Procurement approach that outlines clear workstreams

Course 3 – Project Planning: Putting It All Together QUIZ ANSWERS

Week 3: Managing Budgeting and Procurement

Google Project Management: Professional Certificate

Coursera Answers & Study Guide

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TABLE OF CONTENT

Managing Budgeting and Procurement INTRODUCTION

This particular week of Coursera’s Google Project Management: Professional Certificate course focuses on managing budgeting and procurement.

Participants will gain an understanding of the components that make up a project budget, how to properly progress through the budgeting process, and best practices when it comes to managing the overall project budget. Additionally, they will become familiar with the different steps involved in the procurement process, such as which documents are required for successful completion and tips for avoiding ethical conflicts along the way.

Utilizing an interdisciplinary approach throughout this week’s lessons, students will develop a holistic appreciation of both budgeting and procurement.

Learning Objectives

  • Examine how to obtain support for legal and compliance issues and avoid ethical conflicts during the procurement process.
  • Explain the procurement process and identify key procurement documentation.
  • Describe how to estimate, track, and maintain a budget.
  • Identify the components of a project budget and how the budgeting process works.

TEST YOUR KNOWLEDGE: UNDERSTANDING PROJECT BUDGETS

1. Fill in the blank: Creating a _____ establishes a cost estimate for your project budget and ensures that you calculate the correct expenses for a set period of time.

  • Forecast (CORRECT)
  • cost of quality
  • reserve analysis
  • contingency budget

Correct: A forecast is a cost estimate or prediction that helps you calculate the correct expenses for a particular time period. You will frequently review your project budget, and it will evolve throughout the project life cycle.

2. As a project manager, you determine the cost for items such as software, tools, labor, and equipment. What budgeting term refers to these types of costs?

  • Reserve analysis
  • Contingency budget
  • Cost of quality
  • Resource cost rates (CORRECT)

Correct: Resource cost rates refer to the cost of resources like labor, tools, equipment, materials, and software. You will need to determine how much each of these resources will cost the company.

3. Which of the following strategies should you consider when creating your budget? Select all that apply.

  • Disregard historical data
  • Time-phase your budget (CORRECT)
  • Baseline your budget (CORRECT)
  • Document all costs (CORRECT)

Correct: Time-phased budgeting allows you to allocate costs for project tasks over the projected timeline in which those expenses are planned to take place. By looking at your tasks against a timeline, you can track and compare planned versus actual costs over time. Also, make sure you baseline your budget and document all types of costs.

Correct: A baseline budget is the estimate of costs you start with at the beginning of a project. When your project accrues actual costs, you use the baseline budget to determine if the project is under or over budget.  It is also a good idea to document all costs and time-phase your budget.

Correct: You should document all types of costs—both internal and external. Some additional strategies to implement include time-phased budgeting and setting a baseline budget.

4. Which three of the following items are examples of direct costs for your project?

  • Utilities
  • Wages and salaries of employees and contractors (CORRECT)
  • General office equipment
  • Staff training (CORRECT)
  • Materials costs (CORRECT)

Correct: Employees and contractors are the people who do the work necessary to complete the project. Therefore, their wages and salaries are considered direct costs.

Correct: Staff training is a direct cost because it is necessary in order to complete your project.

Correct: Since materials are necessary to complete your project, they are considered a direct cost.

5. At what point in the project life cycle does the project manager create the project budget?

  • Closing phase
  • Execution phase
  • Initiation phase (CORRECT)
  • Planning phase

Correct: It’s important to remember the project manager may need to adjust the budget throughout the project life cycle.

6. Who creates estimates for the project budget?

  • Project manager (CORRECT)
  • Project sponsor
  • Chief Financial Officer (CFO)
  • Team representative

Correct: The project manager also collaborates with other people on the project to create the estimates.

