A Note on Project Selection in Research and Development — Post-Rothschild

Abstract

THE PROJECT selection problem has been tackled by numerous people, including many from operational research backgrounds. The methods suggested and adopted include both qualitative and quantitative, latter ranging from simple ranking procedures for individual projects, occasionally making use of decision-tree type structures, to those that consider a portfolio of projects and which often take form of mathematical programming models. Information inputs are generally in form of estimates of resource requirements and cash flows over time. Ranking is usually done in order of net present value, rates of return or benefit to cost ratios. In portfolio type of models it is possible to choose a set of projects which maximize a given objective function subject to meeting a specified set of constraints or alternatively it is possible to use model to identify a range of portfolios with particular characteristics from which an appropriate choice can be made. But what of recent developments in thinking about R & D management? In applied research area, recent Rothschild report' emphasizes role of in project selection process and states that the person who has to pay for end-product of applied R & D is, for obvious reasons, in best position to decide how much can be afforded. It goes on to say that depending on his qualifications, he may need to take advice of scientists, mathematicians or engineers skilled in subject under consideration but inference is that decision to go ahead or not with a particular piece of applied research ultimately lies with customer. If this is situation we face we must ask on what basis will he make this choice. Presumably answer is on two major points firstly price he must pay and secondly time-scale within which he can expect results in effect quotation he receives from R & D department or establishment. It would, of course, be naive to assume that customer-contractor relationship is a simple one in which quotations can be prepared and agreed with minimum of consultation. In areas of less complexity than R & D it is accepted that interchange takes place during course of tendering but in many of these cases customer knows as much as contractor about problems and difficulties which are likely to be encountered. This is not always true of R & D, which tends to offer a specialist service and where ground which is common to both parties may be very limited. Indeed one of