A comparison of portfolio analysis techniques for Research and Development programs

Many Department of Defense (DoD) organizations do not use quantitative techniques to compare, prioritize, budget, and manage their Research and Development (R&D) programs. Instead, the process for assessing the benefits of the programs is often qualitative. However, quantitative techniques exist that can help identify high payoff programs and prioritize programs. With an R&D budget of approximately $34.4B for FY2000 (a decrease of about 8% since FY98), agencies within the DoD must be able to quantify the value of the programs to their program managers, agencies, DoD, and Congress. This paper presents the results of a comparative analysis of three portfolio analysis techniques applied. to R&D programs. The techniques investigated included Multiobjective Decision Analysis, benefit cost analysis, and data envelopment analysis (DEA). An actual data set is used to compare the results of the techniques. We found that the techniques produced some conflicting results. The usage of a real world data set allowed us to identify the strengths and weaknesses of the portfolio analysis techniques and to assess the potential insights from comparing the results of different portfolio analysis techniques.