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ELSEVIER

European Journal of Operational Research 80 (1995) 462-473

Components of efficiency evaluation

in data envelopment analysis
Agha Iqbal Ali a,* Catherine S. L e r m e

b Lawrence

M. Seiford c

a School of Management, The University of Massachusetts at Amherst, Amherst, MA 01003, USA

b Carroll School of Management, Boston College, Chestnut Hill, )VIA 02167, USA
c Industrial Engineering and Operations Research, The University of Massachusetts at Amherst, Amherst, MA 01003, USA

Abstract
This paper examines three essential components which comprise efficiency evaluation in data envelopment
analysis. The three components are present in each DEA model and determine the implicit evaluation scheme
associated with the model. These components provide a framework for classifying the various DEA models with
respect to (i) the form of envelopment surface, (ii) the orientation, and (iii) the pricing mechanism implicit in the
multiplier lower bounds. The discussion focuses on the standard DEA models, includes additional issues relating to
efficiency evaluation, and is illustrated by a computational example.

Keywords: Data envelopment analysis; Efficiency; Framework

I. Introduction
Since the seminal paper by Charnes, C o o p e r and Rhodes in 1978, a variety of data envelopment
analysis models has appeared in the literature as have numerous studies employing the technique
(Banker, Charnes, Cooper, Swarts, Thomas, 1989; Seiford, 1990). Each of the various models for data
development analysis (DEA) seeks to determine which of n decision making units ( D M U s ) determine an
envelopment surface 1 (or efficient frontier). Units that lie on (determine) the surface are deemed efficient
in D E A terminology. Units that do not l i e o n the surface are termed inefficient and the analysis provides
measures of their relative efficiency. These measures of relative efficiency depend upon the particular
evaluation scheme implicit in the D E A model employed. As will be shown, the efficiency evaluation is
determined by three components: envelopment surface, orientation, and multiplier lower bounds. As will
be demonstrated, these components provide a unifying framework for classification of D E A models.

* Corresponding author.
I This envelopment surface can be interpreted as the empirical production surface which represents the state of the technology.
0377-2217/95/$09.50 1995 Elsevier Science B.V. All rights reserved
SSDI 0377-2217(94)00131-U

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463

T h r e e of the D E A models that are m o s t often associated with the D E A m e t h o d o l o g y are the CCR,
B C C and additive models 2. To introduce the c o m p o n e n t s which f o r m the f r a m e w o r k developed in this
p a p e r we briefly examine these models. O u r notation is as follows. W e assume that there are n D M U s to
be evaluated. E a c h D M U c o n s u m e s varying a m o u n t s of m different inputs to p r o d u c e s different
outputs. Specifically, decision making unit l, c o n s u m e s a m o u n t x a > 0 of input i and p r o d u c e s a m o u n t
Yrl > 0 o f o u t p u t r 3. Finally, in the m o d e l formulations, X t and Y/ denote, respectively, the vectors o f
input and o u t p u t values for D M U t while the s n matrix of outputs is d e n o t e d g and the m n matrix
of inputs is d e n o t e d X.
T h e primal and dual linear p r o g r a m m i n g statements for the (input oriented) C C R m o d e l are:

(CCR,p(Yt, )(l))

(CCRID(Yt, X l ) )

min

O-s(le

max

/zY/

st.

YA - s = Yl,

s.t.

v X t = 1,

+ le)

OX l - X A - e = O,

t z Y - v X < O,
g_>el, v > e l .

A_>O, e>__O, s>__O,

T h e primal and dual linear p r o g r a m m i n g statements for the (input oriented) B C C m o d e l are:

(BCCIp(Yt, Xt))

( BCCD( Y1, )(l) )

min

O - s ( l s + le)

max

tzYt + oJ

s.t.

YA - s = Yl,

s.t.

vXI = 1,

OX I - X A

I-*Y- v X + ~ol < O,

Iz > e l , v > e l .

- e = O,

1A = 1,

A_>O, e_>O, s>_O.

T h e primal and dual linear prograrnrning statements of the additive m o d e l are:

( A D D p ( Y t , Xz) )

( ADDD(Yt, Xt) )

min

- (ls + le)

max

]Y/-- 1]Xl --~ (.o

s.t.

YA-s=Yt,

s.t.