7. What should a project manager account for when project budgeting? Select all that apply.

  • Surprise expenses (CORRECT)
  • Reforecasting throughout the project (CORRECT)
  • Competitor prices
  • Stakeholder needs (CORRECT)

Correct: By budgeting for surprises, the project manager is less likely to go over budget.

Correct: A project manager may need to create a separate, revised budget based upon how the project is tracking.

Correct: It’s important to know exactly what stakeholders expect from the project.

TEST YOUR KNOWLEDGE: CREATING A PROJECT BUDGET

1. As a project manager setting a budget, you factor in unexpected costs that may arise during the project. What budgeting strategy does this refer to?

  • Leveraging experts
  • Bottom-up approach
  • Adding a buffer and reserves (CORRECT)
  • Setting a baseline

Correct: When budgeting for a project, you’ll want to leave room for costs that exceed estimations.

2. As a project manager, what three things should you do to control costs and reduce changes to the budget? Select all that apply.

  • Ensure budget changes are within scope. (CORRECT)
  • Manage changes as they’re made. (CORRECT)
  • Request stakeholder approval on additional costs only after they are incurred
  • Establish a sign-off plan and inform stakeholders of any expense changes that occur. (CORRECT)

Correct: You should ensure that any additional costs or changes to the budget are within the project boundaries. You should also get stakeholder sign-off on any changes and manage changes as they are made.

Correct: You should update forecasts as cost changes occur because you don’t want budget changes to surprise you. You should also get stakeholder sign-off on any changes and ensure changes are within scope.

Correct: You should get appropriate stakeholders to agree to any additional costs before they are incurred. You should also manage changes as they are made and ensure the changes are within scope.

3. As a project manager, what does going under budget on a project indicate about your approach to budget management? Select all that apply.

  • That your initial estimates were inaccurate (CORRECT)
  • That you accurately estimated the total cost of ownership (TCO)
  • That you effectively conserved funds and will likely receive larger budgets for future projects
  • That you could have spent more on the project to provide extra resources (CORRECT)

Correct: Going under budget indicates that you may not have done a good job at initially estimating and that you could have spent more money on the project. It also could result in your budget for future projects being reduced.

Correct: Going under budget indicates that you could have spent more money on the project. For example, you could have possibly had extra resources or better quality output. It may also mean that you did not do a good job at initially estimating and that your budget for future projects could be slashed.

4. What budgeting challenge arises when changes or growth cause additional work the project manager hadn’t planned for?

  • Inaccurately accounting for total costs
  • Budget pre-allocation
  • Inaccurate budget baseline
  • Scope creep (CORRECT)

Correct: Scope creep is when changes, growth, and other factors affect the project’s scope at any point after the project begins. Scope creep causes additional work that wasn’t planned for, so it can impact your budget.

5. What does the bottom-up approach entail?

  • Review past projects that are similar to the current project to get an idea of what the project could involve.
  • Think about all the parts of a project from the beginning to the end that have an associated cost, and add all of that together. (CORRECT)
  • Gather insights from experts who worked on a similar project in the past and use their knowledge as a resource.
  • Establish the main objectives of a project and keep them within a reasonable framework to ensure the project makes financial sense.

Correct: The bottom-up approach is a useful technique when making a project budget. To apply this technique, you’ll think about all the parts of a project with an associated cost and add them all together.

6. When is a good time to review the project budget and identify if you need to make any changes?

  • After speaking with the project sponsor
  • After the initiation phase
  • After you meet a milestone (CORRECT)
  • After a retrospective

Correct: Milestones can act as checkpoints for budget management and payment.

7.  Kim, a producer at a mobile gaming company, is excited to launch the company’s first mobile game in February. Kim clearly maps out the tasks and schedule for each of the team’s developers. She considers working days and her commitments on other projects.

Kim realizes that in mid-December she did not account for the company’s mandatory two-week holiday shutdown in her schedule. It is too late to do anything, so she flags it to her manager and waits for the shutdown to happen. Did this project manager implement effective risk management and most likely stay under budget?

