This paper presents the final results of a PhD research project conducted within the Australian Defence Force's Capability Development Group. The Group manages just over 200 projects with a portfolio value exceeding $40 billion. The project knowledge environment is complex, fluid, political, and subject to the vagaries of a changing technological and strategic environment. Social and organisational network analysis techniques offer a means to understand these complex relationships, and in so doing allow managers to make informed decisions at the project, programme, and portfolio levels. In particular social and organisational network analysis techniques provide knowledge diagnostics and reveal gaps in understanding. These gaps can be visualised and used to weave greater understanding of project and capability inter-dependencies.

The network analysis techniques are however static and represent a snap-shot of portfolio network health at a given time, leaving many managers with the so what question. In this sense they are diagnostic techniques. A system dynamics approach, developed by Jay W. Forrester in the mid-1950s and first described at length in the book Industrial Dynamics, extends the approach and shows the potential effect on the project portfolio, and by extension into the capability acquisition domain. It answers the so what question and shows the importance of understanding project and capability interdependencies early in the development process. In particular the system dynamics model predicts the rework and acquisition delay resulting from incomplete knowledge. The combined results of the network analysis and system dynamics modelling extend the diagnostics to allow a number of different analyses in support of capability acquisition.