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Project Portfolio Selection in Public Administration Using Fuzzy Logic
Article in Procedia - Social and Behavioral Sciences · March 2013
DOI: 10.1016/j.sbspro.2013.03.036
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Procedia - Social and Behavioral Sciences 74 (2013) 41 – 50
26th IPMA World Congress, Crete, Greece, 2012
Project Portfolio Selection in Public Administration Using
Fuzzy Logic
Lilian Noronha Nassifa,c,*, João Carlos Santiago Filhob, José Marcos Nogueiraa
a
Federal University of Minas Gerais, Av. Antônio Carlos, 6627 - ICEx, Belo Horizonte, 31270-000, Brazil
b
Ancine, Av. Graça Aranha, 35, Rio de Janeiro, 20030-002, Brazil
c
Public Ministry of Minas Gerais, Av. Álvares Cabral, 1740 - 4o. andar, Belo Horizonte, 30170-001, Brazil
Abstract
The project selection for portfolio management in the governmental sphere is not associated with project financial
return, but necessarily involves public benefits. The literature is extensive for portfolio selection when the financial
approach is crucial, but little is discussed about selecting projects from the standpoint of public policies. This paper
presents a method for project selection in the area of Information Technology (IT) using a tool to support decisionmaking based on fuzzy logic. A case study validated the method developed, which consists of: 1) Identification of
projects; 2) Association of projects with strategic planning; 3) Categorization of projects; 4) Definition of linguistics
variables and fuzzy function; 5) Definition of inference rules; 6) Function calculation; and 7) Portfolio balancing. The
paper presents interesting experimental results that show the priority of projects and their success potential. The
success is related with qualitative and diffuse metrics applied in a simulator for fuzzy logic.
©
Authors.by
Published
Elsevier
Ltd. and/or peer-review under responsibility of IPMA
© 2013
2012The
Published
ElsevierbyLtd.
Selection
Selection and/or peer-review under responsibility of IPMA
Keywords: Project portfolio management; Fuzzy logic; Decision making; Information Technology.
1. Introduction
A project portfolio should consider the company's strategic planning and adopt an efficient method of
project selection. Because private and public organizations have specific concerns and restrictions, new
methods of project selection need to be developed to address these different perspectives. The
government's decision-making process is guided by a number of peculiarities such as the existence of
*
Corresponding author. Tel.: +55-31-3347-0918; fax: +55-31-33470918.
E-mail address: [email protected]
1877-0428 © 2013 The Authors. Published by Elsevier Ltd.
Selection and/or peer-review under responsibility of IPMA
doi:10.1016/j.sbspro.2013.03.036
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Lilian Noronha Nassif et al. / Procedia - Social and Behavioral Sciences 74 (2013) 41 – 50
legal norms, interest groups, media, and all citizens. Therefore, it is very difficult to measure project
success using indicators such as cost-benefit or Return of Investment (ROI). Public administrators
estimate project effectiveness by using qualitative indicators.
This work presents a methodology of governmental project selection. The methodology uses fuzzy
logic with qualitative indicators. The methodology application provides the success potential of projects
considering their prioritization.
This paper is organized as follows: Section 2 presents methods of selecting projects. Section 3
highlights the main problems and goals of project selection, and describes a new methodology for
governmental project selection using fuzzy logic. Section 4 shows a case study that applies the developed
methods and provides results. Section 5 concludes the paper.
2. Related Works
The project selection to build a portfolio is not a simple task, since resources are scarce and the
demands of business exceed those limitations. Peng et al. (2005) consider project selection as a problem
of allocating capital among a number of assets to maximize return on investment while minimizing risk.
Mulcahy (2009) classifies the decision models of project selection into two categories: benefit
measurement and constrained optimization. The benefit measurement method uses a comparative
approach between projects adopting techniques such as: 1) Scoring models; 2) Economic models; and 3)
Cost-benefit analysis. The constrained optimization method uses a mathematical approach, adopting
techniques such as: 1) Linear Programming; 2) Integer programming; 3) Dynamic programming; and 4)
Multi-objective programming.
The literature presents new methods of project selection using fuzzy logic. Carlsson et al. (2007) use
fuzzy logic to select projects of research and development (R & D) with the objective of avoiding
inaccuracies of return. Qin et al. (2009) present mathematical models that use fuzzy logic to improve the
expected value of projects. Peng et al. (2005) use credibility programming to deal with project selection
problem. These articles use fuzzy logic to solve problems about return of investment. Our approach
differs from the others mainly by using fuzzy logic to select projects whose qualitative benefits are more
relevant than financial returns.
