Analytical Hierarchy

Process (AHP) Nayan Jain

AHP technique to aid decision making with an example in Pawan Prakash
construction projects. Group - 13
 ● Literature Overview

● Solving an Example
Contents
● Application of AHP

● Discussing an Online Tool

 ● Decision-making is defined as the process of determining the
best alternative among all possible choices but in practice,
achieving an optimized result can be problematic as
decision-makers are often confronted with various
decision-making problems.
Introduction ● These cognitive biases and the increasing complexity of modern
to Decision problems make it extremely important to adopt a methodology
for
Making ● Making it straightforward (easy to use and understand),
● effective (making the consistent decisions according to our criteria
Process and interests)
● Trustworthy (proven methodology) decisions.
● Multi-criteria decision-making (MCDM) is one of the most
important branches of decision theory and is used to identify the
best solution from all possible solutions available.
 ● MCDM is a technique that combines alternative’s performance
across numerous, contradicting, qualitative and/or quantitative
criteria and results in a solution requiring a consensus.
● MCDM methods are frequently used to facilitate the resolution of
Multi-Criteria real world decision-making problems.

Decision ● It aids decision makers in selecting shortlisted alternatives or a

single alternative that fulfils their requirements
Making ● Pros and Cons Method - the problem is clearly stated, alternative
(MCDM) possible solutions are proposed, and the pros and cons of each are
established. It is one of the best known MCDM methodology.
● The above method works well for simple problems but has the
disadvantage of not being able to accurately quantify the relative
importance of each factor to be traded.
 ● There are several methods of decision-making but most require
specific training in areas such as economics, operations research,
probability, etc.
● Several methods have been developed to enable improvements in
MCDM, including:
MCDM ●
●
Analytical Hierarchy Process (AHP)
Analytical Network Process (ANP)
Methodologie ● Decision Trees
● TOPSIS
s ● Fuzzy - Decision Making
● Multi-Attribute Utility Theory (MAUT);
● Elimination and Choice Corresponding to Reality (ELECTRE);
● Choosing by Advantages (CBA), etc.
 ● Although, MCDM remains an active area of research in
management science a recent survey carried out on information
technology (IT) companies reported that 71.9% of those
companies knew of the existence of MCDM methods yet only
33.3% actually used them.
● This gap between known and used methods is much smaller for
the traditional financial methods of cost‒benefit and SWOT
Awareness analysis; that is, 89.5% of companies know financial methods and
74.6% use them.
about MCDM ● It is thus, important to investigate the usefulness of MCDM
methods and to highlight the benefits of using these methods for
the actual practitioners.
● In this research we may focus on AHP as it is one of the most used
MCDM methodologies by various literatures in Construction
Industry.
 ● AHP was created by Saaty (1980) to deal with decision making
problems in complex and multi-criteria situations.
● AHP assists in making decisions that are characterized by several
interrelated and often competing criteria, and it establishes
priorities amongst decision criteria when set within the context
of the decision goal.

Introduction ● A key aspect is that decision criteria are assessed with respect to
their relative importance in order to allow trade-offs between
to AHP them.
● AHP allows decision-makers to employ multiple criteria in a
quantitative manner to evaluate potential alternatives and then
select the optimal option.
● In this process, the decision maker carries out simple pairwise
comparison judgments which are then used to develop overall
priorities for ranking the alternatives.
 ● The first level of the hierarchy contains the decision goal, whereas
the subsequent lower levels represent the progressive breakdown
of the decision criteria, sub-criteria and the alternatives for
reaching the decision goal;
1st Step of
AHP Goal Objective

Level 1 Criteria 1 Criteria 2 Criteria K

Hierarchy
formation Level 2 Sub-Criteria 1 Sub-Criteria 2 Sub-Criteria L

Level N Alternative 1 Alternative 2 Alternative M

 ● Decision-makers (who are often domain experts) are asked to
complete pairwise comparisons of the elements at each level of
2nd Step of the hierarchy, assuming the elements are independent of each
other.
AHP ● In this regard and considering the decision goal, comparisons are
made between the relative importance of every two criteria at
the second level of the hierarchy.
Pairwise ● Every two sub-criteria under the same criterion (at level two) are
also compared, and so on and so forth.
Comparisons
● These pairwise comparisons are often based on a nine-point
scale.
2nd Step of
AHP

Pairwise
Comparisons
 ● Expert judgments are necessary for determining the relative
importance of each criterion and any alternative to achieving the
decision goal.