/ x Y - v X + ~ol < 0,

-XA - e = -XI,

/z ~> 1, v ~> 1,

1A = 1,
A>_O, e_>O, s>_O.
E a c h of the above models seeks to determine the efficiency of a particular D M U (Y~, X t) with respect
to the e n v e l o p m e n t surface d e t e r m i n e d by the efficient (best practice) D M U s . T h e solution of a D E A
m o d e l for D M U (Y/, X l) results in a m e a s u r e o f efficiency and f u r t h e r identifies an efficient point
( ~ , ) ( l ) on the e n v e l o p m e n t surface. As we shall see, efficiency evaluation and the location of this
efficient (projected) point ( ~ , ) ~ t ) are d e p e n d e n t on b o t h the f o r m of the e n v e l o p m e n t surface and the
evaluation system implicit in the particular D E A model. F u r t h e r m o r e , subtle differences in the m a t h e matical formulations o f the models can p r o d u c e significant differences in one evaluation c o m p o n e n t yet
leave a n o t h e r u n c h a n g e d .

2 The acronymic designation of the first two models arises from the authorship of the original articles (Charnes, Cooper, and
Rhodes, 1978, and Banker, Charnes, and Cooper 1984). The additive model is developed in Charnes et al. (1985).
3 The assumption of positivity is for expositional convenience. There are several ways in which it can be relaxed. See, for
example, All and Seiford (1990) and the discussion therein.

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464

Examining the structure of the primal model formulations given above, we notice that the CCRIe and
BCCIe models differ only in that the latter includes a 'convexity' constraint (1A = 1). Again with respect
to model structure, one observes that substitution of 0 = 1 (and = 1) in the BCC~e m o d e l produces the
additive model (ADDp). This similarity in model structure points to an underlying framework within
which these and other D E A models are embedded. As will be seen, the identification of such a
framework provides a better understanding of the solution methodology and, also, aids in the interpretation of results.
The consequences of differences in formulation allow further comparisons between models. It can be
easily shown that the envelopment surfaces for the BCC and additive D E A models are identical and thus
the sets of DMUs determined to be efficient are exactly the same for both models. However, as we shall
demonstrate, the two models differ in their implicit evaluation principles 4. In contrast, both the CCR
and BCC models obey the same evaluation principles. However, the form (geometry) of the envelopment
surface is different for these two models. The interrelationships between envelopment surface, orientation, and lower bound specification and their effect on efficiency evaluation are the subject of this paper.
The format for this paper is as follows. In Section 2, we discuss two underlying types of envelopment
surfaces for data envelopment analysis. The notation introduced facilitates the subsequent discussion of
different evaluation systems. The mathematical programming models introduced in this section are
'nonoriented models' and give rise to the non-oriented projections described in Section 3. Section 4
constrasts input and output orientations while Section 5 discusses the effect of changing the units of
measurement of the data. Efficiency evaluation components are identified and illustrated with a
computational study in Section 6. Concluding remarks are presented in Section 7.

2. Envelopment surfaces
The various models proposed in the D E A literature employ several different types of envelopment
surfaces. Our discussion, however, will focus on the two basic piecewise linear envelopment surfaces
commonly referred to as constant returns-to-scale (CRS) and variable returns-to-scale (VRS) surfaces.
This is not in anyway restrictive 5:
One of the two types of envelopment surfaces (CRS or VRS) results from the particular D E A model
employed, i.e., the pair of (dual) linear programs that effect data envelopment. For example the CCR
model produces a CRS envelopment surface while the BCC model and the additive model produce a
VRS envelopment surface. To facilitate our development of a framework in the sections to follow, we
first examine the following general nonoriented envelopment models.
The primal and dual statements of the nonoriented constant returns-to-scale (CRS) model are:

x,, .,, .,))

x,, u', ,,'))

min

- (uts +vte)

max

s.t.

YA - s = Y~,
-XA - e = -Xt,

s.t.

A_>O, e_>O,

txYt - vXI
t~Y-vX<_O,
/z >_ u l, v _>v l.

s_>O.

4 T h e evaluation principles (system) for a particular D E A model define criteria that determine the m a n n e r in which projected
points are determined for the inefficient D M U s . This is discussed in Sections 3 and 4.
5 For example, the multiplicative models (Charnes et al., 1982, 1983) produce piecewise log-linear or piecewise C o b b - D o u g l a s
envelopments. However these non-linearities can, by data transformations, be m a d e linear. Similarly, although Seiford and Thrall
(1990) propose four piecewise linear envelopment surfaces, two of their surface classifications result from hybrid combinations of
our two basic surfaces. Extension of our results to the two additional hybrid surfaces is straightforward.

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465

The primal and dual statements of the nonoriented variable returns-to-scale (VRS) model are:

(VRSNp(YI, S l, Ul, vl))

(wsNo(Y,, x,, u,, v,))

min

-(uts+vle)

max

/ZYl-uXt+60

s.t.

YA -- s = YI,

s.t.

