PMP Practice Questions #70
As a project manager, you have noted that the Cost Performance Index (CPI) of your project is consistently below 1,. In light of these findings, which of the following would be the most appropriate action in this situation?
A. Conduct a thorough analysis of the project’s cost performance and focus on strategies to control the overspending for the remaining duration of the project.
B. Conduct a detailed analysis of the project’s cost performance, identify ways to control costs, and calculate the best Estimate at Completion (EAC) to present to management.
C. Communicate the current cost performance issues to the stakeholders and recommend a reduction in the project scope to realign the budget with the actual work being performed.
D. Request that management allocate a management reserve to the project, justifying this need based on the current and projected cost performance trends.
Analysis:
In this scenario, as a project manager of a software development project, you have identified a critical issue: the Cost Performance Index (CPI) is consistently below 1. This indicates that the project is over-budget, as you are spending more than planned. Given this situation, the challenge is to determine the most appropriate course of action to rectify or mitigate the budget overrun.
Analysis of Options:
Option A: Conduct a thorough analysis of the project’s cost performance and focus on strategies to control the overspending for the remaining duration of the project. This option involves conducting a detailed analysis of the project’s cost performance and implementing strategies to control overspending for the remaining duration of the project. While it addresses the immediate need to curb additional expenses, it does not provide a solution for the overspending that has already occurred. This option is proactive but partially addresses the issue.
Option B: Conduct a detailed analysis of the project’s cost performance, identify ways to control costs, and calculate the best Estimate at Completion (EAC) to present to management. This approach includes a detailed analysis of the project’s cost performance, identification of cost control measures, and the calculation of an updated Estimate at Completion (EAC) to present to management. It is a comprehensive response that not only seeks to control future costs but also reassesses the overall budget in light of the current spending trend. This option provides a complete view of the situation and offers a balanced solution.
Option C: Communicate the current cost performance issues to the stakeholders and recommend a reduction in the project scope to realign the budget with the actual work being performed. Communicating the current cost performance issues to stakeholders and recommending a reduction in project scope to align the budget with actual work performed is a direct action. However, this option assumes that scope reduction is feasible and acceptable, which may not always be the case. It also may not address the root causes of the budget overrun.
Option D: Request that management allocate a management reserve to the project, justifying this need based on the current and projected cost performance trends. Requesting additional funds from management to cover the budget shortfall is another direct approach. While this may provide immediate financial relief, it does not necessarily address the underlying issues causing the budget overrun. Additionally, it assumes that stakeholders will agree to increase the budget, which is not guaranteed.
Conclusion: Considering the need for a holistic and informed approach to address the budget overrun, Option B is the most suitable. This option encompasses a thorough analysis of the project’s cost performance, explores ways to control future costs, and involves recalculating the project’s estimated completion budget. This comprehensive approach ensures that both current and future budgetary concerns are addressed, and it provides a clear and revised budget plan to present to management for decision-making. The other options, while addressing certain aspects of the problem, do not offer as complete a solution as Option B.
PMP Exam Content Outline Mapping
| Domain | Task |
|---|---|
| Process | Task 5: Plan and manage budget and resources |
Topics Covered
- Budget Forecast
- Cost Control
