PROJECT

COMMUNICATIONS MANAGEMENT
GETTING THE WORD OUT
Project Communication Management
CRITICAL LINKS between
people, ideas and information ->
Success!

90% of PM time is spent

communicating.
Which skill is most important
for a PM?
Team Building
Negotiating?
Communicating
Technical Expertise?

Need to be planned for.

Major project killer.
PM needs to master it!
Project Manager Serve As Focal Person
(Who should interact/communicate)
 Barriers to Effective Communications

• Lack of clear communications channels

• Selective perception
• Distance (Physical or temporal)
• Emotions
• Power games
• Language
• Noise (communications distortion)
• Inconsistency between verbal and nonverbal communications
• Etc

 Geographic location and cultural background affect the complexity of project communications.
• Different working hours
• Language barriers
• Different cultural norms

Note: The presence of communication barriers may

lead to increased conflict within the project
Effective Communication Skills
Questioning,
probing ideas and Educating to
Listening actively
situations for increase
and effectively
better team’s
understanding knowledge

Setting and Persuading a

Fact-finding managing person or
expectatio organization
n

Negotiating to Summarizing,
achieve recapping and
mutually Resolve conflict identifying
acceptable next steps
agreement
The three Communications Management Processes
PROCE PROCESS
PROCESS NAME DESCRIPTION
SS # GROUP
Develop an appropriate approach and plan for
project communication activities based on the
Plan Communications
1 Planning information needs of each stakeholder or
Management
group, available organizational assets, and the
needs of the project.
Ensure timely and appropriate collection,
Manage creation, distribution, storage, retrieval,
2 Executing
Communications management, monitoring, and the ultimate
disposition of project information.
Monitorin
Monitor
g& Ensure the information needs of the project
3 Communications
Controllin and its stakeholders are met.
g
10.1 – Plan Communication Management : TT
.1 Communications Requirements Analysis
 Determines the sum of information needs of stakeholders
 Communication scope, effort and complexity increase substantially with
the number of stakeholders
 Formula to calculate number of communications channels is n(n-1)/2,
where n is the number of stakeholders
 Information required to determine project communications requirements
includes:
 Organization charts / Project organization and stakeholder responsibility
relationships
 Disciplines, departments, and specialties involved in the project
 Logistics of how many persons will be involved with the project, and at which
locations
 Internal information needs e.g. communication within the organization
 External information needs e.g. communicating with the media, contractors,
etc 8
10.1 – Plan Communication Management : TT

9
 10.2 – Plan Communications: Tools & Techniques
.2 Communications Technology
Methods used to transfer information among project stakeholders
Communications technology factors that affect the project include:
 The urgency of the need for information
 The availability of technology
 The expected project staffing
 Duration of the project
 The project environment

.3 Communication Models
Key components
 Encode: to encode thoughts or ideas into a language that is understood by others
 Message and feedback: the output of encoding
 Medium: the method used to convey the message
 Noise: anything that interferes with the transmission and understanding of the message
 Decode: to translate the message back into meaningful thoughts or ideas

10
 10.2 – Plan Communications: Tools & Techniques
.4 Communications Methods
 Methodologies used to share information among project stakeholders
Interactive communication
 Between two or more parties performing a multidirectional exchange of information
 The most efficient way to ensure common understanding by all participants on
specified topics, and includes meetings, phone calls, video conferencing, etc
Push communication
 Sent to specific recipients who need to know the information
 Ensures that information is distributed but does not certify that is actually reached or
was understood by the intended audience
 Includes letters, memos, reports, emails, faxes, voice mails, press releases
Pull communication
 Used for very large volumes of information, or for very large audiences, that
requires the recipients to access the communication content at their own discretion
 Includes intranet sites, e-learning, knowledge repositories, etc.

Project Communications Management 11

 Basic Model of Communication

Message
Encode Decode

Sender Medium Noise Receiver

Noise
Decode Encode
Feedback- Message

 Key components of a basic model of communication (Sender-Receiver

Model) Components in the communications model need to be taken into
account when discussing project communications

Note: This Communication model also known as two roles Communication Model
Communication Dimensions
Communication Methods
Exercise
Communication Methods Exercise
Scenarios Method
1. Memos…………………………….. Informal Written
2. Project Plans……………………… Formal Written
3. Communicating over long distanceFormal Written
4. Meetings……………………………. Informal Verbal
5. Presentations………………………. Formal Verbal
6. Conversations……………………… Informal Verbal
7. Complex Problems.……………….. Formal Written
8. E-mail…………….…………………. Informal Written
9. Notes……………..…………………. Informal Written
10. Speeches.………………………… Formal Verbal
11. Project Charter.………………… Formal Written
 10.2 – Plan Communication: Outputs
.1 The Communication Management Plan
Usually provides
Stakeholder communication requirements
Information to be communicated: language, format, content,
level of detail
Reason for distribution off that information
Time frame and frequency for the distribution of required
information
Person responsible for communicating the information
Person responsible for authorizing release of confidential
information
Methodsor technologies used to convey the information: e-mail,
memoranda, press releases
16
 10.2 – Plan Communications: Outputs
.1 The Communications Management Plan
Usually provides.. Contd
Resources allocated for communication activities, including time and
budget
Escalation
process for resolution of issues with time frames and
management chain
Methods for updating and refining CMP as the project progresses and
develops
Glossary of common terminology
Flow charts of the information flow in the project, workflows with
possible sequence of authorization, list of reports, and meeting plans
Communication constraints, usually derived from specific legislation or
regulation, technology, and organizational policies
May include guidelines and templates for project status / team meetings,
e-meetings, e-mail, project website, PM software, etc.
17
 Risk
 Risks are uncertain events which may or may not occur, but
which would matter if they did happen
 Project Risk is an uncertain event or condition that, if it occurs,
has a positive or negative effect on at least one of the project
objectives (such as Cost, Scope, Schedule, Quality, etc)
 Therefore each risk should relate to at least one project objective,
and some risks may affect more than one objective
 Risk may have one or more causes; A cause may be a
requirement, assumption, constraint, or condition that creates the
possibility of negative or positive outcomes

