PMP People — Leading Projects Practice Question
Your project is running 15% over budget at the midpoint. The team is working well, but the variance is due to inaccurate cost estimates. What should the project manager do first?
⚠ Common exam trap
The trap here is that candidates often jump to immediate corrective actions like cutting costs or requesting more budget, overlooking the PMP principle that the first step in addressing a variance is to analyze its root cause before implementing a solution.
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
✓
Perform a root cause analysis to understand why estimates were inaccurate and develop a corrective action plan
The project manager should first perform a root cause analysis to understand why the cost estimates were inaccurate, as this addresses the fundamental issue rather than applying a superficial fix. This aligns with the PMBOK Guide's principle of identifying the root cause of a variance before taking corrective action, ensuring that the corrective action plan targets the actual problem and prevents recurrence.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Reduce the scope of remaining work to bring costs back in line
Why it's wrong here
Reducing scope without first performing a root cause analysis is a premature and potentially detrimental action. Such a decision could lead to delivering a product or service that does not meet the original business need or stakeholder expectations, thereby compromising project success. Any scope change must follow the formal change control process, including a thorough impact analysis on quality, schedule, and stakeholder satisfaction, which cannot be done effectively without understanding the variance's origin.
- ✗
Inform the team to cut costs wherever possible
Why it's wrong here
Instructing the team to arbitrarily cut costs without a specific plan or understanding of the cost drivers is an irresponsible and potentially damaging approach. This directive can lead to reductions in critical quality activities, increased risks, or a decline in team morale and productivity as they struggle to meet an undefined mandate. Effective cost control requires targeted actions based on variance analysis, not broad, undirected mandates that could jeopardize project objectives.
- ✗
Request additional budget from the sponsor to cover the overrun
Why it's wrong here
Immediately requesting additional budget from the sponsor without first conducting a thorough variance analysis and exploring potential corrective actions is an an unprofessional and inappropriate response. A project manager is expected to investigate the reasons for cost overruns and propose solutions, demonstrating proactive management and fiscal responsibility. Requesting more funds prematurely suggests a lack of understanding of the project's financial health and fails to address the root causes, making future overruns likely.
- ✓
Perform a root cause analysis to understand why estimates were inaccurate and develop a corrective action plan
Why this is correct
Performing a root cause analysis is the most appropriate initial action when a significant budget overrun is identified. This systematic approach allows the project manager to identify the underlying reasons for the cost variance, such as inaccurate estimates, scope creep, unforeseen risks, or inefficient resource utilization. Understanding the true cause is crucial for developing an effective corrective action plan that not only addresses the current deviation but also prevents recurrence, ensuring better project control and future estimation accuracy.
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Written by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
This PMP practice question is part of Courseiva's free PMI certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the PMP exam.