Methods for selecting the optimal portfolio of projects

Most organizations do not have sufficient resources to meet all of their obligations; selecting which projects should be funded is not just ranking projects and funding them 'top-down' until resources are depleted. Organizations need to balance the benefits that project portfolios provide with their respective constraints and they need to do so in a meaningful way. To address this problem, we propose using enterprise portfolio analysis to reach the optimal projects mix and maximize the collective benefits, while balancing other factors such as risk, dependency and budget etc. Three extended mathematical models and revised dynamic programming algorithms together with simulation optimization are proposed based on solution of standard knapsack problem. Specifically, the proposed models and algorithms are illustrated using an example from practices. ©2008 IEEE.