PMP Exam Prep – Part 10: Project Cost Management

In this Section, we will address issues relating to cost at a project management level. It is very helpful to have as broad a background as possible in addressing questions on cost, as questions on cost in the exam are rather diverse, ranging from Earned Value Analysis (EVM) to Accelerated Depreciation, Cost Risk and Contract Types and so on.

Cost Activities throughout the Project Lifecycle

There are three processes that relate to cost when it comes to the Project Lifecycle:

  • Estimate Costs
  • Define Budget
  • Control Costs

Questions really focus on how we build our cost, structure our cost, map our cost, and keep track of our cost.

Estimate Costs

There are a number of different ways to estimate costs and they are tested in the exam. We can build estimates from the bottom-up or from the top-down.

Where do we start looking at when we come up with the estimates for a project’s costs? If you are building an estimate from the bottom-up with the very tiny, finite details, then you will use the WBS. We look directly at where all the work is done, at the work package level.

We would do this because we have the work already broken down into small amounts and it is always easier to estimate something that is smaller in magnitude rather than something that is larger. We typically do not report out our costs to the organization at the granular level of the work package. We commonly do so at one level above the work package, known as  the Cost Account level. Our estimates tend to be pretty accurate when we start at the work package level.

Definitive estimates

The definitive estimate is what you would have if you created an estimate starting at the work package level. The definitive estimate is also known as a bottom-up estimate; a grass-roots estimate or even an engineering estimate. The order of accuracy here is from (–5 to +10%)†. The range of percentages used by PMI to describe the range of accuracy of the various estimates has been used for many years and this range comes primarily from the construction industry.

Definitive estimates are the ideal, but the big down side is that a large amount of time that has to be invested in creating this estimate. Furthermore, Customers and Management may also want estimates in earlier stages of the project, where the project team hasn’t yet defined the WBS at the work package level.

Budgetary estimates

Budgetary estimates are also known as top-down estimates; or analogous estimates. An analogous estimate can be created when we look at past projects or elements of past projects and we try to draw an analogy or parallel between how costs looked like at that time and how the costs might look like in our current situation for similar projects. The range of accuracy here is from (–10 to +25%)†.  The range of accuracy has expanded more compared to the definitive estimate because we do not have a lot of the detailed information that we need in order to come up with a more accurate estimate from a work breakdown structure.

There are many things to consider with the analogous estimate and one of the things we need to capture are the lessons learned. If your organization had not captured the lessons learned previously, then you might not have this data. We look at past projects and we look at what was similar to the projects that we are doing now and what are the differences that would be significant to the cost differences between the previous project and what we are doing today. This is a kind of estimate that can be done much earlier on in the project.

Order of Magnitude Estimates

Order of magnitude estimates are also referred to as classic estimates; ballpark estimates; ‘guesstimates’ or S.W.A.G.s (Scientific Wild Anatomical Guesses). A simple situation where a project manager is asked to come up with this type of estimate is when the boss calls you in and says, “I have a meeting that is starting in 10 minutes and I need an estimate from you and don’t worry, I won’t hold you to it.” The order of accuracy here is from (–25 to +75%)†.  Remember that this range had an order of magnitude that is a 100%.

†A note on the ranges of accuracy

As we look at the range of estimates, you will notice that the ranges tend to be of higher magnitude on the positive site and lower on the negative side. In other words, we tend to assume that we are going to foul things up and so we build our estimates that tend to be more accurate on the downside. People tend to be optimistic and therefore we see a greater range of accuracy on the positive side than on the negative side.

Parametric Estimates

When coming up with a parametric estimate, we look at the parameters or dimensions of the estimate itself. By looking at the parameters of the estimate, we can come up with the Parametric Estimate fairly quickly. This is an estimation method that takes specific values; combines them with other values and then uses this relationship to come up with an estimate.

For example, a contractor was asked to give a quotation for some construction work on a site. He was observed to do the following: He went to the site, looked at the site, paced around the site in a square area by taking broad steps across the site, looked at the customer and then subsequently offered an estimate of forty-five thousand dollars. When asked for where that figure came from, he said that was his basic parametric estimate of $225 per square foot.

The contractor was using his experience and his knowledge to come up with the estimate, but there are a lot of formal parameters.

For example, in construction, if you are building an office in a particular location, you may use a parametric estimate in terms of dollars per square foot. In the software business, it could be dollars for lines of code. In the construction engineering business if you were building a highway for example, a common parametric estimate would be based on dollars per lane mile or kilometer.

Ultimately, you are comparing one variable to another variable and finding a relationship between the two. Such that when a variable moves in one direction, the other variable is going to move along with it.

Parametric estimating is something that is very commonly used for order of magnitude estimates or for budget estimates. Parametric estimating is something that is very commonly used for budgetary estimates as well.

Function Point Analysis

Function Point Analysis is a type of parametric estimate. Function Point Analysis is commonly used when estimating the costs of software application development. Specific functions or features are determined and are aligned with cost factors associated with building these features.

The functions are things that the software is going to do. It is a function of the software application itself and the software engineer will determine the number of functions that a particular software application will have and then come up with an estimate based on the number of functions.

Function Point Analysis is one of the more common types of cost estimating methods where software is being developed as opposed to using a parametric of lines of code.

Learning Curve

The Learning Curve is a concept that states that over time, the costs of doing more work should decrease because we’ve gotten more proficient at performing the work. For example, when I first started learning how to roller blade, it took me about three weeks of practice to be able to roller blade a complete mile. It took me another three hours of practice to rollerblade a two mile distance and the third mile came down to another thirty minutes. As you can see, we are getting better at doing things as we move along. This is the meaning of the Learning Curve.

Law of Diminishing Returns

The Law of Diminishing Returns identifies a basic economic situation where as you put more and more of anything into something you get proportionately less out of it. For example if it costs you a million dollars to get 99% of quality out of a process, it might cost you another million dollars to get to 99.9%, the question is if it is really worthwhile to do that?

Different types of Costs

In the exam, you will be given a scenario and then asked what type of cost the question is referring to.  One such example is to distinguish between variable and fixed costs

  • Variable Costs: Variable costs rise in proportion to the amount of work done. For example the costs associated with skilled labor or materials consumed directly by the project are variable costs. As you progress through the project, you consume more materials and you expend more labor. If you stop working, then you don’t consume any more materials or labor.
  • Fixed Costs: Fixed costs are a non-recurring cost and relate to one-time expenditures.  PMI likes to use equipment as an example of fixed costs in the exams.
  • Direct Costs: Direct Costs are the costs that are directly ascribable to a given project. You can point to a component and say that it is one of your costs and you are paying for it. When you are painting a room, the paint is a direct cost. It is something that you have to incur when doing that project
  • Indirect Costs: Indirect Costs can be defined as the cost of doing business aside from the actual cost of conducting the business itself. Commonly known as overheads, lighting, heating and rental costs are examples of indirect costs.

Defining a Budget

Cost Accounting

Cost Accounting is a fundamental notion that transfers over from the section on Project Scope Management. Recall that the Cost Account or Control Account exists at one level above the work package in the WBS. The Control Account is commonly used for tracking the finances of a project by the functional organization.

At the project level, we can monitor our costs at the work package level. At the functional level or the organizational level, we want to track costs one level higher at the Cost Account level. This is because it is not efficient for management to monitor costs at the detailed level of the individual work packages.

