Performance Evaluation Metrics

Abstract

It may well be the case that no topic is more intensely debated in the evaluation community than the topic of evaluation metrics. For every advocate of a particular metric there will be those who are equally critical. Why such a debate? The debate concerns substantive issues about the choice of appropriate discount rates and appropriate procedures for dealing with mathematical complexities, such as multiple rates of return, that can obscure economic interpretations. We have chosen to leave the debate outside the scope of our inquiry, and instead discuss three performance evaluation metrics used by the National Institute of Standards and Technology (NIST). NIST has “standardized” on three performance evaluation metrics, and those three metrics are discussed in this chapter: the internal rate of return, the implied rate of return or adjusted internal rate of return, and the ratio of benefits-tocosts. A fourth metric, net present value, is readily derived from the information developed for the benefit-to-cost ratio.