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TEAMFLYTeam-Fly®PreparingfortheProjectManagementProfessional(PMP
)CertificationExam..........................9618$$$$FM09-06-0214:57:59PS..........................9618$$$$FM09-06-0214:57:59PSThisPageIntentionallyLeftBlankPreparingfortheProjectManagementProfessional(PMP
)CertificationExamSecondEditionMichaelW.Newell,PMP,ENPAmericanManagementAssociationNewYork•Atlanta•Brussels•BuenosAires•Chicago•London•MexicoCitySanFrancisco•Shanghai•Tokyo•Toronto•Washington,D.C...........................9618$$$$FM09-06-0214:58:00PSSpecialdiscountsonbulkquantitiesofAMACOMbooksareavailabletocorporations,professionalassociations,andotherorganizations.Fordetails,contactSpecialSalesDepartment,AMACOM,adivisionofAmericanManagementAssociation,1601Broadway,NewYork,NY10019.Tel.:[phone]Fax:[phone]Website:‘‘PMI’’andthePMIlogoareserviceandtrademarksregisteredintheUnitedStatesandothernations;‘‘PMP’’andthePMPlogoarecertificationmarksregisteredintheUnitedStatesandothernations;‘‘PMBOK’’,‘‘PMNetwork’’,and‘‘PMIToday’’aretrademarksregisteredintheUnitedStatesandothernations;and‘‘ProjectManagementJournal’’and‘‘Buildingprofessionalisminprojectmanagement’’aretrademarksoftheProjectManagementInstitute,Inc.LibraryofCongress-Cataloging-in-PublicationDataNewell,MichaelW.,1945–Preparingfortheprojectmanagementprofessional(PMP)certificationexam/MichaelW.Newell.—2nded.p.cm.Includesbibliographicalreferencesandindex.ISBN0-8144-7172-2(pbk.:alk.paper)1.Projectmanagement—Examinations,questions,etc.I.Title.HD69.P75N492002658.4
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076—dc2120020102232002MichaelW.Newell.Allrightsreserved.PrintedintheUnitedStatesofAmerica.Thispublicationmaynotbereproduced,storedinaretrievalsystem,ortransmittedinwholeorinpart,inanyformorbyanymeans,electronic,mechanical,photocopying,recording,orotherwise,withoutthepriorwrittenpermissionofAMACOM,adivisionofAmericanManagementAssociation,1601Broadway,NewYork,NY10019.Printingnumber10987654321..........................9618$$$$FM09-06-0214:58:00PSThisbookisdedicatedtomywife,Saralee,whocorrectsmyspellingandputsupwithallmyfoolishness...........................9618$$$$FM09-06-0214:58:01PS..........................9618$$$$FM09-06-0214:58:01PSThisPageIntentionallyLeftBlankContentsPrefacexvIntroduction1WhatIsProjectManagementAnyway?2AdvantagesofProjectManagement6OrganizingforProjectManagement7TheProjectizedOrganization7TheTraditionalOrganization9TheMatrixOrganization10TheProjectOffice12HowtheProjectManagerMakesProjectsSuccessful13TheProjectLifeCycle14ProjectProcesses14Summary151.ScopeManagement16InitiationoftheProject17ProjectCharter17ConstraintsandAssumptions18WhoAreThoseStakeholders?18CostandItsRelationshiptoPrice19OverbidorUnderbid:WhichIsBetterforYourCompany?20GettingtotheScopeBaseline23WorkBreakdownStructure25SystemsApproachtoWorkBreakdownStructure28AdditionalProjectBreakdownStructures30ChangeManagement30ProjectJustifications31TheBreakEvenChart32ProblemswithBreakEvenCharts33AverageRateofReturnonInvestment34PresentValueofMoney34InternalRateofReturnonInvestment39Summary44vii..........................9618$$CNTS09-06-0214:58:10PSviiiContents2.TimeManagement46ActivityDefinition46ActivitySequencing47ActivityonArrowDiagramming48PrecedenceDiagrammingMethod(PDM)49LogicalRelationships50Finish-StartRelationship(FS)50Start-StartRelationship(SS)52Finish-FinishRelationship(FF)53Start-FinishRelationship(SF)53LeadsandLags54DiagrammingRelationships55ProjectStartandProjectFinishEvents55LogicalPrecedenceDiagram56ActivityDurations56BuildingtheNetworkDiagram57BufferingtheSchedule63ReverseResourceAllocationScheduling67CriticalPathMethod(CPM)67ProgramEvaluationandReviewTechnique(PERT)68MonteCarloSimulation73TheSimulation74OutputfromtheMonteCarloSimulation75Summary753.CostManagement77WhyWeNeedCostManagement77ProjectLifeCycleandProjectCost78UsingtheWorkBreakdownStructure78CostEstimating79TypesofEstimates80TopDownEstimates80BottomUpEstimates80AnalogousEstimates80ParametricEstimates81DefinitiveEstimates81CostBudgeting83..........................9618$$CNTS09-06-0214:58:11PSixContentsCostControl85EarnedValueReporting85CumulativeReporting85EarnedValueParameters86DifficultiesinDataCollection87ReportingWorkComplete89Examples89CalculatedValuesforEarnedValueReports90FinancialMeasures94ReturnonSales97ReturnonAssets98EconomicValueAdded99Depreciation100StraightLineDepreciation100AcceleratedDepreciation101SumoftheYears’Digits101DoubleDecliningBalances102Summary1024.HumanResourcesManagement104ProjectManagerRolesandResponsibilities104StrongMatrix,WeakMatrix,andBalancedMatrix106StrongMatrix106WeakMatrix106BalancedMatrix108MakingMatrixManagementWork109PersonnelandPersonalEvaluations109Motivation110ImportanceofMotivation110IndustrialRevolution110Scient