PMP Rapid Review: Initiating the Project
- 8/15/2013
- Task 1.1: Perform project assessment based upon available information and meetings with the sponsor, customer, and other subject matter experts, in order to evaluate the feasibility of new products or
- Task 1.2: Define the high-level scope of the project based on the business and compliance requirements, in order to meet the customer's project expectations.
- Task 1.3: Perform key stakeholder analysis using brainstorming, interviewing, and other data-gathering techniques, in order to ensure expectation alignment and gain support for the project.
- Task 1.4: Identify and document high-level risks, assumptions, and constraints based on current environment, historical data, and/or expert judgment, in order to identify project limitations and propo
- Task 1.5: Develop the project charter by further gathering and analyzing stakeholder requirements, in order to document project scope, milestones, and deliverables.
- Task 1.6: Obtain approval for the project charter from the sponsor and customer (if required), in order to formalize the authority assigned to the project manager and gain commitment and acceptance fo
- Answers
The Initiating the Project performance domain covers approximately 13 percent of the Project Management Professional (PMP®) exam. It covers the processes involved in selecting, justifying, and approving a project; and creating the project charter. It also covers the identification and analysis of project stakeholders. The work performed during project initiation is used as a foundational input into the rest of the project management domains, so it is essential that it is carried out appropriately.
This chapter covers the following tasks:
- Task 1.1: Perform project assessment based upon available information and meetings with the sponsor, customer, and other subject matter experts, in order to evaluate the feasibility of new products or services within the given assumptions and/or constraints.
- Task 1.2: Define the high-level scope of the project based on the business and compliance requirements, in order to meet the customer’s project expectations.
- Task 1.3: Perform key stakeholder analysis using brainstorming, interviewing, and other data-gathering techniques, in order to ensure expectation alignment and gain support for the project.
- Task 1.4: Identify and document high-level risks, assumptions, and constraints based on current environment, historical data, and/or expert judgment, in order to identify project limitations and propose an implementation approach.
- Task 1.5: Develop the project charter by further gathering and analyzing stakeholder requirements, in order to document project scope, milestones, and deliverables.
- Task 1.6: Obtain approval for the project charter from the sponsor and customer (if required), in order to formalize the authority assigned to the project manager and gain commitment and acceptance for the project.
Task 1.1: Perform project assessment based upon available information and meetings with the sponsor, customer, and other subject matter experts, in order to evaluate the feasibility of new products or services within the given assumptions and/or constraints.
The first step in any project involves the tasks related to assessing the project feasibility and deciding whether the project will proceed. It is important during this process to assess the needs and requirements of the project sponsor, customer, and other significant stakeholders to determine whether the project is feasible with the knowledge and information available at that time.
Exam need to know...
Project selection
For example: How are potential projects selected from all possible projects?
Business case development
For example: What is the business need or justification for the project?
Project selection criteria
For example: Does the project meet the required strategic, financial, and non-financial criteria?
Project sponsor
For example: What is the primary role of the project sponsor?
Customer
For example: What is the primary role of the customer?
Project selection
Project selection is the selection of projects via a defined process to select only those projects that meet the organization’s strategic goals and any defined financial and non-financial criteria. Assessing all potential projects against these filters ensures that there is a greater chance of project success. The project selection process is the first task completed in the project lifecycle. The key purpose of a defined project selection process is to be able to assess all potential projects against a predetermined set of criteria; then after assessing each project, end up with an approved portfolio of projects, each of which might be given a score or priority assessment to determine the order in which the projects are completed. Figure 1-1 shows the process that a project should go through to make it into the portfolio of approved projects.
Figure 1-1 A diagram showing the process of assessing all potential projects against strategic, financial, and non-financial criteria
True or false? All projects should be justified and selected on the basis of a predefined selection process.
Answer: True. All projects that an organization undertakes should have been through a defined process that assesses the strategic importance and alignment, and financial and non-financial criteria before being approved.
Business case development
As part of the project-assessment and project-selection tasks, you should document the assessment process; assessment of financial and non-financial matters; and input from key stakeholders such as the sponsor, customer, and other subject matter experts (SMEs) in a business case. A business case can be a simple summary of relevant matters for small projects or an exhaustive document covering known risks, constraints, assumptions, and strategic financial and non-financial criteria for larger, more complex projects.
The development of a business case can be an initial phase of any project with an approval milestone required for proceeding to further planning.
True or false? The preparation of a business case authorizes a project to proceed.
