PMP Certification: Develop Project Charter (based on PMBOK® Guide, 6th Edition)

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Develop Project Charter 101

What Is a Project Charter and When Do You Need It in a Project Life Cycle?

  • WHAT Develop Project Charter Is. Develop Project Charter implies working with stakeholders to create the project charter, the foundation document for the project. The project charter provides political and financial support for the project, telling everyone in the company why the project is needed and providing the project manager authority to manage the project.
  • WHY Develop Project Charter Is Important. The project charter is the green light that gives the project manager the authority to expend organizational resources to achieve project objectives.
  • WHEN Develop Project Charter Is Executed. The design—and signing—of the project charter is the first official process performed in every new project.
  • HOW Develop Project Charter Operates.
InputsTools and techniquesOutputs
  1. Business documents
    • Business case
    • Benefits management plan
  2. Agreements
  3. Enterprise environmental factors
  4. Organizational process assets
  1. Expert judgment
  2. Data gathering
    • Brainstorming
    • Focus groups
    • Interviews
  3. Interpersonal and team skills
    • Conflict management
    • Facilitation
    • Meeting management
  4. Meetings
  1. Project charter
  2. Assumption log

Source: PMBOK® Guide, 6th ed., Chapter 4, section 4.1, p. 75.

Develop Project Charter Key Terms

What Are the Key Terms to Fully Understand the Process of Developing a Project Charter?

  • Assumption. A factor that is considered to be true, real or certain without proof or demonstration.
  • Benefits Management Plan. A document that describes the activities necessary for achieving the benefits of a project and when these planned benefits will be delivered. It also outlines metrics and procedures to measure progress against benefits.
  • Business Case. A document that examines business need and cost-benefits analysis of a project to justify the approval of the project and to set its boundaries.
  • Constraint. A factor that limits the project team’s options to complete the project and to produce the required deliverables.
  • Depreciation. It accounts for the fact that assets lose value over time.
  • Law of Diminishing Returns. Productivity and resources are not linked in a 1:1 relationship; at some point adding resources does not yield a corresponding increase in productivity.
  • Opportunity Cost. The economic and financial benefit lost by selecting another project.
  • Sunk Cost. A cost that has already been incurred on the project and cannot be recovered if the project was to stop.
  • Working Capital. The funds available for use by an organization.

Develop Project Charter Tips

What Are the Best Tips to Answer Correctly the PMP Cerification Exam Questions on Develop Project Charter Process?

  • Agreements. The PMP exam sometimes mentions the agreements as “contracts“, even though not all projects have contracts.
  • Develop Project Charter Vs. Identify Stakeholders. Develop Project Charter and Identify Stakeholders are the two initiating processes in the PMBOK Guide. Develop Project Charter process, though, must be executed first, as its input – project charter – features as output of the Identify Stakeholders process.
  • Deviations from Baselines. Incomplete risk identification and risk management often cause changes from the baselines created during planning. Whenever the PMP exam asks you what to do if the project deviates remarkably from the performance measurement baseline, choose the answer that implies a review of the risk management process.
  • Enterprise Environmental Factors Vs. Organizational Process Assets. In a certain way, enterprise environmental factors limit the project, while organizational process assets support it.
  • Project Authorization. A business case documents the justification for the undertaking of a project, but it doesn’t officially authorize its existence. A project is authorized by the project charter.
  • Project Sponsor Vs. Customer. The project sponsor is always internal. The customer may be internal or external but is the recipient of the deliverable. The same person may fill both roles, but the role of customer and the role of sponsor should not be confused.
  • Project Sponsor Vs. Project Manager. The sponsor of the project is in charge of creating the project charter and provides financial and political support for the project. The project manager manages the project.
  • Project Statement of Work (SOW). Important but not mandatory input, there is no need for SOW in the presence of business case, contract, or agreement.
  • Project selection. There may be three types of questions on the PMP exam about project selection:
    • direct, project selection mentioned openly as the core of the question
    • indirect, project selection relates to the business case
    • distracting, project selection concepts as distractions in questions on other topics, to mislead you.

For a detailed analysis of each project management process group and knowledge area, click on “PMP Certification – Free Exam Prep” here or on the right menu.

SOURCES: Project Management Institute (2017). A Guide to the Project Management Body of Knowledge (PMBOK® Guide). 6th ed. Newtown Square: Project Management Institute. Project Management Institute (2016) | 2016 PMI Thought Leadership Series: Benefits realization management framework.

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