Cost Management Plan

Cost management is a subsidiary element of the project plan. The cost management plan describes how cost variances will be managed in the project. Variances can occur on both the positive side and as well as the negative side.  Candidates must understand the difference between the Cost Management Plan and a Budget.

From a practical point of view we cannot address variances as something which is ‘one size fits all’; We can have major variances and then minor variances depending on the nature of the related work packages. The cost management plan describes how each of these will be managed.

Cost Control

The Cost Control Process is similar to the Scope and Schedule control processes in that it is concerned with the factors that can potentially change the cost baseline. We need to determine if changes have occurred to the cost baseline and we need to manage those changes when they occur.

You need a cost management plan in place to address issues of cost control. It is one of the key inputs to the actual cost control effort. All project team members should know how the project manager is going to handle such variances when they occur.

Stakeholders don’t like to get caught off guard with variances and if we are looking at some cost reports and we have a cost overrun of %200, then there has to be a plan in place in order to address that.

Earned Value

Earned value is tested extensively in the exam. This is is a difficult concept for many candidates because Earned Value is commonly not used by many candidates prior to studying for the exam. There are a number of questions on the exam relating to Earned Value, but they tend not to ask you to perform any calculation, but require you to understand the various formulas and identify which formula to apply in a given situation.

Cost Schedule Control Systems Criteria (CSCSC)

Earned Value is a component of CSCSC. This came out of the US Federal Government back in the 60s and 70s when an entire system of cost control and reporting was formed. So there might be an example of that in the exam.

Example calculations for EV

The examples given on the exam are rudimentary. However, if you do not know what the formulas are, then you might not be able to answer the questions correctly.

    • Planned Value (PV): This is also known as the Budgeted cost for the Work that was scheduled (BCWS). Planned Value refers to how much money has been planned into the project at one point in time. How much money has been set aside for the project as of a given data-date. The ‘data-date’ is a point in time we are looking at in evaluation. It is an estimate. When you are estimating the work that has to be done for a job, you are really estimating the Planned Value for the work. This can be figured out at any given point in time for the project.
    • Actual Cost (AC): Also known as the Actual Cost for the Work Performed (ACWP). The Actual Cost is how much work we have actually spent on so far. In other words, it is the actual cost for the work done.
    • Earned Value (EV): Also known as the Budgeted Cost set aside for the Work Performed. (BCWP) How much we had planned to spend for the work that we had actually gotten done.

Budget at Completion (BAC)

    :  BAC represents the total cost of the project. The total of all the planned value estimates

  • Estimate at completion (EAC):  EAC is what we now expect the total job to cost based on our performance to date.
  • Estimate to Complete (ETC):  How much more do we expect the project to cost based on our performance to date. We are not concerned with what you have spent so far. You are only concerned with how much you have left to spend to complete the project.

Candidates tend to find some confusion between EAC and ETC. Make sure you can distinguish between these terms.

Earned Value Formulas

You will be required to understand and apply the following formulas. Exam focuses on the basic formulas. EV is always the first acronym in any equation when it comes to calculating cost. All values are expressed in dollars and not days or weeks. Also, be wary as to how negative numbers are represented in the exam. For example, negative 200 can be expressed either by (200) or “-200”.


Negative Variances are bad and Positive Variances are good

  • Cost Variance (EV – AC):How much you planned to spend less how much you actually spent at that point in time.
    Positive Cost Variance: Earned Value (Budgeted Cost) is greater than Actual Costs.
    Negative Cost Variance: Spent more than you budgeted for.

    • Is a negative cost variance bad? Typically a negative value is bad, but depending on where you are in the project you might be able to recover. The earlier in the project where you find the cost variance, the more time that you will have to correct the problem. If you are on the last activity for a project and you find out that you are having a negative cost variance, then that is not good news.
  • Schedule Variance (EV – PV):The work that we scheduled and we are subtracting from that the work that we have done.
    Positive Schedule Variance: I have performed $200 dollars of work and I had planned to do $400 of work done by now. Scheduled variance is -$200. I am behind by $200 worth of work. That is BAD

Cost Performance Index

We want to be able to look at how we are performing on this project. Is everything going as planned? We want to find out how much we are extracting from each dollar that we had invested. Most of the questions tend to have nice round numbers when it comes to CPI questions. PMI is not trying to test your mathematical abilities. They are trying to test your understanding of the concepts behind the Earned Value management system.

  • Cost Performance Index (CPI) (EV /AC):  If I have an earned value of $200 and I have an Actual cost of $400, then I have a CPI of 50 cents.  For every dollar of effort that you are putting into this particular effort or activity, you are only getting back 50 cents worth of work. That is BAD
  • Total Budget (BAC) PV ): The sum of all the Planned Value amounts in the project a.k.a. total budget
  • Estimate to Complete (ETC) (ETC = EAC – AC):ETC is the Estimate At Completion minus the Actual Costs. How much more money we need to complete the project at this point in time.
  • Estimate at Completion (EAC): What the job is going to cost based on a number of different factors. We may see a variety of formulas to come up with different ways to calculate EAC, all of which will give you varying answers to the same question. They will describe a prospective situation for which the EAC will be:


For Example:

EAC = (AC + Remaining Budget) / CPI

The first formula for EAC is used when the current variances are seen as typical of future variances.

EAC = (AC + New Estimate for All Remaining Work)

The Second formula is based on the fact that when past performance shows that original estimates were not only flawed or are no longer relevant because of a change in the conditions.

EAC = (AC + Remaining Budget)

The third formula for EAC is based on the fact that when our current variances are seen as atypical.

The key in knowing which formula to apply is by looking at the question and looking at the descriptive clues as to what formula should be used to determine the value of EAC.

The fundamental idea behind EAC is in what we now expect the total job to cost. We have to understand that the value of the Earned Value Management System is in collecting this information to help us to look to the future.

  • Variance at completion (VAC) (VAC = BAC – EAC):Variance is a measure of how far off the mark we are. It is the one thing that management is always concerned about.

We are looking into the future and assuming that based upon our current performance, how much our variance is going to be at the end. i.e. continuing at this rate, given our actual costs, what are the variances going to be at the end? Positive is good in this case.

Applying Earned Value concepts

How do we go about applying Earned Value and how we go about tracking our progress? A question that we might often find ourselves asking team members is ‘how far along are you with the work?’ and Earned Value may help us to answer that question to a certain degree.

For Example: You are painting a room. According to Earned Value estimates, how far along are you in this Painting project?

  • 50/50 rule
    If I had started the project, I would report 50% complete. In other words, once I start the project, I would report 50% of the work complete. So my earned value is 50% of whatever the planned value is. This applies even though I just put my brush to the wall. I opened up a paint can. I am 50% complete for earned value purposes.
    Conversely, if I have almost finished painting the room and I have completed 99% of the work, according to Earned Value, I have still only completed 50% of the work. Only when I have completely finished the job, can I report the other 50% complete for Earned Value purposes.
  • 20/80 rule
    When I start a project or activity, I report 20% done and only when I complete the job, I report the other 80%.
  • 0/100 rule
    This is the most conservative among the 3 reporting rules. I cannot report any of the work as being complete until the work has been completed 100%. This is normally reported at the work package level.

