Capital project selection using an integrated AHP-LP model: a case study in a developing economy

Abstract

An integrated analytic hierarchy process (AHP) and linear programming (LP) model that considered both quantitative and qualitative factors in choosing the best capital project options from a list of competing projects is presented. The prioritised (ratios) weights of the individual projects obtained from AHP were used as the pre-emptive weights of the decision variables of the resulting LP model that maximises the profitability of the organisation. The integrated model is applied in a developing country within the Nigerian National Petroleum Corporation (NNPC) in selecting capital projects that meet the organisation's strategic goals. A comparison between the integrated model and the traditional capital budgeting technique shows that the integrated model outperformed the traditional capital budgeting method in choosing the projects that best meet the organisation/s overall goals.