Leading transportation organization – Portfolio optimization

Understanding the project portfolio and defining ‘what’ the organization should do to deliver strategy and policy through project investments – balancing risk, return and resource constraints is vital to business success. Seldom do organizations get it right and this case study explains an approach to how to improve the performance of this ‘integrating’ practice.

This client, operator of one of the largest, and oldest, transportation systems in the world, wanted to improve its process for allocating £500MM of annual capital funds to some 2000+ projects for the replacement and expansion of infrastructure. 
It needed a better way to identify investments, within a fluctuating funding limit, to yield the greatest system benefits.

What we found

  • Annual portfolio planning process in place, but based largely on subjective and non-standardized input, and with a limited time horizon
  • Made investment decisions by allocating capital to functional departments (and a few strategic projects) on the basis of initial business case statements. 
  • Generally, it was left to business lines to make more refined decisions on how to spend the funding they were allocated
  • Due to overall complexity and conflicting value measures, often projects would be selected simply because they had the most vocal advocates
  • No way to account for changing priorities or to determine the cumulative benefit of a potential scenario

What we did

  • Developed a new portfolio optimization approach, taking into account budgetary/ resource constraints, complex business objectives, and project interrelationships
  • Developed and implemented an optimization tool to perform analyses, allowing management to efficiently run a series of “what if” scenarios
  • Extended the planning horizon up to a decade
  • Installed an assessment assurance process to ensure consistency between competing business line bids
  • Standardized business case requirements to reflect a set of defined programme targets, enabling direct comparison and cumulative analysis

What was achieved?

  • The optimization of the project portfolio was explicitly based on quantified benefit as it relates to defined strategic targets – and provided projections of the outcomes of various scenarios against these targets
  • Increased speed and flexibility compared to the previous, manual approach
  • Feedback loops enabled business lines to improve their bids until much later in the business planning process
  • A “virtuous cycle” of better planning, improved data quality and availability, and improved decision-making/ results
  • Ability to re-optimize portfolio elements (on an annual or semi-annual basis) with an objective understanding of impact.

This organization not only improved their portfolio management practices but totally overhauled their strategic planning process on the back of this initiative.

John Hall
PA Consulting Group

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