PMP Key Terms and Definitions / Formulas Flashcards
Planned Value (PV)
Budgeted value of work planned to be done at a given time
Earned Value (EV)
Budgeted value of work actually completed
Actual Cost (AC)
Actual cost of work completed
Budget at Completion (BAC)
The original cost baseline
Estimate at Completion (EAC)
Expected total project cost (forecasted based on performance to date)
Estimate to Completion (ETC)
Expected remaining cost (now until project completion)
Variance at Completion (VAC)
Expected variance over/under budget
Cost Variance (CV) Formula
EV - AC; Negative is bad, positive is good, zero is on budget
SV Schedule Variance (SV) Formula
EV - PV; Negative is bad, positive is good, zero is on budget
Cost Performance Index (CPI) Formula
EV/AC; Under 1 is bad; over 1 is good; exactly 1 is on budget
Schedule Performance Index (SPI) Formula
EV/PV; Under 1 is bad; over 1 is good; exactly 1 is on schedule
Estimate at Completion (EAC) Formula
AC + (BAC-EV) AC plus work remaining, use budget rate (VARIANCES ATYPICAL);
BAC/CPI assumes same rate of spending will continue (VARIANCES TYPICAL);
AC + [(BAC-EV)/(CPI*SPI)] Assumes current cost and scheduled performance will continue
Estimate to Completion (ETC) Formula
EAC - AC; Expected cost of work remaining
Variance at Completion (VAC) Formula
BAC - EAC; Negative is bad, positive is good, zero is on budget
To Complete Performance Index (TCPI)
(BAC-EV)/(BAC-AC); CPI needed to compete project within budget;
(BAC-EV)/(EAC - AC); CPI needed to hit EAC - assuming original budget unachievable
How is float determined?
The float (AKA slack) is determined by Late Finish (LF) - Early Finish (EF)
What is critical path?
The critical path is the longest duration path through the network diagram. Any delays along the critical path will delay the project. The tasks that have float can be delayed by the amount of float and not delay the project.
Enterprise Environmental Factors (EEF)
the environment you work in that can impact your project; corporate culture, industry standards, infrastructure, political climate; market conditions, etc.
Organizational Process Assets (OPA)
any documented processes and procedures; corporate knowledge base (e.g. project archives); organizational knowledge repositories
What is a project life cycle?
Series of phases a project passes through from start to finish
What is tailoring?
The appropriate combination of processes, inputs, tools, techniques, outputs and life cycle phases to manage a project
What is a project?
a temporary endeavor undertaken to create a unique product, service or result
What is project initiation context?
initiated in response to business factors broken down into four categories: regulatory/legal, stakeholder needs, business change/tech strategies, build/improve products, processes or services
What is project management?
application of knowledge, skills, tools, techniques, to project activities to meet project requirements effectively and efficiently while integration PM processes
What is a program?
a group of related projects coordinated to allow for more control
What is a portfolio?
a collection of projects and programs aligned to achieve strategic business objectives
What are phases?
a group of related project activities allowing for more control and often completes major deliverables; may leverage a phase gate at the end to validate performance and progress
What is organizational project management?
the alignment of projects, programs, and portfolios and aligning them to strategic organizational goals
What is performance measurement baseline?
the original approved plan plus/minus all approved changes; the current approved version of the plan
What is a system?
a set of formal policies, procedures, rules or processes that defines how things are done
What is progressive elaboration?
an iterative approach (to planning) of increasing the level of detail in the plan as greater amounts of information or more accurate estimates become available; plans are created in multiple passes rather than all at once
What is historical information?
documents or data from previous projects which are used to assist in future project decisions
What is a functional organization structure?
a departmentalized structure where employees work for only one manager; project manager has little or no power
What is a matrix organization structure?
employees report to both a functional manager and a project manager (power is shared)
PM has little power, functional manager has most of the power
weak matrix
PM has moderate power
balanced matrix
PM nearly has full power, functional manager has little power
strong matrix
What type of structure does the PM have little or no power?
