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Project Management Training Podcasts

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These podcasts are part of the parallel project learning system. As an accredited training provider they are based on the APM Body of Knowledge and can be used standalone or in conjunction with the APMP study guide, on-line e-learning and workshops. Visit our website www.parallelprojecttraining.com for full details.We're with you all the way

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These podcasts are part of the parallel project learning system. As an accredited training provider they are based on the APM Body of Knowledge and can be used standalone or in conjunction with the APMP study guide, on-line e-learning and workshops. Visit our website www.parallelprojecttraining.com for full details.We're with you all the way

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PMP Exam Prep Podcast

By Quacker Jack - Jun 12 2012
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GREAT resource for on the go studying. I have been listening to your podcasts to and from work, on break, during soccer and t ball practices for my child and they have been very informative. But we need to hear more, haven't had any since April. I take my PMP exam this weeks, but will definitely keep up with these going forward as refresher an on going learning. Thank you Parallel Project Management!

iTunes Ratings

14 Ratings
Average Ratings
6
1
6
1
0

PMP Exam Prep Podcast

By Quacker Jack - Jun 12 2012
Read more
GREAT resource for on the go studying. I have been listening to your podcasts to and from work, on break, during soccer and t ball practices for my child and they have been very informative. But we need to hear more, haven't had any since April. I take my PMP exam this weeks, but will definitely keep up with these going forward as refresher an on going learning. Thank you Parallel Project Management!
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Project Management Training Podcasts

Latest release on May 03, 2020

All 80 episodes from oldest to newest

APM PMQ (BoK7) Procurement

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In this APM Project Management Qualification (BoK7) podcast, Paul and John discuss procurement. This podcast is ideal for anyone doing one of the APM PMQ project management courses and aims to address the following assessment criteria:

  • Explain the purpose, typical content and importance of a procurement strategy
  • Differentiate between different methods of supplier reimbursement (including fixed price, cost plus fee, per unit quantity, and target cost)
  • Differentiate between different contractual relationships
  • Explain a supplier selection process

A procurement process is used by companies in the acquisition of goods and services. This will usually have a defined procurement strategy document and include details on selecting suppliers, setting up contracts and management of those contracts.

Because the procurement strategy document is a standard project document it needs to be in place at the start of a project as it is an important factor at the same time as considering the business case of a project.

Typical parts of the procurement strategy documentation are:

 

Make or buy decision:

Would it be better to produce the required goods within the organisation or would it be more efficient or cost-effective to use an external producer/suppler. This decision can only be made when the specification of the product is fully understood.

 

Contractual relationship:

There is a wide choice of contractual agreement types fro the single contract between the client and supplier to more complex agreements between the client and a main contractor and between main contractor and sub-contractors.

 

Reimbursement methods:

These are the payment terms and the way in which the goods or services will be paid for. This could be as simple as a fixed-price method for a clearly specified product through to much more flexible arrangements where an innovative new product is being developed by the supplier for the client.

 

Supplier selection:

Large organisations will usually have an established process to help in the selection of the right suppliers, most usually through a competitive tender process where several suppliers provide costs for the required product/service. The aim being for the organisation to acquire the product or service at the most competitive price.

 

Contract administration:

This should be a regular, ongoing process throughout the term of the contract to confirm that both supplier(s) and client are complying with the terms of the contract which they have agreed.

 

Feedback and review:

This is important in any type of strategy in order to learn lessons about what went well and what did not; in order to improve the process for future projects.

This podcast is just part of the Parallel Learning System for the APM Project Management Qualification. This approach includes a wide range of learning resources including a printed study guide, on-line e-learning, a tutor lead study group and a wide range of project management courses.

SEE THE TRANSCRIPT BELOW:

Introduction:

Welcome to a Parallel Project Training APM Project Management Qualification podcast based on the APM body of knowledge seventh edition. You should be using this in conjunction with our e-learning, podcasts and potentially a tutor-led course. For more information please visit www.parallelprojecttraining.com

Paul Naybour:

Hello welcome to another parallel project training podcast we're on to procurement for the APM PMQ with Paul Naybour and John Bolton.

Hello, John

John Bolton:

Hello everybody.

Paul:

Last chapter. By now the guys are hurray. Guys and girls.

John:

If this takes two minutes it’s because we've had a long day. Yeah, well. It's quite a big topic, though so let’s crack on

Paul:

By completing this subsection you will be able to understand the learning objectives:

  • Explain the purpose of a procurement strategy. We need to get that clear, because it causes confusion
  • Differentiate between the different types of reimbursement method.
  • Differentiate between the different types of contractual relationship
  • Explain the supplier selection process.

So, let's talk about procurement strategy first. What is a procurement strategy I think this is the thing that I see causing the most blanks. Also called procurement plans. So basically,

John:

I don't think they do I think if you could say procurement plans, a lot of people they think about supplier selection.

Paul:

Yes, and they get confused. Because strategy is a is a document written early in the project, about how you're going to procure those goods and services.

John:

I think it's a bit more profound than that actually because. Let's say I write a business case. And I'm going to build a bridge. I could if I was a bridge building company. Let's take a different example. Let's say, I'm a construction company. And I'm going to move into a new headquarters. Yes. Right. I could decide to use my own staff to fit the building out and then move us in.  Or I could hire a consultancy firms do it for me,

Paul:

Or, you could just lease the building? Or you could build a building.

John:

Let's just worry about how I'm going to fit the building out. Right. Okay. So we've already acquired the building. It's a building. So now I've got to fit it out. I've got to make it fit for purpose for my people. Yeah, I'm going to move my staff in there. But because I'm a building company, I could decide to do all the building work, lay all the carpets, do all the partitions, offices, everything myself. I could use my own staff to do that. Or I could hire somebody else to do it.

Paul:

Or I could just go into a serviced office.

John:

Or, I could hire somebody else in to do it. Okay.

So I've got a choice between using my own people, which would be make it myself. Or I could buy those services in, right. I will talk about service office in a sec. But let's just keep it simple. There's two options. One is where I make it and one is where I buy it. So why would I make it myself it’s because it might be a bit cheaper. I've got more control. I haven't got such a long lead time. So I'm going to go to 10 dodge got a design and get on with it. So there's lots of advantages do it myself. Or if I go to tender I might get a better job done. I haven't got to tie my people up doing fairly mundane work as they might see it.

So there's choices to be made. Now. those choices are fundamental to what project you've got because if you decide to do it yourself, you've got to go and buy all the materials, do all the plans. If I get a consultancy in to do it, a prime contractor, they'll just it.

So now I've got very different contracts. All I'm doing is managing them. Yes. And what they do, I'm not managing my people and how they do it. So the procurement strategy side kind of fits between the business case and the project management plan. Because when you write the project management plan, you've got a very different project.  So you kind of go down one limb or the other.  And to me, that's the essence of a procurement strategy.  And now, if you talk about Yes, we can have a serviced office.  If your requirement is a new office, yeah, then yeah, I mean, that might be another form of buying it in.  So yeah,

Paul:

So I actually think it goes back to the business because, you know, in the business case, we show different optionss. So some of those may be different procurement option. You know,

John:

That's right or I might decide to do multiple contractors or I might decide to do prime contractors.

Paul:

Before we can get on with the planning of the project. We need to decide what procurement approach or procurement strategy is going to be - a fundamental decision.

John:

That's right. So that document contains a few things. The first thing which is fundamental is whether we're going to make it or buy it.

And the second thing is going to be, are we going to contract people if we do? Yes, and you've very rarely just have one or the other is usually a mixture of the two. You might decide that you're going to do that on the basis of ascertain costs or fixed price or target costs are so it's going to be issues around how you're going to want to pay for it. Milestone payments, lump sums. What form of contract - JCT or NEC3 or whatever it's going to be. Or your own, or IPS.

