Risk-Based ROI, Capital Budgeting, and Portfolio Optimization in the Department of Defense https://www.dau.edu
Wismeth (2012) noted that the Army has implemented the Army Portfolio Management Solution to facilitate the collection and analysis of information necessary to prioritize the thousands of IT investments within its portfolio. IT investments are grouped according to the mission capabilities they support: Warfghter, Business, and Enterprise Information Environment Mission Areas, each of which is led by a three- or four-star-level general ofcer or senior executive. Janiga and Modigliani (2014) recommended that the DoD foster dynamic and innovative solutions for tomorrow’s warfghter by designing acquisition portfolios that deliver an integrated suite of capabilities. Programexecutive ofcers today often focus on executing a dozen similar but independent programs. In contrast, large commercial businesses manage integrated product lines for items ranging from automobiles and electronics to software and health services. The DoD could leverage this model as a basis for constructing portfolios of similar programs that deliver enhanced capabilities in shorter timeframes. burdens on acquisition offcers to make decisions regarding potential programs with respect to the joint capability portfolio. Furthermore, signifcant cost overruns in recent acquisition programs reveal that, despite efforts since 2010 to ensure the affordability of systems, additional work is needed to develop enhanced approaches and methods. The Institute for Defense Analyses prepared a document for the Ofce of the Director, Acquisition Resources and Analysis, under a task titled “Portfolio Optimization Feasibility Study” (Weber et al., 2003). The objective was to study the feasibility of using optimization technology to improve long-term planning of defense acquisition. The model described in this document is an example of optimization technology that can estimate and optimize production schedules of Acquisition Category I programs over a period of 18 years. With each passing year, the infusion of ever more complex technologies and integrated systems places increasing
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Defense ARJ, January 2020, Vol. 27No. 1 : 60-107
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