PMP People — Leading Projects Practice Question
Your project is running 15% over budget at the midpoint. The variance is due to higher-than-expected costs for raw materials. The sponsor is concerned and wants to know how you will bring the project back on budget. What is the BEST response?
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 variance analysis to identify corrective actions and present options to the sponsor.
The PM should perform a variance analysis, determine the root cause, and then explore options such as cost reduction, schedule compression, or submitting a change request if additional funding is needed. The PM should then communicate the analysis and proposed actions to the sponsor.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Assure the sponsor that the team will work overtime to recover the cost overrun.
Why it's wrong here
This is an inappropriate and premature response. Assuring the sponsor of unanalyzed overtime commitment is irresponsible, as it often leads to increased costs through premium pay, decreased productivity due to fatigue, and potential team burnout. A project manager's role is to analyze the root cause of variances and propose sustainable, data-backed solutions, not to make immediate, potentially harmful, and unverified promises. Such an action fails to address the underlying issue and can exacerbate project problems.
- ✗
Reduce the scope of the project to align with the budget.
Why it's wrong here
While scope reduction can be a viable corrective action, it should not be the immediate or sole response without proper analysis. Reducing scope without understanding the root cause of the cost overrun might eliminate critical deliverables or features, impacting project objectives and stakeholder satisfaction. This decision requires thorough impact analysis, stakeholder consultation, and formal approval via the change control process, making it a potential solution rather than the initial analytical step.
- ✓
Conduct a variance analysis to identify corrective actions and present options to the sponsor.
Why this is correct
This is the most appropriate first action for a project manager facing a significant cost overrun. Conducting a variance analysis involves comparing actual performance to the planned baseline, identifying the root causes of the deviation, and forecasting future performance. This systematic approach enables the project manager to develop informed corrective actions and present a range of well-considered options, along with their potential impacts, to the sponsor for an informed decision, adhering to sound project governance.
- ✗
Submit a change request for additional budget to cover the variance.
Why it's wrong here
Submitting a change request for additional budget without prior analysis is premature and irresponsible. A project manager must first understand why the project is over budget through variance analysis and explore all possible internal corrective actions. Requesting more funds without demonstrating a thorough investigation into the root causes and potential mitigation strategies suggests a lack of control and due diligence, which can erode sponsor confidence and may lead to rejection.
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