Acquisition Management for System of Systems: Affordability through Effective Portfolio Management

Abstract

The lack of focus on complexity issues in System of Systems related acquisitions prevents effective support for Better Buying Power (BBP) targets of affordability, innovation, increased productivity, and healthy competition in reducing costs and improving delivery of promised performance. The impetus is to provide the necessary analytical frameworks and associated tools that enable better informed decisions in support of BBP objectives. This paper extends our previous work in robust portfolio optimization and adopts a multi-period portfolio management approach to support the objectives of BBP. Derived from the financial engineering and operations research literature, robust multi-period portfolio management principles provide a decision-making framework that balances performance of a portfolio of systems, constitute e.g., a system of systems, against potential risks. The framework also balances short versus long term gains through its multi-period formulation. An illustrative example, using a Littoral Combat Ship inspired naval warfare scenario, demonstrates application of the approach and potential use for acquisition practitioners.