Understanding Budget Scenario Optimization Calculations

The Optimization tool simulates different project selection scenarios to find the optimal selection of projects that meets your desired objective values. The optimal selection may be limited by project and cost constraints to meet budgetary or other cost requirements. After running the tool, two lines are generated:

• Total Cost Constraint: This line includes the total cost constraint value only. The purpose of this curve is to show the best possible project selection using only a total cost constraint.
• Total & Time-phased Cost Constraint: This line includes the total cost constraint value and time-phased cost constraint values. The purpose of this curve is to show the best possible project selection using all possible cost constraints.
• Both lines also consider project budget constraints, project dependencies, and any projects with Forced In or Forced Out states.

The following examples demonstrate how the budget planning Optimization tool generates an optimized project selection result.

Note: The following examples are specific to manually input cost constraints, not portfolio funds.

Example 1

Example 1 only considers a total cost constraint value to determine a project selection that maximizes total project value while minimizing total project cost.

Project	Cost	2017	2018	2019	2020	Project Value
A	$400	$100	$200	$100		$1000
B	$300	$50	$100	$100	$50	$400
C	$200	$0	$50	$100	$50	$400
Total	$900	$150	$350	$300	$100	$1800

If you consider a total cost constraint value of $500, the possible project selection scenarios are as follows:

• Project A
• Project B
• Project C
• Project B and Project C

Each of these selections meets the $500 total cost constraint. The selection that maximizes your Project Value is Project A, with a value of $1000 and a cost of $400.

Example 2

Example 2 considers a total cost constraint value as well as time-phased cost constraints. We will also see how the optimal project selection may vary based on changes to the input cost constraint values.

Project	Cost	2017	2018	2019	2020	Project Value
A	$400	$100	$200	$100		$1000
B	$300	$50	$100	$100	$50	$400
C	$200	$0	$100	$100	$50	$400
Total	$900	$150	$300	$300	$100	$1800
Constraint Set 1	$500	$50	$250	$200	$100
Constraint Set 2	$500	$100	$200	$200	$100

Consider Constraint Set 1. The possible combinations of projects are as follows:

• Project B
• Project C
• Project B and Project C

Each of these combinations not only meets the $500 total cost constraint, but also the time-phased cost constraints for each yearly period. The combination that maximizes the Project Value is Project B and Project C, with a total value of $800.00, at a total cost of $500.00.

Consider Constraint Set 2. Although similar to Constraint Set 1, the time-phased total cost values for 2017 and 2018 have both been modified. The possible combinations of projects that meet the constraint values in Constraint Set 2 are as follows:

• Project A
• Project B
• Project C
• Project B and Project C

Each of these combinations meets the $500 total cost constraint and each time-phased total cost constraint. The combination that maximizes Project Value is Project A, with a total value of $1000.00, at a total cost of $400.00.

The modification of the time-phased cost constraints has resulted in a greater possible Project Value.