COURSE 3 - Google PMP Certification (Week 3)

When creating a budget, a project manager must account for

-Understanding stakeholder needs -Budgeting for surprise expenses -Maintaining adaptability -Reviewing and reforecasting throughout the project

Potential Unethical Risks

-bribery or corruption -sole-supplier sourcing -interaction w state owned entities

Traditional procurement management

-focus on standard contracts with clear terms and deliverables -project manager may be responsible for end-toend procurement -Contracts may feature lengthy and extensive documentation

Forecast

A cost estimate, or prediction over a period of time

Reserve analysis

A method to check for remaining project resources

As a project manager selecting a vendor, you first need to outline the details and requirements of your project in order to solicit bids. Which procurement document helps with this task?

A request for proposal (RFP) An RFP is a document you use to solicit bids from vendors. Once you receive several bids, you can choose the best vendor for your project.

Test your ethics.

When you face an ethical dilemma, ask yourself questions in each of the following categories: -Shame: Would you be ashamed if someone knew what you did? -Community: Would you want your friends to know the decision you made? -Legal: Would you face legal action if you took this action? -Situation: Would your actions be justified in this situation? -Consequence: Would a negative outcome be worth your actions?

Completing

measuring your success

A project manager...

must show the requested amount if money was used in order to secure enough budget for future projects

Fixed contracts

usually paid for when certain milestones are reached

Fill in the blank: Creating a _____ establishes a cost estimate for your project budget and ensures that you calculate the correct expenses for a set period of time.

forecast A forecast is a cost estimate or prediction that helps you calculate the correct expenses for a particular time period. You will frequently review your project budget, and it will evolve throughout the project life cycle.

Budget creation takes place...

in the initiation phase of your project

Cash flow

is the inflow and outflow of cash on your project

Controlling

making payments and maintaining and ensuring quality

contingency reserves

unds added to the estimated project cost to cover identified risks. These are also referred to as buffers.

Milestone

An important point within the project schedule that indicates progress and usually signifies the completion of a deliverable or phase of the project

contingency budget

Money that is included to cover potentially unforeseen events that aren't accounted for in a cost estimate

Tips for selecting

Now that you have outlined what you need for your project, you need to determine vendors to source these items. Research and assess various vendors and suppliers, and try to find out if your preferred vendors have a reputation for delivering quality work on time. After you've identified your preferred vendors and suppliers, interview them to learn more about their products and services. If possible, make site visits to see exactly how each vendor runs their business in person.

procurement

means obtaining all of the materials, services, and supplies required to complete the project. You have just learned about the procurement process in project management.

Initiating

planning what you need to meet your project goals

As a project manager, you're interested in working with vendors in a way that is collaborative and places an emphasis on relationships. What procurement management process should you choose?

Agile Agile procurement management is more collaborative with both the project team and the end supplier than traditional approaches. There is a heavy emphasis on the relationship between these parties.

Once you sign a contract with a vendor, you audit each task, execute quality control, and approve invoices. These are examples of what project manager duty?

Assurance As a project manager, you'll want to frequently review the work delivered by your vendors.

Budget spreadsheet templates

Budget templates are a useful tool for helping you estimate, track, and maintain a project budget. Below, you will find a few different budget templates that you can use for future projects. Each of these templates is formatted in a digital spreadsheet.

funding

cash into your project

Selecting

deciding which supplies and vendors to use

Contract writing

developing, reviewing, and signing contracts

Scope creep

when changes, growth, and other factors affect the project's scope at any point after the project begins. Scope creep causes additional work that wasn't planned for, so scope creep can also impact your budget. There are several factors that can lead to scope creep, such as: A vague Statement of Work (SoW) Conversations and agreements about the project that aren't officially documented Unattainable timeframes and deadlines Last-minute asks from priority stakeholders Addressing these factors as you plan your project can help prevent scope creep from impacting your budget.

budget pre-allocation

your budget is already set before you even start the project

The budgeting process usually happens in...

conjunction with the scheduling process

Procurement Process

-Initiating -Selecting -Contract Writing -Control -Completing

Fixed contracts

Paid for when certain milestones are reached

Monitoring the budget is...

