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Lockheed Martin Space Systems Company Optimizes Infrastructure Project-Portfolio Selection

Division of Business and Economics, Colorado School of Mines, Golden, Colorado 80401
Lockheed Martin Space Systems Company, Denver, Colorado 80201
cgurgur{at}mines.edu
tom.morley{at}lmco.com

Lockheed Martin Space Systems Company spends millions of dollars on the maintenance and modernization of its infrastructure each year. Projects often involve investments that cannot be justified purely in terms of net present value or other classical investment-evaluation methods. The options are also restricted because funds that are not spent within a given time frame must be relinquished. Furthermore, some projects may be delayed and the unplanned carryover of their costs moved into the next fiscal year; this causes the postponement or cancellation of other unrelated projects because of in-budget transfers. In this paper, we used multiattribute utility theory and chance-constrained programming to optimize the selection of infrastructure projects. Our solution ensured the selection of high-value projects to maximize the company's performance. These selections were subject to the constraints that a portfolio did not exceed the available budget and that the carryover of the unspent funds to the next fiscal year did not exceed predetermined limits. We used Microsoft Excel to ensure broad accessibility, transparency, user interaction, improved data collection and asset management, and ease-of-use by managers.

Key Words: capital rationing; chance-constrained programming; multiattribute utility theory; budgetary carryover; spreadsheet applications