Decision-Analytic Concept Selection and Value of Information in a Public Project

Abstract

In product development, firms choose product concepts in the conceptual design phase and develop final products from the chosen concepts. Concept selection is one of the most difficult decisions in product development since it involves large degrees of uncertainties. This paper presents a framework for decision-analytic concept selection and information gathering in a public project, in which the government has an option to cancel the project if the cost of the project exceeds the budget. In this framework, a customer (e.g., the government) has an option to cancel the project instead of a decision-maker (e.g., a national laboratory). In information gathering, this paper presents, first, sensitivity analysis that enables engineers to investigate whether it is beneficial to collect additional information about uncertainties, and second, the value of perfect information in determining the maximum monetary resource they should spend for such activity. Finally, an illustrative example demonstrates decision-analytic concept selection, sensitivity analysis, and the value of perfect information for a next generation linear collider.Copyright © 2005 by ASME