Project valuation and scheduling with recourse

Abstract

A model is presented to treat new product development projects that are subject to a mid-project management review. The model solves a 'chicken and egg' problem in concurrent life cycle analysis, namely that a project cannot be costed until it is scheduled, cannot be scheduled until the continuation decision is made, and cannot be evaluated for continuation until it is costed. The model solves the conundrum via a mixed integer programming formulation that makes all three determinations simultaneously. It poses the problem as an exercise in managerial options. A worked example illustrates the technique.<>