3rd Step of ● As AHP allows subjective judgments by decision makers,

consistency of the judgments is not automatically guaranteed.
AHP ● Therefore, consistency verification is essential to ensuring
optimized outcome. To control the consistency of pairwise
comparisons, a computation of consistency ratio should be
Verification of performed.
● At this stage, decision-makers are required to revise their initial
Consistency judgments if the computed consistency ratio exceeds the
threshold of 0.1.
● Detailed Methodology for consistency check will be discussed in
later segment.
 ● Determines the local, global and total priorities.
4th Step of ● Local priorities are obtained from the pairwise comparison
matrices using any of the existing prioritization procedures.
AHP
● Global priorities (the priorities of the elements of the hierarchy
with regards to the mission) are obtained through the principle of
hierarchical composition.
Prioritization ● Total priorities (the priorities of the alternatives with regards to
and Synthesis the mission) are obtained by a multi-additive aggregation of the
global priorities of each alternative.
 AHP Framework

Develop the
Develop the Model Hierarchy

Derive Priorities for the

Check for Consistency
Criteria

Methodology Derive Priorities for

Check for Consistency
Alternatives
for AHP
Derive Overall Priorities

Perform Sensitivity Analysis

Making the Final Decision

 ● (1) Develop a model for the decision: Break down the decision
into a hierarchy of goals, criteria, and alternatives.
● (2) Derive priorities (weights) for the criteria: The importance of
criteria is compared pairwise with respect to the desired goal to
derive their weights. We then check the consistency of judgments;
that is, a review of the judgments is done in order to ensure a
Methodology reasonable level of consistency in terms of proportionality and
transitivity.
for AHP ● (3) Derive priorities (preferences) for the alternatives: Derive
priorities or the alternatives with respect to each criterion
separately (following a similar process as in the previous step, i.e.,
compare the alternatives pairwise with respect to each criterion).
Check and adjust the consistency as required.
 ● (4) Derive Overall Priorities (Model Synthesis): All alternative
priorities obtained are combined as a weighted sum—to take into
account the weight of each criterion—to establish the overall
priorities of the alternatives. The alternative with the highest
Methodology overall priority constitutes the best choice.
● (5) Perform Sensitivity analysis: A study of how changes in the
for AHP weights of the criteria could affect the result is done to
understand the rationale behind the obtained results.
● (6) Making a Final Decision: Based on the synthesis results and
sensitivity analysis, a decision can be made.
 ● Suppose, an organization needs to prioritize from 6 projects that
it can execute. It only has resources to execute 1 of them.

Goal Project Selection

Understandin
Stakeholder
g Level 1
Commitment
Financials Strategic Other

Methodology Level 2
Team
Commitment
Return on
Investment
Ability to
Compete
Risks

with Example Organization

Profits
Internal
Urgency
Commitment Processes

Project Man. Net Present Technical

Hierarchy Formation Commitment Value
Reputation
Knowledge

Level 3 Project A Project B Project C Project D Project E Project F

 ● Solving First Level of Hierarchy and form a Comparison Matrix.
The basic question that needs to answered every time is: Which
criteria is more important and by how much times?
Understandin
g
Methodology
with Example
● In order to interpret and give relative weights to each criterion, it is
necessary to normalize the previous comparison matrix. The
Deriving Priorities of normalization is made by dividing each value by the total column
Criteria – Pairwise value. Average of each row gives the Priority or Eigen Vector
Comparisons

● SC – Stakeholder commitment, F = Financials, St = Strategic, OC = Other

 ● Consistency - The objective is to capture enough information to
determine whether the decision makers have been consistent in
their choices.
Understandin ● If A>B and B>C it would be inconsistent that A<C.
g ● The inconsistency index is based on maximum Eigenvalue, which
is calculated by summing the product of each element in the
Methodology Eigenvector by the respective column total of the original
comparison matrix.
with Example
● The Table below demonstrates the calculation of maximum
Eigenvalue (λmax)
Deriving Priorities of
Criteria – Checking
for Consistency
 ● The calculation of the consistency index is given by the following
formula
● CI = (λmax - n)/(n-1) , n = number of criteria
● Consistency ratio (CR) which is determined by the ratio between
Understandin the consistency index and the random consistency index (RI).

g
Methodology
● Hence, in our case the calculations of CI and CR is:
with Example ● CI = (4.06-4)/(4-1) = 0.02
● CR = CI/RI = 0.02/0.9 = 0.02 = 2%
Deriving Priorities of
Criteria – Checking ● Since its value is less than 0.1 or 10%, the matrix can be
considered to be consistent.
for Consistency
 Solving Next
Level of
Hierarchy –
Stakeholder
Commitment

● TC –Team commitment, OC –Organization commitment, PMC – Project Managers commitment, .

