PMI SH Plan and Manage Budget and Resources

Question

A project manager is developing a project budget. After estimating the cost of each activity, the manager adds a contingency reserve by increasing the estimated cost of all activities by the same percentage.

However, this resulted in the total cost exceeding the allocated budget even before adding the management reserve. 

What should the project manager do?

• Request additional budget to ensure that all cost estimations are appropriately funded.

• Reduce the percentage increase to reduce the total cost of the project.

• Recalculate the contingency reserve based on identified risks and response strategies.

• Allocate a portion of the contingency reserve to the management reserve.

Answer explanation

Increasing the estimated cost of all project activities by the same percentage is not a sensible way to estimate a contingency reserve. Contingency reserves are typically calculated based on identified risks, not directly on individual activity costs. The project manager should recalculate the contingency reserve to ensure that it is accurate and appropriately calculated.

The other answer choices are incorrect. 

Requesting an additional budget may not be necessary or feasible. The project manager should first attempt to optimize the contingency reserve based on identified risks.

Reducing the percentage increase without justification may restrict the ability to manage risks and could put the project in jeopardy. 

Management and contingency reserves serve different purposes. Allocating a portion of the contingency reserve to the management reserve is not appropriate and may cause serious issues in the future. 

A project manager planning a strategic predictive project has suddenly fallen ill. The project baseline must be submitted to the customer within 3 days, and the project management office (PMO) director must find someone to finish the planning. The choices are:

Project manager A: highly experienced in Scrum projects only, available immediately for 2 days only

Project manager B: moderately experienced mainly in construction projects, available the next day for 1 week

Which project manager should the PMO director choose and on what basis?

• A is available immediately and has more experience to plan quickly and correctly.

• B better understands the complexities of predictive planning and has use of a network of subject matter experts (SMEs).

• A is more up to date and conversant with the latest project planning trends and methodologies.

• B will be available to work for a longer period in case the submission deadline is missed.

Answer explanation

The more complex estimation work in predictive projects often relies on expert input. Access to SMEs as well as predictive mindset and experience would be critical to completing the planning baseline.

There is no point in selecting a project manager just because he / she is available

A project manager in a cross-functional organization needs to inform the department manager of the number and type of resources required, and the length of time they will be needed. What should the project manager use to present this resource information?

• Resource assignments

• Resource histogram

• Responsibility assignment matrix (RAM)

• Project organization chart

Answer explanation

A resource histogram, by definition defines resource requirements over time.

Resource assignments take place once the need for resources has been determined and available resources have been identified.

The Project organization chart and Responsibility assignment matrix will not identify the need for resources nor for what duration they are needed.

A project execution phase overlaps with a holiday in the country where the majority of team members are based. This phase is critical, and all team members are required to work through the holiday. This negatively impacts team morale.

What should the project manager have done to avoid this?

• Requested help from other teams based in other countries

• Postponed project activities

• Prepared the stakeholder engagement plan

• Better developed the resource management plan

Answer explanation

The resource management plan takes into consideration factors that affect resource availability, including normally observed non-working days.

Requested help: Transitioning project work is a reactive step and not a practical solution in most cases.

Postponing activities further delays critical work and is therefore not an option

The stakeholder engagement plan doesn't address the issue of resource availability working on the project.

Question

A project manager learns that a functional manager is assigning a two-week task in another project to a team member. Loss of this resource for two weeks will jeopardize the project schedule.

What should the project manager do?

• Review the resource management plan to determine how to negotiate with the functional manager.

• Submit a change request to the change control board (CCB) to obtain a replacement resource from another department.

• Meet with the project sponsor to discuss the priority levels of the two projects.

• D.Assign another team member to perform the work of the team member who will be missing for two weeks.

Answer explanation

The project manager should review the resource management plan to determine how to negotiate with the functional manager. The resource management plan is used to help determine how resources are categorized, allocated, managed, and released. This will provide guidance as to how the project manager can negotiate with the resource's reporting manager.

The other answer choices are incorrect. CCB reviews and approves all project change requests, not resource management; meeting the project sponsor is an escalation that could be avoided; assigning another team member would have cost. 

The sponsor notified the product owner that the budget was approved for a project. However, any additional investment for the project would have to wait until the next fiscal year.

The product owner is concerned that this will hold up the project.

What should the product owner do?

• Track the budget based on the release plan and show the value to the business.

• Explain that the project is just starting and the budget will need to be adjusted.

• Track the budget based on each sprint and remove nice-to-have deliverables.

• Ensure that the project manager monitors every invoice from the project.

A new project has high uncertainty in the cost required for completion. What approach should the project manager use to determine the expected costs?

• Analogous estimating

• Statistical techniques estimating

• Parametric estimating

• Three-point estimating

Answer explanation

Three-point estimating uses the most likely, optimistic, and pessimistic estimates, which improves estimate accuracy for a project with high uncertainty. Analogous estimating uses values from a previous similar project. Since this project has a high level of uncertainty, it can be assumed there is no similar project to compare. Parametric estimating uses a statistical relationship with historical data and is often used in construction. Other statistical techniques are not the best approach for a project with a high level of uncertainty.

An unforeseen issue results in the need to procure a new piece of machinery critical for meeting quality specifications. From where may the necessary funds be obtained?

• Key stakeholders

• Management reserve

• Contingency reserve

• Project sponsor

Answer explanation

PMBoK Sixth Edition Section 7.3.3.1 states: "

COST BASELINE

The cost baseline is the approved version of the time-phased project budget, excluding any management reserves, which can only be changed through formal change control procedures. It is used as a basis for comparison to actual results. The cost baseline is developed as a summation of the approved budgets for the different schedule activities.

Cost estimates for the various project activities, along with any contingency reserves (see Section 7.2.2.6) for these activities, are aggregated into their associated work package costs. The work package cost estimates, along with any contingency reserves estimated for the work packages, are aggregated into control accounts. The summation of the control accounts make up the cost baseline. Since the cost estimates that make up the cost baseline are directly tied to the schedule activities, this enables a time-phased view of the cost baseline, which is typically displayed in the form of an S-curve. For projects that use earned value management, the cost baseline is referred to as the performance measurement baseline.

Management reserves (Section 7.2.2.3) are added to the cost baseline to produce the project budget. As changes warranting the use of management reserves arise, the change control process is used to obtain approval to move the applicable management reserve funds into the cost baseline.

Question

A project is slightly ahead of schedule. However, the project manager was informed that a critical deliverable will not be available on time.

If the project manager is able to crash the deliverable that is behind what would the impact be?

• Project warranty issues would result.

• Project costs and risks would decrease.

• Project costs and risks would increase.

• Rework would need to be performed.

Answer explanation

Crashing a project will increase both costs and risks.

Question

A project's original budget at completion (BAC) was calculated as US$100,000, but the estimate at completion (EAC) is US$120,000. If the schedule performance index (SPI) is equal to 1, what is the cost performance index (CPI)?

• Equal to 1.2

• Less than 1

• Equal to 1

• Greater than 1

Answer explanation

PMBoK Sixth Edition Chapter 7 Section 7.4.2.2 states: "Cost performance index. The cost performance index (CPI) is a measure of the cost efficiency of budgeted resources, expressed as a ratio of earned value to actual cost. It is considered the most critical EVA metric and measures the cost efficiency for the work completed. A CPI value of less than 1.0 indicates a cost overrun for work completed. A CPI value greater than 1.0 indicates a cost underrun of performance to date. The CPI is equal to the ratio of the EV to the AC. Equation: CPI = EV/AC"

The correct answer is "Less than 1". The distractors are correct.