the final costs are less or greater than the original estimated costs, then both the buyer and seller share costs based upon a pre-negotiated formula (such as 70/30). Generally the first number in the split refers to the buyer’s portion, the second number to the seller’s portion.
Contract value = actual costs ± percentage of difference + incentive fee
Cost Plus Award Fee (CPAF)
In a CPAF contract the seller is reimbursed for allowable costs. The majority of the fee is only earned based on the satisfaction of identified broad subjective performance criteria. The performance criteria is defined and included in the contract and the fee determination is based solely on the determination of seller performance by the buyer and is usually not subject to appeals.
Contract value = actual costs + buyer-defined performance fee
Examples
CPFF:
The contract states that the builder will be reimbursed for the costs associated with the construction of the shed, estimated at $10,000. In addition, the builder will receive a fixed fee equal to 50% of the estimated costs ($10,000 x 50% = $5,000)
If the final costs are $18,000, the builder will receive:
$18,000 Cost (100% of actual costs)
$5,000 Fixed Fee (50% of the $10,000 estimate)
$23,000 Total
CPIF:
The contract states that the artist will have all costs reimbursed for the new sign, estimated at $5,000 and in addition, for each day that the sign is completed early, the artist will receive $200. If final costs are higher or lower than $5,000, the difference will be split 50/50.
If the final costs are $6,000 and the artist delivers the sign three days early, the artist will receive:
$5,000 Cost (100% of estimated costs)
$500 Cost (50/50 split of the $1000 over the estimate)
$600 Incentive Fee ($200 x 3 days early)
$6,100 Total
CPAF:
The contract states that the performer will be reimbursed for their costs and in addition will receive an award fee based on the reaction of the audience.
If the final costs are $10,000, anything above the $10,000 would be paid at the discretion of the buyer.
Develop versus Manage the Project Tea
Develop versus Manage the Project Team
There are four processes in the human resources knowledge area: develop human resource plan, acquire project team, develop project team, and manage project team. While developing the human resource plan and acquiring the project team are straightforward, it may not be as intuitive to know the differences between developing and managing the project team.
Develop the Project Team
The develop project team process is the second HR process in the executing process group and the intent is to improve the competencies of team members through training and enhances the interactions of team members through team-building. (The “fun” stuff!)
There are a number of techniques used to develop the project team:
Interpersonal or “soft” skills, such as empathy, influence, creativity, group facilitation
Training team members to enhance their competencies
Team-building activities to progress them through the stages of team development (forming, storming, norming, and performing)
Establishing ground rules, set by the team members
Co-locating the team into one physical location
Incenting the team through the use of recognition and rewards
Manage the Project Team
The manage project team process tracks team member performance, provides feedback to the team members, resolves issues, manages changes to optimize project performance, and may also involve disciplinary escalations to the functional manager. (The “un-fun” stuff!)
The tools and techniques used to manage the project team include:
Observing and conversing with your team members (yep. Actually looking at and talking to the people on your team. Step away from the computer!)
Providing project performance appraisals on the team members
Utilizing the appropriate conflict management approach: confronting/problem-solving, compromising, forcing, smoothing, withdrawing, and collaborating
Leveraging an issue log to manage the open issues within the project
Quality Control versus Verify Scope
Quality Control versus Verify Scope
While most people understand the concept of quality control, differentiating QC from the verify scope process may be a bit more difficult. Both processes are monitoring and controlling processes and both involve the evaluation of the project deliverables.
Quality Control
The perform quality control (QC) process evaluates the project results (outputs, deliverables) to ensure they comply with quality standards that were defined in the quality management plan. The QC process also identifies ways to eliminate causes of unsatisfactory results and validates that approved change requests have been implemented as approved.
QC must be conducted prior to the verify scope process and the perform quality assurance (QA) process (where the project processes and results will be audited and evaluated for continuous process improvement actions).
Think of QC as the internal quality check of the products or deliverables prior to giving them to the customer or end-user.
The key outputs from QC are the “validated deliverables”
Verify Scope
The verify scope process secures formal acceptance of the completed project deliverables from the customer, end-user, or requesting party. Verifying scope includes reviewing the deliverables with the customer to ensure that they are completed satisfactorily in order to receive formal acceptance of the deliverables.
Think of verify scope as the quality check / user acceptance testing.
The key outputs from verify scope are the “accepted deliverables”.
Example
As part of my project management requirements, I need to produce a weekly project performance report.
When I check the data and figures within my performance report to ensure they are correct, I am performing quality control.
When I provide the performance report to my sponsor for her approval, I am performing verify scope.
Summary
While both QC and verify scope are monitoring and controlling processes associated with the review and approval of the deliverables, QC is the “internal” check that results in “validated deliverables”, followed by verify scope, the “external” check that results in “accepted deliverables”.
Corrective versus Preventive Actions versus Defect Repairs
Corrective versus Preventive Actions versus Defect Repairs
Other than scope changes, change requests may include corrective actions, preventive actions, and defect repairs.
While changes to the project scope, if significant, may update the project baselines (scope, schedule, and cost performance), corrective actions, preventive actions, and defect repairs should not be used to justify a baseline change.
It is important that any variances from the baselines are noted so as to understand the cause and impact of the variance and to contribute to lessons learned.
Corrective Actions
Corrective actions are taken when the project has deviated from the planned scope, schedule, cost, or quality requirements. Corrective actions are reactive in nature and are intended to bring the project’s performance back into alignment with the agreed-upon project baselines.
Preventive Actions
Preventive actions are taken when the project is trending away from the planned scope, schedule, cost, or quality requirements. Preventive actions are proactive in nature, based on a variance and trend analysis.
Preventive actions are intended to ensure the project is delivered in alignment with the agreed-upon project baselines.
Defect Repairs
Defect repairs are implemented when the product or deliverable does not meet the documented quality requirements.
Example
You are building a vacation log cabin for Mr. and Mrs. Johnson. You had originally planned to use a small backhoe for the excavation. Once excavation begins, you realize that the small backhoe is not sufficient and you are now behind schedule. Bringing in a larger backhoe would be a corrective action.
As you evaluate the costs to trim out the inside of the house, you determine that based on the cost trending, you could go over budget. As such, you substitute lower-cost interior doors to prevent exceeding the budget. This is a preventive action.
Upon preliminary inspection of the bathroom fixtures, you find that the hot and cold water are reversed. You ask your plumber to fix the plumbing. This is a defect repair.
The larger backhoe, substitute doors, and plumbing fix would not affect the project baselines as you will want to track the variances and document the causes. Generally speaking, the associated costs with these actions would be the responsibility of the performing project organization.
Now if Mr. and Mrs. Johnson opted to have a spa installed on the outside patio and that wasn’t in the original requirements, that would be a scope change and the baselines would need to be updated. Mr. and Mrs. Johnson would be responsible for the costs associated with the spa.
Summary
Change requests can include scope changes, corrective actions, preventive actions, and defect repairs.
Corrective actions are reactive in nature and are intended to bring the project back into alignment with the baselines.
Preventive actions are proactive in nature to ensure the project doesn’t deviate from the baselines.
Defect repairs are used to correct products or deliverables that do not meet the documented quality requirements.