 Solving Next
Level of
Hierarchy –
Financials

● ROI –Return on Investment, Pf- Profits, NPV – Net Present Values. .

 Solving Next
Level of
Hierarchy –
Strategy

● IM –Compete in International Markets , IP – Improves Internal Process, RP – Improves Reputation. .

 Solving Next
Level of
Hierarchy –
Others

● Risks – Risks or threats , UR – Urgency, ITK – Internal Technical Knowledge.

 ● The global priority for each criterion is determined by the result of
the multiplication of each priority on the first level by its
respective priority on the second level.

Global Priority
 Deriving
Priorities for
Alternatives–
Each Alternative is
then compared for
each criteria
Results obtained through
online tool.

● Weighing/Ranking each project in accordance to

the criteria in consideration.
Deriving
Priorities for
Alternatives–
Each Alternative is
then compared for
each criteria
Results obtained through
online tool.
Deriving
Priorities for
Alternatives–
Each Alternative is
then compared for
each criteria
Results obtained through
online tool.
Deriving
Priorities for
Alternatives–
Each Alternative is
then compared for
each criteria
Results obtained through
online tool.
 ● The mechanism for calculating the final priority is to sum the
products of the multiplication of each criterion's priority weight
by its alternative weight.

Model
Synthesis –

Total Priority

● Hence, given the comparisons of the decision maker the Project D

is the most suitable project to be given preference over other
projects considered.
 ● AHP has found its widest applications in multi-criteria decision
making, in planning and resource allocation, and in conflict
resolution.
Decision Areas Decision Problem Authors Year
Risk management Decision making for balanced risk allocation selection Khazaeni, G. et al 2012

Application of Sustainable or green

construction
Sustainable building materials selection Akadiri, P.O et al 2013

AHP in Housing Helping developers to select appropriate sites Ahmad, I. et al 2004

Construction Contractor prequalification

and selection
An advanced model for contractor prequalification El-Sawalhi, N., et al
and selection
2007

Industry Dispute resolution Exploring key features of alternative dispute Cheung S.O., et al
resolution
2004

Construction productivity Predicting the impact of a technology on productivity Goodrum, P.M. et al 2011

Fire safety management Optimal selection of fire origin room Tavares, R.M. et al 2008

Quality management Helping contractors to solve quality problems Lam, K.C. et al 2008
 ● Quality is a critical issue for almost all construction stakeholders
and one of the key criteria for measuring project success in
construction.
● Thus, AHP could be applied in analysing quality management
decisions in order to develop more decision support systems to
help solve quality problems in construction projects.

Application in ● Future research can be done in:

● Quality Performance
Domain of ● Client Satisfaction
● Productivity
Quality
● Future AHP applications could focus on developing quality
Management performance measurement models to help assess and measure
the quality performance of different stakeholders within the
construction industry.
● There is scope to develop AHP-based quality measurement
models/systems for international contractors and other
construction stakeholders to improve their quality performance.
● However, limited research is found in this domain.
 ● Some of the advantages of AHP includes:
● Well – Proven – Used for more than 30 years for MCDM
● Broad Application – Can be Applied in Various Domains
● Intuitive and easy to use
● Solves Multi level and Multi Criteria Easily
● Builds alignment around criteria priorities
Reasons to ● Validates consistency

Use AHP and ● Limitations of AHP includes:

Limitations ● It can only solves independent criteria, for dependent criteria ANP
(Analytical Network Process - An advanced AHP) can be used.

● Online tool Available for AHP:

● One can use online tool available at
https://bpmsg.com/ahp/ahp-calc.php.
● It can solve AHP problems up to 20 criteria and was being used in
this research for the second level of hierarchy.