~Y-

-Xh

- e =

-Xt,

u X +160 <_ O,

Ix > u t,

v >~ v

t.

1h = 1,

A_>O, e>_O,

s_>O.

We refer to the dual problem statements ( C R S N D or VRSND) as multiplier or pricing models. The
primal problems, on the other hand, can be characterized as e n v e l o p m e n t or p r o j e c t i o n models. Of
course, only one of these problems (primal or dual) needs to be solved; the solution to the other is easily
obtained by the duality theory of linear programming.
These nonoriented programs directly address the underlying characterization of efficiency: A decision
making unit, l, is efficient if it lies on a facet-defining hyperplane of the envelopment surface;
specifically, a hyperplane of the form /xly - vtx = 0 for C R S envelopment or a hyperplane of the form
tzly -- vlX + w l = 0 for FRS envelopment,
The parameters u l and v z (introduced for notational convenience) are the specific lower bounds on
the variables/x and u in the dual programs 6. Our discussion in the present section is with respect to the
general specification, u t and v t, of these vectors. Further interpretation and effect of specific lower
bounds are presented in Section 5.
Optimal values of variables for either of the primal nonoriented envelopment programs for D M U l are
denoted by the s-vector s t, the m-vector e t, and the n-vector At. A n optimal dual solution is given by the
s-vector/z t, the m-vector v t, and, for the VRS model, the variable 601.7
Identification of the envelopment surface requires the solution of a linear programming model for
each decision making unit l. Each of the n sets of values given b y / z t, v t, (60t), l = 1, 2 , . . . , n, are the
coefficients of hyperplanes that define facets of the envelopment surface.
The C R S e n v e l o p m e n t surface consists of particular facets that result from the intersection of
(supporting) hyperplanes in Em+s (which pass through the origin) and the convex polyhedral cone
determined by the vectors (Yj, Xi) , j = 1 , . . . , n; a hyperplane Izy - v x = ES=m/zryr - Eirn=ll.'iX i = 0 intersects the cone in a facet of the C R S envelopment surface if and only if / . t Y j - v X j = E~=l/.tryrj-~m
_
t=l12iXij < O, f o r all j = 1 . . . . n (with equality for at least one j).
The V R S e n v e l o p m e n t surface consists of particular facets that result from the intersection of
(supporting) hyperplanes in R m+s and the convex hull of the points (Yj, X ) , j = 1 . . . . , n in Rm+s; A
hyperplane Ixy - v x + 60 = ES=ll.rYr -- Eim=lb'iXi -'}- 60 = 0 intersects the convex hull in a facet of the
surface if an only if/zYj - v X j + 60 = E~=l/z~y~j - Ei%1vixij + oo <~ O, f o r a l l j = 1 . . . . . n (with equality for
at least one j).
Finally, the critical role of the vectors (u l, v t) is worth emphasizing: In the primal formulation, they
are the coefficients of the objective function and thus are a component of the evaluation mechanism. The
result is that they determine the directions of the projection. We illustrate this in the following section
although a complete discussion of the effect of lower bound specification is reserved for Section 5.

6 For example, setting ul = 1 and vl = 1 in VRSNe produces the additive model.

7 Alternate primal solutions can exist. Trivial alternate dual solutions always exist since each of the dual variables can be
multiplied by a positive scalar to yield another optimal dual solution. Non-trivial alternate dual solutions can also exist. This can
happen, for example, when the rows of the primal models are linearly dependent.

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A.L Ali et al. / European Journal of Operational Research 80 (1995) 462-473

3. Non-oriented projections

For the primal envelopment problem for DMU l, the optimal vector At defines a point
{ n

x/=l

j=l

on the envelopment surface. This point is a linear combination for the CRS model, or a convex
combination for the VRS model, of units that lie on the envelopment surface. The point ( ~ , Xt) is
referred to as the projected point. The following theorem establishes that the projected point, in fact, lies
on a face of the envelopment surface.
Theorem. Suppose At is optimal for the primal problem. Then the point ( ~ , J(t) = (gi"= 1Aj~
, t gj=, 1A/X
)t
lies

on a face of the envelopment surface determined by a supporting hyperplane defined by the optimal dual
multipliers ixt, v t, ( ogt).
Proof. From duality theory of linear programming, we know that for each j with A~ > 0, the corresponding dual constraint is binding, i.e./xtY] - vtxi + wl = 0. Thus each decision making unit j ~ A = {j I/xlYj vtx] + o9l = 0} is efficient and lies on the hyperplane ixty - utx + ogt = 0. This hyperplane defines a face
(which may be a facet 8) of the envelopment surface with normal vector (ixl, vt). A sufficient, but not
necessary, condition for membership in A is A] > 0. Since each point Y/, Xi, for which A~ > 0 lies on the
plane, we have