3. Project Selection
An erroneous project selection to compose a portfolio can generate problems such as: 1) Excessive
number of projects; 2) Inappropriate projects; 3) Projects disconnected from strategic objectives; 4)
Unbalanced portfolio (Qin et al., 2009). In the next section, a new methodology of project selection is
presented. It was elaborated to avoid these problems and to provide recommendations to people with
decision-making power.
3.1. Methodology of project selection
The Methodology for Governmental Project Selection using Fuzzy Logic (MGPS-fuzzy) developed in
this work, extended the macro-processes of portfolio management presented in Mulcahy (2009) and
included a fuzzy module.
The MGPS-fuzzy is presented at Figure 1 and consists of the following processes that are executed
sequentially: Identification; Association with strategic planning; Categorization; Definition of linguistic
variables and fuzzy function; Definition of inference rules; Function calculation; Balancing and
prioritization of portfolio.
Lilian Noronha Nassif et al. / Procedia - Social and Behavioral Sciences 74 (2013) 41 – 50
Fig. 1. Methodology MGPS-fuzzy
During the process "Identification", stakeholders define projects in interviews, meetings, or using
forms. The project identification follows a bottom-up approach, i.e., it is elaborated by the technical team.
During the process "Association with strategic planning", each project identified is associated with
actions defined by the institution's strategic planning. In the process "Categorization", projects are
categorized into groups of same similarities. Processes "Definition of linguistic variables and fuzzy
function", "Definition of inference rules", and "Function calculation" are part of the fuzzy module, which
will be detailed in section 3.2.
3.2. Fuzzy module
The fuzzy logic (Zadeh, 1965) is an extension of boolean logic that introduces the notion of sets with
partial membership. It is used in many fields where systems must deal with imprecision and uncertainty.
With the use of linguistic variables and rules of inference, fuzzy logic provides a mathematical
framework capable of representing not only the knowledge of experts as well as the preferences of
decision makers in investment projects (Wang & Hwang, 2005).
The fuzzy module in the MGPS-fuzzy consists of three processes that interact strongly: 1) Definition
of linguistic variables and fuzzy function; 2) Definition of inference rules; and 3) Function calculation.
In the process “Definition of linguistic variables and fuzzy function”, the values 0 through 10 are
associated to each variable to represent a benefit or an importance of a project. The fuzzy function
represents the result of linguistic variables correlation. The linguistic variables and the fuzzy function
must be defined together with stakeholders.
In the process “Definition of inference rules”, it is necessary to define rules that correlate linguistic
variables and fuzzy function to obtain interpretations as follows:
• the more variable-1 decreases and variable-2 decreases, the better is the result;
• the more variable-2 decreases and variable-3 increases, the better is the result;
• the more variable-1 increases and variable-2 increases, the better is the result;
According to the rules described above, variable-1, variable-2, and variable-3 correspond to linguistic
variables, which are the inputs to the fuzzy model; and result corresponds to the fuzzy function, which is
the output of the fuzzy model.
In the process “Function calculation”, the inference rules and linguistic variable values are used for
each project recognized at the “Identification” process.
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Lilian Noronha Nassif et al. / Procedia - Social and Behavioral Sciences 74 (2013) 41 – 50
4. Case Study Using MGPS-fuzzy
The methodology MGPS-fuzzy presented in section 3 was applied to a case study in a government
company with 500 employees and about 40 IT professionals. The IT area is traditionally composed by
subareas of infrastructure and system development. This work focuses on project selection in the subarea
of infrastructure. In the following, the methodology is applied.
4.1. Project identification
The identification of IT projects was conducted in three meetings with the infrastructure team and 25
projects were identified as described in Table 1.