So there's that procurement strategy kind of laying down the rules. And quite often organisations have these already. They have a way of a standardised way of doing things.  And you just tune it.

It's also influenced by business rules as well, because the chances you know that one of your procurements parts of your procurement strategy might be that you make all your acquisitions through some sort of Credit Card, some sort of corporate credit card arrangement. Or you might have to go to three tenders. So there's, there's things that are stipulated to you.  So the procurement strategy is a kind of composite of what the organisation wants you to do and how you're going to do this particular project. That's why it's a bit of a hybrid. That's why it doesn't live in the business case or the project management plan, really, because both documents…

Paul:

It’s usually actually written by a procurement specialist. Yeah, what I've done. Yeah, the procurement specialist to go this is the procurement strategy for this.

John:

They're quite popular in the oil and gas industry.  And instead of a project management plan, you get a procurement strategy and a project execution plan.

Paul:

Remember, going to that talk by the guy from HS2. And he talked about the procurement strategy, the packages, the way we're going to package up those projects, right, and how the different contractors that they were going to appoint to the different packages. That was like really, really early in the project.  So I think that's a really good description because it differentiates the procurement strategy - strategic document - with the bits that we're going to look at next, which are things like the options in terms of different contractual relationships that we can have.

John:

Yeah, so the strategy will say it is our intention to do fixed price only. One of our customers used to do ascertain cost then they went to a fixed price and now they’re back to ascertain cost. So I expect in a few years’ time they’ll go back to fixed price, but that's the kind of global decision that they've made.

Paul:

So different types of contracts relationship, we could adopt…let's do the different types of contract relationship next. So they’ve simplified this quite a lot. Yeah, they’ve basically said… let’s do the most common first.

John:

I've a bit of an issue about this because I think they've like they've really simplified, dumbed this down to a point where it’s meaningless in a lot of ways.

Paul:

The first option is to go to a prime contractor or, principal, or main contractor. Usually a large company, but this should then subcontract the work out and the prime or main contractor may or may not add that much themselves. So they may subcontract everything out, or they may add quite a lot of value themselves. So that's quite common in big projects, because that probably that one be, you know, that big project is too big for one organisation to take on and they need lots of subcontractors. And the client wants to one point of contact so they won't be able to go to one organisation say, right, you're running this project for us. You go away and make it happen.

John:

Yes. So I mean, just to summarise, you've got a client with a contract with a main contractor, and the main contractor intern contracts to subcontractors. So if you had to subcontractors actually you should have three contracts, you know, one main contract and two sub contracts.

Paul:

Yes. But you wouldn’t necessarily - as the customer - see those sub contracts though

John:

That's the problem - one of the problems is you have no direct line of sight with the people that are on the ground. You always have to go through the main contractor and legally, you can't sue a sub-contractor unless you have third party rights.  So you know it can take a lot of the burden away from you because what's going to happen is that principle contract is going to integrate all the works everything, they're gonna make sure that bricklayers aren't tripping over the plumbers and electricians are coming in before the plasterer and all that sort of stuff.

Paul:

The advice I heard is if you've got one of these contracts then “eyes on hands off”. So you keep an eye on what's going on. You let the main contract to get on with doing their job as you appointed them to manage that contract. So don't start telling subcontractors what to do.

John:

You might need some decent reporting though. Just to make sure they are on track because otherwise if you have no line of sight with the subcontractors they could be telling you black’s white and you don't know any different so you need quite a good, really good reporting anyway but, even more so in that instance.

Paul:

So then to overcome those disadvantages what you can do is have direct relationships with one or more suppliers single or multiple contractors so people also call this a hub and spoke. So I'm in the spoke and there's loads of people around the hub but now I'm doing the role of the prime contractor. I'm sort of coordinating all those different contractors together so this is a bit like Grand Designs you know where they got the plumber and the electrician and the guy doing the wall and the roof and he's on the phone all the time trying to, you know, put the plumbing guy back because the guy who's doing the plastering hasn't arrived you know.

John:

The first time I did our kitchen I did it the hub and spoke – I don’t want to call it hub and spoke - but anyway, with multiple suppliers. So I got the guy who did the work top because we didn't have any money. It was cheaper. So I managed it all myself and I took the risk of making sure the floor was level so that when they put the worktop in he didn't moan about the floor being unlevel right so, but the next time I did it, I did it with the prime contractor. A kitchen fitting company came in and did it all. They charged me a lot more, but probably, arguably, a better result.

Paul:

I had a kitchen fitted once and the kitchen fitters left their order in the kitchen overnight, and they been paid like £300 - £400 to fit the kitchen and I'd been charged like 1,500 quid for kitchen fitting.

John:

Well, that's the problem.

Paul:

Whoa, I should just employ those guys directly.

John:

Yeah, exactly. But I did the prime or principal guy from the shop in the town. What occurred to me was he had a bigger book than I. He just had more people that he knew.  

Paul:

But they knew that if he wasn't happy they weren't going to get any more work.

John:

To be fair, he had more buying power as well. But he didn't use that buying power to reduce my price he used it to reduce his cost

Paul:

For his car! Did he have a nice car?

John:

He did. Yeah, he had a Lotus Cortina.

Paul:

So the advantage is you get more flexibility. So Terminal 5 I think was done this way. So they acted as the hub. And they pulled in the different resources as and when they needed. It gives you more flexibility, but you do have to be a lot better. You have to be more on it. You have to be much more - like you - making sure the floor’s level. And if there's any disputes between those different suppliers, you're the one who's got to fix them.

John:

Well, I mean, when you're thinking about this as well, you need to think about it from a different point of view. These two are not different depends who you are. Because if you're the project manager managing multiple suppliers, you might be doing that on behalf of a main contractor. So the Hub and Spoke is no different to prime contractor. It just depends who you are. So the only thing you're adding to a hub and spoke model is the prime contract between you and the client. That's the only difference.  So anyway…

Paul:

So that moves us on to payment rates. So there's different types of payment. And I think people get confused about this, because each of those different types of contracts will probably have multiple payment forms in them - probably some that we call fixed price components where you've agreed, say, a certain amount for your kitchen. And then they'll have a day rate for extras. So within a contract, well, there’s schedule a rate so that's paying so much per unit.

John:

That's not in the book - not anymore. You didn't want it in there so I took it out. And it doesn't appear in any of the indicative content. Any of that. That’s what I'm saying ...

Paul:

Okay.

John:

Okay.

Paul:

So right, what should we do then let's just go quiet and see if I can edit in.

Paul:

So that moves us on nicely talk about the different types of payment that you might see in a contract. Any one contract might have multiple payment mechanisms. So the typical ones, you'll see are fixed price. I think everyone knows what a fixed price is. fixed price fixed scope. Yeah, except it should be firm price.

John:

Woah, really?  There was a silence there.

Paul:

A firm price contract is what most people mean by fixed price. Our firm price means that fixed price with a firm scope, fixed actually means it's fixed to some form..

John:

No, no, no, no, no, no. Firm price is firm. Nothing ever changes – nothing. Fixed price is the same as a firm price, except for the things that can change. So in a fixed price contract, you can have inflation. It can be indexed against certain... So fuel prices, consumables. So firm price and fixed price are different. But I've never seen a firm price contract.

Paul:

People usually use him to mean the same thing.

John:

Anything over about a year in duration, you're mad because of inflation and anything can happen to the commodity prices. So I think firm price from the point of view of being one end of the continuum - it's not in the syllabus, anyway.  So I think when we talk about fixed price, what we really mean is, there's a reasonably fixed price for reasonable fixed scope of work and any changes will incur extra cost.

