A slacks-based measure of efficiency for the case of exogenously fixed factors

Standard data envelopment analysis (DEA) models assume that all inputs and outputs can be varied at the discretion of management or other users. In any realistic situation, however, there may exist “exogenously fixed” or non-discretionary factors that are beyond the control of a DMU’s management, which also need to be considered. This paper proposes a slacks-based measure (SBM) of efficiency in the presence of non-discretionary factors in data envelopment analysis. This scalar measure deals directly with the discretionary input excess and the discretionary output shortfall of the decision making units (DMUs) concerned. The new measure has a close connection with the measure proposed by Banker and Morey (1986). We then apply this measure to a real world data set.