Thus the point (Y/, X 1) is projected onto the point ( ~ , J(t) on the hyperplane, txty - vtx + o9/= O. For the
CRS model, it can be similarly shown that the projected point lies on the hyperplane/xty - vtx = 0. []
The preceding theorem established that the efficient units (vertices) which comprise the projected
point correspond to positive Ai values. An alternate characterization of the projected point is available
from the primal constraints.
ASY], ~ A S X j ) = ( Y I + s ,

(~, Jf,)= (~
j=l

Xt-et).

j=l

This characterization lends itself to referring to the vector s l as the vector of output slacks and the
m-vector e I as the vector of excess inputs. The relationship between the values of output slacks and
excess inputs and the relative prices is evident from the complementary slackness conditions from linear
programming duality theory. Specifically
sl > O

i&lr__
- - U rl,

r = 1,...,S,

el>0

u[ = v/,

i = 1 . . . . . m.

Since positive values of the slack or excess variables correspond to multipliers which are at lower
bound, the term ixtsZ+ vie I is exactly the objective value utst+ vie t at optimality. This establishes the
earlier claim that these lower bounds (u l, v l) directly effect the direction of projection. In Section 5, we
8 A facet is a full dimensional face.

A.L Ali et al. / European Journal of Operational Research 80 (1995) 462-473

467

further examine the particular relationship between efficiency evaluations obtained for different specifications of the parameters u t and v t.

4. Oriented projections
The previous section examined non-oriented projections; the additive model being the most frequent
example appearing in the D E A literature of a non-oriented VRS model. In contrast, the D E A models
examined next are orientable.
Input oriented models maximize the proportional decrease in the input vector (while remaining within
the envelopment space). Clearly, a proportional decrease is possible until at least one of the excess input
variables is reduced to zero. The input oriented models for CRS and VRS envelopment are stated
below 9.

x,, u,, v,))

(CRStD(Yt,

X t , u t, v t ) )

min

0 - e(uls + vie)

max

t~Yt,

s.t.

YA - s = Y t ,

s.t.

v X l = 1,

O X t - X A - e = O,

txY-

A > O,

~ >__e u t,

e > O,

s -> O.

xt, u,, v,))

0 -- e ( uls + v l e )

max

s.t.

YA - s = Yt,

s.t.

- e = O,

i.tY t + o9,
v X l = 1,
tzY-

1A=I,

v X + tol _< 0,

/ z > e u l,

A_>O, e->O,

v -> e v t.

( V R S I D ( Y I , g l , Ill, v l ) )

min

OX t -XA

v X <_ O,

v -> e v t.

s_>O.

Output oriented models maximize the proportional increase in the output vector possible while
remaining within the envelopment space. Clearly, a proportional increase is possible until at least one of
the output slack variables is reduced to zero. The output oriented models for CRS and VRS envelopment are stated below:

(CRSo.(r,, x,, u', v'))

(CRSoD(YI,

X t , u l, v l ) )

max

qb + 8 ( u l s + v l e )

min

vX t

s.t.

~bY~- YA + s = 0,

s.t.

/xYt = 1,

XA + e = Xt,

A > O,

e ~ O,

-tzY

s -> O.

+ v X > O,

].L >__Eu l,

1J -> EV l.

9 T h e labels for these models underscore the role of the envelopment surface in our efficiency evaluation framework. For CRS
envelopment, CRSI and CRS o (with u l = 1, v I = 1) correspond to the input and output oriented CCR models (Charnes, Cooper
and Rhodes, 1978). For VRS envelopment (with u l = 1, v l= 1) input and output orientation correspond to the BCC models
(Banker, C h a r n e s and Cooper, 1984).

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A.I. Ali et al. / European Journal of Operational Research 80 (1995) 462-473

xt, u t, v,))

Xt, u t, v ) )

max

~+e(uts+vte)

max

vXt+to

s.t.

~bY~- YA + s = 0,

s.t.

