RAND's Portfolio Analysis Tool (PAT)

Theory, Methods, and Reference Manual

by Paul K. Davis, Paul Dreyer

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Strategic planning often involves investing in a mix of capabilities and activities and assessing the adequacy of options for meeting a variety of objectives. Such an analysis “portfolio” may be characterized by allocation across investment categories or by the corresponding allocation across objectives. RAND's Portfolio Analysis Tool (PAT) was designed to facilitate strategic analysis dealing with both uncertainty and differences of perspective. PAT generates high-level summary depictions for discussing issues of balance. It uses a spreadsheet-based format with options shown in rows and various measures of option goodness in columns. The PAT user can drill down (zoom) to understand the basis of high-level characterizations and to identify troublesome problems. PAT can depict various types of risk in a number of ways and present options that mitigate or hedge against those risks. Built on an earlier application-specific tool, PAT-MD, which was developed for the U.S. Missile Defense Agency's Program Integration Office (MDA/PI), PAT reflects lessons learned, and it has evolved considerably. The approach to analysis enabled by PAT is oriented toward assisting high-level decisionmakers to frame their thinking about balance, to construct good multifaceted options for consideration, and to make subsequent choices. This report documents the theory and methodology of PAT and serves as a combined reference manual and user's guide. It will be of interest primarily to analysts and those who manage analysis.

Table of Contents

  • Chapter One

    Introduction

  • Chapter Two

    Overview of PAT

  • Chapter Three

    PAT Input Worksheets

  • Chapter Four

    PAT Output Worksheets

  • Chapter Five

    Details of the Methodology

  • Chapter Six

    Marginal and Chunky Marginal Analysis

  • Chapter Seven

    Concluding Observations

  • Appendix A

    Quickstart on Using PAT

  • Appendix B

    Transferring Data from an Earlier Workbook

  • Appendix C

    Editing and Neatening

The research described in this report was prepared for the Office of the Secretary of Defense (OSD). The research was conducted in the RAND National Defense Research Institute, a federally funded research and development center sponsored by the OSD, the Joint Staff, the Unified Combatant Commands, the Department of the Navy, the Marine Corps, the defense agencies, and the defense Intelligence Community.

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