How to Pass PMP® Exam – Part2

In the first part of this article we talked in general about the PMP exam and how to prepare yourself to pass it, in this part we will try to cover the most important processes and what formulas we need to memorize.

In total there are 42 processes all of them are important, and you need to study them all well, here I will list those that needs more attention:

Important Processes by Knowledge Area:

  • Integration
    • Develop Project Charter.
      • Understand what SOW is and how it can help in creating the project charter.
    • Direct & Manage Project Execution.
      • Focus on change request types (Corrective, Preventive, Defect repair, and Updates).
    • Monitor & Control Project Work
    • Perform Integrated Change Control**
  • Scope
    • Define Scope
      • The output of this process is very much important (Project Scope Statement).
    • Create WBS
      • Focus on Decomposition, WBS, WBS Dictionary, and Scope Baseline.
    • Control Scope
  • Time: Mainly all of them.
    • Define Activities.
      • You should know what Rolling Wave Planning means, and how to use it.
    • Sequence Activities.**
      • Read this process very carefully, and try to practice the following:
        • Precedence Diagramming Method (PDM).
        • Dependency Determination.
        • Applying Leads and Lags.
    • Estimate Activity Resources.
    • Estimate Activity Duration.**
      • Focus on Three-Point Estimates (PERT), and understand how the other estimate methods work.
    • Develop Schedule.**
      • The most important output of this process is the Schedule Baseline, pay attention to the Tools and Techniques of this process, and how to use them.
      • Understand the difference between Crashing a schedule and Fast tracking a schedule.
    • Control Schedule.
  • Cost
    • Determine Budget.
    • Control Cost.**
      • Here Earned value management comes to the picture, that’s why this is one of the most important processes that you need to master not only know, read very well.
  • Quality
    • Plan Quality. **
      • Understand what Cost of Quality means.
      • Understand the Control Charts and how to use them.
    • Perform Quality Control
      • Pay a very good attention to the Tools and Techniques of this process.
  • Human Resource
    • Develop Project Team.
      • Focus on Team-building activities & Recognition and rewards.
    • Manage Project Team.
      • Focus on Conflict management, when it comes to conflicts “Confronting or Problem Solving” is the best answer.
  • Communication: Mainly all of them, as more than 80% of the project manager’s time spent on communication.
    • Identify Stakeholders
    • Plan Communication.
    • Distribute Information.
    • Manage Stakeholder Expectations.
    • Report Performance.
  • Risk
    • Perform Qualitative Risk Analysis.
    • Perform Quantitative Risk Analysis.
    • Plan Risk Responses.
      • Focus on Strategies for Negative Risks or Threats (Avoid, Transfer, Mitigate, Accept).
      • Focus on Strategies for Positive Risks or Opportunities (Exploit, Share, Enhance, Accept).
    • Monitor & Control Risks.
  • Procurement
    • Plan Procurement.
    • Conduct Procurement.

Important Formulas & Equations:

Term

Description

PERT (Three-Points Estimate)

(P + 4M + O )/ 6 Pessimistic, Most Likely, Optimistic

Standard Deviation (SD)

(P – O) / 6

Variance

[(P - O)/6 ]squared

Float or Slack

LS-ES and LF-EF

Cost Variance (CV)

EV – AC

Schedule Variance (SV)

EV – PV

Cost Performance Index (CPI)

EV / AC

Schedule Performance Index (SPI)

EV / PV

Estimate At Completion (EAC)

BAC / CPI,

AC + ETC — Initial Estimates are flawed

AC + BAC – EV — Future variance are Atypical

AC + (BAC – EV) / CPI — Future Variance would be typical

Estimate To Complete (ETC)

Percentage complete

EAC – AC

EV/ BAC

Variance At Completion (VAC)

BAC – EAC

To Complete Performance Index TCPI

Values for the TCPI index of less than 1.0 is good because it indicates the efficiency to complete is less than planned. How efficient must the project team be to complete the remaining work with the remaining money?

( BAC – EV ) / ( BAC – AC )

Net Present Value (NPV)

Bigger is better (NPV)

Present Value PV

FV / (1 + r)^n

Internal Rate of Return

Bigger is better (IRR)

Benefit Cost Ratio

Bigger is better ((BCR or Benefit / Cost) revenue or payback VS. cost)

Or PV or Revenue / PV of Cost

Payback Period

Less is better

Net Investment / Avg. Annual cash flow.