Paul:

So next one's cost plus fee. So basically, you pay all my costs, plus an agreed fee. And that fee includes my profit. So implies some form of open book relationship. So you know what my costs are. So I have to send you timesheets or something like that.

John:

The thing is cost not price, so I'm paying your cost. Whereas before I was paying a fixed price so I don't see your costs under a fixed price. Cost plus is typically where they do the scheduler rates. We decide what components we're going to do, but when it actually comes to buy them, I pay you what you've actually paid. So if you want 40 metres of concrete, we estimated that was going to cost five grand.  But then it actually turns out to be £3,800. I pay you £3,800 plus an agreed fee, wherever your profit fee is.

Paul:

And are we going to percentage and fixed fees?

John:

Well, they don't differentiate. But we could, I mean, that confuses a lot of people because you can have cost plus percentage fee so I'll pay you 1,000 pounds – sorry -  I'll pay your cost plus 10%,. Or I could pay you your cost plus 1000 pounds. Which is slightly different. So cost plus fixed fees. Not really. I might just charge you a design fee. So you might charge me cost plus design fee.

Paul:

Yes percentage is more common, isn't it? Per unit quantity -  that's like carpet fitting. So you pay for the quantity - each square metre you have you pay so much per unit.

John:

We used to call that time & materials. So your everyday work we pay an amount of money but it's price, it's not cost. So we pay you your fee for that one day's work. So we pay you for your time & materials.

Paul:

Yeah, it isn't usually quantity though - the output quantity, so it's usually per metre or per square foot.

John:

I think it could be either.

Paul:

Target cost is where you agree a target – we’re going to pay you a million pounds. And then if you underspend the cost I will share the saving and if you overspend we'll share the pain.

John:

 Or you might have incentives around that as well. So you've got some target in mind that you're both trying to achieve. And that's the good thing, because you're both working towards the same target because the pain or gain will hit both of you.

Paul:

Correct. And differentiate between different types of contracts we’ve done. For the supply selection process - how did you get into contracts? So most people have met this before.  And we've got five steps but there's about 20! Like issue an invitation to tender, get the quotes back, tenders back, off the suppliers. Review those quotes, bids back and then award the contract to the successful supplier. That's actually a vast simplification of a 20 or 30 step process.

John:

Well, I think it can be. I mean, it also can be many years coming – if you’re spending a billion pounds I think, the only way this works, is because it's principles based The only way this works is to describe the principle and let people adapt to their own local conditions. Because every organisation you come across has got a different way of doing this. Do we have three suppliers or five tenders? Have bidders conferences or not? How do we do weighting criteria? You know, so there's a whole bunch of suppliers.

Paul:

Sector-specific as well.

John:

You might get bound up in the European Union's procurement regulations, and there's usually anti-competitive law, and the US has got different laws again.

Paul:

I expect the best advice is if you're going to do a major or significant procurement, go and talk to the procurement specialist because in the UK, certainly, (I’ve only just  discovered this actually) the procurement has personal liability for the process having been followed properly. And they can be personally under European law.

John:

Yes.  For European procurements. Yes. That’s right. It's custodial sentence as well. You can't do things like breaking it up into two small chunks to get under the limits. It was 200,000 euros, isn't it? 200,000 euros for services and about 1.5 million euros for capital.  There's a whole load of other boundaries for service contracts.

Paul:

In practice, most people will get a procurement specialist.

John:

That’ll be a key point in strategy as well. You see, the procurement strategy will raise the fact that you are liable to go through these processes of which you're not in control.

Paul:

Yeah, it's another interesting point, you know about the three-point accountability thing? So best procurement practice is you have a requester, who's a technical person who asked for the work. There's a procurement specialist who place the contract and a finance person who checks and pays the invoice. So you have those three different departments involved in procuring and paying for work. It just means there's less chance of things go wrong. less chance of corruption.  Less chance of fiddling the books.

John:

They call it separation of duties.

Paul:

 So you'd have that principle of three.

John:

 Well, I think you know, great. Good idea.

Paul:

Good. Thank you, John.

May 03 2020

22mins

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APM PMQ (BoK7) Quality - Planning, Assurance and Control

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In this APM Project Management Qualification (BoK7) podcast Paul and Jan discuss quality control, quality management and quality assurance. This podcasts aims to address the following APM PMQ assessment criteria;

  • Explain what is meant by quality planning
  • Differentiate between quality control and quality assurance

This podcast is just part of the parallel learning system for the APM Project Management Qualification. This approach includes a wide range of learning resources including a printed study guide, on-line e-learning, a tutor lead study group and a wide range of project management courses

Here is a summary of the different aspects of quality within a project management environment:

Quality Planning

A project manager will always need to create a quality plan detailing how the project will produce products of the required quality. Included in the quality plan will be the following:

  • Roles and Responsibilities related to quality issues
  • The processes to be followed for both production and testing procedures
  • A description of how continual improvement will performed
  • Details of quality assurance such as supplier vetting
  • Details of quality control techniques such as Pareto Analysis
  • How to establish and manage interactions with other project processes such as configuration management
Quality Assurance

Quality assurance demonstrates how the necessary quality will be achieved and in doing so instils confidence in stakeholders regarding quality levels of the final outcome.

The typical components of quality assurance are:

Training

Are members of the project team competent and fully trained to complete the work assigned to them.

Audit

A formal, external audit of processes provides reassurance that the project will be carried out as expected.

Supplier Accreditation

When goods and materials are supplied to be used in creating the products that will form the project deliverables then those goods or materials must be assessed to be of the required quality.

Lessons Learned

Lessons should be learned throughout the project and effectively communicated so that any problems are resolved at the point they are being made. This ensures the root of the problem is identified rather than issues recurring again and again.

 

Quality Control

Quality control measures will vary widely depending on the type of project and the type of project deliverable. The key similarity, however, will be a comparison of the final deliverable with the original specification.

Some of the quality control techniques that might be used in a project management environment include:

  • Pareto analysis
  • Walk-throughs
  • Process control charts
  • Visual inspection and measurement
  • Continuous improvement

And here is a transcript of this podcast:

Introduction 

Welcome to a parallel project training APM project management qualification podcast based on the APM body of knowledge seventh edition, you should be using this in conjunction with our elearning podcasts, and potentially a tutor led course. For more information, please visit www.parallelprojecttraining.com

Paul 

Hello, welcome to another Parallel Project Training podcast today we're doing quality podcasts with Jan. Hello, Jan

Jan 

Hi there.

Paul 

Very good. Very good. So this is based on the seventh edition of the body of knowledge with PMQ. So the learning so the assessment criteria in this question section are explained what is meant by quality management and differentiate between quality control and quality assurance?

Jan 

Right? That's a mouthful

Paul 

Explain what is meant by Quality Management, I suspect we have two definition of what quality is first.

Jan 

Okay, so it's going for the body of knowledge. It says qualities assessment of a product's fitness of purpose. While the definition appears to be limited the products that the project will produce. It also implies not only to these products is the process and procedures deployed in managing the project iself.

