January 2020
• Budget Constraint. Fiscal Year (FY) budget limitations and probabilities of budgetary overruns. • Total Ownership Cost (TOC) and Total Lifecycle Cost (TLC). Accounting for the cost of developing, producing, deploying, maintaining, operating, and disposing of a system over its entire lifespan. Uses Work Breakdown Structures (WBS), Cost Estimating Categories (CEC), and Cost Element Structures (CES). • KnowledgeValueAdded (KVA). Monetizing Learning Time, Number of Times Executed, Automation, Training Time, and Knowledge Content. • Strategic and Capability. Multiple value metrics can be determined fromSMEs: ExpectedMilitaryValue and Strategic Value. Future Weapon Strategy Metrics Capability Measures (CM). Difficult to quantify and need SME judgment: Innovation Index, Conversion Capability, Ability to Meet Future Threats; Force Structure (size/units), Modernization (technical sophistication), Combat Readiness, Sustainability; Future Readiness (ability tomeet evolving threats, ability to integrate futureweapon systems). Domain Capabilities (DC) Portfolios are divided into different domains, and each domain is optimized separately and then combined into the enterprise level and re-optimized; example domains include Coastal Defense, Anti-Air Surface Warfare, Anti-Surface Warfare, Anti-Submarine Warfare, Naval Strike, Multi-Mission Air Control, Sea Control, Deep Strike, Missile Defense, and so on. Constraints can be added whereby each domain needs to have a minimum amount of capability or systems, and within each domain, diferent “value” parameters can be utilized. Optimization Application at PEO-IWS and NAVSEA The following is a case illustration of portfolio optimization. The values and variables shown are nominal and used for illustration only; they should not and have not been used for making any actual decisions. Nonetheless, all that has to be done in any future real-life applications is to change the names of these options and the values. The analytical process and portfolio methodology remain the same.
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Defense ARJ, January 2020, Vol. 27No. 1 : 60-107
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