Present Value

Present Value represents the value to us today of future cashflows. Payment today is worth more than payment sometime in the future. For example getting a thousand dollars in your hand today is more valuable than getting the same sum tomorrow or 2 years from now, because we could spend the money today or simply invest it and get some interest back from the original sum. Conversely, at 10% interest, the sum of $1000 a year from now is worth nine hundred and ninety dollars today.

While you don’t have to do many calculations on present value for the exam, you will have to be aware of the fundamental concepts behind Present Value. Present Value is a way where we can try to determine which projects have to be done. It is the context generally in which present value will be used.

Benefit Cost Ratio (BCR) (Benefit / Cost)

BCR is used as a project selection technique. A BCR value of ‘one’ means that we are at a breakeven point in the project. If the BCR is smaller than one, it means that we are spending more money than we are investing into the project. A BCR of ‘greater than one’ means that our project is profitable.

Example: We are going to make 2 million dollars on this project but it will cost us a million dollars. The BCR is calculated as follows:

BCR = Benefit / Cost

= $2m / $1m

= 2

The BCR is a ratio and has no units. This means that it’s not a good tool to compare between different projects. For example, another project costs promises a return of $200 in return for an investment of $50.

BCR = $200/$50 = 4

On paper the BCR of this second project seems much higher than the first project which has a BCR of 2. However one project provides us with a return of $1m and the other with a return of $200. It is misleading to compare between the two.

Internal Rate of Return

IRR is not a simple mathematical calculation-based concept like EV. You won’t have to calculate it on the exam because there is no ready formula to use in the examination environment. IRR is standard way of calculating the return on an investment or project and is calculated the same way regardless of which company we are looking at. Different companies do NOT come up with their own ways of calculating IRR. IRR is based on the concept of Present Value. A larger percentage value of IRR is more desirable. It is similar to a basic investment.

Key points to be aware of when it comes to the exam: IRR is consistent across organizations. It is a basic financial measure. There is no ready formula for use when it comes to calculating IRR.

Payback Period

A Payback Period is measured in terms of time and not dollars. When you look at your project, you look at the number of time periods up to where your cumulative revenues exceed your cumulative costs, i.e. your project has turned a profit. The Payback period is the amount of time it takes for us to turn a profit.

The shortest payback period is usually the best answer. The most attractive is to have it shorter because we want to see those returns as soon as possible. We don’t want our investment to be hanging there and want a return as soon as is reasonable or possible.

Opportunity Cost

Opportunity Cost refers not so much to what we didn’t do, but more about what we could have gained had we done so. A simple example to illustrate this concept can be derived from a dollar bill.

The dollar bill that I hold in my hands is here because I forgot to pick up a lottery ticket. I was supposed to pick up the lottery ticket yesterday and I always make it a point to pick up a lottery ticket. By virtue of opportunity cost, I have a dollar that I could have invested in a lottery ticket. Because I know that this would have been the time that I won the lottery, I missed out on winning the lottery prize that is 100 million dollars.

My opportunity cost associated with this dollar bill is ninety nine million nine hundred and ninety nine thousand, nine hundred and ninety-nine dollars, of course less what ever I would have to pay in taxes.

If you see a question that involves opportunity costs, then expect to see these terms – ‘would have’,  ‘should have’, ‘could have’, ‘might have’, or ‘may have’. If the question uses these terms, then it might be leading you towards opportunity cost.

For example: “We could have gone after this work; we should have gone after this work; our competition went after this work. If we had done this, then it would have made us this much money or generated us this much revenue.”

Sunk Cost

Sunk Cost requires you to forget the past or the money that you have spent to date as you are looking forward towards the end of the project and this is very difficult for a lot of people to do.

Example: A co-worker has a nasty habit of buying beat up cars and putting a lot of money into them in order to restore them. In the process of maintaining his 1959 vintage Ford Truck, he sunk a total of $40,000.00 before finally giving up the car. A lot of people asked why he was throwing so much money into this car.

The answer to that lies in Sunk Cost.  The notion is that you forget about the money that you sunk into something and you look ahead and you make an evaluation based on how much additional investment you make from this point forward.

Instead of looking at the 38 or 39 thousand dollars that he had spent so far, he asked questions such as how much was this little piece of equipment such as a water pump or air filter.

We apply this to projects when we look at a project that we invested four million dollars into in order to get one million dollars return out of it. We ask ourselves if it is worth it to spend the last two hundred thousand dollars’ worth of work. The answer is that we have to complete this project. The rationale here is that we are almost at the end of the project and for a couple more hundred thousand dollars we will see the final return of a million dollars and at the very least minimize our losses.

Emotionally, people are tied to the amount of money that they have already spent and they have to get over that barrier to realize the benefits.

Contingency reserve

Contingency Reserve is defined for something like a risk generally that has been planned for and some money has been set aside to take care of that risk should that occur A contingency reserve is something that you had on hand as a contingency in case anything happened. You also usually have the contingency reserve as part of your budget and you would probably show that as part of your overall project budget

Management reserve

Management Reserve is a pot of money or time set aside to address risks that turned into problems that you did not plan for. I.e. Murphy ’s Law would be a type of risk that would be covered by management reserve. Management reserve is where you usually have to go around begging for money from the powers that be. So you have to supplant yourself to management because you had to go spend this money.

PMI is trying to get away from their term of management reserve, they are trying to work their way towards the term reserve as being a more generic term. You may still run into management and contingency reserve during the exam.

Working Capital

Working Capital is defined as Current Assets less the Current Liabilities. You need to know the fundamental definition of working capital and what it is. This is generally good for one question in the exam.

Depreciation of Capital

For accounting purposes, a company may want to depreciate the value of an asset over time. This has a direct impact on the amount of tax that a company has to file in its return. You need to know of the various types of depreciation.

  • Straight-line Depreciation: Things that we are willing to make  a long term investment in. for example if you see that Dark Cherry furniture in your Boss’s office, then chances are they are using that straight line depreciation because they don’t mind taking their time writing that stuff off.
  • Accelerated depreciation: We perform accelerated depreciation on things that we want to get our return out of very quickly. For example, computers and hardware or some of the large-scale software are generally depreciated using accelerated depreciation. For example, I am buying a used piece of equipment. I should use accelerated depreciation, because I want to depreciate my investment fast and get the potential tax benefits from the depreciation itself.

For the exams, one of the examples that you are going to see on accelerated depreciation is in items such as technology that become quickly obsolete. And if it is a very old building, then you want to use accelerated depreciation. The terms Double Declining Balance and Sum of the Years-digits may come up in the exam. These are various methods of performing depreciation on an asset.

Value Analysis

Value Analysis can be defined as simply looking at an item and trying to establish if it is worth paying for.

For example, if you were to buy a new car and I told you that it would cost $400 for a full set of the cup holders that went into your car, would you be willing to spend that amount of money? Most people would not want to pay that money. I would be willing to pay that amount of money in a heartbeat and that is a classical example of value analysis. I put a high value on those cup holders. I know how much it is going to cost me to clean the stains on the carpets because there were no cup holders.

Life-cycle cost

Life-cycle costs are different from project costs because it includes every cost associated with the project, including acquiring, operating and maintaining and disposing of the final project deliverables over the lifecycle of the project.