Project Risk Management 20

21
Project Risk Management

 Risk is an uncertain event or condition that, if occurs, has an effect on at

least one project objective.
 Risk management objectives:
 increase the probability and impact of positive events (opportunities).

decrease the probability and impact of negative events (threat).
 Terms & concepts:
 Uncertainty: a lack of knowledge about an event that reduces confidence
 Risk averse: someone who does not want to take risks.
 Risk tolerances: area of risk that are acceptable/unacceptable.
 Risk thresholds: the point at which a risk become unacceptable
Project Risk Management

Risk factors
4.
4.
2.
2. 3.
3.
1.
1. The
The
The
The range
range of
of Expected
Expected anticipated
anticipated
The
The probability
probability possible
possible timing
timing (when)
(when) frequency
frequency of of
that
that itit will
will outcome
outcome in
in the
the project
project risk
risk event
event
occur
occur (impact)
(impact) life
life cycle
cycle
(how
(how often)
often)
 Risk
 Because RM should be embedded in the planning and operational
documents of the project, it is established as part of the project;
RM is not an optional activity
 Known risks are those that are identified and analyzed; it may be
possible to plan for them using the Risk Management processes
 Unknown risks cannot be managed proactively
 Risk relates both i.e. threats to project success (Negative Risk),
and opportunities (Positive Risk) to enhance chances of the
project’s success

Project Risk Management 24

 Definitions
Risk Event
 “A discrete occurrence that may affect the project for better or worse”
 May be favorable or unfavorable
 Risk Probability
 “The likelihood of occurrence. The ratio of the number of chances by which an event
may happen (or not happen), to the sum of the chances of both happening and not
happening.”
 Amount at Stake
 “The extent of adverse consequences which could occur to the project”
 Known Situation (not a risk category)
 Known-unknown
 “Identifiable uncertainty”
 Situation that we know may happen, but not how or whether it will affect us
 The subject of risk management
 Unknown-unknown
 “An item or situation whose existence we cannot imagine” 25
 Identifying Risk by Uncertainty
IMPACT
KNOWN UNKNOWN
UNKNOWN

UNKNOWN
UNKNOWN EVENTS UNKNOWN
KNOWN IMPACT UNKNOWN
(Needs Cause Analysis) (Ignorant Bliss)
EVENTS

EVENTS
KNOWN KNOWN EVENTS
KNOWN

KNOWN
KNOWN UNKNOWN IMPACT
(Certainty) (Needs Risk Management)

KNOWN UNKNOWN
IMPACT

Project Risk Management 26

 Strategies for Handling Risks

 Opportunities
 Threats  Exploit
 Avoid  Share
 Transfer  Enhance
 Mitigate  Accept
 Accept

• Some responses are designed for use only if certain events occur
• Events that trigger the contingency response, such as missing
intermediate milestones or gaining higher priority with a supplier
should be defined and tracked

Project Risk Management 27

 Some Definitions
 A Contingency/ Fall Back Plan is developed by the team, if the
response strategy is found to be not effective while implementation.
(Plan B if Plan A fails)
 Secondary Risk is the risk arises due to implementation of original
risk response plan. Team shall review any possibility of secondary
risk while finalizing risk response strategy. (A contingency reserve
will cover cost overrun in critical path but this may strain the funding
and total cost)
 Residual Risk is the risk that will remain even after implementation
of risk response strategy (No 100% Solution) (Insurance will cover
hospital charges for an accident but what about the disability)
The seven Risk Management Processes
PROCE PROCESS
PROCESS NAME DESCRIPTION
SS # GROUP
Plan Risk Define how to conduct risk management
1
Management activities for a project.
Identify individual project risks as well as
2 Identify Risks sources of overall project risk, and
document their characteristics.
Prioritize individual project risks for further
Perform Qualitative Planning analysis or action by assessing their
3
Risk Analysis probability of occurrence and impact as
well as other characteristics.
Numerically analyze the combined effect of
Perform Quantitative identified individual project risks and other
4
Risk Analysis sources of uncertainty on overall project
objectives.
The seven Risk Management Processes
PROCE PROCESS
PROCESS NAME DESCRIPTION
SS # GROUP
Develop options, select strategies, and
agreeing on actions to address overall project
5 Plan Risk Responses Planning
risk exposure, as well as to treat individual
project risks

Implement Risk
6 Executing Implement agreed-upon risk response plans.
Responses

Monitor the implementation of agreed-upon

Monitorin
risk response plans, track identified risks,
g&
7 Monitor Risks identify and analyze new risks, and evaluate
Controllin
risk process effectiveness throughout the
g
project.
 11.1 – Plan Risk Management
 The process of deciding how to approach and conduct
risk management activities for a project
 Entails deciding how to approach, plan and execute
risk management activities for a project
 Risk Management Planning is important to:
 Ensure that the level, type, and visibility of risk
management are commensurate with both the risks and the
importance of the project to the organization

