Portfolio Analysis and Management for Naval Research and Development

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The Office of Naval Research (ONR) has the responsibility for defining and sponsoring research and development (R & D) necessary to support both the current and future requirements of the Navy and Marine Corps. To accomplish this mission, ONR must fund a broad spectrum of research, ranging from basic research needed to open up new options for the long-term to near-term advanced technology development to support the current fleet. Moreover, ONR must make its R & D funding decisions in the presence of uncertainty: uncertainty in required capabilities, in performance requirements, and in the feasibility of a technology or R & D approach. This monograph describes the adaptation of an R & D portfolio management (PortMan) decision framework developed by the RAND Corporation to support ONR's R & D decisionmaking, and the demonstration of its use by means of a case study evaluation of 20 sample ONR applied-research projects. PortMan computes the expected value of an R & D project as the product of three factors estimated by experts: value to the military of the capability sought through R & D, the extent to which the performance potential matches the level required to achieve the capability, and the project's transition probability. This approach allows identification of those R & D projects with high-value capabilities but formidable technical or fielding problems that remain to be solved-projects for which management attention may have the greatest leverage.