Applying data envelopment analysis to allocate incentive bonuses for container terminal operators

Abstract

Incentive bonus payments for terminal operators are mostly based on the size of throughput growth rate. In most cases, this does not encourage terminal operators to effectively utilize the terminal facilities and equipment. Therefore, it is necessary to establish efficiency and scale of operation as the basis for incentive bonus allocations. The importance of this issue is that in some port governance models, concessions are static agreements where fees and other conditions generally do not change over time. This paper introduces the possibility and advantage of data envelopment analysis (DEA)-based incentive bonus allocations that can ensure that the incentive bonuses allocated to terminal operators are based on both the amount of throughput/throughput increment and production efficiency. To this end, three DEA-based incentive bonus allocation models are proposed for different output items. The results show that the incentive bonus allocation approach proposed in this study effectively takes into account the magnitude of the throughput/throughput increment and production efficiency of terminal operators.