Project Risk Management 3

1
 11.1 – Plan Risk Management: Outputs
 Risk Management Plan
 Describes how risk management will be structured and performed on the project
 Sub-set of the Project Management Plan Includes
 Methodology: Defines the approaches, tools, and data resources that may be used to
perform RM on the project
 Roles and responsibilities : Defines the lead, support and risk management team for
each type of activity in the RMP and assigns roles & responsibilities to the people
 Budgeting: assigns resources and estimates costs needed for risk management in the
project cost baseline
 Timing: defines when and how often the RM process will be performed throughout the
PLC and establishes risk management activities to be included in the project schedule

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 11.1 – Plan Risk Management: Outputs
Risk Categories
 Provides a structure that ensures a comprehensive process of identifying
risk to a consistent level of detail, and contributes to the effectiveness
and quality of Risk Identification
 A Risk Breakdown Structure is one approach to providing such
structure which is a hierarchical depiction of identified risks arranged
by risk category and subcategory that identifies the various areas and
causes of potential risk
 Risk categories may need to be tailored, adjusted, or extended to new
situations before they are used on the project

Project Risk Management 3

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 Example of RBS
Project

Project
Technical External Organizational
Management

Subcontractors Project
Requirements Estimating
And Suppliers Dependencies

Technology Regulatory Resources Planning

Complexity And
Market Funding Controlling
Interfaces

Performances
Customer Prioritization Communication
And Reliability

Quality Weather

The Risk Break Down Structure (RBS) lists the categories and sub-categories within which risks may arise for a typical project.
Different RBSs will be appropriate for different types of projects and different types of organizations. One benefit of this
.approach is to remind participants in a risk identification exercise of the many sources from which project risk may arise
Project Risk Management 3
5
 11.1 – Plan Risk Management: Outputs
Probability and impact matrix
 Risks are prioritized according to their potential implications for the
project’s objectives
 The specific combinations of probability and impact with corresponding
importance for planning responses to the risk are set by the organization
 These combinations are reviewed during the RMP process
 Revised stakeholders’ tolerances
 Stakeholders’ tolerances, as they apply to the specific project, may be
revised in the Plan Risk Management process
Reporting formats
 Describe the content and format of the risk register
 Defines how the outcome of the risk management processes will be
documented, analyzed, and communicated
• Tracking
 Documents how all facets of the risk activities will be recorded for the
benefit of the current project, future needs, and lessons learnt
Project Risk Management 3
 Documents whether and how risk management processes will be audited 6
 11.2 Identify Risks
The process of determining which risks might affect the project
and documenting their characteristics
Participants in Identify Risks process can include
 Project manager, team members, Risk Management team, Subject Matter
Experts (SME), customers, end users, other project managers, stakeholders,
and Risk Management experts
 All project personnel should be encouraged to identify risks
RI is an iterative process as new risks may become known as the
project progresses. The frequency of iteration and who participates
in each cycle varies from case to case

Project Risk Management 3

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 11.2 Identify Risks
Both opportunities and threats should be considered during RI
Each risk should be described at a level of detail where it can be
assigned to a single owner with clear responsibility and
accountability for its management
Trigger conditions should also be identified where this is
possible and appropriate
Involvement of the team in the RI process builds a sense of
ownership and responsibility for the risks and associated risk
response actions

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 11.2 – Identify Risks: Tools & Techniques
.1 Documentation Reviews
 Structured review of project documents including plans, assumptions, previous
project files, contracts, and other information
 Quality of plans and consistency between those plans and with the project
requirements and assumptions indicate risk in the project
.2 Information Gathering Techniques
 Brainstorming
 To obtain a comprehensive list of project risks, using a multidisciplinary set of experts
 Ideas are generated under the leadership of a facilitator
 Categories (e.g. RBS) can be used as a framework
 Risks are then identified and categorized by type of risk and their definitions are sharpened

Project Risk Management 4

0
 11.2 – Identify Risks: Tools & Techniques
.2 Information Gathering Techniques (contd.)
 Delphi Technique
 A way to reach consensus of project risk experts who participate anonymously
 Facilitator uses a questionnaire to solicit ideas about the project’s important risks
 Responses are summarized and circulated to the experts for further comments
 Consensus may be reached in a few rounds of this process
 Helps reduce bias in the data and keeps any one person from having undue influence on the
outcome
 Interviewing
 Experienced project participants, stakeholders, and subject matter experts
 Root Cause Analysis
 Specific technique to identify a problem, discover the underlying causes, and develop
preventive action
 Sharpens the definition of risk and allows grouping risks by causes