Table 1. Identified projects
Project ID
Project name
1
Data security policy
2
Definition of a security and risk management team
3
Definition of a treatment and incident response network computing team
4
Definition of process to start services in production environment
5
Demand management
6
Desktop backup
7
Desktop remote management
8
Distribution of new workstations
9
Infrastructure management
10
Internet access policy
11
Internet link upgrade
12
Link upgrade (MPLS)
13
Migration from 32bits to 64bits servers
14
Password security policy
15
Review of Active Directory
16
Review of CPD environment
17
Review of e-mail
18
Review of firewall
19
Review of network structure
20
Review of service desk
21
Review of Squid
22
Server backup review
23
VoIP
24
VPN establishment for internal access and software factory
25
Wireless network
Lilian Noronha Nassif et al. / Procedia - Social and Behavioral Sciences 74 (2013) 41 – 50
4.2. Association of projects with strategic planning
In our case study, the interfacing of IT projects with other areas of the enterprise occurs as shown in
Figure 2. The client area represents all areas in the enterprise where the projects are strongly linked to
strategic planning. The client area frequently demands projects to IT area. Most projects require the
development of systems. The system development team requires a subset of projects in the infrastructure
to support the demands of communication and storage. The area of infrastructure, in turn, needs to keep
and improve the current operational environment. Therefore, some of infrastructure projects related to the
strategic planning are mediated by the requirements identified by the system development team. The
strategic planning of the case study has generic actions defined to IT area, namely: organize the systems
and IT services; build and maintain a reliable public database; organize and disseminate information.
Fig. 2. Association of projects with strategic planning
4.3. Categorization of projects
The categorization of projects will assist the processes of defining linguistic variables and portfolio
balancing. In this study, we identified categories according to actions defined in the strategic planning and
demands from the system development team, as shown in Figure 2. Table 2 shows the grouping of
projects in categories of affinity. The categories represent specific actions to address actions defined to IT
area in the strategic planning.
Table 2. Categories identification according to strategic planning
Category
Project ID
Availability of the environment
9, 16, 22
Expansion
8, 11, 12
Improved customer service
6, 7, 17, 20, 25
Innovation
23
New systems (support activities of the development team)
4, 5, 13, 24
Requirement of the laws
2, 3
Security
1, 10, 14, 15, 18, 19, 21
4.4. Definition of linguistic variables and fuzzy function
The linguistic variables were defined by stakeholders based on the benefits or difficulties in project
execution. The variables chosen were: cost (given the necessary public investment and annual budget
constraint in the IT area); external dependence (assuming that an IT project that interacts with many areas
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Lilian Noronha Nassif et al. / Procedia - Social and Behavioral Sciences 74 (2013) 41 – 50
of the company has a greater risk of not succeed); and visibility (assuming that the project impact on
users can cause a good impression of the administration). Therefore, in the case study, the cost, the
external dependence, and the visibility correspond to linguistic variables; and the project success potential
corresponds to the fuzzy function.
4.5. Definition of inference rules
Stakeholders defined the inference rules, establishing a correlation between linguistic variables and
fuzzy function, as follows:
• the more cost decreases and external dependence decreases, the better is the project success potential;
• the more external dependence decreases and visibility increases, the better is the project success
potential;
• the more cost decreases and visibility increases, the better is project success potential.
Where each variable has the following values and interpretations: External dependence: 0 (good), 10
(bad); Cost: 0 (good), 10 (bad); Visibility: 0 (bad), 10 (good). From these correlations, we constructed 27
inference rules. Table 3 depicts examples of inference rules that will be described in the fuzzy model.
Table 3. Inference rules depicted in the fuzzy model
Cost
(input)
Visibility
(input)
Dependence
(input)
Project success potential
(output)
High
Low
High
Weak
Low
High
Low
Strong
Low
High
Medium
Strong
High
High
High
Medium
High
Low
High
Weak
Low
Medium
Medium
Medium
Two important concepts must be considered when inserting or extracting data from the fuzzy model:
fuzzification and defuzzification (Shaw, 1998). The fuzzification process interprets the scale of numerical
values of linguistic variables to a description apparently informal (Low, Medium, High). This translation
is significant because the fuzzy logic helps decision makers where the uncertainty is strongly present.
In the case study, stakeholders defined values for each project presented in Table 1, on a scale of 0 to
10, for each linguistic variable. Table 4 shows the fuzzification of values to informal values Low,
Medium, and High; where Low represents the values 0 to 3; Medium represents the values 4 to 6; and
High represents the values 7 to 10. The process of defuzzification is the reverse of the process of
fuzzification, i.e. it transforms subjective data into numbers. This process will be used in the function
calculation process.
