On the Use of Simulation-Optimization in Sustainability Aware Project Portfolio Management

Abstract

Among other variables, uncertainty and limitation of resources make real-life project portfolio management a complex activity. Simulation-optimization is considered an appropriate technique to face stochastic problems like this one. The main objective of this paper is to develop a hybrid model, which combines optimization with Monte Carlo simulation, to deal with stochastic project portfolio management. A series of computational experiments illustrate how these hybrid approach can include uncertainty into the model, and how this is an essential contribution for informed decision making. A relevant novelty is the inclusion of a sustainability dimension, which allows managers to select and prioritize projects not only based on their monetary profitability but also taking into account the associated environmental and/or social impact. This additional criterion can be necessary when evaluating projects in areas such as civil engineering, building and construction, or urban transformation.