/,I(l = 1,

XA + e =Xt,

-IxY+

v X + ~ol >_ O,

1A=I,
/.~>eu l, v >_ e v t.
A>_0, e_>0, s_>0.
Optimal primal variables for decision making unit, l, are denoted 0 l (or ~bt), At, s t, e t. While the
optimal value for 0 l (or ~bt) is unique there can be multiple optimal solutions for the other variables. We
denote optimal dual variables by/~t, vt and, where applicable, to t. For these oriented models, the point
(Y~, X t) is projected onto a face of the envelopment surface, i.e., a supporting hyperplane defined by the
optimal dual multipliers ~l, v t, (wt).
By orienting the projection, for either a C R S or VRS envelopment surface one obtains different
projected points for inefficient units. These projected points reflect the particular priority of the
orientation. Input-orientation seeks a projected point such that the proportional reduction in inputs is
maximized. Implicit in an input orientation is that the primary objective of the DMU being evaluated is
to gain efficiency by reducing excess input consumption while continuing to operate with its current
technology mix (characterized by the actual input ratios). Similarly, output-orientation seeks a projected
point such that the proportional augmentation in outputs is maximized. In this situation, the primary
objective is to reach efficiency by focusing on productivity gains while preserving the current output mix.
Satisfaction of the primary objective, for either orientation, may not be sufficient to reach the
envelopment surface, i.e. attain efficiency.
Oriented projections, hence, require first determining the maximum radial movement (intermediate
projection) in the input or output direction. (In terms of the models stated above this corresponds to an
optimal value for 0 l or ~t, respectively.) This maximum radial movement identifies an intermediate point
(Yt, OtXt) for the input orientation or a point (~btYl, X t) for the output orientation. This intermediate
point reflects the primary emphasis of the input or output orientation.
However radial movement by itself is not sufficient to always guarantee that this intermediate point
will lie on the efficient frontier. One must further apply a non-oriented projection to the intermediate
point. The resulting projected point ( ~ , ) ~ t ) , which will lie on the efficient frontier, is expressed as
(Yl + st, 01Xt - et) for input orientations and as (c,btYl + s t, X t - e t) for output orientations.
The oriented models stated in this section accomplish the 'total' projection. I.e., the solution of these
models produces a 'final' projected point ( ~ , Xt) which lies on the efficient frontier. The preceding
conceptual discussion in terms of an intermediate point only illustrates an essential nuance in the
mechanism of efficiency evaluation for an oriented model. Although we will not do so, this conceptual
development can be formalized as a two stage procedure characterized by the solution of first stage and
second stage models. See Ali and Seiford (1993) for details.
5. Multiplier lower bounds and units of measurement

As described earlier, the manner in which the projection (onto the development surface) is effected in
different D E A models depends not only on the orientation but also on the values of the vectors u l, v l,
i.e. the lower bounds on multipliers. Implicit in the choice of values for the vectors u t, v t are assumptions
about marginal worths of outputs and inputs. We illustrate this dependence with three examples.
( i ) E q u a l bounds

Lower bounds given by u rt = 1, r = 1. . . . s, and v~ = 1, i = 1 , . . . , m , implicitly assume that the

marginal worth of each unit of the nonzero output slacks and nonzero excess inputs for a DMU are

A.I. Ali et al. / European Journal o f Operational Research 80 (1995) 462-473

469

identical (and equal to 1). Further, the marginal worths of nonzero output slacks for a particular output
or nonzero excess inputs for a particular input are the same across all decision making units. This pricing
mechanism implies that a unit of slack for any measure (input or output) is equated to a unit of waste,
and that the objective function of the primal models simply accounts for global waste. This pricing
mechanism therefore leaves unchanged the particular conversion system defined by the scale and units of
measurement of the various inputs and outputs. For instance, if input 1 measures annual wages in
millions of dollars, input 2 measures annual salaries in thousands of dollars and input 3 measures the
number of hours worked in thousands of hours, then whenever there is slack in these inputs, one million
dollars of annual wages is equivalent to one thousand dollars of annual salaries, and equivalent to one
thousand hours of work. It follows that caution should be exercised in selecting units of measurement if
the standard model is to be used without manipulation of the data. To fully 'standardize' the model and
prevent the inappropriate aggregation of non-commensurable measures, some preprocessing of data may
be required. Suggested approaches have involved scaling or normalizing the data using average,
minimum, or maximum values. In our opinion, the use of averages should be discouraged due to the lack
of justification/interpretation. Furthermore, the average values, themselves, are aggregates of both
efficient and inefficient levels and therefore can only be representative of an inefficient theoretical
D M U 10
(2) DMU

specific

bounds

Lower bounds given by u 1r -_ 1 / Y r l ' r = 1 , . . . , s, v [ = 1 / x i l , i = 1 , . . . , m , implicitly assume that the

marginal values of non-zero output slack and excess input variables are not identical. These marginal
values are consistent with an emphasis on proportional reduction of inputs and proportional augmentation of outputs for each DMU. These lower bounds are D M U specific, reflecting the fact that different
techniques demand different input and output mixes. Consequently, different relative values are assigned
to the various inputs and outputs.
(3) Barycentric

bounds

Lower bounds given by the reciprocal coordinates of the barycenter of all units, namely
U lr --