Summary:  Project Cost Management

  1. Accuracy of estimates
  2. Values of estimates
  3. Benefit cost ratios
  4. Internal rate of return
  5. Payback period
  6. Different types of cost estimating
  7. Earned value


In this section, we looked at the different ways of coming up with a cost estimate and then using that estimate to build a budget, which is another baseline in the project. When it comes to controlling costs, we need to be very familiar with the concepts of Earned Value, and also some basic cost accounting concepts such as IRR and depreciation.

In the next section, we will cover Project Quality Management.

Ook! Road Chimp, reaching for a banana.

PMP Exam Prep – Part 9: Project Time Management

In this section, there will be a large focus on Scheduling. By the end of the section, you should develop an understanding of how networks are used to solve resource allocation; scheduling issues and leveling issues. You should expect to see PERT, CPM and Network diagrams in great detail during the exam. You should know how they are constructed and how schedules are computed.

Time Processes throughout the Project Lifecycle

There are five processes that relate to time when it comes to the Project Lifecycle:

  • Define Activities
  • Sequence Activities
  • Estimate Activity Resources
  • Estimate Activity Durations
  • Develop Schedule
  • Control Schedule

PMI wants us to be comfortable with each of the activities and the role that they play throughout the Project Lifecycle.

Exam Hint – Document original calculations in earlier questions as there is a good possibility that you might see the same example later in the question set. You should also be able to look at a PDM Method Diagram and calculate the Critical Path. For example, the question might ask you to calculate a new critical path based on new information provided by the question.

Define Activities

This process adheres to the concept of decomposition that was discussed in the previous section on Project Scope Management. By this stage of project planning, we have created the scope baseline a.k.a the WBS and we now want to decompose the WBS into a greater level of detail, such that we can define the activities that need to be completed in order for the total project to be considered complete.

For the exam, you will have to familiarize yourself with some of the various practices and techniques for defining activities. Some of these techniques are well established and have been around for a long time.


The PERT or Program Evaluation and Review Technique was developed in the late 1950s by the consulting firm Booz, Allen and Hamilton for the US Navy during the Polaris Submarine Program. The PERT technique was developed together with the Work Breakdown Structure or WBS.  The PERT works best in situations when an organization performs lot of projects that are similar in nature or repeats similar activities using a standardized process. For example, the US military used a well-defined and repeatable processes to build each submarine in the Polaris program. They could compare the durations that it took to perform a specific activity, such as installing a hatch or cover, across a number of different projects. PERT  is also best suited to situations where there  is flexibility when it comes to costs or budgets.

There are 3 Time Estimates found in PERT:

  • Pessimistic Time Estimate
  • Most Likely Time Estimate
  • Optimistic Time Estimate

PERT is a Probabilistic Time Estimate. The purpose of these calculations is to determine the likelihood of completing a particular path activity or even the entire project based on that activity. While PERT used to be a dominant activity estimation tool, it is not used that frequently today. We tend to see PERT used a lot in Precedence Diagrams, which will be discussed later in this section. Two calculations used by PERT that you will need to know for the exams are listed below:

(A) Most Likely Time Estimate (PERT Mean):

{Pessimistic Estimate + (4 x Most Likely) + Optimistic Estimate} /6

(B) PERT Standard Deviation:

(Pessimistic Estimate – Optimistic Estimate) /6

You are not required to calculate PERT in the exam, just need to know how to find the PERT standard deviation, which is by subtracting the optimistic estimate from the pessimistic estimate and dividing the result by six. A lot of people tend to get confused with the different formulas. For example, in the exam you might be presented with some duration estimates and asked to choose the PERT Standard Deviation from a number of formulas. One of the answers they give you will be the answer for the PERT mean and not the Standard Deviation.

Critical Path Method (CPM)

The DuPont corporation and Remington Rand developed CPM or the Critical Path Method in the 1950s. The application of CPM in those days was for planning and scheduling Plant maintenance and construction programs. The emphasis in this case was with controlling costs while leaving the schedule flexible.

We don’t need the Pessimistic and the Optimistic time estimates for calculating CPM. We just need one data point for CPM and that is the most likely time estimate. In other words, your best guess is good enough as far as coming up with the duration required for a particular activity or time. We use CPM when building Activity-On-Arrow diagrams.

CPM is not that popular today, and while we tend to use one time estimates per activity in most instances, we typically use the PERT formula to obtain the most likely time estimate.

Precedence Diagramming Method

The PDM or Precedence Diagramming Method is considered to be more commonly used today for formulating activity duration estimates when compared to either CPM or PERT techniques.  PDM was developed by a professor in Stanford University in the early 1960s and this method is also called Activity on Node.

To visualize an Activity on Node diagram, think of a picture of a network and you see boxes connected by lines and within the boxes are the activities. The lines between the boxes simply define the sequence of activities from one activity to the next.

Note that Activity on Node diagrams differ from Activity on Arrow or Activity on Line methods. Activities in the latter cases are depicted by lines in between the nodes. The activity is actually on the line and the nodes connecting the lines are simply identifiers of the activity itself.

Sequence Activities

For the exam, you will need to know the fundamental ways which networks are represented and how to construct and use network diagrams to calculate various characteristics of a project. Activity Sequencing follows up on the previous process, Activity Definition, by focusing on the appropriate sequence of performing activities now that they have been listed out.

At this point in the project, the planning team will be asking questions such as how particular tasks should be performed and in which sequence they should be carried out and if the tasks can be performed sequentially, in parallel or a combination of the two. The sequence could be linear, one after the other; or in parallel with certain tasks overlapping each other in certain cases. This largely depends on the nature of the work to be performed and how the various activities interact with one another..


When we do the sequencing, there are both hard and soft logics or Mandatory and Discretionary Dependencies that we need to pay attention to.

  • Mandatory Dependency or hard logic typically involves a physical or technological limitation of the work. For example, a prototype must be built before it can be tested. There is no overlap of activities here, there is a clearly defined sequence. You have to build a prototype before you can test it.
  • Discretionary Dependency or soft/ preferential logic is defined by a preference of how you would like to do something; how you might have done something in the past; or how your organization might dictate how a task is performed.

Examples of Discretionary Dependencies: We can find examples whenever there is a desire to sequence in a way that is desirable and customary. For instance, if you were doing plumbing and electrical work in sequence rather than in parallel, some people would prefer to perform one task and then move on to the other. However, it is not necessary to do so because of some mandatory dependency between the two. It is simply a matter of preference.

Another example is that some project management practitioners believe that the correct sequence in a project is that you must complete the concept phase before you can move to the design phase of the project lifecycle. This is not hard logic and is in fact preferential or soft logic.

Exam Tip – External dependencies are defined as anything that is needed from outside sources other than the project team. For example, prototype and test results that you rely on an external organization to perform. A example PMI likes to use is in regulatory environments, where you are waiting for the vendor, the client, the regulator or anybody external to the project to move it forward.

Activity on Arrow Method

The activity on arrow diagramming method involves the creation of a network of nodes and joining these nodes are arrows. All activities flow in one direction, typically from the left to the right and the actual activities and their durations are listed in the arrows. The nodes represent milestones, where there isn’t any work performed. All relationships are finish to start in an activity on arrow diagram.

Finish to start: Events occur in serial. You cannot start one activity until another activity finishes. Example, you cannot make the coffee until the water has boiled. There are many activities that can be done in parallel or overlap one another and as such, we see a case where Activity-On-Line diagrams don’t represent the real world that well.

