An efficiency measure that ignores the impact of scale-size by comparing a DMU only to other units of similar scale. Technical efficiency is computed using the BCC model. Overall efficiency is sometimes referred to as technical efficiency as closely follows the concept of technical efficiency developed by Farrell (1957), which technical efficiency as defined here, is known as ‘pure technical efficiency’. [Farrell M J (1957), ‘The measurement of productive efficiency’, J. Roy. Statist. Soc., 120, pp 253-290.]

Simply stated, a unit is Pareto-efficient when an attempt to improve on any of its inputs or outputs will adversely affect some other inputs or outputs. Formally, Chames et al (1981) consider a DMU to be 100% efficient only when ‘none of its inputs can be decreased without either (i) decreasing some of its outputs, or (ii) increasing some of its other inputs, and none of its outputs can be increased without either (i) increasing one or more of its inputs or (ii) decreasing some of its other outputs’. Since the condition for Pareto-efficiency is that a DMU’s efficiency score is 1, efficiency and Pareto-efficiency are synonymous. [Chames A, Cooper W W and Rhodes E (1981), ‘Evaluating program and managerial efficiency: an application of data envelopment analysis to program follow through’, Mgmt. Sci., 6, pp 668-697.]

The operational practices (a combination of the management and engineering knowledge) that determine how a DMU’s inputs are transformed into outputs.

Another name for reference set

Short for decision making unit or DMU.

A DMU is said to operate at increasing returns to scale (IRS) if a proportionate increase in all of its inputs results in a greater than proportionate increase in its outputs. If for a given unit the sum of its dual weights in the dual model turns out to be less than 1, then that unit can be said to operate at IRS, assuming it is technically efficient.

Any factor used as a resource by the DMU for producing something of value.

A term used in conjunction with the ratio models to indicate that an inefficient unit is made efficient through the proportional reduction of its inputs while its outputs proportions are held constant. While the CCR model yields the same efficiencies regardless of whether it is input or output-oriented, this is not so with the BCC model.

The proportions in which a unit’s input/output values are combined.

A measure of a unit’s ability to produce outputs from its set of inputs. Since the efficiency of a given DMU is measured with respect to other DMUs in the field, the obtained efficiency is always relative. From the standpoint of the efficiency frontier, an enveloped unit’s efficiency is related to its radial distance from the frontier.