Research On Real Options Value Of Resource-Constrained Project Portfolio Selection Problem

Due to the increasing competition between organizations caused by scarcity of resources, project managers are increasingly looking to manage multiple projects in parallel within the limited time and resources, to gain higher interest. But carriying out multiple projects in parallel lurks a high degree of uncertainty, such as inappropriate portfolio selection, irrational portfolio structure, poor scheduling scheme and combination, which will greatly affect the development of the organization, and may lead to catastrophic consequences. Therefore, reasonable project selection and resource allocation have increasingly become the focus of researchers and managers. In previous studies, the net present value (NPV) analysis had been used for the evaluation of the project portfolio. However, in the real market where exist uncertainty and competition, the traditional NPV method can not effectively analyze various uncertain factors, and thus tend to underestimate the true value of the project. Real Options (RO) theory receives widespread attention for aiming at the uncertainty, and its flexibility.This study attempts to apply the real option theory to the evaluation of the project portfolio selection, in order to overcome the limitations of existing NPV evaluation methods. By analyzing of the type and valuation of the real option, it was founded that:the real option theory was more adapted to the business model of the project, and more in line with the actual project portfolio management, which means, it had advantages as project portfolio selection function to assess the objective. Meanwhile, in a resource-constrained conditions, considering the project selection and project scheduling, taking maximize the portfolio value of real options as the objective function, a mathematical model for the resource-constrained project portfolio selection and scheduling (RCPPSS) was established. Considering the characteristics of problems, the double decision-making framework was designed for solving the problem:for the upper decision-making, improved ant colony optimization algorithm for project portfolio selection problem, as well as real the objective function calculation of the portfolio real options value (ROV) were used as an important function module; for the lower decision-making, multi-project scheduling heuristic algorithm based on priority rules was used. With the experiment design method, system generated12project portfolio selection and scheduling problem instance, and also the effectiveness of the algorithm was compared and tested.The results showed that:the double decision-making method have a better solution for project portfolio selection and scheduling problems; compared to the NPV method, the value of real options can more truly reflect the value of the portfolio, and provide decision makers with higher yielding project portfolio.