Paul 

So there's two things,

Jan 

There's two things Yes, because quality to the to the product itself, you can see why it conforms to specification. And of course, the specification is set out when we have to do things like scope management and kind of requirements. So does it meet or does not meet the actual requirements. And of course, that has to be kind of agreed and kind of baseline. And then we talk about change control and all that sort of stuff. But qualities can be very, very subjective as well. So quality to you like a quality car to you may not be To me, that's what I want to use car for. But also, its terms around people's experience of the project management and the processes itself is how we manage, it's like the work we do, we can actually get a lot of people through a course and get the exams passed. But what they'll actually remember is our interaction with those people our service, if you like, and once you start talking about that it's our processes, how we actually took the order, how we had to get a production sorted out how we actually manage the classroom into managing any sort of queries or problems, or maybe issues about have had is around experience. So there's two sides of it, you can actually have something like a fantastic stadium that is built and is fit for purpose. But it's a project management, everything Oh, my goodness, you know, the experience was so bad. The processes weren't there. We did lots of changes in the project, we didn't know what quality was, or all the requirements was he can actually set up for a bad experience. So it's

Paul 

two sides summary qualities, two things. It's the delivery of the output. Yes. Fitness for purpose.

Jan 

To specification.

Paul 

Yeah. to auto specification. Yes. And it's to the quality of the process that got us there.

Jan 

Yes. Good. Yes, it is. And it also, it can be against the processes, because projects don't just deliver products, they can deliver processes, especially when you start talking about quality in the service sector industry is a process like your experience of a restaurant, for example, you remember the experience, and the food, the food being the product. Okay.

Paul 

Okay. So we need to differentiate between quality control and quality assurance, right? I spoke about talk about quality planning to really hadn't we aspect.

Jan 

So that's what we need to do at the very beginning.

So sorry.

So we talked about quality planning at the very beginning is how we actually and it should be should be sorted out as a separate product or separate entity is embedded in what we do. The minute we start to talk about scope of the project, or even the parameters of the project in terms of the time, the cost, the scope, quality, I often put into the middle part of triangle, we deliver it, it's fit for purpose as…

Paul 

…the quality plan.

Jan 

A quality plan will be the roles responsibilities, often, you know who's responsible for the quality of the project will actually pretty everybody is, and we actually has interaction with it to how we're going to actually define quality criteria, what tools and process of going to be using to manage the quality, what sort of resources we're going to be using, what sort of testing can a specialist test equipment, specialists, people to do the testing, what assurance we're going to put around that to make sure that we are doing what we think we should be doing. We can carry out audits and interactions to other processes. We talked in other podcasts around change and configuration management to what we often called managed The the baselines of the projects and together with the assets, the configuration version control of the project.

Paul 

So it's part of the PMP.

Jan 

Yes, certainly is developed by the project manager with the teams. Okay. Okay. So that's done early in the project lifecycle? Yes, yes, certainly, actually, quality may be kicking off. Sitting around the concept, we started the business case, but certainly will be teased out as we go into definition.

Paul 

So how's that different from quality assurance, as quality assurance, different from quality planning,

Jan 

the quality assurance might be a higher end it often I call that the umbrella of quality incorporates a planning and control. And it's making sure the organisation and city qualified experienced people have scripts, that we have processes in place that will manage the process, run the project, like we have a risk management process, change management process, this is how we actually do the requirements, we actually will have testing, certain organisations have testing labs or procedures. There's certain laws and legislation we have to follow, like your health and safety and other legislation. And we have to make sure that these procedures are being followed through an audit certifies assurance provides confidence to stakeholders that we can time after time, deliver a quality product to the customer, we have the infrastructure, if you like or the structure to do it.

Paul 

So I like the idea of the assurance being an umbrella. Yes. So the bit how's that different from quality control for control is you control the quality that we deliver?

Jan 

The quality is around inspection, testing, measuring, okay, whatever that from the requirements, you actually define the quality criteria of each of the products have the output and does it or does not meet specification. Okay, so we may have tolerances

Paul 

so each product gets right quality assessed in some way.

Jan 

Is that measuring something that that item needs to be four centimetres, is it four centimetres, yes or no plus or minus and plus or minus tolerances?

Paul 

Good. And as different techniques, you can use walkthroughs? Or

Jan 

Yes, we offer his walkthroughs within parallel project training, when we actually walk in through both sayings, especially mission testing very much in engineering environments or software environments. You can use process control charts, there's 101 different quality control techniques. But when we're doing resource management for the project, there's but he ran the policy planning is what resources do we need? What facilities Do we need to actually carry out the testing?

Paul 

Good, as short and sweet. So to summarise quality is the delivery the fitness for purpose for the project? Yes, performance, the specification and who decides that? Yeah, it's it's about the control of the products. Yes, making sure those products meet the specification. Of course

Jan 

specification is control for configuration management, and then change control.

Paul 

It's about that overarching quality assurance umbrella. Yes. And it's about project quality plan as part of project management. Yes,

Jan 

what we need to do for this project specifically to do quality management, and of course, within the quality plan, we may be drawing down certain key process procedures from the quality management, the quality assurance bit, okay, you know, if you're going to do a testing, this is how we do testing. This is how we, you know, do risk risk management within this organisation. Excellent, good fracture. Okay, thanks very much.

We hope you enjoyed this podcast and found it informative. To find out about our training courses elearning or tutor led course please go to www.parallelprojecttraining.com

May 02 2020

8mins

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APM PMQ (BoK7) Risk and Issue Management

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In this APM Project Management Qualification (BoK7) podcast, Paul and John discuss risk and issue management. This podcasts aims to address the following APM PMQ assessment criteria;

  • Explain each stage in a risk management process (such as identification, analysis response, and closure)
  • Explain proactive and reactive responses to risk (such as avoid, reduce, transfer or accept and exploit, enhance, share and reject)
  • Explain the benefits of risk management
  • Explain the key aspects of issue management

This podcast is just part of the parallel learning system for the APM Project Management Qualification. This approach includes a wide range of learning resources including a printed study guide, on-line e-learning, a tutor lead study group and a wide range of project management courses

Below is a transcript of this podcast:

Introduction 

Welcome to a parallel project training APM project management qualification podcast based on the APM body of knowledge seventh edition. You should be using this in conjunction with our elearning podcasts, and potentially a tutor led course. For more information, please visit www.parallelprojecttraining.com

Paul 

Hello, welcome to another Parallel Project Training podcast with John Bolton. Hello, John. Hello and Paul Naybour. Oh, we're doing the PMQ and we're doing risk and issue management today. Deep joy. So we've got quite a big section here. Quite a lot of assessment criteria.

John 

This was the longest podcast in the box. So this lasts 47 minutes

Paul 

So explain the stage in the risk management process such as identify analyse, plan, response and closure, explain proactive responses to avoid reduced transfer and accept exploiting enhance, share and reject, explain the benefits of exposure and explain the key aspects of issue management and contingency. So as we start with this definition, a risk event is

John 

well, yeah, a risk event is an uncertain event or set of circumstances that should occur or they occur would have an effect on the achievement of one or more of the project's objectives. That's the prime guide definition. Okay. There is a slightly different glossary definition. Okay, what's the glossary? Say it doesn't talk about risk events as much it talks about just it says something more generic. The risk is the potential of an action or event to impact on the achievement of objectives,

Paul 

potential action or event. Yeah. Okay. So they're all events that might have an impact on achievement.

John 

Yeah, I mean, I think people talk about the word event as if it's meaningful, I think it's just just a noun,

Paul 

or an adjective, whatever it is, to the key thing that can be opposite. They can be opportunities or threats, right. So you're looking at both, which confuses some people sometimes because generically, we talk about risks being bad things, but we don't tend to write down on opportunities are very rarely academic,

John 

which is, but then, you know, interest rates could go up as well as down. I have a blog about that fuel prices forgot as well as down. They want to talk about that or not really. Okay. No, I mean, well, we need to mention it, because it could be part of, but it's not ostensibly part of the syllabus. Yeah. You know, they don't talk about risks. Positive risks in here are explicitly Yeah, although they do talk about the responses as being exploiting heartshare or reject, which in the pram guide on opportunity on so we talk about those as well.