Dummy Activities

How do you show complex dependencies when you cannot draw them on paper in activity on line diagrams? It may be impossible to draw an arrow from activity AC to activity AD due to tremendous complexity. The solution is to use dummy activities. These are activities that consume no time or resources and are displayed to show dependencies between different activities that would otherwise not be drawn. A dashed or dotted line represents a dummy activity

Precedence Diagramming Method (PDM/AON)

The precedence diagram method was developed to overcome some of the limitations of Activity-On-Line Diagrams. There are no dummy activities in this case. PDM is one of the most commonly used network diagramming techniques and you need to be familiar with how to construct and analyze these diagrams for the exam.

Exam Tip –Definitions and terms: In studying for the exam, it is important to look at lists of terms and memorize those terms. Many questions require you to know the definitions of a term such as Float in order to correctly answer the questions. For example, there is a distinction between Lag and Slack that should be noted for the exam. 

The following list defines some of the most frequently used terms in network diagramming. You should develop a thorough understanding of these terms.

  • Lag: Imposed Waiting Time. For example, when you paint a room, you will have to wait for the paint to dry once you paint the room. No resources are consumed in this case, while the paint is drying. Lag adds to the Duration of an activity.
  • Negative Lag (Lead): The opposite of lag, this is the ability to jump ahead before you start the next activity in a Finish to Start Relationship.
  • Critical Path: The critical path is the path through the network that takes the most amount of time. It represents the least amount of time with which the project can be completed. (see section below for full explanation)
  • Slack (Float): Slack is the amount of time whereby a particular activity can be delayed without delaying the entire project.  Slack is a function of the network and is calculated by looking at the network.
  • Zero Slack: Activities on the Critical Path generally have zero slack, this doesn’t always have to be the case. Sometimes, the critical path is the path with the least float or slack. For example, if you have an imposed end date, it is possible to have a float of perhaps one or two days.
  • Total Float: The Total Float is calculated by analyzing the network of a project. The Total Float does not affect the end date of the project. Typically, the Total Float can be defined by the Late Start minus the Early Start or the Late Finish minus the Early Finish. 
  • Free Float: This is an activity’s Float that does not have an impact on the next task in the network. Free float looks at how much this task can be delayed without impacting the very next task, also known as the nearest successor in the network.

Critical Path

The Critical Path is probably the most important concept when it comes to Project Time Management. The total duration of all the activities in a single path from start to finish is summed up to a number and expressed in days or hours. That number traces the longest path through the network and is also the shortest time in which the project can be completed. There can also be more than one Critical Path for a network in many projects. So don’t be fooled by a question that leads you to believe that there is only one Critical Path.

  • Q: How do you determine if a task is critical?
  • A: There is no slack or float for a particular activity.

PDM Relationships

There are different types of relationships connecting the activities depicted in Precedence Diagrams. The knowledge of these relationships is very important when we look at PDM.

  • Finish-to-Start – Activity A must be 100% complete before Activity B starts. If you were to impose lag, then it would occur between these 2 activities. E.g. Activity “A” would finish and then n days later, “B” would start.
  • Finish-to-Finish – We can use a Christmas family dinner as an example. Good cooks tend to time the preparation the various side dishes such that they finish at the same time as the main dish. This way all of the dishes can appear on the table at the same time, in a finish-to-finish relationship.
  • Start-to-Start – Both events can start at the same time and can therefore run in parallel. There is no time lapse between the two activities. A time lapse might occur if there is lag time or an imposed waiting time.
  • Start-to-Finish – For example, in some organizations, the selection process for Project Manager role has to be underway for at least 2 weeks before the proposal phase may finish. This is a way to ensure that all the candidates for the PM role have a chance to look at a proposal before it goes out the door. In this case, the Project Manager Selection Phase Starts with a  lag time of 2 weeks, then the Proposal phase may finish for a project.

You will not be required to distinguish between different scenarios for the 4 types of relationships in the exam. Rather, you will have to determine how they are expressed. The terminology used in the question is what you have to pay attention to. For example, you need to know the precise terms, i.e. Finish-to-Finish and Start-to-Start and not “Beginning to End” or “End to Finish”


Crashing represents a need to accelerate the schedule or reduce the duration of a project or phase within the project. Crashing almost always increases your cost, illustrating the interplay of the Triple Constraint we had discussed in the section on Project Integration management.  The increase in costs can be due to a need to add more Human Resources or Equipment to the project or even allocating more salaried personnel in order to perform the work. Note that there is a cost for salaried project personnel. For example, as more of a project manager’s time is allocated to a project, there will be a cost relating to a loss in productivity due to fatigue.

When it comes to selecting the activities to crash, we only want to crash activities on the Critical Path. It is these activities that are directly impacting the duration of the Project. All other activities that do not lie on the Critical Path should have inherent float or slack and so expending resources to crash these non-critical path activities will result in comparatively less dramatic results to the duration of the total project. If you want to accelerate the project schedule, then you will have to find a way to reduce the duration of the critical path.

We want to look into crashing the activities where we are going to gain the most amount of time for the least amount of cost. You may also want to look at the rest of your network and try to determine the activities that are close to the critical path. If you crash your critical path too much, a new critical path may appear or you might end up adding these tasks onto your critical path as well.


For fast-tracking, we are attempting to do the project with the same defined amount of resources that we estimated, but we are trying to achieve the same work in less time. The way to do this is by running tasks in parallel. Such that once a particular task starts, we might start another task immediately. We are trying to work on more tasks at the same time. There is a disadvantage to Fast-tracking, which is the increase in level of risk and complexity: As you increase the complexity of a project, you inherently increase the risk and this increases the probability that the project might fail.

Concurrent Engineering: There is a technique that is similar to Fast-tracking and has appeared in the exams. Some people call this Fast-tracking. But it really is a planning technique or an approach to a project, where when be begin the project we have all the parties that will be somewhat involved in the project to be part of the initial project planning team.

The objective in this case is to become aware of all of the tasks in the project and plan for the tasks that have to be performed. This way, we are concurrently analyzing the work that we need to do and we are preparing for the work that has to be done. This can significantly help a project complete sooner as more people have been made aware of what they have to do earlier in the project. The key difference in this case is that while Fast-tracking looks at overlapping tasks, Concurrent Engineering looks at overlapping entire Phases.

Gantt chart

What is the best tool for planning and analyzing your project schedule? If you said Gantt Chart, that you answered incorrectly! Gantt charts are great presentation tools, however the PDM and Network Diagrams are the best tools to use for analysis because they show us relationships between different activities.

01 Gantt






Fig 5-1. Gantt chart

The Gantt chart does not show all of the interrelationships between the activities. While Project Management software applications such as Microsoft Project and commonly provide us with a Gantt Chart view of our project, not all of the relationships are displayed in the Gantt chart. We use the network diagram to see how every activity relates to every other activity for the project. This is the best tool to use for comprehensively planning out a project schedule.

The entire notion of a Gantt chart does not include dependency lines such as the arrows we see in Activity on Node diagrams. Technically, once we add Arrows to a Gantt chart, it is no longer a Gantt Chart, but instead a time-scale dependency diagram.


A milestone is an activity with a duration of zero. It exists at a particular juncture in time that you have identified as being significant to the project and that you want to communicate to stakeholders. I.e. it could be the end of a phase or task or the delivery of a work result or even the expenditure of a certain sum of money. Milestones are very effective in communicating with upper management or the customer. The reason is that these parties may not be interested in looking at the technical details of the project. They may not even be able to understand some of the details at the lower levels of the WBS.

