Application of Multi-Criteria Decision-Making Based on Combined Analytic Hierarchy Process and Linear Programming as an Alternative for Project Selection: The Case of Ethiopian Road Authority Road Projects
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Date
2022-06
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Addis Ababa University
Abstract
Resources are limited for pursuing and funding new projects hence the challenge is to
prioritize, select and allocate optimally. Ethiopian public projects encountered challenges in
selecting best projects, finishing in time and cost. The project selection methods commonly
used are quantitative in nature and they lack to account for intangible factors which can affect
the outcome of project appraisals. An integrated Analytic Hierarchy Process and Linear
Programming model that considered both quantitative and qualitative factors in choosing
capital project is presented. The combined model is applied in Ethiopian Roads Authority
road projects with Planning and Development Commission and Ministry of Finance as prime
stakeholders in project selections. Research surveys were conducted in those organizations
and secondary documents were used for the analysis. The results indicated project
characteristics, with 0.5 weight, were ranked higher than other criteria related to the firm
characteristic and external factors with weights of 0.36 and 0.14 respectively. The most
important project selection sub-criteria found to be profit, measure of worth, project risk,
financial standing, and resources with the overall weight of 0.15, 0.13, 0.12, 0.10 and 0.09
respectively. Others are economic factors, experience, technical ability, size & complexity,
duration, organization culture, environmental, location factors, social responsibility, and
political factors with weights of 0.07, 0.07, 0.07, 0.06, 0.04, 0.03, 0.02, 0.02, 0.02, and 0.01
respectively. Four projects out of six total projects were selected to have the most use of
resources under the available resource constraints. The study provides a simple framework
that can be used by organizations to make these challenging decisions. The integrated model
is recommended for its ability to capture all possible factors, optimality advantage and
applicability in different situations with refining the selection criteria.
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Keywords
Analytic Hierarchy Process,, Linear Programming, Projects, Project Appraisal, Resource Constraint, Optimality