Applying Financial Portfolio Analysis to Government Program Portfolios

Abstract

Government agencies and the Department of Defense in particular, require decision-support tools when making funding decisions regarding portfolios of programs or projects. Government agencies have had some success in applying Project Portfolio Management (PPM) when choosing among potential programs; however, once programs are underway, financial managers routinely face funding optimization decisions similar to those of private-sector stock market portfolio managers. While private-sector portfolio managers rely on "stock-price" based financial portfolio analysis to aid decision making, government financial managers lack an equivalent "stock-price" metric for program or project performance. This research suggests the government's Earned Value Management System (EVMS) metrics may be used to generate a suitable proxy with which financial portfolio analysis can be conducted. From this analysis, risk and return trade-offs can be quantified and used when making portfolio decisions. An example using representative EVM data is presented. Recommendations on the possible applicability and limitations of the technique are discussed.

Open PDF

Document Details

Document Type
Technical Report
Publication Date
Jun 01, 2007
Accession Number
ADA469960

Entities

People

  • Bradford L. Botkin

Organizations

  • Naval Postgraduate School

Tags

Communities of Interest

  • Biomedical
  • Energy and Power Technologies
  • Ground and Sea Platforms
  • Human Systems

DTIC Thesaurus Topics

  • Business Administration
  • Commerce
  • Contracts
  • Data Mining
  • Databases
  • Fixed Wing Aircraft
  • Governments
  • Information Retrieval
  • Information Science
  • Linear Programming
  • Management Personnel
  • Money
  • Optimization
  • Organizational Structure
  • Procurement
  • Spreadsheet Software
  • Test And Evaluation

Readers

  • Computational Modeling and Simulation
  • Defense Acquisition Program Management
  • Economics