Paul 

So risks can have causes background facts, it make them happen. So that's called change or political uncertainty, economic uncertainty, or technology or something. And that cause introduces an uncertain event, which has an impact on time, cost and quality usually, or achievement of the overall objectives for the period.

John 

So I mean, how is our problem with going down the cause? root, you know, so you can they might rain tomorrow? Because of global warming? That's a fact. Yeah. But I mean, it could cause a global warming is more likely Pratt was the rain. Warning. Yes, exactly. So what's the cause? So close to this, because I've got diesel,

Paul 

diesel, and go back and back and back back, but you just try to identify a manageable root cause? So Ben, well, it's

John 

a specificity of, isn't it? It's, it might rain, tomorrow's facts, but it might rain when we've got the roof off the building. Yes, that's a risk.

Paul 

Yes.

John 

So that's something tangible I could do something about the corner. It's only any use to you if there's actually it's meaningful due to the fact we're working outside in February, a rain

Paul 

tomorrow,

John 

we might have bad weather while we've got the roof of the building. It's while we've got the roof of the building. That's the key bit. Yes. So we haven't got enough resources. That's fact you know, most people haven't. Yes, yeah. So we haven't we haven't we know, we know. We're short of people. Therefore, there's a risk that I won't have my expert on the for a week in June to review my document of risk, and that's the risk.

Paul 

And so that means your project might be delayed. That's why Guess what? A good the benefits of risk management. Well, it's demonstrates professionalism, you got sound process in place, means you can calculate the contingencies properly. You know what you're doing about those risks? And it builds a culture that actually lets you take risk,

John 

where things go wrong, they're stone they because you're proactively doing something about it. Yes, but but also So it has the has the effect of labelling people to do things. It's an enabling thing rather than a restrictive thing.

Paul  

Yes. So risk isn't necessarily bad.

John 

No, because where there's where there's muck, there's brass.

Yeah, exactly where there's opportunity risk you get no

better. Exactly, exactly. So, you know, the only way you avoid all risk is sort of lying in bed in the morning. Wait to die. Yeah. sighs you have to avoid the risk, you avoid the

Paul 

risk. Yeah. So the process we're going to follow is slightly simplified, identify what those risks are, assess the significance of race plan, what you do by the wrist and close might actually find most people are understand this now. Mostly, they've done it for health and safety perspective.

John 

Yeah. And

Paul 

we're, we did talk about health and safety earlier. Here, the difference is that we're looking at the impact of time, cost and quality, rather life and accident. So we're going to identify what those risks are, assess them plan what to do about them, and close out the risks.

John 

I think it's a shame that they've sort of diluted the health and safety aspects of this a bit because yes, in my experience, a lot of our customers Health and Safety, Health is very important. So I don't want anyone to run away with the idea that we're dismissing that

Paul 

now it's mandated requirement,

John 

we are talking about project risk here, not kind of such as life and limb.

Paul 

Yeah. And so the difference is, this is discretionary. You don't have to understand what your commercial risks are. If you don't, you'll just lose money and grow our business but you do the Law Society says you need to manage your health and safety risks. It's a mandatory thing everybody has to do. So, working through that process, the first terminators identify understand what those risks are. And we've listed out some techniques brainstorming SWOT assumption analysis, interviews, prompt lists, checklists, are slip swatting, they're by mistake. And we're going to talk through each of these are quite obvious, really well,

John 

they are I mean, I think people know what a brainstorming session a capture assumption, I suppose the the assumptions analysis might be a bit trickier. My Way think, and assumptions are risks, really? Because I'm assuming I've got five bricklayers, therefore there's a risk. I haven't. Yeah, that's fine. I'm assuming the customer is going to do that for therefore there's a risk they don't.

Paul 

Yes. So assumption that you have any uncertainty about

John 

sales guys never using let the bid managers put risks in the proposals. Why? Well, because they used to say, well, the customer might think is risky, they want to buy it. But you know, so as descriptions in AD square that circle, so what assumptions in here you have assumptions, pages and pages of assumptions. But basically, I mean, but sometimes you have to make assumptions as we move forward, Tony? Yeah. So you know, I'm assuming that, you know, with the, you know, the server's gonna be delivered on the right day or something, but, you know, essentially, we used to convert that into

Paul 

assuming when the server rise, it will run software that we've written.

John 

You know, I used to, yeah, so assumptions, we used to turn them into risks, just tell everybody go through them and put them under risk. Because that way they do get managed. Yeah. brainstorm interviews is like a one to one, isn't it? Probably just a good promise, the pestle, you know, do a pestle analysis a good list? Yeah. And then a checklist is a more definitive version of a problem list is where specific actions are identified. So you see, those were things like display screen assessments in the health and safety space. But also, you know, you see him on procurement has the has the has the supplier potential supplier got a clear, you know, credit history, or they got a record of ccjs have they got this okay? So you go and take and if they take all of those then you're at you're sort of happy doesn't mean they're any good, but you've gone through the checklist.

Paul 

So from there, we build our risk log or risk register.

John 

Yeah, usually got, you know, like a normal Excel spreadsheet type thing. Identification description. In fact, everybody I know uses Excel.

Paul 

Do ya? Some people have databases? Yeah,

John 

this was big columns and other big database system.

Paul 

So then we've got this long list of risks. The next step is which are key risks and most people are happy with this probability impact grid now we look at how likely the risk is impacts gonna be and

John 

very common. high probability high impact risk there's one of these on the news the other night was was was watching one of those Brexit things and also face Laura, what's her name? Coons Berg had a risk recipe I wasn't gonna I can't remember it was exactly but yeah, they one of these. So where were the main risks? So they were they were appearing on this

Paul 

site, a set of generic sort of templates for infographics. And it had all these in it. Like you have become a member David Wilson invented this thing with a different waiting Yeah, it was this idea that thing get to know that old Yeah.

John 

So the pig the pigs all right is a sort of visual training aid. It's a bit rubbish when it actually use one.

Paul 

Well, you just code it into a lookup table on your Excel spreadsheet. Yeah.

John 

But you just it becomes illegible after about half a dozen on there.

Paul 

No, no, sorry, it calculates the colour. So you can build it into Excel so that when you put the high medium low, it will calculate whether it's red, Amber green. Oh,

John 

I know. Yeah. But I mean, all you're doing is just yeah. Yeah, but I mean, this actual grid. Yeah. As good as training. And if you've got a workshop with a bunch of people getting to put risks on posters and stick them on the wall, usually is a column and is really yeah, they you normally have a long tabular thing that you can saw.

Paul 

Yeah. So next step is take your most significant risks and come up with responses. That's right. Most people will just talk about mitigation here. So we have to just talk a little bit about that, because mitigation is a simplification of the APM

John 

view of the world. Well, mitigation is like a collective noun. Yeah, for all of these things, right. So to mitigate a risk, you can accept it, avoid it, transfer or reduce it. That's right. So mitigation is not a valid thing to be talking about.

Paul 

Yeah. So for exam mode, we need to talk about accepting the risk is basically saying, Well, I know what that risk is, I'm just gonna live with it. Yeah, I've done I've done all the reasonable stuff that I can to minimise that risk. So eventually, I think you do you end up accepting everything? Yes.

John 

I think a lot of us could accept because by definition,

Paul 

yeah. And business.

John 

Well, the point is, once you've accepted something, you have to provide a contingency.

Paul 

Because because they happen rarely see, that's why

John 

irrespective of how remote it might be, or unlikely it might be due

Paul 

to what happened. And that's where insurance and PII insurance and all that sort of avoid, avoid my favourite actually changed the scope. So that that risk can no longer happen.

John 

We're used to stuff called traco ethylene traco. trike,

Paul 

oh trike. Yeah. For cleaning.