*crucial* for a project manager to enforce accountability in terms of spending

What is a request for proposal (RFP)?

-A document that outlines the details and requirements of an organization's project to be passed on to vendors Exp: A request for proposal, or RFP, is used to solicit bids from vendors so the project team can select the best vendor for a project. RFPs are widely used within different departments in a company and across various industries.

PMI's code of ethics

Honesty, responsibility, respect, and fairness are the values that drive ethical conduct for the project management profession

RFP

Request for Proposal A document that outlines the details of the project

Bottom up approach

-Break project into tasks -Estimate cost of each item -Add estimates together -Add contingency and tax -Seek approval from key stakeholders

Agile procyrement management

-Collaborative with both the project team and the end supplier -Emphasis on the relationship between these parties -Project team plays a larger role in identifying what needs to be procured -Living contract

NDA

Nondisclosure agreement A document that keeps confidential information within the organization

Procurement

Obtaining all of the materials, services, and supplies required to complete the project

Time & materials contracts

Paid monthly based on the hours worked and other fees associated with the work, like travel and meals

Resource cost rates

The cost of a resource

PMI

Project Manager Institute

SMEs

Subject Matter Experts

When is a good time to review the project budget and identify if you need to make any changes?

After you meet a milestone Milestones can act as checkpoints for budget management and payment.

Which of the following strategies should you consider when creating your budget? Select all that apply.

-Baseline your budget A baseline budget is the estimate of costs you start with at the beginning of a project. When your project accrues actual costs, you use the baseline budget to determine if the project is under or over budget. It is also a good idea to document all costs and time-phase your budget. -Document all costs You should document all types of costs—both internal and external. Some additional strategies to implement include time-phased budgeting and setting a baseline budget. -Time-phase your budget Time-phased budgeting allows you to allocate costs for project tasks over the projected timeline in which those expenses are planned to take place. By looking at your tasks against a timeline, you can track and compare planned versus actual costs over time. Also, make sure you baseline your budget and document all types of costs.

In order to control costs

-Establish a sign off plan and inform the appropriate stakeholders of any changes that occur -Manage changes as they are made -Accept budget misses will happen -Adequately account for, adapt, and manage your budget with that risk in mind

As a project manager, what three things should you do to control costs and reduce changes to the budget? Select all that apply.

-Establish a sign-off plan and inform stakeholders of any expense changes that occur. You should get appropriate stakeholders to agree to any additional costs before they are incurred. You should also manage changes as they are made and ensure the changes are within scope. -Manage changes as they're made. You should update forecasts as cost changes occur because you don't want budget changes to surprise you. You should also get stakeholder sign-off on any changes and ensure changes are within scope. -Ensure budget changes are within scope. You should ensure that any additional costs or changes to the budget are within the project boundaries. You should also get stakeholder sign-off on any changes and manage changes as they are made.

Resources and tactics that you can use to make sure you aren't overestimating or underestimating.

-Historical data -Leverage experts -Bottom-up -Confirm accuracy -Baseline

Week 3 Themes

-How to create and manage a real-world project budget -Discuss the components of a budget and how stakeholders play a role in the budgeting process -Learn about the importance of procurement in project management -Learn about vendor management and procurement in Agile and traditional methodology settings -Introduce legal and contractual documentation -Understand the role of legal teams and ethics in procurement -Create your own documentation

Most projects are created to...

-Improve workforce productivity -Increase revenue -Attempt to save costs within an organization

What is the process of obtaining all the materials, services, and supplies a team needs to complete a project?

-Procurement Exp: In addition to the materials, services, and supplies, a project manager also needs to procure essential goods and services through vendors.

Cost Analysis Factors

-Resource cost rates -Reserve analysis -Contingency budget -Cost of quality

What are some potential ethical risks project managers need to be aware of? Select all that apply.