Table 4. Fuzzification of values for the linguistic variables associated with each project
Informal Values
External dependence
Cost
Visibility
Low
12, 11, 22, 9, 3, 2, 7, 20, 15, 18,
19, 21
12, 11, 3, 2, 17, 13, 5, 4, 24, 15
12, 16, 22, 3, 2, 25, 13, 5, 4, 24,
10, 14, 1, 18, 19, 21
Medium
8, 25, 6, 14, 5, 13, 17, 24
9, 25, 20, 18, 19, 21
8, 9, 7, 20, 15
High
23, 16, 10, 1
23, 2, 16, 22, 7, 6, 10, 14, 1
23, 11, 6, 17
Lilian Noronha Nassif et al. / Procedia - Social and Behavioral Sciences 74 (2013) 41 – 50
4.6. Calculation of potential
The success potential of each project was calculated using the tool called Fuzzy Logic Toolbox,
available in Matlab (MathWorks, 2012). The simulation model is formed by rules defined in Table 3 and
linguistic variables of each project, defined in Table 4.
After these calculations, the results were defuzzyficated, i.e., the terms Weak, Medium, and Strong
associated to success potential of each project were transformed into numerical values. The graphs shown
in Figures 3, 4, and 5 represent functions defuzzyficated, which correlate each pair of linguistic variables.
Figure 3 shows that project success potential increases when external dependence decreases and
visibility increases. Figure 4 shows that project success potential increases when external dependence
decreases, and cost decreases. Figure 5 shows that project success potential increases when cost
decreases, and visibility increases. The calculation of the success potential for each project is shown in
Table 5.
Fig. 3. Visibility versus external dependence
Fig. 4. Cost versus external dependence
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Lilian Noronha Nassif et al. / Procedia - Social and Behavioral Sciences 74 (2013) 41 – 50
Fig. 5. Visibility versus cost
4.7. Portfolio balancing
In the case study, the portfolio balancing was done by the project prioritization given by different
stakeholders. They prioritized projects based on their evaluation of subjective variables, such as
availability of human resources and project completion prediction. The list of projects was revised using
four priority classes given by three different stakeholders: the infrastructure team, the systems
development team, and the manager of user services.
Table 5 presents the final results, where the priority of each project was calculated from the average of
different views with weights 3, 2, and 1 respectively to the areas of infrastructure, systems development,
and manager of user services. Projects are ranked in decreasing order of priority followed by the project
success potential.
5. Conclusions
The project selection to compose a portfolio is not a trivial task. Several variables must be considered,
such as the dependence of external areas, the project cost, and the project visibility. In the case study
conducted, initially, the IT infrastructure team identified a list of necessary projects. After this survey,
projects were categorized according to affinity groups and associated with actions of the company
strategic planning. Subsequently, stakeholders defined the linguistic variables, the fuzzy function, and the
inference rules for the model. Finally, using the previous information, a simulator of fuzzy logic
calculated the success potential for each project.
The methodology developed is a new approach of selecting projects to compose a portfolio using a
technique of artificial intelligence, fuzzy logic. The model can help in the decision-making process where
uncertainty is strongly present. Our approach considers qualitative metrics because it is applied in the
governmental sphere, which must select projects from the point of view of benefits instead of the
financial return perspective.
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Lilian Noronha Nassif et al. / Procedia - Social and Behavioral Sciences 74 (2013) 41 – 50
Table 5. Project portfolio
ID
Project name
Project success potential
Priority
11
Internet link upgrade
0.863
1
3
Distribution of new workstations
0.5
1
22
Server backup review
0.5
1
9
Infrastructure management
0.5
1
1
Data security policy
0.5
1
19
Review of network structure
0.5
1
16
Review of CPD environment
0.137
1
14
Password security policy
0.863
2
10
Internet access policy
0.646
2
3
Definition of treatment and incident response network computing team
0.549
2
2
Definition of security and risk management team
0.549
2
17
Review of e-mail
0.549
2
12
Link upgrade (MPLS)
0.5
2
25
Wireless network
0.5
2
24
VPN establishment for internal access and software factory
0.5
2
15
Review of Active Directory
0.5
2
6
Desktop backup
0.646
3
7
Desktop remote management
0.5
3
20
Review of service desk
0.5
3
13
Migration from 32bits to 64bits servers
0.5
3
5
Demand management
0.5
3
4
Definition of process to start services in production environment
0.5
3
18
Review of firewall
0.5
3
21
Review of Squid
0.5
3
23
VoIP
0.5
4
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