A novel simulation optimization model for the project portfolio selection and scheduling problem regarding the risks of the projects

Abstract

Timely project completion within the predicted budget is one of the primary goals of project-oriented organizations. The inherent risks associated with projects have made achieving these goals challenging for most organizations. In many cases, the interdependence of risks across different projects leads to undesirable consequences, further exacerbating this challenge. To address the aforementioned challenges, this article introduces a novel formulation for the two-objective problem of project portfolio selection and scheduling. The first objective is to maximize the profit of the project portfolio by accounting the aggregated cost impacts of risks on projects’ activities. The second objective aims to minimize the implementation time of the project portfolio. To evaluate the expected impacts of risks and their interactions, the objective functions are developed based on the Bayesian Networks approach. Current mathematical formulations for the integrated problem of project portfolio selection and scheduling exhibit significant limitations, including the absence of incorporating risk factors and their interdependencies within and across projects on the duration and cost of activities. As solution approach, the simulation-based approximation approach is developed to establish a linear modeling of the problem. Since this approach provide multi objective mathematical modeling, augmented ϵ -constraint programming is employed to solve the presented model. For the validation of the formulations, the proposed model and solution approach are applied to a sample instance. The results of the model implementation, while confirming the validity of the proposed approach, demonstrated that selecting projects with less interference effects with other projects can yield more favorable outcomes for project-oriented organizations.