John 

Yeah, yeah, it gives off equipment and mustard gas when you warm it up.

Use a dip. Copper don't use that anymore

while they stop using it because it was a bit dodgy. And so they kind of avoided any risk of it was quite a global that was that was. Yeah, that's pretty nice. Yeah, that was. And so what they did, they introduced a different degreaser. Yeah. Which of course wasn't quite as good. Yeah. So they've already won risk. But they introduced another one. Yeah, that's an example of a secondary risk. Yeah. But avoiding is where you just change what you're doing change the scope, or change the process or

Paul 

Yeah, transfer, give the rest of somebody else who's better able to manage your risk looking at somebody else's? Yeah, usually through insurance, an example of transfer or contracting.

John 

I don't know. I think transfer is really hard. Because you transfer you don't insurance only transfers, the impact doesn't matter. The

Paul 

probability, you only transfer you can only transfer the impact, he cannot transfer the likelihood, if the risk still happens, is transferred to a subcontractor. But the vistal you transfer I think, like if you transfer the risk to a subcontractor if something goes wrong, it's still you're still your fault. So you just replace a kind of digital delivery delay risk with a reputational risk. Yeah, it works if you give it to someone who's better able to manage it than you.

John 

Yeah. But it's still like,

Paul 

yeah, it's still like, they might have more skill and competence to manage that risk. They might though. Yeah.

John 

So that's why that's, that's why you subcontract? Yes. Because there's a risk we can't do it. Therefore get someone that can.

Paul 

Yeah, he's done it before. He's got like last Friday's Yeah. Reduce is the closest to what people mean by mitigate. So he takes some action to reduce the likelihood of doing a survey or pilot study or feasibility study. Or you reduce the impacts more tickets reduce the impact. To reduce, you know, it's gonna rain. So wear a coat. Put us put a cover up or something.

John 

Yeah, yeah. So if you got to take the roof off the building in February, you're going to offer time? Yes. So reduce him post likelihood. No impact.

Paul 

Yes. The impact, correct. Sorry, I was wrong.

John 

Then you got opportunities. And these are in to some degree there. The other? Yeah, the adverse, are they so reject his way? So Trevor, we don't bother with it. Yeah. Quite why we need to write that down is beyond me. But anyway, enhance where you you actually try and enhance the probability or the impact

Paul 

separately to reduce

John 

by doing something? Yeah. So you actually take action to enhance it? Yeah. exploited is where we don't don't do any action. We just take the take the opportunity to take it when it comes. Okay. So there's no cost involved in in house. Yes, they just had to happens or it doesn't same. exploit,

Paul 

exploit.

Okay, exploit is different from enhance.

So that's the same as Except to them what exploit?

John 

exploit is the same? Well, hold on, let's start again. accept, accept and reject. They go together. Yeah. Yeah. So accept and reject. They're those. If I enhance and reduce, they're the same. Yeah, share, and transfer, they're the same. So avoid an exploit.

Paul 

Okay? So we don't avoid it. We just say, Oh, that's a good rest. Let's just go for it.

John 

I don't think they're opposites. Yeah, we've had this conversation before, avoid is where you do something differently to stop it happening. exploit is where you do exactly the same as what you were going to do. And wait for it to happen. Yeah. So they're not always opposites. But three of them are, but yeah, so in, you know, in a, in a practical sense, if, if I'm building a new station, and I decide there's an opportunity to put up, pop up coffee shop on it, and get some rent from it, then I might, might exploit that, and just rent it out and cost me nothing. On the other hand, if that space needed some water, or some power, or drainage or whatever, then I might have to do some more grant more enabling works to make it happen. So I'm doing the same thing, except now I'm doing some work to make it happen, rather than just letting it happen naturally. Good.

Paul 

So next step is to response. So actually making this happens a lot, I think. So you caught your plan, you put it in this register, and they goes, Oh, that's a really good recipe. Let's put that in the bottom drawer and forget about it. Yeah. So response means actually going out and buying that insurance policy or subcontracting this workhorse, right.

John 

That's the thing that's the mistake people make is they think that doing that is contingency, but it isn't buying PCs part of your budget, isn't it? Yeah, actually spend money. So it's golden is doing a prototype, if I decide if I decide I'm going to put some drainage in for that pop up shop. Yeah, all of a sudden, it said work back into my car, and I'm gonna spend it actually

Paul 

committed to doing it. That's right. So it's

John 

no longer kind of is no longer optional. And enclosure

Paul 

is about keeping all the records up to date as in.

John 

Yeah, well, it's just about tied in keeping it keeping your shipshape, really. But if the project the project could the risk unnaturally close? So if, if you've got, if you've had the roof of the building and put it back again, then although there's no risk is that yeah, it's like most construction jobs, all the risks are happen before you get to damp proof course. Okay, because it's all about ground condition winds, it's all about, you know, sort of in a lost civilization or, you know, not having a proper, you know, kind of soil, sort of constituency. So, some risks can naturally just drop off. Yes. Others, you get to the end of a project, and you might find if you've identified others, so, if you've built a new build a new building, you realise there's a risk that the flooding, you might need to tell somebody. Yeah, this used to be called closed it? No, it's called monitor monitor.

Paul 

Yeah. So I think what they're trying to get out here is when when a phase is like you're saying, when a phase is finished, you can close out the risks associated with that phase. Yeah. And realise the savings. Of course,

John 

the point about a close risk is that if there was any contingency associated with it, it gets relinquished. Yes. That's why closures quite important. Yes.

Paul 

Yes. So let's talk about contingency. We mentioned it a few times, like so what's your definition of a contingency? Same as yours?

John 

I think I hope go on. Well, you when you do probability impact grades, you work out what the probability is. Yes. And the impact? Yes. And that allows you to come up with a figure. Yes. And that figure in pounds is what your contingency is. So the consequence of that is, if it's not on the risk log, there's no contingency for it. Yes, that doesn't mean something could still go wrong, just because it's not in your log. But I've got a I've got a risk that I've identified, I've worked out what my contingency budget is. Alongside that I need a contingency plan. So I need to know what's going to happen if that risk occurs, no matter how unlikely it might be. So that's why it essentially every every risk on a risk log eventually is accepted. Yes. Because, but but you can't just accept it. Accept that

Paul 

you have to have some money in the bank, and you have to know what you're going to do. Because it might be really important to you contingency plan is all your team might win the lottery. That's right. So what's your contingency plan if they do?

John 

retire,

Paul 

or recruit consultants, so you might have to put some agency staff to backfill, that's your contingency plan. So you work that out in advance? Yeah. Well, how much money would you need to set aside for that much plan? Well, the chances of your team winning the lottery blooding? Low Yeah, so not so much. So you write about we need to take counts both the cost of the contingency action, but also the likelihood of slack contingency actually

John 

happening, and it's the way insurance works. That's why car insurance things. People say all the insurance was really cheap. Well, that's probably because they consider it to be a really low risk. What's the chance of me getting well

Paul 

continued kidnapped in another class if you continuously plan to Lewis cabins?

John 

Yeah, that's right. It's like insurance. You'd never don't need it till you need it. No. But that's contingency. So the the obvious question is, well, what do you do about the risks that you haven't identified? That just okay, just pop up in front of known unknown, although actually they're not risk their issues. So what happens to the issues that occur that you never predicted? Yes, the unknown unknowns, and that's called manage reserve.

Paul 

Yes. Okay.

John 

I, neither neither the contingency or the management reserve are held by the project manager. I

Paul 

don't know. That's different from different organisations. Yeah. organisations give the country a little bit of pm some a little bit.