Exam Tip –You may be asked in the exam if a kickoff meeting is a milestone. The answer is No. The kickoff meeting in its raw state takes a lot of time and resources. The kickoff meeting can be converted to a milestone as follows “Kickoff meeting complete.” Or “Kickoff meeting underway,”


Develop Schedule

In this process, we develop the schedule by analyzing activity durations and sequences, related resource requirements and related dependencies. We will go through several techniques that can be used to develop an efficient schedule.

Types of Schedules

There are several classifications of schedules that can be created. Several are listed below:

  • Heuristic Scheduling: This is also known as rule of thumb estimating; learning by discovery; or learning by trial and error. PERT is a good example of a form of heuristic scheduling.
  • Resource-constrained Schedule: In a situation where there is competing demand between projects for a scarce resource, you end up updating and scheduling your project around the availability of this resource. An example could be the leasing of shared equipment or facilities; or the use of a subject-matter expert. The impact of varying resource availability is that the project has the potential to extend or shrink in duration.
  • Time-constrained Schedule: This occurs in a scenario where the network schedule is fixed. In other words, there exists a fixed, hard coded date which we must adhere to by all means. For example during the Y2K readiness programmes for many businesses, December 31st 1999 was a hard set date of completion that could not vary.


We want to ensure that we do not exhaust the resources that are working on our project. For example, if we try to crash a project or particular task, a particular resource might end up working 18 hours straight, which is not a sustainable level of effort. The objective of leveling is to establish a schedule where a resource is used in a pretty much consistent manner over time. A situation where there might be a bad allocation of resources is when a resource is utilized heavily in one period of time and not utilized at all in another period. Ideally, we want to find a way where the resource is used in a pretty much consistent manner over the duration of the project.

We recognize that our resources might be overworked and by performing leveling, we reduce the overcommitment of resources. Leveling inherently lengthens the project schedule, especially if the resource is required to perform a task on the critical path. However, if we have adequate float, or the resource is involved in an activity that is not on the critical path, then we may not lengthen the schedule.

Schedule Conflicts

Conflicts can arise between the project team and the client due to scheduling issues such as tasks or objectives being unable to be reached by a predetermined time. You need to be aware of certain tools which can aid the Project Manager in the process of resolving these conflicts.

  • Resource Histogram: This is a bar chart that displays which resources are being used and across what time they are utilized.
  • Resource Gantt: This is a Gantt chart that displays the tasks and responsibilities of individual resources. It shows the utilization of resources across a Gantt view. In the exam, you will be tested more on your knowledge the definition of this tool rather than on your ability to create or work with one.
  • Responsibility Matrix: This is a list of the tasks and activities together with assigned resources for performing each particular task in the project.

Monte Carlo Simulation

There is very little emphasis on the exam for the technical details of Monte Carlo. Monet Carlo is an iterative process and is performed many times, usually on a computer.  Monte Carlo takes the individual activities in a project and looks at what the range of variability is for each activity. Each time we run a simulation, we vary an individual activity slightly to see how it impacts the overall project. By running thousands of simulations, patterns start to emerge and we can start prioritizing activities that have the greatest impact on the project that we want to look out for.

For example, Activity A may take between 3 to 5 days to complete and activity B may take between 4 and 6 days. We input these possible combinations of activities into a model and run a simulation to see how changes to these activity durations may impact the overall project finish date. The first time we run the simulation, we might come up with a duration of 3 days for Activity A and 6 days for activity B. The next iteration might result in 4 days for Activity A and 5 days for Activity B. The process may be repeated many thousands of times in order to build a statistical regression of possible outcomes.

All that we need to know is that Monte Carlo Simulations are run iteratively based on parameters of a particular activity to see where the schedule will generally fall out. Monte Carlo also tends to be a lot more pessimistic in nature than CPM and PERT. This is because Monte Carlo accounts for all of the near-critical paths. PERT is more pessimistic than CPM because CPM works on a single data point duration whereas PERT includes the most pessimistic duration estimates.

Summary:  Project Time Management.

  1. Activity Estimation
  2. Activity Sequencing
  3. PERT and CPM
  4. AON and AOA Diagrams
  5. Crashing and Fast Tracking
  6. Leveling


In this section, we looked at another component of the Triple Constraint, Project Time Management. We learnt that Project Time Management typically takes place after we build a WBS and utilizes the concepts of decomposition to build an activity list, sequence these activities and build up duration estimates for these activities. We build project schedules using tools such as our Activity on Arrow and Precedence Diagramming Methods a.k.a. Activity on Node diagrams. We use concepts such as the Critical Path to focus our efforts in managing potentially complex networks that could have thousands of paths. Finally we use concepts such as Crashing, Fast-tracking and Leveling to manage our networks.

In the next section, we will review the third Triple Constraint, Project Cost Management.

The Chimp says, “Have a drink, you deserve it!”


PMP Exam Prep – Part 8: Project Scope Management

In this section we will learn how to define, measure and control the amount work to be performed in order to achieve the goals or objectives of a project.

Project Scope Management involves some of the earliest activities that a PM will manage on a project. Logically, you need to first figure out the total amount of work you need to accomplish in order to complete a project before you can calculate how long the project will take and also how expensive the project will be. You might also recall from earlier sections that Scope is a component of the Triple Constraint and therefore Scope is the first of the triple constraints that we focus on.

Scope Activities throughout the Project Lifecycle

There are five processes that relate to scope when it comes to the Project Lifecycle:

  • Collecting Requirements
  • Defining Scope (Planning)
  • Creating the WBS
  • Verify Scope
  • Control Scope

PMI wants us to be comfortable with each of these processes and the role that they play throughout the Project Lifecycle.

Collecting Requirements

PMI’s approach towards Project Scope Management is to start off by collecting requirements. Here, we first perform a needs analysis as well as some initial data gathering. The focus here is on starting some of the very preliminary processes of the project. Some of the activities performed include:

  1. Performing the initial Risk assessment.
  2. Conducting Focus Groups and Workshops
  3. Working through Questionnaires and Surveys
  4. Evaluating Prototypes

At this point in the project, we’re still trying to identify what the requirements are and how we can measure the success of a project. It’s important to note that we should have a copy of the Project Charter to refer to at this point, as the Charter is listed as an input to the project.

Define Scope

We go through a process known as decomposition. We start with some of the preliminary bit of information that we have assembled in the project to date, such as a Project Charter, Statement of Work and Business Plans and we’re trying to break down the requirements into a greater level of detail. In other words, we are trying to build a detailed description of the project and its final deliverables.

Tools and techniques

  1. Product Analysis
  2. Alternatives Identification
  3. Facilitated Workshops

The output of this process is the Project Scope Statement. The scope statement is a written document and it contains a project justification; the product or end result of the project; as well as the overall objectives of the project being undertaken. The Scope Statement is often an attachment to the Project Charter and not part of the Project Charter itself.

The Project Scope Statement commonly contains the following components:

  • Project Scope Description
  • Acceptance Criteria or what must be completed in order for the project to be considered a success
  • Deliverables which can be thought of as the end result of the project
  • Exclusions which typically identify the areas that are out of scope for the project
  • Constraints which are externally imposed restrictions on the project, such as deadlines, budgets and limited resources
  • Assumptions relating to the scope of the project and the potential impact of these assumptions if they are not valid.

