CompTIA Project+ PK0-004 – Managing the Project Integration part 1
- Selecting a project
There may be times in your career where management calls upon you to help select a project. So in this lecture, we’re going to look at project selection, calculations and different approaches to select a project. Most of these are benefit measurements. Benefits measurements are a way of comparing the benefits of the projects. You usually have one or two or seven or eight projects and you examine, well, what are the benefits, what are the cost? And we call that a cost benefits ratio. Now the cost benefits ratio, sometimes called a CBR, means that it identifies the number of cost to the number of benefits, like three cost to five benefits, that’s a pretty good ratio. And you would see that as three colon five. Now, scoring models, just like you used in procurement, scoring models are a way of scoring each potential project based on different factors like cost, schedule, benefits and so on.
Now a murder board is where you have a committee that reviews all proposed projects and then they could kill a project before it even begins. And so it’s called a murder board. The payback period describes how long will it take for the project to earn or pay back the investment. Sometimes that’s called management horizon or the break even point. Now there are a couple of formulas you need to know with the time value of money. The first one is future value of Money. The idea of future value of money is where you come to me and you want me to invest in a project. And let’s say that the, the project that you want me to invest in is $250,000.
Well, I would say, okay, I have $250,000 to invest, which is a better deal for me to invest in your project or to put it into the stock market or a CD or what have you. So the formula is future value equals the present value times one plus I to the power of N. That should be the power of N, where I is the interest rate and N is the number of time periods. Let’s look at this formula. Let’s say that the present value is $100,000 and this project is going to last for five years and I is 6%. So pretty good interest rate there, . 06. Well, if we plug this formula in, so present value 100,000, I is zero six. And in this five years, our formula would look like this, 100,000 times 1. 6 to the power of five. And that’s the power of five there. So it would be 100,000 times 1. 338,226.
And remember, Powers, we go 1. 6 times 1. 06 times 1. 06, so on, five times. And so the future value is 133,822. 62. So what this means if I’m going to invest in your project, let’s say it is $100,000. So I’m going to invest $100,000 in your project. If I were to get 6% on it somewhere else, that would be worth $133,000 and some change, almost $134,000. Your project if I invest in it, it has to be worth more than about $134,000 for it to be a good investment. So, in other words, if I invest in your project, I give you 100,000 for five years and my return the end of your project if it’s only worth 110,000, that was not really a good investment for me. It would have been better to just put it over here where I could earn the 6%. So that’s future value of money.
If we can find the future value of money, we can do the inverse. We can find the present value of money. Present value of money is where we know the future value, where a project manager says, well, this project will be worth $250,000 in three years, and I need to invest $178,000 to get there. So it’s a very similar formula. We say future value, that 250,000, for example, divided by one, plus the interest rate to the power of N. So let’s see what this formula looks like. In this example, a project manager has said, okay, this project will be worth $160,000. It will take five years to complete. So if we plug in our formula, the interest rate and that’s provided to us, there’s no calculation for the interest. It’s just from our bank or the market or another opportunity. So 6% is what’s given to us in this example.
So our formula would look like present value equals 160,000 divided by because we’re 1. 338,226. We got that by taking the interest rate of 0. 6. So 1. 6 to the power of five. So 160,000 divided by 1. 33, that would tell us our present value is $119,561. What does this mean? All right, let’s think about this. I come to you and I say, I need you to invest in my project, and in five years, this project will be worth $160,000. So if your investment will cost me more than $119,000, it’s not a good deal to invest in, because you could take that money and put it somewhere else, and in five years, you would exceed the $160,000. So the investment should be no greater than about $119,000. Present value is also making some assumptions that the project really will be worth 160,000 in five years. The next type of formula is net present value.
It finds the true value of the project when we have multiple returns. So, for example, we may have a project that’s going to last three years, but each year there will be deliverables. So as soon as we create one deliverable, there is some return on investment. There’s some benefit that you get. So what this does, it considers the initial cash outlay to get the project started, and then we find the present value for each year that the project has a return. So net present value, you calculate the return for each time period, and then you find a present value for each time period. You sum those up minus the original investment and then it will tell you when you have a net present value, greater than zero is good. So the faster you get to zero, then you start making money. Let’s take a look at an example. So, let’s say we have a project that is going to last for five years.