-Sole-supplier sourcing Sole-sourcing keeps outside vendors from bidding on a project. Project managers should also be aware of the risks of bribery or corruption and inappropriate interaction with state-owned entities. -Bribery or corruption One form of corruption is when a vendor seeks to reduce the competition for a contract during the bid through bribery or other means. Sole-supplier sourcing and inappropriate interaction with state-owned entities are some other ethical traps to avoid. -Interaction with state owned entities Any relationship with a government that is based upon inappropriate relationships that limit competition is unethical. Project managers should also be careful to avoid ethical traps like bribery, corruption, or sole-supplier sourcing.

Vendor management entails...

-Sourcing vendors -Getting quotes for vendors' work -Deciphering which vendors will fulfill your needs -Negotiating vendor contracts -Setting deadlines for vendors -Evaluating performance -Ensuring payments are made

Which three of the following items are examples of direct costs for your project?

-Staff training Staff training is a direct cost because it is necessary in order to complete your project. -Materials costs Since materials are necessary to complete your project, they are considered a direct cost. -Wages and salaries of employees and contractors Employees and contractors are the people who do the work necessary to complete the project. Therefore, their wages and salaries are considered direct costs.

What should a project manager account for when project budgeting? Select all that apply.

-Stakeholder needs It's important to know exactly what stakeholders expect from the project. -Reforecasting throughout the project A project manager may need to create a separate, revised budget based upon how the project is tracking. -Surprise expenses By budgeting for surprises, the project manager is less likely to go over budget.

As a project manager, what does going under budget on a project indicate about your approach to budget management? Select all that apply.

-That you effectively conserved funds and will likely receive larger budgets for future projects Exp: Going under budget on a project does not mean that the funds you saved will be allocated to a future project. In fact, your budget for future projects could be slashed. Going under budget indicates that you may not have done a good job at initially estimating and that you could have spent more money on the project. -That you accurately estimated the total cost of ownership (TCO) Exp: TCO factors in the expenses associated with a product or service over its lifetime, rather than just upfront costs. Accurately estimating TCO is unlikely to cause you to go under budget on a project. Rather, going under budget could mean that y

Perform a reserve analysis

A reserve analysis will help you account for any buffer funds you may need. First, review all potential risks to your project and determine if you need to add buffer funds, also referred to as a contingency budget. These funds are necessary because new costs that you did not expect are likely to happen throughout the project. You may also want to account for cost of quality in your overall project budget. The cost of quality refers to all of the costs that are incurred to deliver a quality product or service, which can extend beyond material resources. This includes preventing or addressing issues with products, processes, or tasks, & internal and external failure costs. One example would be having to redesign a product or service due to defects. A defect could mean refunds to customers, time and money required to create a new product or service, and multiple other potential costs affecting the client.

As a project manager setting a budget, you factor in unexpected costs that may arise during the project. What budgeting strategy does this refer to?

Adding a buffer and reserves When budgeting for a project, you'll want to leave room for costs that exceed estimations.

Tips for contract writing

Contract writing requires excellent attention to detail, so pay close attention to the inclusions and exclusions in the vendor's offer. There may be some items included in the vendor's price that you can provide in-house at low or no additional cost. For example, the vendor's offer may include charges for storing materials, using certain equipment, or labor. These are all things that you may be able to provide from your organization's resources, so you can opt to save costs with the vendor on those items by using in-house materials and resources. Sometimes, the vendor may write the contract. In this case, checking carefully for clarity and accuracy ensures that you know exactly what you are getting from the vendor. Whether the contract is written by you or by the vendor, you will almost always want to consult with a legal and compliance team to ensure that everything in the contract is ethical and legal.

As a project manager, you host weekly meetings to periodically review vendor performance and work quality. Which procurement process step does this represent?

Controlling During this step, you will periodically check on vendor work to ensure it meets the terms of the contract.

Cost of quality

Costs that are incurred to prevent issues with products, processes, or tasks -Prevention costs -Appraisal costs -Internal failure costs -External failure costs

Understand the legal requirements for your procurements.

Every country has regulations to adhere to when conducting business in that country. Be sure to research the legal and ethical requirements based on your project and procurement needs, and if your organization has a legal team, make sure to lean on them for support and advice.

