This research was initiated to address a shortfall in some of the previous work
reviewed with respect to capital budgeting and allocation. This shortfall has to do with
the very general manner in which the public sector is addressed. The public sector poses
problems which are unique to its environment and the simple extension of private sector
tools to this domain is considered ineffective.
The central aim of this research is to develop an initial methodology for capital
allocation to projects in the public sector. In developing this methodology the
fundamental differences between the public and private sectors are pointed out. The
methodology devised utilizes knowledge from the fields of Engineering Economy, Capital
Budgeting, and Multi-Attribute Decision Analysis.
Basic principles of Engineering Economy and Capital Budgeting are reviewed.
The Multi-Attribute Decision Model selected for implementation in this research methodology is the
Analytic Hierarchy Process (AHP). The procedure followed by the
AHP is presented and its benefits and limitations are discussed.
The research addresses the quantitative and qualitative aspects of assessing
projects in the public sector. A hypothetical example is presented to demonstrate the
manner in which the methodology works. The thesis concludes with recommendations
and proposes areas for further research.
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