15) PMP Formulas and Calculation

PMP Formulas and Calculation for the Certification Demystified

Many consider the most difficult part of the PMP exam to be the calculations and PMP formulas. Luckily PMP calculation is not quantum physics, you just need to understand and memorize the following PMP Calculation formulas.

PMP Formulas
Name (Abbreviation)	Formula	Interpretation
No. of Communication Channels	n (n-1)/2 n = number of members in the team	n should include the project manager e.g. if the no. of team members increase from 4 to 5, the increase in communication channels: 5(5-1)/2 – 4(4-1)/2 = 4
Schedule Performance Index (SPI)	SPI = EV/PV EV = Earned Value PV = Planned Value	< 1    behind schedule = 1    on schedule > 1    ahead of schedule
Cost Performance Index (CPI)	CPI = EV/AC EV = Earned Value AC = Actual Cost	< 1    Over budget = 1    On budget > 1    Under budget sometimes the term ‘cumulative CPI’ would be shown, which actually is the CPI up to that moment
Schedule Variance (SV)	SV = EV – PV EV = Earned Value PV = Planned Value	< 0    Behind schedule = 0    On schedule > 0    Ahead of schedule
Cost Variance (CV)	CV = EV – AC EV = Earned Value AC = Actual Cost	< 0    Over budget = 0    On budget > 0    Under Budget
Estimate at Completion (EAC) if original is flawed	EAC = AC + New ETC AC = Actual Cost New ETC = New Estimate to Completion	if the original estimate is based on wrong data/assumptions or circumstances have changed
Estimate at Completion (EAC) if BAC remains the same	EAC = AC + BAC – EV AC = Actual Cost BAC = Budget at completion EV = Earned Value	the variance is caused by a one-time event and is not likely to happen again
Estimate at Completion (EAC) if CPI remains the same	EAC = BAC/CPI BAC = Budget at completion CPI = Cost performance index	if the CPI would remain the same till end of project, i.e. the original estimation is not accurate
Estimate at Completion (EAC) if substandard performance continues	EAC = AC + (BAC -EV)/(CPI*SPI) AC = Actual Cost BAC = Budget at completion EV = Earned Value CPI = Cost Performance Index SPI = Schedule Performance Index	use when the question gives all the values (AC, BAC, EV, CPI and SPI), otherwise, this formula is not likely to be used
To-Complete Performance Index (TCPI)	TCPI = (BAC – EV)/ (BAC – AC) BAC = Budget at completion EV = Earned value AC = Actual Cost TCPI = Remaining Work /Remaining Funds BAC = Budget at completion EV = Earned value CPI = Cost performance index	< 1    Under budget = 1    On budget > 1    Over budget
Estimate to Completion	ETC = EAC -AC EAC = Estimate at Completion AC = Actual Cost
Variance at Completion	VAC = BAC – EAC BAC = Budget at completion EAC = Estimate at Completion	< 0    Under budget = 0    On budget > 0    Over budget
PERT Estimation	(O + 4M + P)/6 O= Optimistic estimate M= Most Likely estimate P= Pessimistic estimate
Standard Deviation	(P – O)/6 O= Optimistic estimate P= Pessimistic estimate	this is a rough estimate for the standard deviation
Float/Slack	LS – ES LS = Late start ES = Early start LF – EF LF = Late finish EF = Early finish	= 0    On critical path < 0    Behind

Hope, the series of my blogs in PMI - PMP (PMBOK 5)  is informative and useful inputs for your exam if you are preparing for PMP Certificate. All the very best!

14) Professional and Social Responsibility

Professional and Social Responsibility

Responsibility

• in the best interest of the society, public and environment
• accept assignments consistent with skills and fulfill commitments
• accept stretch assignment when the assigner is fully aware of the skill gaps
• own error and make corrections
• uphold laws and regulations
• report illegal/unethical activities substantiated with facts
• ask for direction should the decision is beyond assigned authority

Respect

• show respect to others
• listen and understand others
• conduct in a professional manner, even if not reciprocated
• resolve conflicts directly
• negotiate in good faith
• do not influence others for personal benefits
• respect others rights

Fairness

• transparency in decision making
• be objective
• provide equal access to information, equal opportunities
• disclose any conflict of interests and refrain from making decisions in case of conflict of interest
• do not deny opportunities base on personal considerations
• do not discriminate
• apply rules without favoritism or prejudice

