Project Portfolio Cost Analysis

Abstract

This chapter presents a stochastic cost analysis for a company's portfolio of 10 projects over 12 months. Each project is planned to start in a given month, and from that month on, it has expected costs, some of which are known (of which, some are zero) and some of which are uncertain. There are possible random delays (or, for a few projects, possible earlier starting months), which shift the cost schedule to the right (or left). Also, each project has a variable chance of failing (i.e., 5%, 10%, 15%, or 20%) in any month after its actual starting month. If it fails in a given month, that month's costs plus any remaining months' costs are not incurred. A simulation model is applied to calculate the variables that are required for the analysis. Four simulations are run to complete the analysis.