Yrl ,

r = l . . . . ,S,

xit

i=

and
v[=

l .... ,m,

possess different characteristics. They distinguish inputs and outputs in terms of a consistent relative
value; i.e., the bounds are the same across all DMUs. Possible objections to this choice of lower bounds
rest on uniformity across DMUs and artificiality. A unique set of lower bounds for all DMUs ignores the
eventual reality of spatially separated markets which allow for different supply and demand conditions
and equilibria and, hence, for multiple, or ranges of, relative prices. The barycenter of the points from
which the lower bounds are derived corresponds to an artificial D M U that is definitely inefficient since it
is interior to the polytope defined by the set of DMUs.

10 W h i l e w e d i s c o u r a g e t h e u s e of a v e r a g e s to normalize t h e data, the u s e of the a v e r a g e as a s u b s t i t u t e for a m i s s i n g d a t a v a l u e is

frequently appropriate.

A.I. Ali et aL /European Journal of Operational Research 80 (1995) 462-473

470
Table 1
Example data set
DMU

Output 1

Output 2

Input 1

Input 2

1
2
3
4
5
6
7
8
9
10
11

160
180
170
190
180
140
120
100
140
140
140

100
70
60
130
120
82
90
82
40
105
50

40
30
93
50
80
35
105
97
100
90
98

30
60
40
70
30
45
75
67
50
60
65

Each of the pricing mechanisms reflected in the above three lower bound specifications can lead to
different projected points. This is a consequence of the fact that each mechanism reflects a different
evaluation system in the underlying linear programming problem.
In typical linear programming problems, if a constraint is scaled (multiplied by a nonzero scalar), the
solution is not altered. In data envelopment analysis, when the data is scaled (each input or output value
is multiplied by a nonnegative scalar), the results can change al. The manner in which projections and
efficiency evaluations are altered under different units of measurement for data depends on the
specification of the lower bounds.
As stated earlier, the term izlst+ vie t is exactly utsZ+ ere l at optimality. This quantity obviously
depends on the defined lower bounds as well as the data. Models with D M U specific bounds are
units-invariant as are the models with barycentric bounds. Models with equal lower bounds (u l, v l) - (1, 1)
are not units-invariant (unless the data are unitless). If the data are not unitless, then the (obvious)
dependence of l s + l e on units of measurement alters both projected points and efficiency evaluation.
The reader will note that for the oriented models different lower bound specifications will not alter
the value of 0 or ~b. That is, both 0 and q5 are units invariant. This reflects the fact that 0 and ~b do not
encompass the entire discrepancy between the observed and projected points. In other words, 0 and ~b
fail to capture all of the information available in the model.

6. Computational illustration
Each D E A model determines an envelopment surface with which it evaluates efficiency. As stated
earlier, a D M U is efficient if it lies on this efficient surface and inefficient otherwise. Thus the form of
the envelopment surface affects efficiency evaluation. When unit l is evaluated we obtain (i) a valuation
system,/~t, ul, (oJ), that is representative of a supporting hyperplane of the envelopment surface, and (ii)
a projected point (Y/, Xt) that lies on the face of the surface defined by this hyperplane. The efficiency
evaluation is dependent upon the orientation and lower bound specification of the model as these clearly
affect the location of the projected point. The interrelationship between these three components of
efficiency (envelopment surface, orientation, multiplier lower bounds) is illustrated with the example

11 D E A models are atypical linear programming problems. They involve constraint matrices that are 100% dense, are highly
degenerate, and exhibit cycling. A discussion of efficient computational constructs which address these problems is given in Ali
(1993).

A.L Ali et al. / European Journal of Operational Research 80 (1995) 462-473

471

Table 2
Effect of envelopment surface
Input orientation, equal lower bounds
DMU

1
2
3
4
5
6
7
8
9
10
11

Projected point (~, XI) with CRS

Envelopment surface
(160.00, 100.00, 40.00, 30.00)
(180.00, 70.00, 30.00, 60.00)
(170.00, 112.00, 67.81, 29.16)
(190.00, 130.00, 50.00, 70.00)
(180.00, 120.00, 80.00, 30.00)
(140.00, 82.00, 32.62, 41.94)
(143.47, 90.00, 37.43, 26.73)
(130.58, 82.00, 36.44, 24.29)
(140.00, 91.00, 49.41, 24.71)
(166.46, 105.00, 46.10, 30.73)
(140.00, 88.00, 38.94, 25.83)

Projected point (~, Y(t)with VRS

Envelopment surface
(160.00, 100.00, 40.00, 30.00)
(180.00, 70.00, 30.00, 60.00)
(174.88, 114.88, 69.75, 30.00)
(190.00, 130.00, 50.00, 70.00)
(180.00, 120.00, 80.00, 30.00)
(170.00, 85.00, 35.00, 45.00)
(161.00, 101.00, 42.00, 30.00)
(161.27, 101.27, 44.54, 30.00)
(160.00, 100.00, 40.00, 30.00)
(165.00, 105.00, 47.73, 31.82)
(162.62, 102.62, 45.23, 30.00)

dataset p r e s e n t e d in T a b l e 1. It consists of 11 D M U s each consuming 2 inputs and producing 2 outputs.

