The Engineering Economist · 2009 · 35 citations · 8 references
BusinessDecision SciencesProject ManagementOptimizationPortfolio ManagementProject PlanningInvestment PrioritizationPortfolio OptimizationPortfolio SelectionProject Cost ManagementProject PrioritizationProject SelectionBudget-constrained Project SelectionNet Present ValueOptimization Under Budget ConstraintsOptimization-based PrioritizationProject Evaluation Under UncertaintyProject Portfolio PrioritizationProject Prioritization CriteriaScenarios
We consider capital investments under uncertainty. A typical approach to this problem, when the problem parameters are assumed known, is via a multi-knapsack model. This model takes as input annual budgets as well as the cost streams and profit—i.e., net present value (NPV)—of each project. Its output is a portfolio of projects with the highest total NPV, observing yearly budget constraints. We argue that such a portfolio fails to hedge against uncertainties in the budgets, the cost streams, and the profits. As an alternative, we propose a model that forms an optimal priority list of projects, incorporating multiple scenarios for these input parameters. We apply our approach to two sets of example projects from the South Texas Project Nuclear Operating Company.
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Defending Critical Infrastructure
Gerald G. Brown, Matthew Carlyle, Javier Salmerón et al. · INFORMS Journal on Applied Analytics · 2006 · 784 citations