Honesty

• understand the truth and be truthful
• honor commitments
• not to deceive others
• not engage in dishonest behavior for personal gain / at the expense of others

13) STAKEHOLDER Management

 |  STAKEHOLDER Management

• stakeholders are groups/individuals who may affect / be affected by the project
• identify stakeholders is a continually process throughout the project life cycle
• identify stakeholders, communicate and engage them, manage expectations and focus on satisfaction
• stakeholder satisfaction is a key project objective
• the Project Manager is responsible for the engaging and managing the various stakeholders in a project

Project Stakeholder Management PITTOs:

Processes	Inputs	Tools & Techniques	Output
Identify Stakeholders	Project Charter Procurement Documents Enterprise Environment Factors Organization Process Assets	Stakeholder Analysis Expert Judgment Meetings	Stakeholder Register
Plan Stakeholder Management	PM Plan Stakeholder Register Enterprise Environment Factors Organization Process Assets	Expert Judgment Meetings Analytical Techniques	Stakeholder Management Plan Project Documents Updates
Manage Stakeholder Engagement	Stakeholder Management Plan Communication Management Plan Change Log Organization Process Assets	Communication Methods Interpersonal Skills Management Skills	Issue Log Change Requests PM Plan Updates Project Document Updates OPA Updates
Control Stakeholder Engagement	PM Plan Issue Log Work Performance Data Project Documents	Information Management Systems Expert Judgment Meetings	Work Performance Information Change Requests PM Plan Updates Project Document Updates OPA Updates

Identify Stakeholders

• identify stakeholders and document their importance/influence (=active involvement) /impact/interest/involvement
• 3 ‘I’s: importance, interest, influence
• stakeholders from operation process needed to be included
• determine the stakeholders’ hot buttons (what response in specific situations) and develop support strategies
• procurement documents are used for determining external stakeholders such as the seller
• stakeholders have the greatest influence in the initial stage of the project
• stakeholder analysis matrix is part of the stakeholder management strategy (output of identify stakeholders)
• Salience Model: describing stakeholders based on the power (influence), urgency and legitimacy
• document only influential stakeholders if there is a large number of stakeholders
• document the impact using a power/influence grid, power/interest grid, influence/impact grid, salience model

Plan Stakeholder Management

• management strategies to engage stakeholders throughout project life-cycle
• Stakeholder Management Plan contains: current/desired engagement levels, scope and impact to stakeholders, interrelationships, communication requirements and forms, how to update the plan
• The distribution of this plan requires precautions as the engagement level of stakeholders is a very sensitive information
• Engagement Level
• Unaware
• Resistant: resistant to change
• Neutral
• Supportive: supportive of change
• Leading: actively engaged for project success
• Stakeholder Engagement Assessment Matrix: (C-current level, D-desired level)

Manage Stakeholder Engagement

• aim: increase support and minimize resistance from stakeholders by addressing issues
• the communication requirements of individual stakeholder are recorded in the Project Communication Plan
• PM may call upon sponsor for assistance
• communicate and work with stakeholders to meet their needs/expectations and address issues
• build trust and resolve conflicts, negotiation skills, communication skills
• need to communicate bad news/issues in a timely manner
• feedback from stakeholders is stored in OPA
• the Issue Log (Action Item Log): to identify issues/define impacts, owner (most important element) and priority/with due date

Control Stakeholder Engagement

• monitor overall stakeholder relationships and adjusting strategies

12) PROCUREMENT Management

 |  PROCUREMENT Management

• Procurement Statement of Work (SOW) is a legal document subject to legal reviews, legal advise should be sought throughout the whole procurement process
• sellers are external to the project team
• need to go through all 4 processes for each and every procurement
• contract elements: offer (seller offer buyer), acceptance (buyer criteria), capacity (physical/financial capabilities), consideration (seller receive), legal purpose (must be legal under law)
• best if contract is signed after PM is assigned
• PM needs to understand terms and conditions, identify risks, include procurement time in schedule and involve in negotiations
• Centralized contracting vs decentralized contracting
• sole source, single source (preferred), oligopoly (very few sellers)
• procurement categories: major complexity (high risk), minor complexity (low risk, expensive), routine purchase (Commercial Off the Shelf Products COTS), goods and services (to perform part of our product)
• a contract is not required to be written, it can be verbal or handshake, for internal projects, formal contract is best
• procurement applies to actors (as a service)
• immaterial breach is minor breach
• point of total assumption (PTA) = Target Cost + (Ceiling Price – Target Price) / % Share of Cost Overrun
• contract change control system is defined in the procurement management plan but not in the contract

