Project Management in the Oil and Gas Industry

Figure 4.9 Effect of operation performance on the whole investment.
Maintenance
& rehabilitation
Time
Operation
Engineering
phase
Construction
phase
Start up
Cost, $
+
–

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140 
Project Management in the Oil and Gas Industry
2. You are in the middle of a new project when you discover that the 
previous project manager made a US $2,000,000 payment that was not 
approved in accordance with your company policies. Therefore, the 
project CPI is 1.2. What should you do?
• Bury the cost in the largest cost center available.
• Put the payment in an escrow account.
• Contact your manager.
• Ignore the payment.
3. A project manager for an offshore project is unsure how much cost con-
tingency to add to the project. There is a 50 percent chance of a weather 
delay causing an impact of US $100,000 and a 20 percent chance of a 
delay in the testing center with a US $20,000 impact. How much should 
the cost reserve be?
• Less than $50,000
• More than $120,000
• Less than $20,000
• More than $54,000
4. You’ve just completed the initiating phase of a small project and 
are moving into the planning phase, when a project stakeholder 
asks you for the project’s budget and cost baseline. What should you 
tell her?
• The project budget can be found in the project’s charter, 
which has just been completed.
• The project budget and baseline will not be finalized and 
accepted until the planning phase is completed.
• The project plan will not contain the project’s budget and 
baseline; this is a small project.
• It is impossible to complete an estimate before the project 
plan is created.
5. An analysis shows that you will have a cost overrun at the end of the 
project. Which of the following should you do?
• Evaluate options to crash or fast track the project and then 
evaluate options.
• Meet with management to find out what to do.
• Meet with the customer to look for costs to eliminate.
• Add a reserve to the project.

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Project Cost Control 141
6. A project is seriously delayed. Earned value analysis shows that the 
project needs to be completed ten percent faster than the work has 
been going. To get the project back on track, management wants to 
add ten people to a task currently assigned to one person. The project 
manager disagrees, noting that such an increase will not produce an 
increase in speed.
This is an example of:
• Law of Diminishing Returns.
• fast 
tracking.
• earned 
value.
• life cycle costing.
7. You are in a project startup. As a project manager you are invited to 
meetings with the project execution team. What should you include in 
these meetings that would have the biggest impact on the project?
• Review of the action item list
• Review of identified risks
• Assignment of tasks to team members
• Estimating 
costs
8. After analyzing the status of your project, you determine that the 
earned value is lower than the planned value. What should you expect 
as an outcome if this trend continues?
• The actual cost will be lower than planned.
• The estimate at completion will be lower than planned.
• The project will finish behind schedule.
• The project will finish below the original cost estimate.
9. A project manager has just been notified by the vendor that the cost 
increased.
What should you determine first as the project manager?
• If there is enough reserve to handle the change.
• If another vendor can provide it at the original cost.
• If another task can save money.
• If the task is on the critical path.
10. Which of the following sequences represents straight line depreciation?
• 200$, 200$, 200$
• 140$, 120$, 100$
• 160$, 120$, 100$
• 120$, 140$, 160$

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