PMP Practice Question: Business Environment: strategy and project benefits
You are the project manager for a large infrastructure project funded by a government grant that requires the project to deliver specific social benefits within three years. The project is currently in its second year, and a recent audit reveals that the project is on track to exceed its budget by 20% due to unexpected material cost increases. The grant terms stipulate that any cost overrun must be absorbed by the organization, not the grant. Additionally, the project benefits are measured based on the number of beneficiaries served, which is currently 70% of the target. The project sponsor is concerned that cutting costs may reduce the number of beneficiaries and jeopardize the grant conditions. The project team has identified two options: (1) reduce the scope of the project to stay within budget, which would lower the beneficiary count to 60% of target; or (2) request additional funding from the organization, but the CFO is reluctant because the project's return on investment is already marginal. What should the project manager do?
⚠ Common exam trap
A common mix-up: candidates choose to escalate (B) or unilaterally cut scope (C) without first performing the necessary analysis, failing to demonstrate proactive benefits management and stakeholder engagement as required by the PMP exam.
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
✓
Conduct a benefits analysis to determine the minimum viable beneficiary count and then propose a revised plan that optimizes cost and benefits.
It aligns with the PMP's focus on benefits realization management. The project manager should first analyze the minimum beneficiary count required to satisfy grant conditions, then optimize the project plan to balance cost and benefits. This approach ensures data-driven decision-making before escalating or implementing scope changes, directly addressing the sponsor's concern about jeopardizing grant conditions.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✓
Conduct a benefits analysis to determine the minimum viable beneficiary count and then propose a revised plan that optimizes cost and benefits.
Why this is correct
As a project manager, the primary responsibility is to analyze problems and propose solutions. Conducting a benefits analysis to determine the minimum viable beneficiary count directly addresses the grant constraint while seeking to optimize the project's value proposition. This proactive approach allows for a data-driven revised plan that balances cost efficiency with achieving the core objectives and stakeholder expectations, avoiding premature escalation or unilateral decisions.
- ✗
Escalate the issue to the steering committee for a decision.
Why it's wrong here
Escalating an issue to the steering committee without first conducting a thorough analysis and proposing viable solutions is generally considered an abdication of the project manager's responsibility. The PM is expected to identify problems, analyze their impact, and formulate recommendations, presenting the committee with options and a preferred course of action rather than just a dilemma. This demonstrates a lack of proactive problem-solving and strategic thinking.
- ✗
Implement option 1 to control costs and then inform the sponsor of the reduced benefits.
Why it's wrong here
Unilaterally implementing a cost-cutting measure that potentially reduces project benefits, especially without prior analysis of its impact on grant compliance, is a high-risk approach. Informing the sponsor *after* the fact demonstrates a lack of stakeholder engagement and could lead to severe consequences, including grant revocation or loss of trust. The project manager must ensure that any changes align with project objectives and constraints, seeking approval for significant deviations.
- ✗
Request additional funding from the CFO, emphasizing the risk of non-compliance.
Why it's wrong here
Requesting additional funding from the CFO solely by emphasizing non-compliance risk, without a detailed business case, cost-benefit analysis, or exploration of alternative solutions, is unlikely to be successful. Financial stakeholders require comprehensive justification, including a clear understanding of the return on investment, the impact of not funding, and a well-structured proposal demonstrating due diligence. A simple request without a strategic financial argument will likely be rejected.
Go deeper
Related to this question
Learn chapter
Introduction to the PMP Exam and Project Management Basics
Key term
Organizational Change Management
Organizational Change Management (OCM) is the structured approach to preparing, supporting, and guiding people through changes in an organization to ensure lasting success.
Key term
Project Management Plan
A formal, approved document that defines how a project is executed, monitored, controlled, and closed, serving as the single source of truth for the project team.
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