And each year we will have some return on investment. That second column there some cash flow. So that cash flow represented here is just going to be a return on what’s been invested in the project. So year 115, thousand year 225 and so on, for a total investment or a total return, I should say, of 100,000. Now, this project costs 78,000 to begin. So we do the net present value for year one, year two, and so on. We add all of those up. The present value for all five years will be $83,000. We invested 78,000. So our NPV is about $6,000, and that’s net present value. Now, for your exam, I really doubt you have to do any of these. You may just have to be topically familiar with them. I sincerely doubt you’ll even see net present value on your exam. But just in case, now you know what it is.
- What’s in the project management plan?
So what’s in the project management plan? Well, in this lecture we’re going to look at how we develop the plan and then what is in the project management plan. So in order to develop this plan, you need several inputs. The project charter outputs from other processes, enterprise environmental factors, factors and organizational process assets. The tools and techniques here, expert judgment and facilitation techniques. The outputs will be the project management plan. Now one thing about the plan that we need to pay attention to is the plan is a collection of subsidiary plans so that input outputs from other processes is when we plan quality or plan HR or plan communications. If we look at those, they create a quality management plan, for example a communications management plan, a staffing management plan and so on, that those subsidiary plans become part of the project management plan.
Now the purpose for the plan, well first off, it communicates our intent. It will serve as a guide for the project manager, give us some structure in the project and then it documents what we are going to achieve. Now, in the plan we have, if you recall, we have three baselines. So we had the time baseline, the cost baseline and the scope baseline. These are part of the plan. When we go about developing the plan, we need to consider the triple constraints of project management. The triple constraints of project management. I know that, you know, this is the same as our three baselines time, cost and scope. Sometimes it’s called the iron triangle. But we need to balance time, cost and scope in order to achieve quality, in order to achieve balance and some feasibility in our project.
Well, who helps develop the plan? Obviously you the project manager, your project team members because they’re the people closest to the work. If you’re doing this project for a customer in a buyer seller relationship, then your customers are involved because they have the requirements and they’re definitely going to affect the schedule and the budget. And then part of enterprise environmental factors may be managements involved, especially in a matrix environment where the functional manager may have some control over the budget and the people and resources, your approach to quality and so on. So the participants, these are people you need to gather early on and these are stakeholders in your project. Now a typical project management plan has a lot of other plans as I mentioned.
So these are just displayed here alphabetically for the most part. Doesn’t mean you have to create them in this order. So you have the change management plan defines how will you address change communications management plan, who gets what information and when configuration management plan describes the configuration of the product cost baseline cost management plan, how will you estimate and budget and control cost? Our HR management plan, that’s our staffing management plan, process improvement plan, this is an output from quality. And then our procurement management Plan how will you purchase and control procurement? Our scope baseline remember that’s made up of our WBS, our scope statement and the WBS dictionary.
Quality Management Plan how will you achieve quality? We had quality assurance and quality control requirements. Management Plan part of our scope session that we had to have requirements and then how do we control those and ensure that we’re hitting our requirements? Risk Management Plan we talked about a risk identification and then we did analysis, qualitative and quantitative risk responses and controlling risk. There’s our schedule baseline.
The schedule Management Plan how will we plan the schedule and control the schedule and develop the schedule? The Scope Management Plan how do we plan for the scope and define the scope and adhere to those requirements and control scope and then our stakeholder Management Plan this is a new plan in the Pimbup Guide, fifth edition. How will you identify, communicate, manage and engage your stakeholders? So that’s a typical project management plan. A lot of information, there a lot of components, opponents, but you can see these are from each knowledge area gets an associated plan. Notice that in quality though, we get two plans the quality management plan and the process improvement plan.
- What project management documents are needed?
A question that I get from a lot of people is, will I really need all of these documents and all of these plans? Well, the answer, it’s a good consultant answer is it depends. There’s a lot of factors that will affect which documents you have to use. The first factor, the most important factor is you should use use the project plans and the documents that are most appropriate for the project you’re doing. Generally, larger projects require more information. Smaller projects, you need less information. Well, I want to show you all of the project documents that you could be musing in your projects and that you might see on your exam. So I’m going to just walk through these. A lot of these you’ve seen already throughout the course.
