PMP Process — Managing Technical Aspects Practice Question
You are managing a project that is running 15% over budget at the midpoint. The variance is due to higher-than-expected material costs. The sponsor is concerned about cost overruns. What should you do FIRST?
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Analyze the cost variance to determine the root cause and update the EAC
The PM should first analyze the root cause of the cost variance and determine if the trend is likely to continue. Based on this analysis, the PM can develop a revised estimate at completion (EAC) and communicate it to the sponsor. Simply asking for more budget or reducing scope without analysis is premature.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
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Ask the team to find cheaper alternatives for materials immediately
Why it's wrong here
Immediately seeking cheaper alternatives without a thorough root cause analysis of the 15% budget overrun is a reactive measure that risks compromising project quality, scope, or future performance. Such an action bypasses proper change control processes and could lead to further issues, as the cheaper materials might not meet specifications or stakeholder requirements. A PMP prioritizes understanding the problem before implementing solutions.
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Reduce the project scope to bring costs back in line with the budget
Why it's wrong here
Reducing the project scope is a drastic measure that directly impacts the project's deliverables and value proposition, requiring formal change requests and stakeholder approval. Implementing such a change without first understanding the specific drivers of the 15% cost variance is premature and could lead to stakeholder dissatisfaction or failure to meet business objectives. Scope changes must follow the integrated change control process, not be an immediate knee-jerk reaction.
- ✓
Analyze the cost variance to determine the root cause and update the EAC
Why this is correct
The most appropriate first step when faced with a significant cost overrun is to conduct a thorough analysis of the cost variance (CV) to identify its underlying root causes. Understanding why the project is over budget enables informed decision-making and the development of effective corrective actions. Subsequently, updating the Estimate At Completion (EAC) provides a realistic forecast of the total project cost, allowing for proactive communication with stakeholders and potential re-planning.
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Request additional budget from the sponsor to cover the overrun
Why it's wrong here
Requesting additional budget from the sponsor without first performing a detailed analysis of the cost variance and identifying its root causes is unprofessional and irresponsible. A project manager must demonstrate due diligence in understanding the financial situation and exploring internal solutions before seeking more funds. Such an action would likely be met with resistance and undermine confidence in the project management team's ability to control costs.
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