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Meeting Report: “Portfolio Decision Analysis” by Gregory S. Parnell

On Tuesday, March 2, 2010 at the Arlington Central Library a joint WINFORMS / IIE presentation took place before 74 listeners.

“Portfolio Decision Analysis” by Gregory S. Parnell
– Professor of Systems Engineering, U.S. Military Academy

[Dr. Gregory S. Parnell, Professor of Systems Engineering at the United States Military Academy at West Point, teaches decision and risk analysis, systems engineering, and operations research. His research focuses on decision analysis, risk analysis, and resource allocation for defense, intelligence, homeland security, and environmental applications. He is also the Chairman of the Board and a senior principal with Innovative Decisions Inc., a leading decision and risk analysis firm. He is a member of the Chief Technology Officer and Information Assurance Panels of the National Security Agency Advisory Board and is a former chair of a National Research Council study on bioterrorism risk analysis. He co-edited Decision Making for Systems Engineering and Management, Wiley Series in Systems Engineering, Wiley & Sons Inc., 2008, and has published over 100 papers and book chapters. Dr. Parnell has served as President of both the Decision Analysis Society of the Institute for Operations Research and Management Science (INFORMS) and the Military Operations Research Society (MORS). He is a fellow of the MORS, INFORMS, and the International Committee for Systems Engineering (INCOSE). Dr. Parnell received his Ph.D. from Stanford University.]

Dr. Parnell spoke to an overflow crowd which had to be switched to the library’s auditorium due to overcrowding the original meeting room. Portfolio Decision Analysis can also be called resource allocation, cost-benefit analysis, project selection, portfolio analysis, etc. He agreed the latter includes capital rationing. He described three approaches to the portfolio decision process:
1) The Analytical Approach,
2) The Decision Conference, and
3) The Dialog Decision Process.

He then gave several examples of portfolio decision analysis from his experience including Marine Corps POM, Air Force Space Command, Army BRAC, Air Force Research Lab, Marine Corps System Command, and others using various OR optimization techniques including linear programming and mixed linear programming. Use the link below to view his detailed slides.

Portfolio Decision Analysis presentation slides © 2010 Innovative Decisions, Inc.

In summary, credible cost data is critical to successful portfolio decision analysis. A combination of OR techniques should be applied to the problem. He adds that the simplest model is best. In the BRAC example 110 attributes were reduced to 40. Moreover, tangible value assessment is preferable to a priority list.

(Submitted by Joseph Scheibeler)