  • Yes
  • No (CORRECT)

Correct: Once Kim identifies a risk, she should proactively work to manage that risk. While flagging it to a manager is a good first step, she needs to take additional steps. In this situation, a stronger risk management solution would be to flag to her manager and any relevant stakeholders and team members who need to be informed about the risk.

Once flagged, she should bring a plan to them on how to manage that risk. Kim might request two extra people to help her work on the launch or hire a contractor which is not bound by the two-week company shutdown to make up the difference. She could also recommend delaying the launch date. Kim should bring these proposals and options to her team and stakeholders and align on a solution to de-risk.

TEST YOUR KNOWLEDGE: INTRODUCTION TO PROCUREMENT

1. As a project manager, you’re interested in working with vendors in a way that is collaborative and places an emphasis on relationships. What procurement management process should you choose?

  • Historical
  • Flexible
  • Traditional
  • Agile (CORRECT)

Correct: Agile procurement management is more collaborative with both the project team and the end supplier than traditional approaches. There is a heavy emphasis on the relationship between these parties.

2. As a project manager, you host weekly meetings to periodically review vendor performance and work quality. Which procurement process step does this represent?

  • Controlling (CORRECT)
  • Initiating
  • Selecting
  • Completing

Correct: During this step, you will periodically check on vendor work to ensure it meets the terms of the contract.

3. As a project manager selecting a vendor, you first need to outline the details and requirements of your project in order to solicit bids. Which procurement document helps with this task?

  • A request for proposal (RFP) (CORRECT)
  • A Statement of Work (SOW)
  • A work breakdown structure (WBS)
  • A non-disclosure agreement (NDA)

Correct: An RFP is a document you use to solicit bids from vendors. Once you receive several bids, you can choose the best vendor for your project.

4. As a project manager creating a statement of work (SOW), who do you ask for input and technical knowledge?

  • Project sponsor
  • Key stakeholders
  • Subject matter expert (SME) (CORRECT)
  • Vendors

Correct: An SME is someone at your organization who has necessary experience and technical expertise that applies to the project.

5. What is the process of obtaining all the materials, services, and supplies a team needs to complete a project?

  • Vendor management
  • Vendor sourcing
  • Time and materials management
  • Procurement (CORRECT)

Correct: In addition to the materials, services, and supplies, a project manager also needs to procure essential goods and services through vendors.

6. Jerome, a program manager at a small, five-person nonprofit company, is responsible for developing a financial literacy program for middle schools. While he has a lot of expertise in financial literacy, he realizes that he needs to find an educator to partner with to help him develop the curriculum.

Which of the following is the best option for Jerome to locate an external resource?

  • The non-profit does not have any educators, so he finds a college student who is studying childhood education and gives them an internship to help create the curriculum.
  • The non-profit does not have any educators, so Jerome needs to look outside the non-profit. By looking outside of the non-profit, he will find someone with the skill set he needs to help create the program materials and educational course. (CORRECT)
  • The non-profit does not have any educators, so he will need to hire one. He puts up a job posting to hire a new staff member.

Correct: External resources are people outside the company who can help with tasks, providing complementary skills to those that exist inside the organization.

7. What is a request for proposal (RFP)?

  • A document that ensures confidential information remains within an organization
  • A document sent after a vendor is selected which evolves as the project goes on
  • A document that outlines the details and requirements of an organization’s project to be passed on to vendors (CORRECT)

Correct: A request for proposal, or RFP, is used to solicit bids from vendors so the project team can select the best vendor for a project. RFPs are widely used within different departments in a company and across various industries.

8. What does a statement of work (SoW) describe?

  • The products and services a vendor or contractor will provide for the organization (CORRECT)
  • The agreement among parties that confidential information stays within an organization
  • The requirements of an organization’s project to be passed on to vendors

Correct: The statement of work describes the products and services a vendor or contractor will provide for an organization. Beyond the organization’s needs, the SoW also includes the contractor’s needs and requirements to successfully perform the services.