• Procurement Statement of Work (SOW) is a legal document subject to legal reviews, legal advise should be sought throughout the whole procurement process
• sellers are external to the project team
• need to go through all 4 processes for each and every procurement
• contract elements: offer (seller offer buyer), acceptance (buyer criteria), capacity (physical/financial capabilities), consideration (seller receive), legal purpose (must be legal under law)
• best if contract is signed after PM is assigned
• PM needs to understand terms and conditions, identify risks, include procurement time in schedule and involve in negotiations
• Centralized contracting vs decentralized contracting
• sole source, single source (preferred), oligopoly (very few sellers)
• procurement categories: major complexity (high risk), minor complexity (low risk, expensive), routine purchase (Commercial Off the Shelf Products COTS), goods and services (to perform part of our product)
• a contract is not required to be written, it can be verbal or handshake, for internal projects, formal contract is best
• procurement applies to actors (as a service)
• immaterial breach is minor breach
• point of total assumption (PTA) = Target Cost + (Ceiling Price – Target Price) / % Share of Cost Overrun
• contract change control system is defined in the procurement management plan but not in the contract

Project Procurement Management ITTOs:

Processes	Inputs	Tools & Techniques	Output
Plan Procurement Management	PM Plan Requirements Documentation Risk Register Activity Resource Requirements Project Schedule Activity Cost Estimates Stakeholder Register Enterprise Environment Factors Organization Process Assets	Make-or-buy Analysis Expert Judgment Market Research Meetings	Procurement Management Plan Procurement SOW Procurement Documents Source Selection Criteria Make-or-buy Decisions Change Requests Project Document Updates
Conduct Procurements	PM Plan Procurement Documents Procurement SOW Source Selection Criteria Seller Proposals Project Documents Make-or-buy Decisions Organization Process Assets	Bidder Conferences Proposal Evaluation Techniques Independent Estimates Expert Judgment Advertising Analytical Techniques Procurement Negotiations	Selected Sellers Agreements Resource Calendars Change Requests PM Plan Updates Project Document Updates
Control Procurements	PM Plan Procurement Documents Agreements Approved Change Requests Work Performance Reports Work Performance Data	Contract Change Control System Procurement Performance Reviews Inspections and Audits Performance Reporting Payment Systems Claims Administration Records Management System	Work Performance Info Change Requests PM Plan Updates Project Documents Updates OPA Updates
Close Procurements	PM Plan Procurement Documents	Procurement Audits Procurement Negotiations Records Management System	Closed Procurements OPA Updates