Project Risk Management 4

1
 11.2 – Identify Risks: Tools & Techniques
.3 Checklists Analysis
 Developed based on historical information & knowledge acquired from previous
similar projects and from other sources of information
 The lowest level RBS can also be used as a risk checklist
 The checklist may be unable to cover all risks, so care should be taken to explore items
that do not appear on the checklist
 Checklist should be reviewed during project closure to improve it for use on future
projects
.4 Assumptions Analysis
 Project is conceived and developed on the basis of a set of hypotheses, scenarios, or
assumptions
 Explores the validity of assumptions as they apply to the project
 Identifies risks to the project from inaccuracy, inconsistency and incompleteness of
assumptions
Project Risk Management 4
2
 11.2 – Identify Risks: Tools & Techniques
.5 Diagramming Techniques
 Cause and effect diagram
 Also known as Ishikawa or fishbone diagrams
 Useful in identifying causes of risks
 System and process flow charts
 Show how various elements of a system interrelate and the mechanism of causation
 Influence diagrams
 These are graphical representations of situations showing causal influences, time
ordering of events, and other relationships among variables and outcomes

Project Risk Management 4

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 11.2 – Identify Risks: Tools & Techniques
.6 SWOT Analysis
– Examines the project from each of the SWOT (strengths, weaknesses, opportunities, threats)
perspectives to increase the breadth of identified risks by including both internal and external
risks
– Examines the degree to which organizational strengths offset threats, and opportunities that may
serve to overcome weaknesses
.7 Expert Judgment
Experienced project personnel, subject matter experts
Experts’ bias must also be taken into account

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 11.2 – Identify Risks: Outputs
.1 Risk Register
 The preparation of risk register begins in the Identify Risks process with the
following information
 List of identified risks, including their root causes and uncertain project assumptions
 Root causes of risk, which are the fundamental conditions or events that may give rise to
the identified risk
 List of potential responses

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 11.3 – Perform Qualitative Risk Analysis
 A rapid and cost-effective method of establishing
priorities for the Risk Response Plan
 Evaluation of the quality of information on project risks
helps understand the assessment of the risk’s importance
to the project
 The process of prioritizing risks for further analysis or
action, by assessing and combining their probability of
occurrence and impact

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 11.3 – Perform Qualitative Risk Analysis
 Assesses the priority of identified risks using
 Probability of occurrence and the corresponding impact on
the project objectives, if risk occurs
 Other factors such as the timeframe for response, and the risk
tolerance associated with the project constraints of cost,
schedule, scope and quality
 Leads to Perform Quantitative Risk Analysis or directly
into Plan Risk Responses

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 11.3 – Perform Qualitative Risk Analysis:
Tools & Techniques
.1 Risk Probability and Impact Assessment
 Risk Probability assessment investigates the likelihood that each specific risk will
occur, and the potential effect on the project objectives such as scope, cost,
quality and performance
 The effect could be negative or positive
 Some risks are kept on the watch-list for future monitoring

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 11.3 – Perform Qualitative Risk Analysis:
Tools & Techniques
.2 Probability and Impact Matrix
 Risks can be prioritized for further quantitative analysis and response based on
their risk rating
 Ratings are assigned to the risk based on their assessed probability and impact
 Organizations should determine which combinations of probability and impact
will result in
 High risk (“red condition”)
 Medium risk (“yellow condition”)
 Low risk (“green condition”)

Project Risk Management 5

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 11.3 – Perform Qualitative Risk Analysis:
Tools & Techniques
Probability Threats Opportunities

0.90 0.045 0.09 0.18 0.36 0.72 0.72 0.36 0.18 0.09 0.045

0.70 0.035 0.07 0.14 0.28 0.56 0.56 0.28 0.14 0.07 0.035

0.50 0.025 0.05 0.10 0.20 0.40 0.40 0.20 0.10 0.05 0.025

0.30 0.015 0.03 0.06 0.12 0.24 0.24 0.12 0.06 0.03 0.015

0.10 0.005 0.01 0.02 0.04 0.08 0.08 0.04 0.02 0.01 0.005

0.05 0.10 0.20 0.40 0.80 0.80 0.40 0.20 0.10 0.05

Probability and Impact Matrix

The organization’s threshold is shown in the matrix to determine whether the risk score is high, moderate or low for that objective. It
Project Risk Management can rate a risk separately for each objective 5
1
 11.4 – Perform Quantitative Risk Analysis
 The process of numerically analyzing the effect of identified risks on overall
project objectives
 Performed on risks that have been prioritized by the QRA process as
potentially and substantially impacting the project’s competing demands
 Analyzes the effect of those risk events and assigns a numerical rating to
those risks

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2
 Quantification Formulae
 Statistical Independence
 Two events are independent if the occurrence of one is not related to the
occurrence of the other
 Sum of Probabilities
 The sum of probabilities of all occurrences is always 1.0, or 100%
 Expected Monetary Value
 EMV = (Risk event probability) x (Risk event value)
 Risk Event Probability is an estimate of the probability that a risk event will occur
 Risk Event Value is an estimate of the gain or loss that will be incurred if the event
occurs

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 11.5 – Plan Risk Responses
 Process of developing options and actions to enhance
opportunities and to reduce threats to project objectives
 It follows the qualitative and quantitative risk analysis
processes
 Includes the identification and assignment of one or more
persons to take responsibility for each agreed-to and funded
risk response
 Addresses risks by their priority, inserting resources and
activities into the budget, schedule & project management
plan as needed
 Selecting the best response from several options is often
required
Project Risk Management 5
5
 Strategies for Handling Risks

 Opportunities
 Threats  Exploit
 Avoid  Share
 Transfer  Enhance
 Mitigate  Accept

 Accept

• Some responses are designed for use only if certain events occur
• Events that trigger the contingency response, such as missing
intermediate milestones or gaining higher priority with a supplier
should be defined and tracked
Project Risk Management 5
7
 .1 Strategies for negative risks or threats
Avoid

