Strategic planning often involves investing in a mix of capabilities and activities and assessing the adequacy of options for meeting a variety of objectives. Such an analysis "portfolio" may be characterized by allocation across investment categories or by the corresponding allocation across objectives. RAND's Portfolio Analysis Tool (PAT) was designed to facilitate strategic analysis dealing with both uncertainty and differences of perspective. PAT generates high-level summary depictions for discussing issues of balance. It uses a spreadsheet-based format with options shown in rows and various measures of option goodness in columns. The PAT user can drill down (zoom) to understand the basis of high-level characterizations and to identify troublesome problems. PAT can depict various types of risk in a number of ways and present options that mitigate or hedge against those risks. Built on an earlier application-specific tool, PAT-MD, which was developed for the U.S. Missile Defense Agency's Program Integration Office (MDA/PI), PAT reflects lessons learned, and it has evolved considerably. The approach to analysis enabled by PAT is oriented toward assisting high-level decisionmakers to frame their thinking about balance, to construct good multifaceted options for consideration, and to make subsequent choices. This report documents the theory and methodology of PAT and serves as a combined reference manual and user's guide. It will be of interest primarily to analysts and those who manage analysis.

"Prepared for the Office of the Secretary of Defense"--T.p.

Introduction. Background -- Portfolio analysis tools -- Report structure / Overview of PAT. Inputs and outputs -- Concepts and terminology -- Navigation and architecture: inputs and outputs / PAT input worksheets. Template builder -- Level 1 data -- level 2 data -- level 3 data -- MRM level 1 and level 2 data -- Cost data -- Perspectives -- Template builder / PAT output worksheets. Summary sheet -- Level 2 drilldown sheet -- Level 3 drilldown sheet -- Cost data sheet -- Scatter plot sheet for cost-effectiveness landscapes -- Spider charts sheet -- Multimeasure spider charts sheet -- Selected details sheet -- Rankings table sheet / Details of the methodology. Basic concepts and definitions -- Alternative methods -- Color-coding in scorecards -- Examples of scoring and aggregation using different methods / Marginal and chunky marginal analysis. Introduction -- Chunky marginal analysis for a ballistic missile defense example / Concluding observations. Purpose and functions of PAT -- Seeking flexibility, adaptiveness, and robustness -- Next steps / Appendix A: quickstart on using PAT -- Appendix B: transferring data from an earlier workbook -- Appendix C: editing and neatening.