Portfolio-Analysis Methods for Assessing Capability Options

This monograph presents and illustrates in some detail an analytical framework and methodology for defensewide capability-area reviews and describes new enabling tools to support capabilities analysis and related tradeoff work within the Department of Defense and the military Services. The Building Blocks to Composite Options Tool (BCOT) is used to generate and screen preliminary options, and the Portfolio-Analysis Tool (PAT) enables users to evaluate in a portfolio-analysis structure those options that pass screening. Variants of the methods can be applied for analysis across capability areas or for strategic-level defense planning, i.e., force planning to establish the overall mix and balance of capabilities. The concepts are illustrated with applications to the capability areas of Global Strike and Ballistic Missile Defense (BMD). Further research is recommended in four areas that promise to have a high payoff for defense planning: analysis cutting across capability areas; strategic-level portfolio analysis; advancing the science of exploratory analysis; and refinement of BCOT and PAT to make them easier to use, understand, modify, and maintain and also to enrich their utility for exploratory analysis and to incorporate new techniques for portfolio analysis developed in the fields of economics and business planning.