Create WBS

The WBS is a Product oriented (no longer task oriented) family tree of activity according to PMI.  The US Military was responsible for many advances in Project Management, including the development of the WBS as well as the PERT technique (A concept we will cover in the section under Project Time Management) that was developed during the Polaris Submarine Missile Program.

Decomposition and the 100% rule

Decomposition is the process of breaking down project deliverables into smaller, more manageable components, as the WBS is constructed in a hierarchical fashion and gets into progressively greater detail as we move from the upper levels of the WBS into the lowest levels of the WBS, also known as the work package level.

The 100% rule states that the WBS should capture all of the deliverables, both internal and external to the project. This follows the concepts of MBO, which were highlighted in the section on Project Integration Management. MBO or Management By Objective  defines an approach where all of the efforts in a project are directed solely towards the achievement of project objectives and that absolutely no effort should be focused on tasks that are superfluous to the project.

WBS Coding Scheme

You should be familiar with the WBS coding scheme for the exam. A coding scheme refers to the numbering format that is attached to the various levels of the WBS. An example of the WBS scheme is listed below:

152.1.1   Hardware Build-out  Requirements Definition  Scheduling and Procurement  Assembly  Closeout

152.1.2   Product Training  Training Requirements  Scheduling and Logistics

Cost Account – Work Package Relationship

The cost account is a term used when analyzing or constructing the WBS and is deemed to be just one level up from the lowest level, also known as the work package level in the WBS. The cost account is considered to be a summary activity with the work package as its child.

Exam Hint – Distractor answers in the exam. You will be presented with several options that are similar to “Cost Account”. For example, Code of Accounts: Defined in the WBS as any numbering system that is used to uniquely identify each WBS element. Chart of Accounts: Defined as any numbering system used to identify project costs by category and does not appear on the WBS. You might be asked to distinguish between these terms on the exam.


80 Hour Rule

This is a generally accepted rule when it comes to assembling the WBS. No discrete activity or series of activities should consume more than 80 hours of effort to accomplish a deliverable. This is equivalent to two 40-hour work weeks. This was a common practice especially in environments where reporting periods are conducted once every two weeks. This rule defines a level of work effort as compared to duration of a particular activity. For example, you can get 80 hours of work completed in one day if you hire enough people.

WBS Benefits

The WBS can provide many benefits to a project, we have listed several below:

  • Team Building
  • Creating a Framework
  • Clarifies Responsibility
  • Clarifies Objectives

In addition, the WBS can be used to help with all of the configuration management processes, including planning; budgeting; funding; estimating and scheduling.

Other Breakdown Structures

For the exam, you will be required to distinguish between the WBS and other breakdown structures. Several common breakdown structures have been listed below:

  • CWBS or contractual work breakdown structure: This is the customer’s perspective of the work breakdown structure.
  • OBS or organizational breakdown structure: The work tied into the hierarchy. We look at the individual elements of the WBS and tie that into the organization. We look at the tasks and refer to the departments in the organization that should be performing the work.
  • RBS or resource breakdown structure: We break down the tasks at the resource level.
  • PBS or project breakdown structure: This is simply another name for the WBS.

Scope Baseline

The WBS lays down the scope baseline for the project and that is because if a task is not in the project, it will not appear in the WBS.  We can have multiple baselines in a project, including a quality baseline; a cost baseline (budget) and a time baseline (schedule). The WBS is still considered to be the primary baseline.

Verify Scope

The scope verification process involves formalizing the acceptance of the Project Scope by Stakeholders.Before we commence on a project, it makes good sense to make sure that everyone agrees on the objectives defined by the project scope before we start investing all of our resources such as time and money.

Similarly, as we complete our work, we also need to obtain acceptance of our work results. As part of our process within the entire project or for each individual phase in the project life-cycle, we need to continuously gain and get acceptance before we move onwards.

In simple terms, we perform verification to ensure that what we have done so far is close to what we had initially planned. We are trying to minimize our level of risk by performing verification. In other words, as the complexity of a project increases, so then does the degree of risk involved in the project.

A good example would be to try to take a shortcut that you’re not familiar with as you’re driving toward a destination. As you turn off the highway, you realize that there is the possibility that you might encounter construction, get lost or even run into bad traffic. The complexity increases as you select this additional route, and hence the risk or the possibility of affecting the outcome of the journey increases.


In this section, we reviewed several concepts relating to Project Scope Management. We reviewed the need to collect requirements and define our scope through a Project Scope Statement and we also looked into the concept of Decomposition, where we break down information into it’s component parts and seek to explain or describe a task in greater detail. We looked at the WBS and examined some of its structural components.

In the next section, we will look at Project Time Management, another element of the triple constraint.

Hope you found this article interesting. As always, show some love by leaving your comments or likes.

Road Chimp signing out.

PMP Exam Prep – Part 6: Project Management Knowledge Areas

I like to use the analogy of a house under construction to go about explaining the structure of the PMBOK and how we can approach the learning process much as we would the building of a house.

Chimp’s Story of a House

I remember the spring of 2001 very well. I just put down a big chunk of my life savings into the down payment of a house. It was in the countryside, pristine wilderness and meadows much much alien to the city ‘chimp’ who had grown up in a concrete jungle.

There’s something about being a first-time homeowner that is special. I recall driving hours every weekend to see the construction of the house. At first, it look very much like the picture below:


I would walk through the structure (I probably wasn’t supposed to.) and try to imagine where all of the rooms were. The flooring wasn’t completed yet and the insulation hadn’t been put into the walls yet. I remember walking from the living room to the kitchen and I could almost figure out what the house would look like, but I had to fill in the details on my own, in my mind.

The previous parts of this Prep Guide up to this point can be thought of like the skeletal structure of a house that is in the early stages of construction. As you walk up to this structure, you can make out that the building has two floors, you can see where the door is going to be and how the various rooms of the house are laid out. The frame work and all the process diagrams therein contained function like the skeleton frame of the house. You get to see all the components of a project that you as the Project Manager should be looking out for and actively managing, just like you see where the various rooms are going to be laid out in the house.

Following our analogies, we will spend a good part of the rest of this guide covering the Knowledge Areas, which can be thought of as the actual ‘stuff’ in the house, or the building materials that you would use to fill in the gaps in the walls, the flooring and the roof. It’s the details that go in to the house, the insulation and dry walls that you erect and the floors that you lay and the plumbing and wiring that goes into these components of the house. The Project Management Knowledge Areas perform precisely this function, as they help to give additional details to how the various elements of a project can be run.

In the subsequent parts of this guide, we will be covering each of the Nine Project Management Knowledge Areas in the following sequence:

  • Project Integration Management
  • Project Scope Management
  • Project Time Management
  • Project Cost Management
  • Project Quality Management
  • Project Human Resources Management
  • Project Communications Management
  • Project Risk Management
  • Project Procurement Management

Under Each Section, we will cover the relevant project management processes and important concepts that you will need to know going into the PMP Examination.

I hope that you’ve liked reading this guide so far! Please leave your comments and requests, they mean a lot to me!

Ook, Road Chimp Signing out!

PMP Exam Prep – Part 5: The Project Management Processes

In this section, we will explore the basic structure of the PMBOK and how PMI has chosen to organize the 42 different Project Management Processes into five basic categories. Knowledge of how the PMBOK is structured will be key in your efforts to prepare for the certification exam as well as to apply the PMBOK in a practical setting.

