The Measurement of Efficiency in Multiunit Public Services

Abstract

After a review of the concepts of efficiency and effectiveness in multiunit nonmarket organisations, a recently developed technique known as Data Envelopment Analysis (DEA) is described and illustrated in this paper, and it is shown how this technique may be used in performance measurement. The linear fractional programming and equivalent linear programming formulations of the DEA problem are presented and an illustrative problem is solved. Some new concepts concerned with the application of DEA are introduced. A nonlinear version of the DEA problem is then described and illustrated. A comparison is made between the solutions of the linear and the nonlinear DEA problems. Last, brief consideration is given to the problems of uncontrollable operating conditions, policy formulation, and the acceptability of the technique to unit managers.