This is the next post in a series describing how the Portfolio Analysis pieces of Project Server 2010 work under the hood.  This post will discuss how portfolios are impacted by forcing in or out specific projects.  I wrote this post as part of an exercise to make sure that I understand what’s going on in Project Server – as well as making an initial attempt to lay the pieces out in a way that my clients would understand.  My goal is to develop an Excel-based model that takes the same inputs as Project Server and then generates approximately the same outputs.  As such, I do not guarantee that I have captured Project Server’s own heuristics exactly, but I feel that I have captured the background concepts well enough to explain them.

DISCLAIMER: The worksheet referenced below is not a competing product to Project Server 2010, and does not contain references to any proprietary code.  It was developed based on publicly available information as an Excel mock up of the server-side portfolio optimization calculations found in Project Server.  The goal of this post is for educational purposes only.

Now that we have that out of the way….for previous posts in this series, please refer to:

Pairwise Analysis Demystified

Pairwise Analysis Revisited

Developing the Solution Set/Assessing Cost Constraints

…and for the worksheet that I will be referring to in the screenshots: Announcing the Catapult Portfolio Simulator v1.

In fact, I’d highly recommend reading the Developing the Solution Set post as this will build off of that foundation.

# Establishing the Solution Set

As I discussed in that post, based on a sample portfolio comprised of 5 projects, we have a potential solution set of 2 to the 5th permutations, or 2 X 2 X 2 X 2 X 2.  This yields 32 potential solutions.

For illustration purposes, we have a project portfolio estimated at costing a total of \$323,207, with a budget of \$350,000…which reminds me of a couple energy companies I’ve seen back when oil prices were spiking a couple of years ago.

Based on the logic discussed in the last post, that gives us an optimal portfolio including Projects 1, 2, 3, 4 and 5.  This also yields an Efficient Frontier (or Ranking Curve) that looks as follows.  You’ll note that the solution set lies right on the Efficient Frontier.

(Fun with the Efficient Frontier is coming soon….stay tuned for future posts.)

# Forcing Projects

So what happens when the boss has a couple of pet projects that absolutely must be included in the portfolio selection?  This introduces the concept of Forcing In or Out projects – which Project Server helpfully allows us to describe in more “political” terms by adding aliases for Forcing In or Out.  One day, I’ll have to brainstorm some entertaining aliases, as I see a lot of comic potential there.

Project Server 2010 allows us to flag each project with one of three potential states:

1. Auto
2. Forced In
3. Forced Out

In the Excel workbook, those options can be toggled here:

This means that each of the 32 solution scenarios now falls into one of five potential states:

1. Unconstrained
2. Includes project that has been forced out (Rejected)
3. Does not include project that has been forced out (Accepted)
4. Includes project that has been forced in (Accepted)
5. Does not include project that has been forced in (Rejected)

So I now decide to Force Out Project 5.

Looking back at our potential solution set, we can see which solutions have been excluded based on the revised criteria.  You’ll see any solution including Project 5 has now been rejected and flagged in red.

To find the optimal solution in this case, we now look at the scores for the remaining solutions and choose the one presenting the maximum Strategic Value.  (For what it’s worth, if multiple solutions have the same Strategic Value, Project Server will automatically pick the cheapest of the options.  The Excel spreadsheet isn’t quite so sophisticated)

The highest Strategic Value maps to the YYYYN solution, which yields the following results:

…and looks like this on the Efficient Frontier chart.  Here, you’ll note that the solution set has dropped below the 100% in the previous example.  Typically, forcing a project in or out of the portfolio may also push the selected solution below the Efficient Frontier.  This indicates that the selected project portfolio is not making the most efficient use of resources.

Coming up: How to Calculate the Efficient Frontier.