But I want to just arm you with some good information here. First off, some project documents, activity attributes recall, the activity list, activity resource requirements, what people do you need? Change request, issue log, project calendars. Remember our project schedule network diagram, quality control measurements. So generally you have some reports attached to these. Recall the resource breakdown structure, where it’s like the work breakdown structure, but it shows where you’re using resources in the project. In procurement, we had seller proposals. You have work performance information, just some reporting on how the project activities are moving forward.
More project documents, activity cost estimates, agreements like our contracts, internal and external. We had forecasting the milestone list. Remember the project charter, project staff assignments, quality metrics. Well, what is quality? What is fast? How do you measure those things? Resource calendars, source selection criteria. How do you choose a vendor? More project documents for you, activity duration estimates and the basis of those estimates. All of those procurement documents, project funding requirements, project statement of work, the requirements documentation. Remember, that precedes our scope and helps us build the scope.
Risk register, stakeholder register, work performance report. So this is like your status report or reports for management about how the project is progressing. More documents, activity list change log, procurement statement of work, project schedule, quality checklist requirements, traceability matrix schedule data, team performance assessments, and work performance data. All right, I know that was a huge list of all of the potential project documents, but there’s a couple of things I’ve done for you. One, if you really want to learn these terms, I encourage you to create flashcards and define all these documents.
So if you want, you can hit pause on the course and then you can go and begin creating your flashcards on these documents that you see here. It’s the ones that we just walked through. You can also go to the PDF document for this session or for the entire course. Rather, they have a PDF for the entire course, every slide. And you can access it this way. But whatever approach you take, I encourage you to be familiar with all of these documents. Chances are you’re going to see many of these on your exam. And if you’re not familiar with them, I encourage you to go back through the course. Or you can get your hands on the Pembach Guide, Fifth Edition, and you can find the clear definition of these in the Pinbuck Guide, Fifth Edition. You.
- Directing and managing the project work
When a project is started and the project manager is assigned, the goal is to get the thing done. So one of our process groups in project management is about execution. And in execution we are getting things done. Really, our team is getting things done. Well, the team looks to you to direct and manage the project work. The stakeholders look to you to satisfy the project objectives. Remember the project objectives, time, cost, scope, quality. Now this means that you have to spend money. Now, sometimes that money comes in the form of you’re paying for the labor, but you have to buy materials or hire contractors. So you may have to not only do the work, but spend funds. Now, part of this is you may have to manage and train and lead the project team.
You’re going to have to work with vendors, so you have to do procurement and manage those sellers and ensure that they are doing the work properly. Basically, directing and managing the project work is everything that you have to do to get the work done. So acquiring and managing those resources, remember, resources just aren’t people. Materials, tools, facilities, equipment, anything that it takes to get the work completed. Directing and managing the project work is also about managing risk. When change happens, how do you flesh those changes into the project plan? Communication is paramount in directing and managing project work because you have to get input from your team and then report that information back to your stakeholders.
So you’re looking for data on schedule, cost, quality, just the overall project progress, also ensuring that lessons learned are documented and then managing that stakeholder engagement, keeping our stakeholders excited and having a sense of ownership and buying into the project that we want that to happen throughout the entire project, not just at the beginning. This is a project management process, so there are some inputs, tools and techniques and outputs you’ll need the project management plan, any approved change request and of course enterprise, environmental factors and organizational process assets, tools and techniques here, expert judgment, your project management information system and some meetings.
Your outputs here will be deliverables the things that your team creates. Work performance, data change request, project management plan updates and project documents updates. You’ve seen many of these actions throughout the course and I just want to nail all of these down one more time. We have corrective action where you have to fix the project, preventive action where you want to prevent a mistake from happening. Often you have a mistake and you learn from it, but there’s opportunity to prevent it from happening again. And then defect repair is you’re modifying nonconformance to project requirements. So corrective action and defect repair often go hand in hand. These actions require, often require, I should say, a change request.
And the reason why is because usually when you have to do a corrective or preventive action, you are going to spend money in time. So a change request is needed to document that and to get the money in time. So corrective actions, you’re fixing the project defect repair. You’re correcting a problem, and then once you correct the problem, you have to do defect repair validation. Was it done properly? You probably have seen this in your projects where there’s a mistake, people have to fix it, and then they rush through the repair. So defect repair validation is you go out, let me make sure that it was repaired properly. Preventive actions are things like safety measures training where we anticipate problems, and it’s really tied towards risk management. So you had corrective action and preventive actions.