Models of Project Portfolio Management

In this work, the problem of budget allocation in project portfolio is analyzed. The existing methods of budget allocation are insufficient for large portfolios or for the macro analysis of the portfolio. Moreover, there is no elaborated method for the strategic buckets formation. Thus, it this research, the new model for budget allocation is presented. It also introduces the concept of multiple choice of project, which enables the simplification of the existing optimization models for the problem of portfolio formation. It implies that for each sub-portfolio (project category) can be defined the expected value and variation of the project costs (or any other characteristic) and basing on these value the portfolio formation problem can be solved. The proposed model is tested on three cases of portfolios with projects costs with unified, normal and lognormal distributions. Moreover, the approach for risk consideration within the model is described. Using the characteristics of the project values of distribution, the maximum levels of riskiness can be controlled. Furthermore, several suggestions for projects interdependencies inclusion into the model are discussed. The results obtained showed that the proposed method is effective for the stated problem and can be further developed for the needs of the organizations.