Project budgeting best practices

Here are a few tips to consider when creating your project budget: *Reference historical data*: Your project may be similar to a previous project your organization has worked on. It is important to review how that project's budget was handled, find out what went well, and learn from any previous mistakes. *Utilize your team, mentors, or manager*: Get into the habit of asking for your team to double check your work to give you additional sets of eyes on your documents. *Time-phase your budget*: Time-phased budgeting allows you to allocate costs for project tasks over the projected timeline in which those expenses are planned to take place. By looking at your tasks against a timeline, you can track and compare planned versus actual costs over time and manage changes to your budget as necessary. *Check, check, and double check*: Make sure that your budget is accurate and error-free. Your budget will likely require approval from another department, such as finance or senior management, so do your best to ensure that it is as straightforward to understand as possible and that all of your calculations are correct.

Stick to your ethical codes.

Honesty, responsibility, respect, and fairness are the values that underpin ethical behavior in the project management profession. The Project Management Institute's (PMI) code of ethics provides detailed guidelines to help ensure you maintain ethical conduct in your projects.

sole-supplier sourcing

In some situations, having a vendor who a company is already familiar with smooths the procurement process and works well for both parties. Ethical issues arise when other vendors aren't even allowed to bid for contracts for which they are similarly qualified. With sole-supplier sourcing, vendors may reach out to buyers before a bid is even requested. When the buyer's organization decides to work with that vendor based on their previously-established relationship, that limits competition before the bidding has even begun. When this happens, companies and the public miss out on the advantages of competition, such as reasonable pricing, product quality standards, or speedy delivery options.

Tips for completing

In the completing step of the procurement process, you will measure the success of your procurements. Ask yourself: Were the materials created good quality? Were there any issues with labor contracts? How were your relationships with vendors? During this step, it is also important to document any lessons learned. It is likely that you will be involved in another project similar to this one in the future. Take notes about how the procurement process went so you can use this information on a future project.5

Vendors

Individuals or businesses who provide essential goods and services

At what point in the project life cycle does the project manager create the project budget?

Initiation phase It's important to remember the project manager may need to adjust the budget throughout the project life cycle.

As a project manager, you are about to hire a new vendor; however, there are terms in the contract you are unfamiliar with. Who should you contact to better understand the contract?

Lawyer Depending on the size of the company you're working for, there may be an in-house legal team, an outsourced legal team, or other legal advisors. A member of one of these teams would be best to consult with for help understanding the contractual language.

Which of the following should a project manager do to ensure an ethical procurement?

Make sure that various stakeholders adhere to governmental policies and adequate corporate social responsibility. You'll want to involve the appropriate stakeholders if you need their decision on a tricky ethical decision. You should also know your company's business requirements, seek out the code of ethics for your profession, and if necessary, consult with an SME.

Kim, a producer at a mobile gaming company, is excited to launch the company's first mobile game in February. Kim clearly maps out the tasks and schedule for each of the team's developers. She considers working days and her commitments on other projects. Kim realizes that in mid-December she did not account for the company's mandatory two-week holiday shutdown in her schedule. It is too late to do anything, so she flags it to her manager and waits for the shutdown to happen. Did this project manager implement effective risk management and most likely stay under budget?

Once Kim identifies a risk, she should proactively work to manage that risk. While flagging it to a manager is a good first step, she needs to take additional steps. In this situation, a stronger risk management solution would be to flag to her manager and any relevant stakeholders and team members who need to be informed about the risk. Once flagged, she should bring a plan to them on how to manage that risk. Kim might request two extra people to help her work on the launch or hire a contractor which is not bound by the two-week company shutdown to make up the difference. She could also recommend delaying the launch date. Kim should bring these proposals and options to her team and stakeholders and align on a solution to de-risk.

Cost Control

Practice where a project manager identifies factors that might impact their budget and then creates effective actions to minimize variances

Who creates estimates for the project budget?

Project manager The project manager also collaborates with other people on the project to create the estimates.

A project manager creates a budget. They determine the amount of buffer funds the project likely needs for completion. What is this budget component?