 Risk avoidance involves changing PM plan

To eliminate the threat posed by an adverse risk

To isolate the project’s objectives from the risk impact
To relax the objective that is in jeopardy such as extending
the schedule or reducing the scope
Some risks that arise only in the early stage of the project
can be avoided by clarifying the requirements, obtaining
information, improving communication or acquiring
expertise

Project Risk Management 5

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 .1 Strategies for negative risks or threats (contd.)
 Transfer
 Risk transference requires the negative impact of the threat along with ownership of the response to a third
party
 Transferring the risk gives responsibility of management of the risk to the third party – it does not eliminate the
risk
 Transferring liability for a risk is most effective in dealing with financial risk exposure
 Involves payment of premiums to the party taking on the risk
 Transference tools can be quite diverse and include
 Insurance, performance bonds, warranties, guarantees, etc
 Contracts may be used to transfer liability for specific risks to a third party
 Cost type contracts, fixed price contracts may transfer risks to the seller

 Mitigate
 Taking early action to reduce the probability and/or impact of a risk is more effective than trying to repair the
damage after the risk has occurred
 Adopting less complex processes, conducting more tests, choosing a more stable supplier are mitigation actions
 Wherever it is not possible to reduce the probability, a mitigation response may address the risk impact by
targeting linkages that determine the severity

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 .2 Strategies for positive risks or opportunities

 Exploit

 To realize the opportunity

 This strategy seeks to eliminate the uncertainty associated with a particular upside risk by making the
opportunity definitely happen
 Directly exploiting responses include assigning more talented resources to the project to reduce the time to
completion or to provide better quality than planned

 Share

 Allocating ownership to third party who is best able to capture the opportunity for the benefit of the project
 Forming risk-sharing partnerships, teams, special-purpose companies, or joint ventures to manage
opportunities

 Enhance

 This strategy modifies the size of an opportunity by increasing probability and/or positive impact risks
 Seeking to facilitate or strengthen the cause of the opportunity, and proactively targeting and reinforcing its
trigger condition might increase its probability
 Impact drivers can also be targeted seeking to increase the project’s susceptibility to the opportunity
Project Risk Management 6
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 11.5 – Plan Risk Responses:
Tools & Techniques
 Strategies for both threats and opportunities
 Accept
 It is seldom possible to eliminate all risk from a project
 Indicates that the project team has decided not to change the project management plan
to deal with the risk, or is unable to identify any suitable response strategy
 May be adopted for threats and opportunities
 The strategy can be active or passive
 Passive strategy does not require any action except to document the strategy, leaving
the project team to deal with the threats or opportunities as they occur
 An example of an active strategy could be to provide for the contingency reserves
including amounts of time, money, resources to handle the risks
 Accepting an opportunity is being willing to take advantage of it if it comes along, but
not actively pursuing it

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Risk Responses
 11.5 -- Plan Risk Responses: Outputs
Components of Risk Register at this point can include
Identified risks, their descriptions, area(s) of the project affected, their causes, and how they
may affect project objectives
Risk owners and assigned responsibilities
Outputs from Qualitative and Quantitative analysis processes including prioritized lists of
project risks and probabilistic analysis of the project
Agreed-upon response strategies
Specific actions to implement the chosen response strategy
Triggers, symptoms and warning signs of risk occurrence
Budget and schedule activities required to implement the chosen responses
Contingency plans and triggers that call for their execution
Fallback plans for use as a reaction to a risk that has occurred, and the primary response proves
to be inadequate
Residual risks that are expected to remain after planned responses have been taken, as well as
those that have been deliberately accepted
Secondary risks that arise as a direct outcome of implementing a risk response
Contingency reserves that are calculated based on the quantitative analysis of the project and
the organization’s risk thresholds
Risk-related
Project Risk Management
Contract Decisions - Decisions to transfer risk, such as agreements for insurance, 6
services and other items as appropriate, are selected in this process
3
 11.6 -- Control Risks
 The risk response owner reports periodically to the
PM on the effectiveness of the plan, any
unanticipated effects and any mid-course correction
needed to handle the risk appropriately

 Includes updating the organizational process assets,

including lessons learned databases and risk
management templates for the benefit of future
projects

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 11.6 -- Control Risks

 Other purposes of the CR are to determine if

 Project assumptions are still valid
 Risk as assessed has changed from its prior state, with
analysis of trend
 Proper risk management policies and procedures are being
followed
 Contingency reserves of cost or schedule should be modified
in line with the risks of the project
 Involves choosing alternative strategies, executing a
contingency or fallback plan, taking corrective actions
and modifying the PM Plan
Project Risk Management 6
6
 CERTIFICATIO
N
EXAM
PREPARATION
COURSE
PROJECT
PROCUREMENT MANAGEMENT
GETTING SOME HELP
What is Procurement?
 Procurement is a Business Management Function
that manage the entire process of acquisition of
external resources in efficient and economical
manner
OR
 Procurement is the act of buying goods, services or
works from an external source.

