Assessment and budget allocation of Iranian natural gas distribution company- A CSW DEA based model

Abstract Regarding the importance of budgeting in organizations, this research proposes an empirical approach to budget allocation problems. The methodological instrument utilized is data envelopment analysis (DEA) which is a nonparametric mathematical programming technique. In the DEA methodology a standard DEA model should be independently solved to evaluate each decision making unit (DMU). Consequently, it is hard to find the magnitude of budget for each DMU by applying a budget allocation model based on standard DEA models because identifying the DMU under evaluation is problematic. Also, to overcome problems of evaluation using standard DEA models, common set of weights (CSW) DEA models were suggested. These models can be developed for use in budget allocation DEA models that lead to finding a single magnitude of budget for each DMU. Moreover, the opinion of the decision maker can be incorporated into the model using budgetary constraints. As a result, a restricted linear budget allocation CSW DEA model is proposed in which the central authority would like to plan for improving the total efficiency scores of all DMUs. In essence, the proposed model is used to reallocate the available budget and, thus, the results obtained will be a suggestion for budget allocation in subsequent periods. Finally, the proposed model is applied to budget allocation in the Iranian gas industry in which the available budget is reallocated to increase the total efficiency scores of Iranian gas distribution branches.