RAND's Portfolio Analysis Tool (PAT): Theory, Methods, and Reference Manual
RAND NATIONAL DEFENSE RESEARCH INST SANTA MONICA CA
Pagination or Media Count:
Strategic planning often seeks to balance investments across numerous objectives. Defense planners, for example, have objectives relating to force capabilities for future traditional and irregular warfare and for operations other than war. The objectives apply separately for different geographical regions and time periods. Acquisition planners have objectives of providing future weapon-system capabilities in each of many mission areas--again for different operational circumstances and time periods. Trainers have objectives such as preparing troops to operate in diverse missions and circumstances. None of these planners have the luxury of a single objective to be maximized. Rather, they are confronted and sometimes confounded by multiple objectives, few, if any, of which can be ignored. Nonetheless, choices must be made, because resources are finite. Consequently, strategic planning often involves investing in a mix of capabilities and activities to address a mix of objectives. It is therefore natural to use the terminology of portfolio planning. The portfolio itself may be characterized by the allocation across investment categories e.g., Army, Navy, Air Force tanks, ships, and planes or by the corresponding allocation across objectives e.g., traditional versus irregular warfare. In either case, the idea is to balance the portfolio. This does not mean spreading money evenly across categories, because not all objectives are equal and because attending adequately to one may require much less effort than doing so for another. Further, given a large baseline of investment such as is enjoyed by the Department of Defense DoD and the Department of Homeland Security DHS, among others, some ways of spending a marginal billion dollars provide far more leverage than others. Spending or cutting that marginal billion in proportion to the baseline patterns of expenditure is often irrational.
- Administration and Management
- Economics and Cost Analysis
- Military Operations, Strategy and Tactics