Question # 4 (AHP Analysis)

A B C

Project Road Project High Rise Building Bus Service Lane

Profit 80M 40M 100M

Experience full little no

Client's Attitude Challenging Very Reliable Very Ambitious

Project Profitability Technical Knowledge Client`s Reputation

A-Profitability
C is very strongly preferred to B A is very strongly preferred to B C is very Moderately Preferred to A
Compared to the First Alternative, The Second Alternative is: extremely preferred very strongly preferred strongly preferred moderately preferred equally preferred Numerical Ranking 9 7 5 3 1

Comparison Matrix
A 1 1/5 3 B 5 1 7 C 1/3 1/7 1

A B C

Calculate the Column Sum . For Example, 1+ 1/5 + 3 = 21/5 = 4.2

Sum 4.2 13 1 1/2

Normalizing Vector Divide each entry in the pair wise comparison matrix by its corresponding column sum.
A B C 1/4 2/5 2/9 0.047619048 0.076923077 0.096774194 0.71 0.54 0.68

A B C

Priority Vector The priority vector is determined by averaging the row entries in the normalized matrix. For Example, + 2/5 + 2/9 = 0.28
Priority Vector 0.28 0.07 0.64

The sum of Priority Values Matrix should be equal to 1. For Example, 0.28+0.07+0.64=1

B-Technical Knowledge
A is Extremely Preferred to C A is Strongly Preferred to B B is very strongly preferred to C Comparison Matrix
A 1 1/5 1/9 B 5 1 1/5 C 9 5 1

A B C

Calculate the Column Sum

Sum 1 1/3 6 1/5 15

Normalizing Vector Divide each entry in the pair wise comparison matrix by its corresponding column sum.
A B C A 3/4 1/7 0.08 B 4/5 1/6 0.03 C 3/5 1/3 0.07

Priority Vector The priority vector is determined by averaging the row entries in the normalized matrix
Priority Vector 0.72 0.22 0.06

The sum of Priority Values Matrix should be equal to 1. For Example, 0.72+0.22+0.06=1

C- Client`s Attitude
B is Strongly Preferred to C B is Extremely Preferred to A C is strongly Preferred to A Comparison Matrix
A B C A 1 9 5 B 1/9 1 1/5 C 1/5 5 1

Sum

15

1 1/3

6 1/5

Normalizing Matrix
A B C A B C 0.066666667 0.084745763 0.032258065 3/5 3/4 4/5 0.33 0.15 0.16

Priority Vector
Priority Vector 0.06 0.72 0.22

The sum of Priority Values Matrix should be equal to 1

Checking Consistency Multiply each column of the comparison matrix by its priority: 1 .06 9 5 + .72 1/9 1 1/5 + .022 1/5 5 1 .18 = 2.35 .67

Divide these number by their priorities to get: .18/.06 = 3.02

2.35/..72 = 3.25 .67/.022 = 3.09 Average the above results to get max. max = (3.02 + 3.25+ 3.09)/3 = 3.12 Compute the consistence index, CI, for two terms. CI = (max - n)/(n - 1) = (3.12 - 3)/2 = .06 Compute the consistency ratio, CR, by CI/RI, where RI = .58 for 3 factors: CR = CI/RI = .06/.58 = .103 Since the consistency ratio, CR, is more than .10, this is not within the acceptable range for consistency. Repeat it with different preferences.

C- Client`s Attitude
B is Very Strongly Preferred to Extremely Preferred to A B is Strongly Preferred to C C is strongly to very strongly Preferred to A

Comparison Matrix
A 1 8 4 B 1/8 1 1/5 C 1/4 5 1

A B C

Sum

13

1 1/3

6 1/4

Normalizing Matrix
A B C A B C 0.076923077 0.094339623 0.04 5/8 3/4 4/5 0.31 0.15 0.16

Priority Vector
Priority Vector 0.07 0.72 0.21

Checking Consistency 1 .07 8 4 + .72 Multiply each column of the comparison matrix by its priority: 1/8 1 1/5 + .21 1/4 5 1 = .21 2.32 .63

Divide these number by their priorities to get: .21/.07 = 3.02 2.32/.72 = 3.20 .21/.63 = 3.07 Average the above results to get max.

 max = (3.02 + 3.20 + 3.07)/3 = 3.10 Compute the consistence index, CI, for two terms. CI = ( max - n)/(n - 1) = (3.10 - 3)/2 = .048 Compute the consistency ratio, CR, by CI/RI, where RI = .58 for 3 factors: CR = CI/RI = .048/.58 = .083 Since the consistency ratio, CR, is less than .10, this is well within the acceptable range.

Overall Project
A-Profitability B-Technical Knowledge C-Client`s Attitude A is Extremely Preferred to C B is Strongly Preferred to C A is Strongly Preferred to B Comparison Matrix
A 1 1/5 1/9 B 5 1 1/5 C 9 5 1

A B C

Sum

1 1/3

6 1/5

15

Normalizing Vector
A B C A B C 3/4 4/5 3/5 1/7 1/6 1/3 0.08 0.03 0.07

Priority Vector
Priority Vector 0.72 0.22 0.06

The overall priorities are determined by multiplying the priority vector of the criteria by the priorities for each decision alternative for each objective.

Priority Vector For criteria

[0.72
A 0.28 0.07 0.64

0.22
B 0.07 0.72 0.21

0.06]
C 0.72 0.22 0.06

A B C

Thus, the overall priority vector is: A: B: C: (.72)(.28) + (.22)(.07) + (.06)(.72) = .26 (.72)(.07) + (.22)(.72) + (.06)(.22) = .22 (.72)(.64) + (.22)(.21) + (.06)(.06) = .51

Project "C" appears to be the overall recommendation.