Answer: False. The preparation of the business case does not authorize a project to proceed; it is authorized by the project charter. The information contained within the business case is considered by the appropriate stakeholders and then a decision is made.
The preparation of a business case is one of the first steps of deciding whether a project should go ahead. Projects are declined or given a lower priority based on the information contained in the business case, so the preparation of a business case is not a guarantee that the project will proceed.
Project selection criteria
As part of performing project assessment and documenting the business need, financial and non-financial matters in a business case, you should have defined project selection criteria by which to measure whether a project should proceed. Project selection criteria are generally sorted into strategic, financial, and non-financial criteria.
Strategic criteria determine whether the proposed project will assist an organization in achieving its strategic goals. Any project that does not assist the organization in achieving strategic goals should not be selected.
Financial criteria for project selection include an analysis of whether the project will provide sufficient financial returns to enable it to be authorized. Typical measures of financial return include the following:
Present value (PV) Calculates the value in today’s dollars of future in coming cash flows generated by a project when a discount rate is applied. The formula for calculating a particular PV is
where C equals the future cash flow, r equals the discount rate, and n equals the time period.
Net present value (NPV) Takes the total PV calculation for a given time period and subtracts it from the initial investment in the project to determine a net present value. The formula for calculating NPV is
where Co is the initial outlay represented as negative number; and PV1, PV2, PV3, and so on represent the PV calculations for the defined time period.
- Return on investment (ROI) Determines what the percentage financial return is on any investment in the project.
- Internal rate of return (IRR) Defines the expected percentage return on any project investment. Most organizations have a defined expectation of what this figure is and do not approve any projects that do not meet this requirement.
- Payback period criteria Determines how quickly an initial investment in the project is repaid.
- Cost benefit analysis Measures the costs of a project against the expected and forecast benefits.
Non-financial criteria for project selection include increased market share, environmental management, health and safety, and not-for-profit motivation.
The only projects that can bypass strategic, financial, or non-financial criteria are compliance or emergency projects.
True or false? Except for complaince and emergency projects, only projects that have been assessed against project selection criteria should be considered for formal approval.
Answer: True. Having a defined set of project selection criteria against which all potential projects are assessed ensures greater chances of project success.
The project selection criteria represent initial constraints imposed on a project because they must be met before a project can be approved to go any further.
Project sponsor
As part of the tasks involved in initiating the project and assessing whether it should proceed, you will require the input and support of the project sponsor. The project sponsor is an internal stakeholder who provides financial and political support for the project and has ultimate accountability for its success. The project manager reports directly to the project sponsor, and it is important that the two have a good working relationship.
The sponsor provides the initial idea, opportunity, or issue that needs to be addressed by the project; and furnishes initial authorization for project assessment tasks to be completed before the sponsor takes responsibility for approving the project by authorizing the project charter.
True or false? The project sponsor manages the project.
Answer: False. The project sponsor provides financial and political support for the project and has ultimate accountability for the project, but does not actively manage it. It is the role of the project manager to take responsibility for managing the project and report to the project sponsor.
The project sponsor is part of the project steering committee that provides oversight, and governance and senior level advice to the project manager. The project manager reports regularly to the project steering committee on the project progress and any risks or issues.
True or false? The project manager is part of the project steering committee.
Answer: False. The project steering committee is composed of senior-level stakeholders and SMEs who provide oversight and governance to the project. The project manager reports to the project steering committee and is not part of it.
Customer
The customer is the stakeholder who is requesting the delivery of a unique product, service, or result from the performing organization. The customer can be either internal or external to the performing organization. If the customer is external to the performing organization, a contract can be used between the organizations to document roles and financial responsibility between the two organizations. The project manager liaises directly with customers and seeks to understand their requirements as part of this project assessment task.
True or false? The project sponsor and the customer are the same.
Answer: False. The project sponsor and customer are different roles, and they should be separate because they have different interests in the project. The project sponsor provides financial and political support for the project; the customer has expectations about and requirements for the project deliverable.
Successfully completing any project assessment relies heavily on evaluating and understanding what a customer requires of the project, so it is imperative that a project manager seek to understand the customer’s requirements.
Can you answer these questions?
You can find the answers to these questions at the end of this chapter.
- Why is important that all projects are subject to a defined project selection process?
- What are typical financial criteria used to assess projects?
- What is the present value of $50,000 in 2 years at a discount rate of 10 percent?
- Your project will cost $30,000 and generate income in the first year of $7,000, $10,000 in the second year, and $15,000 in the third year. What is the net present value of your project at a discount rate of 8 percent?
- What role does the project sponsor play in the project?