TEST YOUR KNOWLEDGE: NAVIGATING PROCUREMENT CHALLENGES

1. As a project manager, you are about to hire a new vendor; however, there are terms in the contract you are unfamiliar with. Who should you contact to better understand the contract?

  • Another project manager
  • Vendor consultant
  • A subject matter expert (SME)
  • A member of the legal team (CORRECT)

Correct: Depending on the size of the company you’re working for, there may be an in-house legal team, an outsourced legal team, or other legal advisors.

2. Which of the following should a project manager do to ensure an ethical procurement?

  • Work with government officials as long as they seem trustworthy.
  • Speak to the press if they inquire about product sourcing methods.
  • Alter vendor contracts based upon what you believe is most ethical for the company.
  • Make sure that various stakeholders adhere to governmental policies and adequate corporate social responsibility. (CORRECT)

Correct: You’ll want to involve the appropriate stakeholders if you need their decision on a tricky ethical decision. You should also know your company’s business requirements, seek out the code of ethics for your profession, and if necessary, consult with an SME.

3. What are some potential ethical risks project managers need to be aware of? Select all that apply.

  • Sole-supplier sourcing (CORRECT)
  • Bribery or corruption (CORRECT)
  • Fraudulent checks
  • Interaction with state owned entities (CORRECT)

Correct: Sole-sourcing keeps outside vendors from bidding on a project. Project managers should also be aware of the risks of bribery or corruption and inappropriate interaction with state-owned entities.

Correct: One form of corruption is when a vendor seeks to reduce the competition for a contract during the bid through bribery or other means. Sole-supplier sourcing and inappropriate interaction with state-owned entities are some other ethical traps to avoid.

Correct: Any relationship with a government that is based upon inappropriate relationships that limit competition is unethical. Project managers should also be careful to avoid ethical traps like bribery, corruption, or sole-supplier sourcing.

4. Once you sign a contract with a vendor, you audit each task, execute quality control, and approve invoices. These are examples of what project manager duty?

  • Mentoring
  • Relationship building
  • Trust-building
  • Assurance (CORRECT)

Correct: As a project manager, you’ll want to frequently review the work delivered by your vendors.

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Project Planning: Putting It All Together WEEKLY CHALLENGE 3

1. When creating a budget, a project manager must do which of the following? Select all that apply.

  • Review and reforecast throughout the project (CORRECT)
  • Approve budget increases
  • Understand stakeholder needs (CORRECT)
  • Budget for surprise expenses (CORRECT)

2. Which scenario is an example of planned cost versus actual cost?

  • When planning your project budget, you document the planned cost of labor. To do this, you use the estimated number of hours your team needs to complete the project. As your project progresses, you document the total hours your team works to determine the total cost of labor for your project. This number may be different from your original cost of labor. (CORRECT)
  • When planning your project budget, you notice that you need to advertise several job positions. The cost to post the job descriptions to several online job boards is $300.
  • When planning your project budget, you need to factor in unexpected costs that may occur. You decide to reserve 5% of your overall budget as a buffer.
  • When planning your project budget, you gather historical data on costs of materials, resources, and labor to determine how much each will cost. Once you begin procuring these items, you don’t update the actual cost.

3. As a project manager creating a budget, you proactively identify factors that may impact expenses. You then take action to minimize the budgetary impact of these factors. What is this task called?

  • Baselining the budget
  • Cost control (CORRECT)
  • Bottom-up approach
  • Estimating cost

4. As a project manager, you research and source for a specific service. You then have to manage that relationship. This is known as what type of procurement?

  • Performance management
  • Budget management
  • Cost management
  • Vendor management (CORRECT)

5. Which section of the statement of work (SoW) includes details about what the service entails and may include major project activities?

