January 2020
view provides senior military leaders valuable metrics for measuring risks and uncertainties of costs, capabilities, and requirements. Armed with these metrics, senior leaders can make better choices, among a set of plausible portfolios, to satisfy the Navy's national security objectives. To support their analysis, a subset of the then-current DON portfolio was selected by fnancial management and acquisition stafwithwhich to test a methodology of portfolio analysis in the area of Mine Countermeasures—a diverse, representative system of programs. This pilot model was a multi- phase process that included gathering life-cycle cost data for the various systems to be analyzed, establishing a scoring systemusing subject matter experts (SME) to determine how efectively current and future systems match capabilities to requirements, and developing a means to display results by which decision makers can examine risk-reward analysis and conduct trade-ofs. The researchers’ ultimate goal was to assess military investments using portfolio analysis methodology. The GAO (General Accounting Ofce, 1997; Government Accountability Office, 2007) emphasized the approach of optimizing a portfolio mix to manage risk and maximize the rate of return. Although the DoD produces superiorweapons, theGAOreported that the department has failed to deliver weapon systems on time, within budget, andwith desired capabilities.While recent changes to the DoD’s acquisition policy held the potential to improve outcomes, programs continue to experience signifcant cost and schedule overruns. The GAO was asked to examine how the DoD's processes for determining needs and allocating resources can better support weapon system program stability. To do this, according to the report, the GAO compared the DoD’s processes for investing in weapon systems to the best practices that successful commercial companies use to achieve a balanced mix of new products, including companies such as Caterpillar, Eli Lilly, IBM, Motorola, and Procter and Gamble. Based on the reports, the GAO found that to achieve a balanced mix of executable development programs and ensure a good return on their investments, the successful commercial companies the GAO reviewed take an integrated, portfolio management approach to product development. Through this approach, companies assess product investments collectively from an enterprise level, rather than as independent and unrelated initiatives. These commercial entities weigh the relative costs, benefits, and risks of proposed products using established criteria andmethods, and select those products that can exploit promising market opportunities within resource constraints andmove the company toward meeting its strategic goals and objectives. In these frms, investment decisions are frequently revisited, and if a product falls short of expectations, companies make tough go/no-go decisions over time.
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Defense ARJ, January 2020, Vol. 27No. 1 : 60-107
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