# Sharing ratio

Discussion in 'PMP' started by Duaa Mouawad, Jan 10, 2018.

1. ### Duaa Mouawad Member Alumni

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how they calculate the Sharing ratio can any body help

12-6 The buyer has negotiated a cost plus incentive fee contract with the seller. The contract has a target cost \$300,000, a target fee of \$40,000, a sharing ratio of 80/20, a maximum fee of \$60,000 and a minimum fee of \$10,000. If the actual cost of the project is \$380,000 how much will the buyer pay as a fee to the seller?

a) \$56,000 b) \$104,000 c) \$30,000 d) \$24,000

Answer: D – Target cost = 300,000 Target fee = 40,000 Sharing ratio = 80/20 which means the seller assumes 20% of the cost overrun or 20% of -80,000 = 16,000. Target fee = 40,000 -16,000 = 24,000 The cost plus incentive fee contract shares the cost savings but could also result in reduced fees to the seller if a cost savings is not achieved

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2. ### Duaa Mouawad Member Alumni

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plus i would like to help what the meaning of this term :

12-19 Contractual language does not preclude the possibility of misunderstandings and situations that could adversely affect project progress. Therefore, it is considered a best practice to have a ______ committee established as a means of removing the obstacles and managing conflicts.

a) Top management ???
b) Disputes resolution
c) Steering ????
d) Engagement ????

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3. ### Duaa Mouawad Member Alumni

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I would like to know what " The salience model "???

Which conflict resolution technique is most likely to result in a permanent resolution?
a)Compromise b)Negotiation c)Confrontation d)Smoothing
Answer: C - Confrontation is most likely to result in a permanent resolution. All the others involve both parties giving something up.
( why C is the answer what the different )

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Last edited: Jan 10, 2018
4. ### tim jerome Well-Known Member Trainer

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The share ratio is proposed by the buyer and negotiated with the seller. To find the appropriate share ratio, the buyer needs to determine the window of acceptable and unacceptable overruns, and provide reasonable profit, with a little reward for cost savings, and a little negative impact for cost overruns.

There are ways to analyze this, but generally, it is through understanding of the acceptable savings and overruns, plus understanding of impact of sanctions/rewards. There is no formal formula, but more a process of analysis.

A Disputes resolution committee is an external group or entity who is tasked with resolving disputes when the disputes cannot be resolved. They may be used in any contractural relationship, but do cost, since you are asking experts to set aside time to perform this. THey may not be technical experts, but they will be experts in leadership and negotiation. This type of a committee provides oversight and governance.

Compare this to a steering committee, which may not have that level of authority, and generally give recommendations or advice.

A Salience Model is used in Stakeholder Management to assess the general engagement of a stakeholder. Instead of merely looking at power and interest (the standard model for such a task), it looks at power, urgency, and legitimacy (authenticity).

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5. ### Duaa Mouawad Member Alumni

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Thanks you a lot but I had many question also :

First : Discretionary dependency when the PM had float in the project duration but how this will help me can you give me clear definition for Discretionary dependency

Second: what the Sub network or fragment network templates

Third :
Which of the following is true with respect to Plan Cost Management?
a.Develop the high-level budget

b.Develop the cost management plan
c.Develop the budget plan
d. Develop both budget plan and cost management plan
is B ??

Four : when i go to sponsor directly and when i go to the team to discuses problem

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Last edited: Jan 12, 2018
6. ### tim jerome Well-Known Member Trainer

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Discretionary dependency is where the team/PM have a say in how the work is done, as compared to Mandatory, which has to be done a specific manner. The benefit is that I may not be able to change the work in a mandatory dependency, but I have flexibility in a Discretionary one. If I'm looking at a change to the schedule, I'll have to look at my discretionary dependencies.
An example of a Discretionary dependency is building individual servers for a server farm; if I can build the individual servers at my desk or in the lab / if it's my choice, I call that discretionary. If site inspection must be performed and signed off by city hall before I can start construction, that's Mandatory.

A sub-network, or schedule network template is a group of activities, collected into a summary task - in order to use easily in multiple instances within the project or as a template for other projects. An example is "concrete pad", which I insert wherever the concrete pad construction is needed. You can consider it as an OPA.

The answer is in relationship to the specific terms -
1. A - 'high-level' generally denotes initiating and the Charter.
2. B - the Cost Management Plan is an output of this process.
3. C - there is not a defined document called the Budget Plan; this is an intentional red herring.
4. D - again, budget plan are inserted to test whether or not the test taker knows that we call this a Cost Management Plan.
You go to the sponsor when the project is at risk of failure and you need to escalate. A lot of people make the mistake of assuming they go to the Sponsor for solutions. The Sponsor expects you to work with the team and stakeholders, and come to the sponsor with options. The team are experts in their domain, and you are experts in helping the entire team come to the solution.

Another confusion is communicating with stakeholders and communicating with team.
• You communicate with stakeholders to learn and to engage (involve).
• You communicate with team to turn data into information, solve problems, and determine variance & suggested outcomes.

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