January 2020
Vascik, Ross, and Rhodes (2015) found that themodernwarfghter operates in an environment that has dramatically evolved in sophistication and interconnectedness over the past half century. With each passing year, the infusion of ever more complex technologies and integrated systems places increasing burdens on acquisition officers to make decisions regarding potential programs with respect to the joint capability portfolio. Furthermore, significant cost overruns in recent acquisition programs reveal that, despite eforts since 2010 to ensure the afordability of systems, additional work is needed to develop enhanced approaches and methods. Vascik et al.’s paper discussed research that builds on prior work that explored system design trade-spaces for afordability under uncertainty, extending it to the program and portfolio level. Time-varying exogenous factors, such as resource availability, stakeholder needs, or production delays, may infuence the potential for value contribution by constituent systems over the life cycle of a portfolio and make an initially attractive design less attractive over time. Vascik et al. introduced amethod to conduct portfolio design for afordability by augmenting Epoch-Era Analysis with aspects of Modern Portfolio Theory. The method is demonstrated through the design of a carrier strike group portfolio involving the integration of multiple legacy systems with the acquisition of new vessels. According to DoDD 5100.96 (DoD, 2017), the Principal DoD Space Advisor (PDSA) monitors and oversees the performance of the entire DoD space portfolio. The PDSA, in assessing space-related threats, requirements, architectures, programs, and their synchronization, advises senior DoD leadership and recommends enterprise-level adjustments. It conducts an annual strategic assessment, or Space Strategic Portfolio Review when directed, assisted by the Defense Space Council and Director, Cost Assessment and Program Evaluation, to address space posture and enterprise-level issues and provides the Secretary and Deputy Secretary of Defense with results of the analysis, which may include prioritized programmatic choices for space capabilities. Capital Budgeting and the Value Concept The Traditional Views Value can be defned in many ways, depending on the needs and views of the stakeholder. For the purposes of this research, one of the ways we will define value is the single time-value discounted number that is representative of all future net proftability. In contrast, the market price of an asset may or may not be identical to its value (“assets,” “projects,” and “strategies” are used interchangeably). For instance, when an asset
71
Defense ARJ, January 2020, Vol. 27No. 1 : 60-107
Made with FlippingBook Learn more on our blog