Portfolio Analysis: Seeing the big picture

Government budgets?are too large to be managed as a whole so it is usual to break it?down into smaller elements.?In the United Kingdom (UK)?the budget?is divided into departments of state by HM Treasury. The Ministry of Defence (MOD) is one such department, but even this is too large to control, hence it is allocated to programmes and those are broken down into projects. At this level the funding lines are estimated, forecast and monitored; they are manageable by an individual project manager.

However, the big picture is needed to ensure that the individual project?budget lines do not exceed the overall funding available!

We have been working on the big picture and generating the UK MOD total budget to establish this portfolio picture. Our approach?has utilised both micro- and macro-parametric cost modelling to their best advantage. Using parametric modelling?we have?explored the cost modelling technique and?applied it to?the in-service capabilities and the future capabilities.

Establishing the defence budget is the first step, after this the real fun begins!

Now we are able to ask question such as; how can the portfolio view be used to influence industry strategy? What are the capability gaps? Is the portfolio balanced across the services? How do we consider balance of investment decisions? What are the cost drivers? And many more.

The paper below used the UK MOD as an exemplar, but the process will be equally applicable to any nation or governments.