O u r discussion will focus entirely on the p r o j e c t e d point.
T a b l e 2 reports the p r o j e c t e d point o b t a i n e d for C R S and V R S e n v e l o p m e n t surfaces with an input
orientation. D M U s 1, 2, 4, and 5 are efficient in b o t h cases. While intentional for our example, it is
unusual to have identical sets of efficient D M U u n d e r the two models. H o w e v e r , note that even with
identical sets of efficient D M U s the p r o j e c t e d points are different for each inefficient D M U . In addition
the distances b e t w e e n the o b s e r v e d and p r o j e c t e d values are g r e a t e r for the C R S surface as the V R S
surface m o r e closely fits the data.
T a b l e 3 reports the p r o j e c t e d points o b t a i n e d for the input oriented, o u t p u t oriented, and n o n o r i e n t e d
V R S m o d e l s with equal lower bounds. O f the seven inefficient points, only o n e ( D M U 6) is projected to
the s a m e point in all t h r e e cases. T h e projected point for D M U 7 is the s a m e for b o t h the o u t p u t
o r i e n t e d and n o n o r i e n t e d case. F o r all o t h e r inefficient D M U s different p r o j e c t e d points are obtained.
As can be seen f r o m the p r e c e d i n g tables the effect of the first two c o m p o n e n t s ( e n v e l o p m e n t surface
and orientation) on efficiency evaluation can be extensive. In contrast, the effect of the third c o m p o n e n t

Table 3
Effect of orientation
DMU
VRS envelopment surface, equal lower bounds
Input oriented
Output oriented
1
(160.00, 100.00, 40.00, 30.00)
(160.00 100.00, 40.00, 30.00)
(180.00, 70.00, 30.00, 60.00)
2
(180.00 70.00, 30.00, 60.00)
(174.88, 114.88, 69.75, 30.00)
(182.50 122.50, 72.50, 40.00)
3
4
(190.00, 130.00, 50.00, 70.00)
(190.00 130.00, 50.00, 70.00)
(180.00, 120.00, 80.00, 30.00)
5
(180.00 120.00, 80.00, 30.00)
(170.00, 85.00, 35.00, 45.00)
6
(170.00 85.00, 35.00, 45.00)
7
(161.00, 101.00, 42.00, 30.00)
(190.00 130.00, 50.00, 70.00)
8
(161.27, 101.27, 44.54, 30.00)
(189.25 129.25, 54.25, 67.00)
9
(160.00, 100.00, 40.00, 30.00)
(185.00 125.00, 65.00, 50.00)
10
(165.00, 105.00, 47.73, 31.82)
(187.50 127.50, 57.50, 60.00)
11
(162.62, 102.62, 45.23, 30.00)
(188.75 128.75, 53.75, 65.00)

Nonoriented
(160.00,
(180.00,
(170.00,
(190.00,
(180.00,
(170.00,
(190.00,
(187.75,
(175.00,
(182.50,
(186.25,

100.00, 40.00, 30.00)

70.00, 30.00, 60.00)
110.00, 47.50, 40.00)
130.00, 50.00, 70.00)
120.00, 80.00, 30.00)
85.00, 35.00, 45.00)
130.00, 50.00, 30.00)
127.75, 51.25, 67.00)
115.00, 45.00, 50.00)
122.50, 47.50, 60.00)
126.25, 48.75, 65.00)

472

A.L Ali et al. / European Journal of Operational Research 80 (1995) 462-473

Table 4
Effect of multiplier lower bounds
DMU
VRS envelopment surface, input orientation
Equal lower bounds
1
(160.00, 100.00, 40.00, 30.00)
2
(180.00, 70.00, 30.00, 60.00)
3
(174.88, 114.88, 69.75, 30.00)
4
(190.00, 130.00, 50.00, 70.00)
5
(180.00, 120.00, 80.00, 30.00)
6
(170.00, 85.00, 35.00, 45.00)
7
(161.00, 101.00, 42.00, 30.00)
8
(161.27, 101.27, 44.54, 30.00)
9
(160.00, 100.00, 40.00, 30.00)
10
(165.00, 105.00, 47.73, 31.82)
11
(162.62, 102.62, 45.23, 30.00)