  • Schedule overview
  • Target audience
  • Purpose
  • Scope (CORRECT)

6. Which of the following justifies sole-supplier sourcing?

  • The supplier provided material for the past three projects.
  • The supplier is easy to work with and offers a discount.
  • The company is cautious about exposing trade secrets. (CORRECT)
  • The project sponsor asks to only use one particular supplier.

7. To create a well-organized budget, a project manager includes different types of expenditures. Which type of budget expense creates a future benefit for a company?

  • Operating expenses (OPEX)
  • Historical expenses
  • Capital expenses (CAPEX) (CORRECT)
  • Indirect expenses

8. At what phase in the procurement process would a project manager review a vendor’s performance and determine if they are meeting milestones?

  • Investigating
  • Controlling (CORRECT)
  • Completing
  • Selecting

9. Which of the following accurately describes total cost of ownership (TCO)?

  • TCO only factors in upfront expenses associated with a product or service.
  • TCO factors in expenses associated with a product or service over its lifetime. (CORRECT)
  • TCO is the dollar amount used to measure if a project is on track or not.
  • TCO is the additional room in the budget for unexpected costs.

10. Fill in the blank: In project management, the budget is considered a _____—it is a success metric.

  • reserve
  • deliverable (CORRECT)
  • dependency
  • procurement

11. As a project manager, the project sponsor gives you cost estimates with a set amount of money to spend. What challenge for effective budgeting does this represent?

  • Lack of historical data
  • Pre-allocated budget (CORRECT)
  • Insufficient cash flow
  • Scope creep

12. After receiving multiple bids for your project, you select a vendor you’d like to work with. You’re ready to start the contracting process. Which procurement document do you fill out and send the vendor?

  • Scope of work (SoW)
  • Request for proposal (RFP)
  • Non-disclosure agreement (NDA)
  • Statement of work (SoW) (CORRECT)

13.  To create a well-organized budget, a project manager includes different types of expenses. Which type of budget expense includes costs for day-to-day tasks within a company?

  • Reserve expenses
  • Operating expenses (OPEX) (CORRECT)
  • Capital expenses (CAPEX)
  • Fixed expenses

14. Which of the following statements is typically true regarding budgeting?

  • It’s important to not go over budget, but it’s recommended to go under budget.
  • It’s important to not go under budget, but it’s recommended to go over budget.
  • It’s important to not go over or under budget. (CORRECT)
  • It’s recommended to go either over or under budget.

15. As a project manager creating a budget, you’re thinking about all the parts of a project from beginning to end—making a list of every material, resource, and contract worker. What do you call this type of budgeting?

  • Top-down approach
  • Contingency
  • Buffers and reserves
  • Bottom-up approach (CORRECT)

16. Which scenario is an example of proactive budget management?

  • You’re reviewing your budget and realize that it took much longer than you anticipated for a subject matter expert to complete a task. The labor cost associated with this task is now well over budget. You must now request a budget increase to cover the cost of the labor.
  • During your project, the market experiences a shortage of a resource that’s crucial for your project’s success. Because of the shortage, the price of this resource increases. This is something you did not expect, nor plan for, and must now figure out how you can afford to complete your project.
  • While planning your project budget, you decide that you don’t need to add buffers for unexpected costs. Since you’ve completed several projects like this one in the past and have always come in under budget, you feel you don’t need to plan for any extra cost.
  • While planning your project budget, you gather historical data and consult with industry experts. You consider fixed costs, add relevant line items, and set aside a 5% reserve for unexpected costs. (CORRECT)

17. As a project manager, you’re seeking a procurement approach that outlines clear workstreams, hard deadlines, and financially protects your project against unforeseen circumstances. Which procurement approach should you choose?

