Interactive Multiple Criteria Optimization for Capital Budgeting in a Canadian Telecommunications Company

Abstract

Decision Support System for Optimal Resource Allocation (DSS ORA) is an interactive mathematical programming system for optimal resource allocation developed to support decisions of investment in capital intensive telecommunications projects. The system strives to maximize corporate goals while respecting financial constraints such as the availability of capital funds, institutional requirements and varied dependencies or synergies among projects. The Analytical Hierarchy Process (AHP) is used for quantification of qualitative managerial judgment in regard to the relative value of projects through a two stage process. An initial resource allocation is found by a linear program, the objective coefficients of which are determined by the AHP. Then, a modified simplex algorithm proposes some rates of funding substitution. Users choose the amount of substitution or can override the substitutions proposed. Thus, users can build gradual confidence in the constraint checking mechanism of DSS ORA and come to rely on its efficiency-seeking capabilities. DSS ORA has been tested by several groups of managers responsible for the management and the implementation of project portfolios with significantly consistent results. The flexibility, user friendliness and quick time response of DSS ORA make it an effective negotiation tool in a group setting.