John 

Sometime. Yeah, I have problem with giving the project manager the contingencies, they tend to spend it. They'll spend it on things other than things supply chain. Yeah, the dangers continues to get. So the good practice, go all the suppose a recommendation that the ideal solution, I suppose, is where the sponsor holds the contingency, and gives it to the project manager on the on the risk event occurring. Yeah. But that's a bit overly bureaucratic and limiting for the project manager on the contractual relation here might be bigger. I mean, certainly, if you're a supplier, that might be the case. I know, big con, some big contracts have relied on that. When they were they've said to the supplier don't build any contingency. And if it goes wrong, we'll give you them. We'll give you the money.

Paul 

Yeah.

John 

But by the way, if it's not on your log, you pay for it.

Paul 

Yes. So I'm gonna have a logbook, we had that once, guess how many risks we had in the log gone. 500 500. Just to make sure that everything was on the log, yeah, we spent six weeks creating a generic log of risk is always different. It's always interesting that you put pressure on one point because you think that's going to solve the problem. And you create a disincentive to do something else.

John 

I went to do a health check on a project up in London once for the government department to remain nameless, and the project managers out I've got 417 or something risks. And I said, I said I don't think I'm managing the

Paul 

contract. They said yes, I say whatever. Why don't blame me for not telling them. Yeah, that's that's not the best plan. Really, that's not the best. Yeah, the best reason for doing it. That's the problem. I will not talk about problems of risk. But that's the problems I've seen the risk is when you build it into a contract, it changes the behaviour. Yeah, does people behave in a commercial way rather than because the project deliver cover their backside? That's what they do. So definition of issues, an issue is something that has a problem that's now or in the near future, that's going to breach our tolerances. tolerances, it's going to exceed our expected budget. Yeah. agreed with the

John 

tolerances, your wiggle room, needs to be

Paul 

in require support from the sponsor to resolve. So they're no longer than certain. Yeah, almost certainly going to happen. Yeah. But they're not insignificant, they're not. So it says the project manager is responsible for the day to day management of the project. This is not day to day issues. This is stuff that's beyond the data, why

John 

the way the syllabus is read, or the way the book implies it is these are the things that they can't deal with. Yes. So it's like something's gone wrong. Our family best but actually to melt, some new legislation comes in. That's right. Or whether or not whether or not I've added on the risk or not is irrelevant. because it'd be sorted out. I've never seen this coming. Yeah.

Paul 

You know, if you're a project manager, you're going to keep tabs on all the parliamentary legislation, it's going to be introduced by the government tomorrow. In our like, it's not, it's not your job,

John 

like, so. issues, really, I mean, and that's why in here, they talk about issue escalation. So I think the key point here for me is issues. Risk Management is prospective. Yes. So it forces you to think about the future and what might go wrong. issue management is here now it's reanimated? Yes. So the project managers got to be quite tuned into what's going on. Yeah. Because you got to spot these things early enough to be able to do something about them and, and actually deal with them straight away. And and that's why the relationship between the project manager in the sponsor is quite important because sometimes issues bubble up, you know, like, I was doing a job and the contractor went out of business. You know, we turned up on a Monday morning, everything was locked up. padlocked up there's a security guard, Stan. Yeah, yeah. You know, you haven't got time to mess about you've got to get a meeting done quickly sorted. You know? So I suppose there's a low tolerance for a lot of documentation around a lot of issues. It usually happens afterwards. But, you know, issue management's usually done through minutes of meetings or, you know, emergency meetings or

Paul 

Yeah, I've actually best place to track issues is on the progress report. Yeah, cuz they're the things you actually want to talk to a sponsor. That's right, your progress. That's why I like raid logs.

John 

Yeah, you know, risks, assumptions, issues and decisions. Not so right about the decision bit, but keeping them all in the same place. The good thing about risk logs is risk, because risks are not yet happened. There's a probability associated, that probability is always less than 100%. Okay, issues 100%. Yes. So there's that. Yeah, actually, when you look at a risk log and look at an issue log, they're very similar. You can lock people up to saying the same, but the only difference is issues. 100% probability, yeah.

Paul 

Little code that says this issue is

John 

yes. Because now an issue. And then you've got you've got traceability that as well. Yeah. Yeah. But anyway, that's a bit sort of

Paul 

cool. So we talked about contingency, we did benefits of issue management and escalation, our fitness true benefit is that it enables the sponsor to take the decisions of sponsor should be taking, and the project managers take decisions the project manager should be taking. So it's, it means that you can ask for the support or the sponsor to resolve issues that are beyond your remit. And if I think back in my career, I wish I had known about this when I was a junior PM, because I used to carry everything on my back. I, you know, I felt responsible for the whole pie. And I didn't realise that actually, if someone has said to me, Paul, you need an issue management process that you can escalate issues up the chain, they're beyond your remit. I think I'd been more successful and I've had a better career. Not I was unsuccessful. But I just think it's a really useful mechanism.

John 

Well, the trouble is, you see, if you sort of take it on yourself, everyone will just get used to taking as far as they won't away didn't tell me. Yeah. And then you got to get yourself to blame everything. I

Paul 

call it monkey management.

Key management's a monkey shoulder.

Yeah. And everybody just wants to dump the monkey on you. Yeah. So you just take everybody's monkeys. And

John 

by the same token, no, no, senior persons kind of thank you for waiting outside their door every morning or like, Oh, well, that's why today, you

Paul 

know, another thing has gone, you know, it's not day to day. So that's why I like this definition of issues or things that are significant. You can't

John 

know. So that's why the boundary is quite important. Because, you know, if you are incompetent, you'll have more issues when you Yes, and that become that's what gets thrown up into stark relief. Yeah, quite quickly. Yeah. Because you're always staying outside to go I've got another problem Mirko deal with it. Yeah.

Paul 

That's why I think stick them on your monthly report. That's the place to sit down and talk about the issues, you know, less their companies going out of business or something. Good. And we talked about contingency planning. Excellent. Thank you, john.

John 

Good

We hope you enjoyed this podcast and found it informative. To find out about our training courses elearning or tutor led course please go to www.parallelprojecttraining.com

May 02 2020

28mins

Play

APM PMQ (BoK7) Earned Value

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In this APM Project Management Qualification (BoK7) podcast, Paul and John discuss earned value. This podcasts aims to address the following APM PMQ assessment criteria;

  • Explain why a project manager would use earned value management
  • Interpret earned value data (including variances and performance indexes)
  • Explain the benefits of using interpretation of earned value data

This podcast is just part of the parallel learning system for the APM Project Management Qualification. This approach includes a wide range of learning resources including a printed study guide, on-line e-learning, a tutor lead study group and a wide range of project management courses

Below is a transcript of this APM PMQ podcast:

Introduction 

Welcome to a parallel project training APM project management qualification podcast based on the APM body of knowledge seventh edition. You should be using this in conjunction with our elearning podcasts, and potentially a tutor led course. For more information, please visit www.parallelprojecttraining.com

Paul 

Hello, welcome to this Parallel Project Training podcast. Today we're looking at our favourite topic earned value.

John 

Yes, hello, Paul – love earned value.

Paul 

This is quite a big change in earned value for this syllabus. But anyway, let's go through the assessment criteria. Explain why project managers should use earned value, interpret and value data including variances and performance indices, expand the benefits of interpreting and value and expand the role of contingency planning and projects. So we're not doing any, we don't have to do the sums of calculating Earned Value anymore.

John 

No, no. I mean, basically there is this new form of torture called interpret interpret. Yeah, so they give you a diagram and go or give you some numbers and you have to figure out what's going on. Yeah. You have to sort of synthesise, and you have to you have to look at those numbers and kind of read into them what could be going wrong on a particular project?

