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(TCM-3189) An Integer Programming Model for Capital Project Portfolio Planning

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Level: Advanced
Venue: 2019 AACE International Conference & Expo, June 16-19, 2019, New Orleans, LA, USA

Abstract: AACE International defines a portfolio as a set of assets – including projects, programs, and other revenue-generating items – that are grouped together for a specific purpose, whether it be management convenience, asset diversification, or some other strategic objective. Portfolio planning is the process of identifying assets and determining the extent to which one should invest in them. A good portfolio plan will maximally leverage organizational resources to generate the greatest possible return. A portfolio plan for capital projects involves a series of decisions that determine if, when, and where each potential project will be executed over some pre-defined time horizon. The two key tasks in capital project portfolio planning – project selection and scheduling – are highly related and interdependent; given scarce resources – availability of funding, labor capacity, physical space, and time, among others – the selection and scheduling of any single project affects the feasibility of all others. The precise nature and consequences of this relationship will be outlined in this paper. The present work argues that the capital project portfolio planning problem can be modelled using a standard integer programming formulation to return the optimal portfolio plan.