 It is favourable that the goods, services or works are

appropriate and that they are procured at the best
possible COST to meet the needs of the acquirer in
terms of quality and quantity, time, and location. 
 What is Difference?
Terms  purchasing and procurement interchangeably, but despite
their similarities they do have different meanings

Procurement involves the process of selecting vendors,

establishing payment terms, strategic vetting, selection, the
negotiation of contracts and actual purchasing of goods.
Vs.
Purchasing is a subset of procurement. Purchasing generally
refers simply to buying goods or services. Purchasing often
includes receiving and payment as well.
 Project Procurement Management
 Project Procurement Management is about establishing, maintaining and
closing relationships with suppliers of goods and services for the project.
The definition of project procurement management from the PMBOK is:

“the processes necessary to purchase or acquire the products,

services, or results needed from outside the project team”

 Includes the processes necessary to purchase or acquire products,

services, or results needed from outside the project team.
 The organization can be either the buyer or seller.
 Project Procurement Management includes the contract management
and change control processes required to develop and administer
contracts or purchase orders issued by authorized project team
members.
 contractual obligations placed on the project team by the contract.

71
 Project Manager’s Role in Procurements
 For the project managers, this is a big responsibility, as well as a huge opportunity to
showcase their skills and prove that they can accomplish tasks requiring outside
resources
 Key roles:
 Know the procurement process
 Understand contract terms and conditions
 Make sure the contract contains all project management requirements
such as attendance at meeting, reports, actions and communications
deemed necessary
 Identify risks and incorporate mitigation and allocation of risks into the
contract
 Help tailor the contract to the unique needs of the project
 Align schedule of the contract and schedule of the project
 Involved in contract negotiation
 Make sure procurement process done smoothly
 Work with contract manager to manage changes to the contract

PM must be assigned before contract signed!

 Project Procurement Management
 Contract
 A mutually binding agreement that obligates the seller to provide
the specified products, services, or results; and obligates the buyer
to provide monetary or other valuable consideration
 It is a legal relationship subject to remedy in the courts
 It may be simple or complex, and reflects the simplicity or
complexity of the deliverables
 Tailoring the contract to the specific needs of the project is the
responsibility of the project team
 Also known as agreement, subcontract, or a purchase order
 Usually subject to a more extensive approval process, because of
its legally binding nature
 Typically organizations have policies and procedures defining
signing authority on behalf of the organization
Project Procurement Management 7
3
7
4
7
5
7
6
 Spectrum of Contract Types

CPPC = Cost Plus Percentage Cost

CPFF = Cost Plus Fixed Fee
CPIF = Cost Plus Incentive Fee
FPPI = Fixed Price Plus Incentive (Fixed price Incentive)
Project Procurement Management
FPIF
FFP
=
=
Fixed Price Plus Incentive Fee (same as FPPI)
Firm Fixed Price
7
7
 Cost-Reimbursable Contracts
 Cost plus percentage fee (CPPF) (Construction)
 fee varies with direct cost
 Cost plus fixed fee (CPFF) (Research)
 actual direct expenses
 plus a fixed fee for overhead & profit
 Cost plus incentive fee (CPIF)
 sharing of cost overruns/under-runs
 Fixed price plus incentive fee (FPIF) (big amount, long duration)
 similar to CPIF, but
 ceiling (maximum) price
Project Procurement Management 7
8
 Project Procurement Management
 Buyer
 The buyer becomes the customer and is the key stakeholder for the seller
 Depending on the buyer’s position in the acquisition cycle, the buyer may be
called a client, customer, contractor, acquiring organization, service requestor,
or purchaser

 Seller
 The seller will typically manage his work as a project.
 The seller’s project management team must be concerned with all the processes
of project management, not just with this (Procurement) knowledge area
 The seller can be viewed during the contract life cycle first as a bidder, a
selected source, and then as the contracted supplier or vendor
 It is an entity, external to the performing organization
Project Procurement Management 7
9
 Centralized Procurement
(Functional Organization)
GENERAL
GENERAL
MANAGER
MANAGER

SALES
SALES CHIEF
CHIEF MANUFACT’G
MANUFACT’G PROCUREMENT
PROCUREMENT
MANAGER
MANAGER ENGINEER
ENGINEER MANAGER
MANAGER MANAGER
MANAGER

Project
Project
Sales
SalesRep
Rep Line
LineManager
Manager Buyer
Buyer
Engineer
Engineer
Project
Project
Sales
SalesRep
Rep Line
LineManager
Manager Buyer
Buyer
Engineer
Engineer
Project
Project
Sales
SalesRep
Rep Line
LineManager
Manager Buyer
Buyer
Engineer
Engineer
Project
Project
Sales
SalesRep
Rep Line
LineManager
Manager Buyer
Buyer
Engineer
Engineer

Project Procurement Management 8

0
 Decentralized Procurement
(Project Organization)

GENERAL
MANAGER

PROJECT SALES CHIEF MANUFACT’G PROCUREMENT

PROJECT MANAGER ENGINEER MANAGER MANAGER
MANAGER
MANAGER
Project
Project Sales Rep Line Manager Buyer
Project Engineer
Sales
SalesRep
Rep
Control
Control
Project
Sales Rep Line Manager Buyer
Project Engineer
Subproject Project
Subproject Engineer
Engineer Project
Sales Rep Line Manager Buyer
Engineer
Line
LineManager
Manager

Buyer Typically some type of Matrix Relationship

Buyer

Project Procurement Management 8

1
The three Procurement Management Processes
PROCE PROCESS
PROCESS NAME DESCRIPTION
SS # GROUP

Document project procurement decisions,

Plan Procurement
1 Planning specify the approach, and identify potential
Management
sellers.

