A Project Manager has been contracted by a company to manage the development of a software business application. The Project Manager discovers that five of the software developers are contractors and

Reporting the unlicensed software use to senior management is the correct first step because it escalates the legal compliance issue to the appropriate internal authority who has the power to resolve it. The PM does not have direct authority over contractor software licensing but has a professional responsibility to report the violation. Senior management can then engage legal, procurement, or vendor relations to remediate the situation properly.

PMI is not the appropriate body to report software licensing violations, as this is a legal matter for the company and software vendor, not a PMI ethics issue.

Calling the software vendor bypasses the company's internal authority and may expose the company to liability before management is aware of the issue.

Filling out a piracy report externally before notifying the company's own management skips the required internal escalation and could create legal complications.