Reserve analysis

As a project manager, you determine the cost for items such as software, tools, labor, and equipment. What budgeting term refers to these types of costs?

Resource cost rates Resource cost rates refer to the cost of resources like labor, tools, equipment, materials, and software. You will need to determine how much each of these resources will cost the company.

Which of the following is an example of using historical data to develop your project budget?

Reviewing past projects that are similar to yours to get an idea of what your budget could entail

What budgeting challenge arises when changes or growth cause additional work the project manager hadn't planned for?

Scope creep Exp: Scope creep is when changes, growth, and other factors affect the project's scope at any point after the project begins. Scope creep causes additional work that wasn't planned for, so it can impact your budget.

As a project manager, you're sourcing a new vendor. The vendor is located in a country that has a history of corruption in your industry. You've had a great initial discussion with the vendor and you don't want to discriminate against it just because of the government's and other companies' history of unethical practices. In 2-3 sentences, describe the steps you should take to avoid any potential ethical traps.

Seek to understand the legal requirements of your procurements For the vendor you're hiring, are you following its country's regulations? Confirm the regulations with your legal team or outside counsel. Stick to your ethical codes Consider the Project Management Institute's (PMI) code of ethics. Be responsible and respectful to your buyers, customers, and the public at large. Practice fairness and honesty. Test your ethics Ask yourself the following questions: Would you be ashamed if someone knew what you did? Would you want your friends to know the decision you made? Could you face legal action? Would your action be justified depending on the situation? Would a negative outcome be worth your actions?

SOW

Statement of Work A document that clearly lays out the products and services a vendor or contractor will provide for the organization

As a project manager creating a statement of work (SOW), who do you ask for input and technical knowledge?

Subject matter expert (SME) An SME is someone at your organization who has necessary experience and technical expertise that applies to the project.

total cost of ownership (TCO)

TCO takes into account multiple elements that contribute to the cost of an item. It factors in the expenses associated with a product or service over its lifetime, rather than just upfront costs. Let's relate TCO to something more common, like owning a vehicle. Let's say you buy a vehicle for a certain price, but then you also pay for things related to the vehicle, such as license fees, registration fees, and maintenance. If you add all of this up, you have your TCO for that vehicle. So now that you know what your TCO is, you may consider those fees before you buy your next vehicle. For example, you might opt for a vehicle with fewer maintenance requirements than one that requires more frequent service, since you know that will save you money overall.

Project Budget

The estimated monetary resources needed to achieve the project's goals and objectives

Jerome, a program manager at a small, five-person nonprofit company, is responsible for developing a financial literacy program for middle schools. While he has a lot of expertise in financial literacy, he realizes that he needs to find an educator to partner with to help him develop the curriculum. Which of the following is the best option for Jerome to locate an external resource?

The nonprofit does not have any educators, so Jerome needs to look outside the nonprofit. By looking outside of the nonprofit, he will find someone with the skill set he needs to help create the program materials and educational course. Exp: External resources are people outside the company who can help with tasks, providing complementary skills to those that exist inside the organization.

Tips for controlling

The procurement process isn't over when the contracts are signed. The next step is to ensure that the work is being done according to the terms of the contract. You will need to periodically review the performance and quality of each vendor. When communicating with vendors, remain professional but firm to ensure that all project requirements are being fulfilled and that all major milestones are being met on time and at cost. Building and maintaining a good relationship with your vendors benefits the team and the overall project. This relationship will make it easier to make adjustments and contract revisions if the need arises. Taking certain measures, like conducting regular check-in meetings, will ensure that the work is being completed according to plan.

What does a statement of work (SoW) describe?

The products and services a vendor or contractor will provide for the organization The statement of work describes the products and services a vendor or contractor will provide for an organization. Beyond the organization's needs, the SoW also includes the contractor's needs and requirements to successfully perform the services.