Paul 

What you do quite often in a project environment Anyway, you go to a progress meeting. And someone hands a report to you as you go in the door.

John 

Yeah, but I mean, if you got it if you've got a CPI of point eight, yes. I mean, interpret that. What does that mean? Well, that means that we're overspending on costs, we're really efficient. But that could be the result of billions of different reasons, you know, so I'm not, you know, we can go through few of them. But there might be many reasons why that's happening. Yeah. So there's not a definitive kind of List of these. But the essence of it is, is that you're working out some sort of, if you figure out your own value, right, that's what

Paul 

Explain why a project manager should use earned value. Let's do that first

John 

Okay, well, the principle is that you can't tell how well your project is doing simply by comparing what you've spent with what you thought you were going to spend. So you need another measure. So you need a third axis on your graph. So the curve on your graph, which is progress, progress is calculated. So the third the third act, the third curve is earned value. And that's calculated by taking the budget completion, multiply it by the percentage complete. Yes. So if you've got a war that's worth three grand, and you're two thirds of the way through, you've got 2000 pounds worth of earned value, putting it very crudely. So you plot those figures, you plot how much you spent, how much Earned Value you've got, and you compare the actual span of the plan costs with your own value, and that gives you indices and indexes and variances. It works on the basis that the only really good answer is your own budget, and you've delivered stuff according to the budget. So if there are no variances on earned value or actual costs, so that's the principle. So the consequence of that is that any deviation is bad. Yeah, even if it's positive,

yes.

Paul 

Is that we're not necessarily good.

John 

It's difference is a deviation. Yes,

so that a deviation positive or negative is not in itself a good thing. However, I thought would be finishing early is probably better than finishing it. No, no, I don't know. I don't agree with you. I don't I have a real problem. I

Paul 

remember the slowdown that

John 

yes, if you will. Okay, so let's, let's think about that. Then I've got two people on site. One's building the roof and one's building the walls. I mean, how old? Yeah, all right. I don't want the bridge deck delivered before the piers for the whole project, but I don't want the top of the rocket finished before the bottom of the rocket, because I don't know where to put it.

Paul 

Yeah. Okay. So at

John 

each level, and also don't forget, you're spending money early. So there's this rush to burn money. Yeah. Where's the actual fact it smooths out your

Paul 

cash flow? I mean, generally, people will say that if it's if the whole

John 

planning the whole planning cycle is predicated on starting as soon as you can, yes. Which is not always a great idea.

Paul 

So let's go back a little bit and talk about these measures that we do. So there's basically two sets of measures of variances honour. So when a variance what we do is look at what our earned value is, we compare it to what we should have spent our actual cost. And what we plan to spend our planned planned cost as planned costs, what we should have spent actual costs what was actually spend, so we end up with cost variance, and we end up with a schedule variance, and those should be zero. So basically, we've spent what we expected and we've delivered what we expected and then the A set of measures our performance indices, and now we do exactly the same. But we compare earned value to the actual cost and earned value to the planned cost, but we do as a ratio. So they were looking for the measures to be one to one means one plan. greater than one means were ahead of plan or delivering more efficiently, less than one means we're behind plan or delivering less efficient. So we were just talking about is, ideally you want to be on plan, in terms of delivery. And in terms of

John 

progress. I mean, I think the other thing is that, you know, you see people coming up, I've got a CPI of naught point seven or 1.7. Okay, and they're going “really clever aren't I really good”? Quick? So 170% efficient? Yeah, you're gonna ask a few questions. Yeah, Don't forget you see if you're if you fit that means you got to finish early. Yes. And under budget? Yes. Well, the business of the time, no snow, the business has set aside all that money to pay for your project. Okay. So they have no, they have to spend it elsewhere. Yes, yes. Yes. So your business has held back all that money in New York coming in? Why?

Paul 

Jesus nicely under forecasts? Yeah. So from those performance indices, we can then do a forecast. And that forecast sort of projects, our current cost performance and current scheduled performance. And so we can turn around to the business and say, I'm currently a little bit ahead. And I think that I might finish this project a little bit ahead, or I'm currently slightly over budget. forecasts.

John 

Nothing wrong with being early a bit under budget, you know, no one's gonna moan about that. Yeah, or being a bit late. But over budget, it's not the end of the world. But it's too late to realise at the end of it,

Paul 

so that's right. That's a sackable offence

John 

to be one to be one month away from the end of them. And then finally, your budget got to be Yeah, it was. Yeah, yeah. That's, that's 90% of the way through realises another 90%. ago.

Paul 

Yeah, that's, that's all for life. So. So that's the fork. So basically, from these measures, we can we can do some forecasting,

John 

but when you interpret the data, they're either going to give you a graph, I think, I don't know. I mean, whatever data on it. Yeah, it depends on how exactly. SPI CPI No, you know, given those No, you don't do the calculation says

Paul 

SPI equals and a CPI.

John 

So also quite quite what the answer the question is, oh, God only knows,

Paul 

because I think you just play it absolutely straight back. So in my SPI is 1.1. Yeah, that means my head of plan, my CPI is naught point eight. That means I'm overspending for what I've delivered.

John 

That's not the question they ask you, though. That's it. They don't ask you that. They say you've got a CPI of naught point eight. Explain what might be going wrong on the project. I'm running late here, though. But that's so why

Paul 

I don't have enough data to answer that question. So yes, that'd be running late for a number of reasons.

John 

Yeah. Well, but that's what it says in the sample paper.

Paul 

Okay, well,

John 

okay. So again, some of the people that are listed exactly the people that listen to this need to understand how to answer that. Okay, well,

Paul 

I'd say, I could be running late for a number of reasons scope, because

John 

I might not be able to get resources this way. So may have, it's a comparison between the CPI and SPI as well. So you look at both of them together. Okay. Because just saying I'm late, because you can't really tell much from that and help with that. Actually, yeah. Because there isn't, there are things that you can deduce from the relationship between the CPI and the CPI. So if you're, if you're spending too much, but you're late, you're probably inefficient, yes. Which means that the people are working odd and spending a lot of money. They're not getting anywhere. Yes. So you might find that there's lot of rework or incoming materials, not very good. scope is poorly controlled. But conversely, if you're early, so I were what was the last one over budget and late, you can be under budget and early. Right. So what that means is really that you're, you're very efficient, you could probably afford to slow down a little bit if you needed to. Or, you know, you might want to re estimate the project, because you're kind of you're kind of doing too well,

Paul 

on the most common one I've seen is you really liked. We're not spending enough.

John 

Yes, that's right.

Paul 

So the team you have is been efficient, because they're delivering more value than cashing in. But you just haven't got enough result.

John 

enough resources. So there are

Paul 

some, it's, you could say this is indicative of that sort of situation, you know, yeah. And I suspect we'll do it.

John 

We'll do in the course as well there. Yeah. I mean, if you if you read if you read our material, there are some parts. Project one, two and four. Yeah, there's there's four examples. There's, there's four main examples of the interpretation. But yeah, when you say the question is, it's a bit you know, without the data, it's very difficult to be definitive. So you have to realise or more generic answers I can see that will develop over time. Well, yeah, once once the examiners work out what he

Paul 

earned value and values measure those three things, the planned cost, that what we've actually spent and our progress in terms of earned value then comparing them and you can compare them as variances differences or distractions from they can forecast what your end is going to be. And you can do some sort of arm waving indicative interpretation or waving of mostly around how efficient your resources you know, are you put in is, is the I put enough money in to get the progress you want or is more money going in the progress you've achieved? Brilliant. Excellent. Okay, john.

We hope you enjoyed this podcast and found it informative. To find out about our training courses elearning or tutor led course please go to www.parallelprojecttraining.com

May 02 2020

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