Plan Procurement Management

• determine whether to obtain products/services outside of organization
• identify possible sellers and pre-meeting with them
• identify explicitly what is needed
• make-or-buy analysis is a compulsory process, needs to take risks into considerations
• carefully written terms and conditions can transfer/share risks
• teaming agreements or joint ventures
• procurement documents: request for proposal (RFP), invitation for bid (IFB), request for quote (RFQ), request for information (RFI), tender notice, invitation for negotiation, seller initial response
• the procurement management plan specifies how a project will acquire goods/services from outside, includes: contract type, risk management, constraints and assumptions, insurance requirements, form and format, pre-qualified sellers, metrics used, etc.
• Procurement Statement of Work (SOW) – performance (describe what can be accomplished), functional (convey the end purpose or result), design (convey precisely what are to be done), can be developed by the seller or buyer – detail enough to allow the potential sellers to decide whether they want/are qualified (at a minimum) to pursue the work
• Contract Types:
• Firm Fixed Price (FFP) – the price is fixed, specifications are well known, risk on the seller
• Fixed Price Incentive Fee (FPIF) – incentives for faster/better than contracted
• Fixed Price with Economic Adjustment / Economic Price Adjustment (FPEA / FP-EPA) – inflation are taken into account
• Purchase Order (PO) – for off-the-shelf goods/services with published rates
• Cost Reimbursable (CR) / Cost Plus – buying the expertise (not the products), outcome is not clear, risk on the buyer, little incentive to control costs on buyer, need invoice audits
• Cost Plus Fixed Fee (CPFF)
• Cost Plus Incentive Fee (CPIF) – incentive for performance, sharing of unused money if under/over contracted amount
• Cost Plus Award Fee (CPAF) – award to be given based on agreed criteria, solely decided by the customer on the degree of satisfaction
• Cost Plus Percentage of Costs (CPPC) – illegal for contracts with US Government
• Cost Contract – not profit, for NGO
• Best Efforts – obligates the seller to utilize best attempts, high uncertainty in meeting the goal
• Time and Materials (T&M) – (hybrid type) when scope is not known, need constant monitoring to control schedule and cost, simple, for short duration, good for proof-of-concept type projects
• Point of Total Assumption – (in fixed-price (incentive fee) contracts) in budget overrun, the point at which the seller assumes all additional costs for delivering the product/service
• PTA = (Ceiling Price – Total Price) / Buyer’s Share Ratio + Target Cost
• target cost = total cost = estimated cost, total price = total cost + total profit
• Request for Proposal (RFP) – cost reimbursable contract, functional/performance SOW
• Invitation for Bid (IFB) / Request for Bid (RFB) – fixed-price contract, design SOW
• Request for Quote – time and material, any type of SOW
• Cancellation for Convenience – buyer can cancel and pay up to the point
• Cancellation for Cause - default by either party, may result in legal actions
• Escrow – survivability of seller in doubt, put the product in escrow (esp. if seller not give up intellectual properties)
• Force Majeure – standard disclaimer refers to ‘Acts of God’
• Indemnification / Liability – responsible party
• LOI Letter of Intent – not legally binding
• Privity – the contractor may use sub-contractor, no direct contractual relationship with buyer
• Retainage – amount to be withheld to ensure delivery
• Risk of Loss – how the risk is shoulder by the parties
• Time is of the Essence – delay in delivery will cause cardinal breach of contract
• Work Made for Hire - all work owned by the buyer
• Sole Source vs Single Source (preferred vendor – for long-term relationship)
• Evaluation Criteria: risk, understanding of need, life-cycle cost, technical capability, management approach, technical approach

Conduct Procurements

• identify the sellers and award the contracts
• PM may not be the lead negotiator on procurement, but may be present to assist
• may need senior management approval before awarding the contracts
• bidder’s conference is a Q&A session with bidders, all bidders receive the same information (bidder are careful not to expose their technical approach during the session => may not have many questions)
• NOT to have secret meetings or communications with individual vendors
• may set up qualified sellers lists
• review seller proposals: weighting systems, independent estimates, screening systems (screen out non-qualified vendors), seller ratings systems (for past performance), expert judgement
• Contract Negotiations and Tactics
• Fait Accompli – not negotiable terms
• Deadline – deadline for deliverables
• Good Guy/ Bad Guy – one friendly, one aggressive
• Missing Man – decision maker is missing
• Limited Authority – not given authority
• Fair and Reasonable – what is fair?
• Unreasonable – making unreasonable demands
• Delay – esp in critical moments
• Attack – force compliance
• Agreement is legally binding and should include (PM should NOT attempt to write the agreement):

Control Procurements

• performed by both seller and buyer
• manage procurement relationships, monitor contract performance, make change and corrections
• the procurement administrator may be external to the project team
• may identify early signs and capture details for pre-mature termination of contract
• the claims administration process deals with changes/disputes, disputes is best to be settled through negotiation > ADR
• may need Alternative Dispute Resolution (ADR) by 3rd parties in case disputes cannot be settled
• For Fixed Price contracts, look out for Bait and Switch (replace with cheaper materials), look out for excessive change requests
• For Cost Reimbursable contracts, audit all invoices, look out for additional charges, tie payment to milestones, make sure people with the required skill sets are doing the job
• For Time and Materials contracts, ensure hours are not padded, follow the milestone dates
• Contract Change Control System: for handling change requests (define who has the authority to approve changes (usually not the PM, but may be assigned the authority))
• Work performance data includes: the cost incurred and the invoice needs to be paid
• OPA may include the seller’s performance

Close Procurements

• all work are completed, deliverables accepted, claims settled OR terminated by either party
• at completion / termination of contract
• prior to administrative closure of Close Project or Phase
• unresolved claims may be left for litigation after closure
• settlement of claims/invoices, audit, archive, lessons learned
• the contract is complete when all the specifications are satisfied, no matter the customer is satisfied with the product or not
• Procurement Audit is the structured review of the procurement process from Plan Procurement Management through Control Procurements, is used to capture lessons learned from the procurement exercise
• once a procurement is cancelled, the next process will be the close procurements