BCWS

The old terminology of Planned Value (PV)

BCWP

The old terminology of Earned Value (EV)

ACWP

The old terminology of Actual Cost (AC)

Order of Magnitude Estimate

-25% – +75% (-50 to +100% PMBOK)

Budget Estimate

-10% – +25%

Definitive Estimate

-5% – +10%

Communication Channels

N(N -1)/2

Expected Monetary Value

Probability * Impact

Point of Total Assumption (PTA)

((Ceiling Price – Target Price)/buyer’s Share Ratio) + Target Cost

Sigma σ
  • 1σ = 68.27%
  • 2σ = 95.45%
  • 3σ = 99.73%
  • 6σ = 99.99985%
Return on Sales ( ROS )

Net Income Before Taxes (NEBT) / Total Sales OR

Net Income After Taxes ( NEAT ) / Total Sales

Return on Assets( ROA )

NEBT / Total Assets OR

NEAT / Total Assets

Return on Investment ( ROI )

NEBT / Total Investment OR

NEAT / Total Investment

Working Capital

Current Assets – Current Liabilities

Discounted Cash Flow

Cash Flow X Discount Factor

Contract related formulas

Savings = Target Cost – Actual Cost

Bonus = Savings x Percentage

Contract Cost = Bonus + Fees

Total Cost = Actual Cost + Contract Cost

Important Terms:

  • Scope Baseline: consist of three components
    • Work Breakdown Structure (WBS).
      • Defines all project deliverables & work packages
    • WBS Dictionary.
      • Contains the actual details of the required work
    • Project Scope Statement.
      • Includes the product scope description and the project deliverable, and it also defines the product user acceptance criteria.
  • Cost Performance Baseline:
    • The cost performance baseline is an authorized time-phased budget at completion (BAC) used to measure, monitor, and control overall cost performance on the project. It is developed as a summation of the approved budgets by time period and is typically displayed in the form of an S-curve. In the earned value management technique the cost performance baseline is referred to as the performance measurement baseline (PMB).


  • Schedule Baseline:
    • A schedule baseline is a specific version of the project schedule developed from the schedule network analysis. It is accepted and approved by the project management team as the schedule baseline with baseline start dates and baseline finish dates. The schedule baseline is a component of the project management plan.
  • Cost of Quality (COQ):
    • Cost of quality includes all costs incurred over the life of the product by investment in preventing nonconformance to requirements, appraising the product or service for conformance to requirements, and failing to meet requirements (rework). Failure costs are often categorized into internal (found by the project) and external (found by the customer). Failure costs are also called cost of poor quality.


  • Product Scope:
    • The features and functions that characterize a product, service, or result.
  • Project Scope:
    • The work that needs to be accomplished to deliver a product, service, or result with the specified features and functions.
  • Project Scope Statement:
    • As Per to PMBOK Guide, The detailed project scope statement includes, either directly, or by reference to other documents, the following:
      • Product scope description. Progressively elaborates the characteristics of the product, service, or result described in the project charter and requirements documentation.
      • Product acceptance criteria. Defines the process and criteria for accepting completed products, services, or results.
      • Project deliverables. Deliverables include both the outputs that comprise the product or service of the project, as well as ancillary results, such as project management reports and documentation. The deliverables may be described at a summary level or in great detail.
      • Project exclusions. Generally identifies what is excluded as from the project. Explicitly stating what is out of scope for the project helps to manage stakeholders’ expectations.
      • Project constraints. Lists and describes the specific project constraints associated with the project scope that limits the team’s options, for example, a predefined budget or any imposed dates or schedule milestones that are issued by the customer or performing organization. When a project is performed under contract, contractual provisions will generally be constraints. Information on constraints may be listed in the project scope statement or in a separate log.
      • Project assumptions. Lists and describes the specific project assumptions associated with the project scope and the potential impact of those assumptions if they prove to be false. Project teams frequently identify, document, and validate assumptions as part of their planning process. Information on assumptions may be listed in the project scope statement or in a separate log.
  • Project Statement of Work (SOW):
    • The SOW is a description of products or services to be delivered by the project, and it references the below:
      • Business need.
      • Product scope description.
      • Strategic Plan.
  • Precedence Diagramming Method(PDM):
    • PDM is a method used in Critical Path Methodology (CPM) for constructing a project schedule network diagram that uses boxes or rectangles, referred to as nodes, to represent activities, and connects them with arrows that show the logical relationships that exist between them.
      This technique is also called Activity-On-Node (AON).
  • Earned Value Management(EVM):
    • Read about and understand the below, and try to practice them as well:
      • Planned Value (PV).
      • Earned Value (EV).
      • Actual Cost (AC).
      • Schedule Variance (SV).
      • Cost Variance (CV).
      • Schedule Performance Index (SPI).
      • Cost Performance Index (CPI).
      • Estimate at Completion (EAC).
      • Estimate to Complete (ETC).
      • To-Complete Performance Index (TCPI).
      • Budget at Completion (BAC).
  • SWOT Analysis:
    • This technique examines the project from each of the SWOT (strengths, weaknesses, opportunities, and threats) perspectives to increase the breadth of identified risks by including internally generated risks. The technique starts with identification of strengths and weaknesses of the organization, focusing on either the project organization or the wider business. These factors are often identified using brainstorming. SWOT analysis then identifies any opportunities for the project that arise from organizational strengths, and any threats arising from organizational weaknesses. SWOT analysis also examines the degree to which organizational strengths offset threats and opportunities that may serve to overcome weaknesses.

I hope that this information help in your preparation for the exam, please do not hesitate to contact me if you need any help, and Good Luck.

References: (PMBOK® Guide) – Fourth Edition.

About Wafi Mohtaseb

Software Development Manager, Project Management Professional PMP, Agile Certified Practitioner PMI-ACP, & Certified ScrumMaster

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