January 2020
° Valuemetrics on Innovation, Capability, Time to Intercept, Warfghting Impact, Health, and Executionwere compiled with the help of SMEs, and these values are weighted and summarized as “OPNAV” (Innovation, Capability, and ExecutionHealth) and “Command” (Time to Intercept and Warfghting Impact) variables. These areweighted average values of multiple SMEs’ estimates of the criticality (1–10, with 10 being the highest) of each capability. “KVA” is unit equivalence (this can be multiplied by any market price comparable such as $1 million per unit or used as-is in the optimization model). These will be used later in the optimization section that follows. • Tornado analysis was run using ROV PEAT. • The AFCAAHandbook recommendations for uncertainty and risk distributions were used, with the following parameters for simulation: ° Savings Now and Capital Investment inputs were set using Triangular distributions based on the risk and uncertainty levels perceived by the SMEs, or they can be based on a ftting of historical data. ° Run 10,000 to 1,000,000 simulation trials. ° The multiple simulated distributions’ results were compared using Overlay Char ts and Ana lysis of Alternatives. • Finally, multiple portfolio optimizationmodelswere run in this case illustration using the following parameters: ° Constra ints for the por t fol io opt imi zat ion were a $4,000,000 budget and less than or equa l to 7 Opportunities. The portfolio’s NPV was maximized. ° Investment Efcient Frontier was run between $2,500,000 and $5,500,000with a step of $1,000,000 and nomore than 7 Opportunities. The portfolio’s NPV was maximized. ° Another Investment Efcient Frontier was run between $2,500,000 and $5,000,000 with a step of $500,000 and no more than 7 Opportunities. The portfolio’s NPV was maximized.
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Defense ARJ, January 2020, Vol. 27No. 1 : 60-107
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