Conduct Obtain seller responses, select a seller, and

2 Executing
Procurements award a contract.

Monitorin Manage procurement relationships, monitor

Monitor
g& contract performance, make changes and
3 Procurements
Controllin corrections as appropriate, and close out
g contracts.
 12.1 -- Plan Procurements Management
 The process of documenting project purchasing decisions, specifying
the approach, and identifying potential sellers
 Determining whether to acquire outside support, and if so, what to
acquire, how to acquire it, how much is needed, and when to acquire it
 May also include subcontracting by contractors
 Must consider resources, skills, and market conditions to perform the
procurement process
 Includes reviewing the type of contract to be used with respect to
mitigating risks, sometimes transferring risks to the seller

Project Procurement Management 8

3
 12.1 -- Plan Procurements:
Tools and Techniques
.1 Make-or-Buy Analysis
 General Management technique used to determine whether the particular
work should be accomplished by the project team or must be purchased from
outside sources
 Evaluation of both alternatives include indirect as well as direct costs
 Project need evaluation for purchase or rental consideration
 Need to consider both quantitative and qualitative factors
 Need to consider long-term organization objectives
2. Expert Judgment
3. Market Research
 Market research includes examination of industry and
specific vendor capabilities. Procurement teams may
 leverage information gained at conferences, online
reviews and a variety of sources to identify market
capabilities

4. Meeting.
Project Procurement Management 8
5
 12.1 -- Plan Procurements: Outputs

.1 Procurement Management Plan

 Describeshow the procurement processes will be managed from developing
procurement documentation through contract closure
 Includes
 Types of contract to be used, and risk management issues
 Whether independent estimates will be used and if they are needed as evaluation criteria
 Actions that the PM team can take if procurement is decentralized
 Standardized procurement documents, constraints and assumptions
 Managing multiple suppliers; coordinating procurement with scheduling, performance,
etc.
 Handling lead times, and setting scheduled dates for deliverables
 Handling make-or-buy decisions
 Identifying requirements for performance bonds or insurance contracts
 Establishing the direction to be provided to sellers to develop and maintain WBS

8
 Identifying prequalified sellers
Project Procurement Management
 Procurement metrics to be used to manage contracts
6
 12.1 -- Plan Procurements: Outputs
.2 Procurement Statements of Work (SOW)
 Developed from the project scope baseline
 Describes the procurement item in sufficient detail to allow prospective
sellers to determine if they are capable of providing the item
 Sufficient detail is based on the nature of the item, the needs of the buyer, or
the expected contract form
 Describes the products, services or results to be supplied by the seller
 Includes specifications, quantity desired, quality levels, performance data,
period of performance, work location, and other requirements
 Is written to be clear, complete, and concise
 Includes description of collateral services required, such as performance
reporting or post-project operational support for the procured item
 May be refined/revised through the Procurement Process until incorporated
into a signed contract
Project Procurement Management 8
7
 12.1 -- Plan Procurements: Outputs
.3 Make-or Buy Decisions
 Documented decisions of what products, services, or results will be either
acquired or will be developed by the project team
 May include decisions to buy insurance policies or performance bonds to
address some of the identified risks

Project Procurement Management 8

8
 12.1 -- Plan Procurements: Outputs
.4 Procurement Documents
 Used to solicit proposals from prospective sellers
 Terms ‘Bid’ and ‘Quotation’ are usually used where the focus is on price
 ‘Proposal’ is used when non-financial (e.g. technical) issues are paramount
 Includes Request for Information (RFI), Invitation for Bid (IFB), Request
for Proposal (RFP), Request for Quotation (RFQ), tender notice, invitation
for negotiation, & seller initial response
 Specific procurement terminology may vary by industry and location
 Structured to facilitate accurate and complete response from the bidders
(sellers)
 Defines the desired format of response, the relevant SOW, and any required
contractual provisions
Project Procurement Management 8
9
 12.1 -- Plan Procurements: Outputs
.5 Source Selection Criteria
 Understanding of need
 Overall or life-cycle cost
 Technical capability
 Risk, warranty
 Management and technical approach
 Financial capacity, production capacity and interest
 Business size and type
 Past performance of sellers
 References
 Intellectual property rights
 Proprietary rights
Project Procurement Management 9
0
Conduct Procurements is the process of obtaining seller responses, selecting
a seller, and awarding a contract. The key benefit of this process is that it
provides alignment of internal and external stakeholder expectations through
established agreements.
 12.2 -- Conduct Procurements:
Tools & Techniques
Bidder Conference
 Bidders conferences (also called contractor conferences, vendor conferences, and pre-bid
conferences) are meetings with all prospective sellers prior to submission of a bid or
proposal
 Used to ensure that all sellers have a clear, common understanding of the procurement
requirements (technical requirement, contract requirement, etc.)
 Responses to questions from sellers are typically distributed to all sellers and may be
incorporated into the procurement documents as amendments
 All potential sellers are given equal standing during this initial buyer and seller interaction
to produce the best bid
Proposal Evaluation Techniques
 Evaluation review process may include weighting criteria
Independent Estimates (a.k.a. “should cost” estimates)
 Estimates prepared by comparison by in-house or outside assistance
 Significant differences indicate that the SOW was not deficient/ambiguous or that the
prospective seller misunderstood or failed to be fully compliant
Project Procurement Management 9
2
9
3
9
4
 12.3 – Control Procurements
 Control Procurement is the process of managing procurement
relationships, monitoring contract performance, and making
changes & corrections as needed
 Both the buyer and seller must administer the contract to meet their
contractual obligations and to protect their legal rights
 Includes a financial management component that involves
monitoring payments to the seller according to the work
accomplished
 Reviews and documents how well a seller is performing or has
performed as per contract, and establishes corrective action when
needed
 Also included managing early termination of contract in accordance
with the termination clause of the contract
Project Procurement Management 9
5
PROJECT STAKEHOLDER MANAGEMENT
Keeping Everyone Engaged
Project Stakeholders