Organic or simple, functional, multi-divisional
What type of structure does the PM have total power?
Project oriented Organization Structure
What is Project-oriented Organization Structure?
employees work directly for and report only to the project manager; project manager has full power and authority
What is a stakeholder?
a person or organization actively involved in the project, or whose interests may be positively or negatively impacted by the project, or who might exert influence over the project
What is a business case?
Reasons to do a project - market demand, business need or strategic opportunity, customer request, technological advance, legal requirement, ecological impact, social need
What is a project manager?
tasked with achieving the project objectives; lead person responsible for communicating with all stakeholders including sponsor; may report to a functional manager or program or portfolio manager
Organizational structure types
FUNCTIONAL, MATRIX (3 types), multi-divisional, PROJECT-ORIENTED, virtual, hybrid, PMO, organic
What is the role of the PM?
leadership; competencies (technical, leadership, strategic/business management); performing integration tasks
Who is the project team?
“worker bees”; the PM, the PM team and the team members
Responsibilities of the project team
carry out the work; collaborate with PM to determine which processes are needed AKA tailoring, prepare estimates, initially resolve interpersonal conflict, develop or contribute to development of team charter
Who is the project management team?
A subset of the Project team that is directly responsible for the project management and leadership activities of the project
What are the project selection models?
Mathematical approach;
Comparative approach
What are types of mathematical approaches?
linear programming; integer programming; dynamic programming; multi-objective programming
What are types of comparative approaches?
Scoring models (MDMP -> weighted criteria and select highest output),
peer review (PROS vs CONS),
murder boards (intense peer reviews),
economic models (Benefit - Cost analysis, payback period, discounted cash flows, Net Present Value (value of money over time), Internal Rate of Return (IRR)
Economic models (comparative approaches): What is benefit-cost analysis?
compares the project benefits to the costs to derive a ratio from which a decision can be made
Economic models (comparative approaches): What is payback period?
Number of periods required to recover a project’s cost
Economic models (comparative approaches): What is discounted cash flows?
Calculates in today’s (discounted) terms what the value of a project would be given cash inflows and/or outflows over a period of time
Economic models (comparative approaches): What is Present Value (PV)?
Formula calculates the value today of a future cash flow (income)
Present Value (PV) formula
PV = FV / (1 + i)^n
Economic models (comparative approaches): What is Net Present Value?
The sum of a series of discounted future cash flows, offset against initial investment
Economic models (comparative approaches): What is Internal Rate of Return (IRR)?
The discount interest rate when NPV equals zero; always choose the project with the highest positive IRR; reject negative.
Net Present Value (NPV) Formula
Sum of [Future Cash Flows / (1 + i)^n] - initial costs
Define sunk costs
project costs spend to date
Define working capital
current assets minus current liabilities
(2) types of depreciation
straight - line (same amount each year), accelerated (ex. buying a car)
Define constraint
a factor that limits the project team’s options; any restriction placed on the project (ex. include: resources, schedule, budget, scope, etc)
Define requirement
condition or capability that is required to be present in product/service/result, satisfy an agreement or other formally imposed specification
Define Opportunity cost
The potential benefit sacrificed by selecting a different course of action.
*Select lower number
Project selection methods: values should be as high as possible when selecting between projects:
Benefit-cost ratio;
NPV;
IRR;
Return on investment (ROI)
Project selection methods: values should be as low as possible when selecting between projects:
Opportunity Cost;
Payback Period
How many processes are there?
49
Define process
series of activities directed towards causing an end result; one or more inputs create one or more outputs
Each individual process has:
inputs, tools, techniques, and outputs
What is a tool?
often something tangible, such as a template, chart or software program; usual used in performing an activity to produce a product or results
What is an input?
any item required by a process before process proceeds
What is a technique?
a defined, systematic procedure to perform an activity and may employ one or more tools
What is an output?
A product, service, or result generated by a process
What is a process group?
logically-grouped sub-sets of project management processes (which do not always occur sequentially)