Barycentric lower bounds

(160.00, 100.00, 40.00, 30.00)
(180.00, 70.00, 30.00, 60.00)
(170.00, 110.00, 60.00, 30.00)
(190.00, 130.00, 50.00, 70.00)
(180.00, 120.00, 80.00, 30.00)
(170.00, 85.00, 35.00, 45.00)
(160.00, 100.00, 40.00, 30.00)
(160.00, 100.00, 42.00, 30.00)
(160.00, 100.00, 40.00, 30.00)
(165.00, 105.00, 47.73, 31.82)
(160.00, 100.00, 40.00, 30.00)

Table 5
Effect of units of measurement
DMU
VRS envelopment surface, input orientation, equal lower bounds
Unscaled data
Scaled data
scale factor (1, 1, 1, 1)
scale factor (100, 1, 1000, 1)
1
(160.00, 100.00, 40.00, 30.00)
(16000, 100.00, 40000.00, 30.00)
2
(180.00, 70.00, 30.00, 60.00)
(18000, 70.00, 30000.00, 60.00)
3
(174.88, 114.88, 69.75, 30.00)
(17000, 110.00, 60000.00, 30.00)
4
(190.00, 130.00, 50.00, 70.00)
(19000, 130.00, 50000.00, 70.00)
5
(180.00, 120.00, 80.00, 30.00)
(18000, 120.00, 80000.00, 30.00)
6
(170.00, 85.00, 35.00, 45.00)
(17000, 85.00, 35000.00, 45.00)
7
(161.00, 101.00, 42.00, 30.00)
(16000, 100.00, 40000.00, 30.00)
8
(161.27, 101.27, 44.54, 30.00)
(16000, 100.00, 42000.00, 30.00)
9
(160.00, 100.00, 40.00, 30.00)
(16000, 100.00, 40000.00, 30.00)
10
(165.00, 105.00, 47.73, 31.82)
(16500, 105.00, 47728.00, 31.82)
11
(162.62, 102.62, 45.23, 30.00)
(16000, 100.00, 40000.00, 30.00)

is less p r o n o u n c e d , particularly in an o r i e n t e d model. F o r the input o r i e n t e d V R S m o d e l results of T a b l e

4, we see that the projections o b t a i n e d for D M U s 3, 7, 8, 9, and 11 are different for the two sets of
multiplier lower bounds.
Finally, T a b l e 5 illustrates the effect of units of m e a s u r e m e n t w h e n using equal lower bounds. T h e
input o r i e n t e d V R S m o d e l with equal lower b o u n d s is solved with the data as in T a b l e 1 and after scaling
the first o u t p u t by 100 and the first input by 1000. (The results are only p r e s e n t e d for the equal lower
b o u n d s case as the other two lower b o u n d specifications are units invariant and p r o d u c e equivalent
projections u n d e r scaling.) D M U s 3, 7, 8, and 11 have different projected points w h e n scaled. Thus
scaling the data, p e r f o r m i n g the analysis, and rescaling the data does not p r o d u c e the s a m e results as
p e r f o r m i n g the analysis on the original data.

7. Conclusions

E a c h of the D E A m o d e l s evaluates efficiency on the basis of t h r e e essential c o m p o n e n t s : a f o r m of

e n v e l o p m e n t surface, orientation, and relative tradeoffs implicit in the multiplier lower bounds.

A.I. Ali et al. /European Journal of Operational Research 80 (1995) 462-473

473

(i) For each type of envelopment surface different projected points (for inefficient units) are obtained
for different evaluation systems, i.e. by effecting a particular orientation a n d / o r by employing a
particular pricing mechanism.
(ii) Models that are units-invariant produce efficiency evaluations and projected points that do not
depend on the units of measurement of the data. This property stems from the selection and
definition of multiplier lower bounds which adjust to (mirror) changes in units of measurement.
(iii) The suitability of a particular model for an application should be gauged with respect to the choice
of the form of envelopment and the evaluation system. The evaluation systems considered in this
paper allow only for lower bounds on the relative prices.
(iv) Extensions to the basic DEA models considered in this paper either alter the form of the surface or
change the evaluation system. For example, both are altered for nondiscretionary variables as only a
subset of the input variables or only a subset of the output variables are used for effecting
orientation (Banker and Morey, 1986);. when additional restrictions are placed on the multipliers,
the evaluation system, and, possibly, the envelopment surface are altered (Charnes, Cooper, Huang
and Sun, 1990).

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