 Stakeholders are persons and/ or organizations

(e.g., customers, sponsors, the performing organization, Govt. or the public)
 May or may not actively involved in the project
 Whose interests may be positively or negatively affected by the
performance or completion of the project.
 Stakeholders may also exert influence over the project, its
deliverables, and the project team members.
 Project management team must identify both internal and
external stakeholders in order to determine the project
requirements and expectations of all involved.
 Project manager must manage the influence of the various
stakeholders in relation to the project requirements to ensure a
successful outcome.
Project Stakeholders

Key stakeholders
• The project manager
• Customer
• Performing organization
• Project Team
• Project Management Team
• Sponsor
• Influencers
• The Project Management Office
General Project Stakeholder Management
 Identify all stakeholders

 Determine their requirements

 Determine their expectations

 Determine their interest

 Determine the level of influence

 Plan how to manage

 Plan communication

 Control engagement
100
The Four Stakeholder Management Processes
Includes the processes includes the processes required to identify the people,
groups or organizations that could impact or be impacted by project

PROCE PROCESS
PROCESS NAME DESCRIPTION
SS # GROUP
Identify project stakeholders regularly and
analyzing and documenting relevant information
1 Identify Stakeholders Initiating regarding their interests, involvement,
interdependencies, influence, and potential
impact on project success.
develop approaches to involve project stakeholders
Plan Stakeholder
2 Planning based on their needs, expectation, interests, and
Engagement potential impact on the project.
Communicate and work with stakeholders to meet
Manage Stakeholder their needs and expectations, address issues, and
3 Executing foster appropriate stakeholder engagement
Engagement
involvement.
Monitorin Monitor project stakeholder relationships and
Monitor Stakeholder
g& tailoring strategies for engaging stakeholders
4 Engagement through the modification of engagement strategies
Controllin
g and plans.
13.1 Identify Stakeholders

 Process of identifying the people, groups, or organizations that

could impact or be impacted by a decision, activity, or outcome of
the project

 Analyzing and documenting relevant information regarding their

interests, involvement, interdependencies, influence, and potential
impact on project success

 The key benefit of this process is that it allows the project manager
to identify the appropriate focus for each stake holder or group of
stakeholders
1
0
2
13.1.1 Identify Stakeholders: Tools and Techniques

13.1.2.1 Stakeholder Analysis

 There are multiple classification models used for stakeholders
analysis, such as:
 Power/interest grid, grouping the stakeholders based on their level
of authority (“power”) and their level or concern (“interest”)
regarding the project outcomes
 Power/influence grid
 Influence/impact grid,
 Salience model, describing classes of stakeholders based on their
power (ability to impose their will),urgency (need for immediate
attention), and legitimacy (their involvement is appropriate).
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0
4
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5
 13.1.3 Identify Stakeholders: Outputs

13.1.3.1 Stakeholder Register

 Identification information. Name, organizational position, location, role in

the project, contact information;

 Assessment information. Major requirements, main expectations, potential

influence in the project,phase in the life cycle with the most interest; and

 Stakeholder classification. Internal/external, upporter/neutral/resistor, etc.

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Plan Stakeholder Management is the process of developing
appropriate management strategies to effectively engage stakeholders
throughout the project life cycle, based on the analysis of their needs,
interests, and potential impact on project success
 Plan Stakeholder Management:
Tools and Techniques
• The engagement level of the stakeholders can be classified as follows:
• Unaware. Unaware of project and potential impacts.
• Resistant. Aware of project and potential impacts and resistant to change.
• Neutral. Aware of project yet neither supportive nor resistant.
• Supportive. Aware of project and potential impacts and supportive to change.
• Leading. Aware of project and potential impacts and actively engaged in
ensuring the project is a success.

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0
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13.3 Manage Stakeholder Engagement

Manage Stakeholder Engagement is the process of communicating and

working with stakeholders to meet their expectations. Manage Stakeholder
Engagement involves activities such as:

• Engaging stakeholders at appropriate project stages to obtain or confirm

their continued commitment to the success of the project;

• Managing stakeholder expectations through negotiation and

communication, ensuring project goals are achieved;

• Addressing potential concerns that have not yet become issues and
anticipating future problems that may be raised by stakeholders. Such
concerns need to be identified and discussed as soon as possible to
assess associated project risks; and

• Clarifying and resolving issues that have been identified.

1
0
9
Manage Stakeholder Engagement is the process of communicating and
working with stakeholders to meet their needs/expectations, address issues
as they occur, and foster appropriate stakeholder engagement in project
activities throughout the project life cycle
Monitor Stakeholder Engagement is the process of monitoring overall
project stakeholder relationships and adjusting strategies and plans for
engaging stakeholders. The key benefit of this process is that it will maintain
or increase the efficiency and effectiveness of stakeholder engagement
activities as the project evolves and its environment changes
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