Process Groups Definition

Candidates need to know what these process groups are and what they produce.  Also interesting to note that within a project, the different phases within the lifecycle of the project will also go through these process groups. For example, during the concept phase of a product, the project team will perform several processes just for that single phase. First you initiate the phase, then you plan it, execute it and finally you close it before moving on to the next phase.

Please refer to Table 3-1 in the PMBOK. You must learn to understand the nature of process interactions. Time spent on this chart is well spent. Memorize this chart. I’ve included a copy of the chart at the bottom of this post, just scroll to the bottom to see it.

It lists all of the 42 Project Management processes listed in the PMBOK that are categorized into 5 Project Management Process Groups. In the exam, you will have to know which of these come from which different process areas. For example, Develop Project Charter is an initiating process.

Knowledge beyond the PMBOK

PMI recognizes that there is more to an effective Project Manager than knowledge of the PMBOK. Figure 3 below highlights some of the different realms of knowledge that PMI believes we should be aware of.


Fig. 5-1 Project Management Realms of Knowledge

For example, under General Management Knowledge and Skills a manager would be responsible for performing activities that would encompass a greater scope than an individual project, such as performing periodic performance evaluations of her staff.

Process Group Interactions





Fig. 5-2 Process Group Interactions

Process groups typically are an iterative process and run serially from Initiating to Planning.  You initiate a project and then you begin to plan it and then you execute it. But during your execution, you control it, which may then cause you to re-plan. So there is overlap there until you eventually finish this process group and continue on to the closing processes.

It is important to note that process groups frequently run in parallelto one another, as process groups are not always discrete or separate and there can be some overlap between the various process groups during the course of a project.

In later parts of this course, you will learn that activities relating to Risk Management and Cost management typically run continually throughout the project and do not have a distinct ending point from one process to another.











Table 3-1 Project Management Process Groups and Knowledge Areas Mapping

You will have to become intimately familiar with this table in order to do well in the exam. Think of the table as encompassing  the entire ‘universe’ of activities that are necessary to managing a project successfully. All of these processes are interwoven together, as the outputs of one process may become the inputs of others.

It is quite likely that you will see more than one question in the PMP exam testing you on your understanding of a particular process. For example, you may be asked to identify the correct outputs of the Quality Assurance process, or since this is a Multiple Choice Examination, you might be given four options, and three are the correct ones and the other option is incorrect.

In my opinion, these are the preferred examination options, as you will see that it only takes hard work and a bit of memorization to get these types of questions 100% correct. No guess work required. My monkey brain likes that!


In this section, we learnt about Project Management Process Groups and how PMI has chosen to divvy up all 42 Project Management Processes into five general Categories: Initiating, Planning, Executing, Monitoring and Controlling and Closing. We were also introduced to Table 3-1 of the PMBOK, which is an important learning tool for the exam.

In the next section, we will piece together the first 5 sections of the PMP Exam Prep posts and go over an introduction to the Project Management Knowledge Areas, the real meat of the PMBOK.

I hope you guys liked reading this! Feel free to post your comments and feedback. It’s greatly appreciated!

Ook! Road Chimp, signing out.

PMP Exam Preparation – Index or Table of Contents

In an earlier post, I mentioned my reasons for wanting to post my courseware online for free. This material has been developed over 10 years of teaching the PMP course and it’s helped over a thousand exam candidates to pass the PMP certification exam. I hope that you can use this too!

So let’s start this PMP certification journey together! The first thing is to organize our thoughts. So therefore, I’ve decided to put up an Index Page here that references the posts  and links on this site.

  1. What is the PMP?
  2. PMP Exam Application Tips (Must read)
  3. About the PMP Exam
  4. The Project Management Framework
  5. Project Management Processes
  6. Overview of Knowledge Areas – House Analogy
  7. Knowledge Areas: Project Integration Management
  8. Knowledge Areas: Project Scope Management
  9. Knowledge Areas: Project Time Management
  10. Knowledge Areas: Project Cost Management
  11. Knowledge Areas: Project Quality Management
  12. Knowledge Areas: Project Human Resources Management
  13. Knowledge Areas: Project Communications Management
  14. Knowledge Areas: Project Risk Management
  15. Knowledge Areas: Project Procurement Management

These posts might take a bit of time, but please feel free to put up your comments if you have any questions or requests. I promise to get back to you as soon as possible!

Ook, Road Chimp.

Project Management Professional – Free Prep Materials, Guidance & Approach

I’ve decided to put up all of my PMP training materials online for free. That’s right, absolutely nothing. Before you start asking me … is there a catch, oh Road Chimp? Let me preface by saying absolutely NO. N. O.  No!  Can’t someone share their knowledge for the pure love of the subject matter? I am successful and have a great career and this came about because many people helped me along the way.. so let’s just say that I’m just passing on some of that good karma. 🙂

Over the past decade, the Road Chimp has swung around from vine to vine, teaching over 1000 adult learners in North America, Europe, Asia and the Caribbean. My success rates are phenomenal, over 80% of the people taking my classes have passed the exam. But honestly, that’s not really so difficult, because the PMP exam itself is not designed to be extremely confusing or tricky. All you need is to invest the time to study the material and remember this ONE IMPORTANT THING:

The PMP exam is about ‘One way’ of approaching project management. It’s not the only way of managing projects and most certainly a lot of exam candidates might have used different processes and methodologies to successfully manage projects. The PMP is based on a Standard known as the PMBOK, which was derived from Industry Best Practices. As practices change, then the PMBOK must also change. In fact the PMBOK goes through a refreshment cycle once every 3 or so years, ensuring that the PMBOK continues to reflect industry best practices for managing projects.

The problem that many PMP exam candidates have is that they tend to instinctively draw upon their own experience when answering a question and while their approach may not necessarily be the wrong one towards approaching a particular problem or situation in real life, it’s just not the standardized process that is prescribed in the PMBOK.

This is the one biggest problem that exam candidates have. They’re trying to answer the exam using their own personal experience and not asking themselves, ‘How would I solve this problem according to the PMBOK?’

So if you can understand this simple paradigm, and constantly approach the exam as you would by directing your efforts towards studying for the PMP exam, then you will be okay!

Okay, so let’s get some housekeeping matters in order before I start sharing all my knowledge and materials with you guys.

Road Chimp’s rules of the road:

  1. Exam questions: There are a number of sites online that provide practice exam questions. I don’t provide any here, but will be very happy to post some links that I like.
  2. Frequency of posts: I will endeavor to get as much of my material online as fast as possible. I’m constrained by work and travel, so I apologize in advance if I can’t get my material up fast enough.
  3. Copyright: All the material posted here is created by me. I’m happy if you share this, in fact nothing would make me happier. I only ask that you not reproduce this and sell it to other people. That wouldn’t be cool as this work took me close to ten years to produce.
  4. Errors and updates: The PMBOK is constantly being updated, and so I will try to keep my posts current. If you see something that is inaccurate, please let me know, and I will do my best to fix the errors.

Okay, that’s enough rules. Ook! I will start my next post with a list of contents. Feel free to email me if you’d like more specific information or requests. I’m really happy to get your comments, as it helps me more than you know.

So let’s begin this journey together! Ook. 🙂

Click on this link to get to the contents page.