Optimizing budget allocations in naval configuration management

Abstract

This paper describes a case study illustration of a technique that can be used to optimize capital expenditure budget decisions for engineering assets under multivariate objectives and uncertain costs. We define measures of capability increase relative to mission types and measures for risk, return and pseudo-correlation on potential maintenance upgrades, allowing portfolio optimization techniques from finance to be applied to asset management decisions. The results provide a risk-reward ratio for investment allocation decisions that is optimal. The work is aimed at capability management for naval platforms, but the technique has broader applicability in the field of asset management and multi-criteria decision making. © Springer 2010.