  • Robust
  • Traditional (CORRECT)
  • Protectionist
  • Agile

18. A document that keeps confidential information within the organization is known as what?

  • Request for proposal (RFP)
  • Non-disclosure agreement (NDA) (CORRECT)
  • Statement of work (SoW)
  • Scope of work (SoW)

19. Which of the following may impact ethics in procurement? Select all that apply.

  • Union contract negotiations
  • Interaction with state-owned entities (CORRECT)
  • Bribery or corruption (CORRECT)
  • Sole-supplier sourcing (CORRECT)

20. At what phase in the procurement process would a project manager check a vendor’s reputation for delivering quality work, and make a site visit?

  • Completing
  • Selecting (CORRECT)
  • Controlling
  • Introducing

21. As a project manager, you review your budget and notice one vendor is costing more than anticipated. You shift funds and recalibrate the budget to offset this increased vendor cost. What is the budgeting term for this task?

  • Setting the baseline
  • Reforecasting (CORRECT)
  • Contingency budgeting
  • Reserve analysis

22. “Honesty, responsibility, respect, and fairness are the values . . .” begins what type of saying of the Project Management Institute that serves as a guide to how they do procurement and other business?

  • requirements
  • slogan
  • code of ethics (CORRECT)
  • motto

23. To create a well-organized budget, a project manager includes different types of expenses. Which type of budget expense includes costs for day-to-day tasks within a company?

  • Capital expenses (CAPEX)
  • Operating expenses (OPEX) (CORRECT)
  • Fixed expenses
  • Reserve expenses

24. At what phase in the procurement process would a project manager define project resources and make the case for obtaining them?

  • Controlling
  • Initiating (CORRECT)
  • Selecting
  • Completing

25. When budgeting a project, you should consider additional expenses such as warranties, supplies, add-ons, and upgrades. Which budgeting term refers to this concept?

  • Total cost of ownership (CORRECT)
  • Bottom-up approach
  • Top-down approach
  • Baseline your project

26. When working through the risk management life cycle, what’s the main goal when evaluating a risk?

  • Controlling risks
  • Identifying risks
  • Treating risks
  • Prioritizing risks (CORRECT)

27. What do project managers need to identify before creating a communication plan?

  • Recipients, communication methods, project risks, and goals of communication
  • Recipients, project risks, goals of communication, and barriers to communication
  • Recipients, anonymous survey questions, goals of communication, and barriers to communication
  • Recipients, communication methods, goals of communication, and barriers to communication (CORRECT)

28. Which of the following is an example of using historical data to develop your project budget?

  • Reviewing past projects that are similar to yours to get an idea of what your budget could entail (CORRECT)
  • Thinking about all the parts of your project from the beginning to the end and adding the costs together
  • Getting quotes from potential vendors
  • Reaching out to project managers who worked on past projects at the company

29. Which of the following are steps in the procurement process? Select all that apply.

  • Contract writing (CORRECT)
  • Initiating
  • Analyzing (CORRECT)
  • Controlling (CORRECT)

30. Fill in the blank: A project manager needs to alter their budget after making changes to the project schedule and costs. This is necessary in order to _____.

  • re-baseline the budget to track project progress of costs (CORRECT)
  • re-baseline the budget to track project progress of tasks
  • baseline the budget to track project progress of reserves
  • baseline the budget to track project progress of costs

31. Which three costs are examples of resource cost rates? 

  •  The cost of materials when building a house (CORRECT)
  •  The cost of software to help manage a project (CORRECT)
  •  The cost of a task buffer
  •  The cost of labor for a project team (CORRECT)

32. Fill in the blank: Typically, a project manager organizes a budget by _____. Then, the project manager lists tasks alongside each task’s associated costs. 

  • tools
  • teammates
  • dependencies
  • milestones (CORRECT)

Managing Budgeting and Procurement CONCLUSION

Understanding how to create and manage a project budget is essential for any budding project manager. In this week of the course, you will learn about the various components of a project budget and how the budgeting process works.

You will also explore how to avoid ethical conflicts during the procurement process and how to obtain support during this stage of the project. Join us now in Coursera.org to gain these valuable skills!

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