Categorize different types of costs

There are different types of costs that your project will incur. For example, you may need to account for both direct costs and indirect costs in your project budget. Categorize these different types of costs in your budget so that you can ensure you are meeting the requirements of your organization and customer. Direct costs: These are costs for items that are necessary in order to complete your project. These costs can include: Wages and salaries of employees and contractors Materials costs Equipment rental costs Software licenses Project-related travel and transportation costs Staff training Indirect costs: These are costs for items which do not directly lead to the completion of your project but are still essential for the project team to do their work. They are also referred to as overhead costs. These costs can include: Administrative costs Utilities Insurance General office equipment Security Develop a baseline budget: A *baseline budget* is an estimate of project costs that you start with at the beginning of your project. Once you have created a budget for your project and gotten it approved, you should publish this baseline and use it to compare against actual performance progress. This will give you insight into how your project budget is doing and allow you to make informed adjustments. It is important to continually monitor your project budget and make changes if necessary. Be aware that budget updates can require the same approvals as your initial budget. Also, you should "re-baseline" your budget if you make significant changes. Re-baselining refers to when you update or modify a project's baseline as a result of any approved change to the schedule, cost, or deliverable content. For example, if you have a significant change in your project scope, your budget will likely be impacted. In this instance, you would need to re-baseline in order to adhere to a realistic budget.

Interactions with state-owned entities

There are some instances in which government agencies require an organization to adhere to stricter ethical standards than they might have otherwise. Most government regulatory agencies exist because a company or an entire industry has ranked profits over their workers or the environment. Governmental agencies such as the Food and Drug Administration and The Occupational Safety and Health Administration, for example, keep businesses within legal and ethical standards. If you are unfamiliar with any governmental restrictions that may affect your industry, organization, or project, you could unintentionally fall into an ethical trap.

What does the bottom-up approach entail?

Think about all the parts of a project from the beginning to the end that have an associated cost, and add all of that together. The bottom-up approach is a useful technique when making a project budget. To apply this technique, you'll think about all the parts of a project with an associated cost and add them all together.

Spreadsheet skills for budgeting

When using a spreadsheet to track a budget, there are basic skills you will need to learn. Understanding how to use SUM and AVERAGE formulas, tables, and filters are just a few of the spreadsheet skills that will make your job as a project manager much easier. Make sure to check the course resources on spreadsheets for an introduction to these skills.

Which scenario is an example of proactive budget management?

While planning your project budget, you gather historical data and consult with industry experts. You consider fixed costs, add relevant line items, and set aside a 5% reserve for unexpected costs.

Tips for initiating

While planning your project, figure out which materials, resources, and supplies you will need to get the job done. During this step, you will decide which items will be internally procured and which items will be externally outsourced. Once you've decided which items you need to outsource, compare each of those items specifications, components, quality measurements, standards, and characteristics with your project's requirements. You may find that some of the items have features you don't need. If you can identify those unnecessary features, you will know exactly what you want and don't want in an item, possibly reducing your total cost.

Historical data

You can always review past projects that are similar to yours to get an idea of what your project could entail

Corruption and bribery

You may be confronted with different types of corruption when going through the procurement process. One form of corruption is when a vendor seeks to reduce the competition for a contract during the bidding process. A company may attempt to bribe members within the organization to sway their decision into a favorable outcome for the vendor. Bribes may include things like money, gifts, tickets to events, and more. Another type of corruption scheme is to offer a certain percentage of an awarded contract—also known as a kickback—to an official who can ensure that their company wins the bid.

Milestones are...

a great opportunity to re-review the budget, to identify if anything needs to be reset or revisited throughout the project

ethical trap

an ethical dilemma that causes us to make a certain decision without regard for our ethical principles

CAPEX (capital expenses)

are an organization's major, long-term, upfront expenses, such as buildings, equipment, and vehicles. They are generally for assets that the company will own and keep. The company incurs these expenses because they believe they will create a benefit for the company in the future.

OPEX (operating expenses)

are the short-term expenses that are required for the day-to-day tasks involved in running the company, such as wages, rent, and utilities. They are often recurring.

management reserves

are used to cover the costs of unidentified risks

Time and materials contracts

are usually paid for monthly, based on the hours worked and other fees associated with the work, such as travel and meal expenses.