Chapter - 1 - Introduction To Eng Economy

Engineering Economy
Sullivian
W.G, Wicks
E.M and
Koelling
C.P (2012)
Mohamad
Sirin, R
(2007)
Blank, L.T, A.Tarquin (2012)

Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
Chapter 1
Introduction to
Engineering Economy
Engineering Economy, Fifteenth Edition 1-2 Copyright ©2012 by Pearson Education, Inc.
Engineering economy…
involves the systematic

evaluation of the economic
merits of proposed solutions to
engineering problems.

Why Engineering Economy is
Important to Engineers
 Engineers design and create …design & build…what

type of design involved?
 Designing involves economic decisions…size min or

max? A=125m2, provide 4Y20 (Area 130m2 not 4Y25
(Area = 135m2
 Engineers must be able to incorporate economic

analysis into their creative efforts …Project A, but 20
company submit tender for this project..
Why Engineering Economy is
Important to Engineers
 Often engineers must select and implement from

multiple alternatives..apa akan terjadi apabila 1 pile
patah semasa kerja piling dilakukan?
 Understanding and applying time value of money,

economic equivalence, and cost estimation are vital for
engineers
 A proper economic analysis for selection and

execution is a fundamental task of engineering.. 1 of
company submit 3 tender, which are 3BQ...which one
the best price??
Engineering economic analysis can
play a role in many types of situations.
• Choosing the best design for a high-efficiency gas
furnace.
• Selecting the most suitable robot for a welding
operation on an automotive assembly line.
• Making a recommendation about whether jet airplanes
for an overnight delivery service should be purchased
or leased.
• Determining the optimal staffing plan for a computer
help desk.
• Determing labour …pekerja asing or tempatan
• Progress Report..Interim payment, S-Curve
• Bidding (BQ)…the best price to select contractor
• Hire purchase..machineries

SEVEN (7) fundamental principles of
engineering economy.
• Develop the alternatives
carefully define the problem, then the choice (decision)
is among alternatives. The alternatives need to be
identified and then defined for subsequent analysis.
• Focus on the differences

only the differences in expected future outcomes
among the alternatives are relevant to their comparison
and should be considered in the decision.

Cont…SEVEN (7) fundamental
principles of engineering economy.
• Use a consistent viewpoint

the prospective outcomes of the alternatives, economic
and other, should be consistently developed from a
defined viewpoint (perspective)
• Use a common unit of measure

using a common unit of measurement to enumerate as
many of the prospective outcomes as possible will
simplify the analysis of the alternatives.

• Consider all relevant criteria
selection of a preferred alternative (decision making)
requires the use of a criterion (or several criteria). The
decision process should consider both the outcomes
enumerated in the monetary unit and those expressed in
some other unit of measurement or made explicit in a
descriptive manner.
• Make uncertainty explicit

risk and uncertainty are inherent in estimating the future
outcomes of the alternatives and should be recognized in
their analysis and comparison.

• Revisit your decisions
improved decision making results from an adaptive
process; to the extent practicable, the initial projected
outcomes of the selected alternative should be
subsequently compared with actual results achieved.

No Principle of eng. Example issue
economy
1 Develop the alternatives SMART Tunnel
carefully define the problem,
then the choice (decision) is
among alternatives
Problem
1. Sinkholes 2. Crack
Propose all decision alternative

1. Service & Repair for maintenances purpose only, (xperlu
redesign)
2. Redesign, sampling & lab testing for others action
approval from authorities
3. New improvement technologist action

economy
2 Focus on the differences Choose expected decision alternative (2) & (3)
2. Redesign, sampling & lab testing for others action
only the differences in approval from authorities
expected future outcomes
among the alternatives are 3. New improvement technologist
relevant to their comparison
and should be considered in
the decision.
3 Use a consistent viewpoint 2. Redesign, sampling & lab testing for others action
approval from authorities
the prospective outcomes of a. melibatkan masa untuk merekabentuk & menyiapkn
the alternatives, economic and laporan serta mendapatkan kelulusan oleh pihak
other, should be consistently berkuasa tempatan.
developed from a defined b. melibatkan kos dan pekerja mahir bagi membuat
penyelenggaraan
viewpoint (perspective)
3. New improvement technologist
a. menggunakan TB Machine jenis Variable Density
bukan jenis Earth Pressure Balance for different soil
condition.
b. menggunakan pekerja mahir yang dilatih khas
c. menggunakan bahan yang mempunyai kekuatan
tinggi

No Principle of eng. economy Example issue
4 Use a common unit of measure 2. Redesign, sampling & lab testing

• R/Bentuk semula & kelulusan ambil masa yang
using a common unit of measurement to lama
enumerate as many of the prospective • Kos yang tinggi
outcomes as possible will simplify the • pekerja mahir yang terlatih
analysis of the alternatives.
3. New technologist to prevent Crack – Steel fibre
Constructive:
•Less material cost
•Labor reduction
•Less human error
Structural:
•Smaller crack width openings
•Higher durability
•Higher impact and abrasion resistance
•Higher fatigue strength
•Improved fire resistance properties
5 Consider all relevant criteria

selection of a preferred alternative Review again all criteria
(decision making) requires the use of a
criterion (or several criteria). The decision
process should consider both the
outcomes enumerated in the monetary
unit and those expressed in some other
unit of measurement or made explicit in a
descriptive manner.
economy
6 Make uncertainty explicit Advantages
•Minimized cracking and spalling
risk and uncertainty are •Less repair and maintenance needed
inherent in estimating the •Better aesthetical appearance of the tunnel
future outcomes of the •No limitations for M&E to drill
alternatives and should be •Higher durability
recognized in their analysis Disadvantages
and comparison.
•The use of SFRC as tunnel lining is uncommon
•Unlike conventional rebar design, SFRC mix design is more
complex.
•No precedence of mix design to follow
•Limited guidelines on the sampling and testing of SFRC
samples
•Engage experienced consultants to facilitate:
7 Revisit your decisions Choose the best decision ..no (3)

improved decision making
results from an adaptive
process; to the extent
practicable, the initial projected
outcomes of the selected
alternative should be
subsequently compared with
actual results achieved.

Engineering Economy
• Engineering Economy involves
– Formulating .. v=P x L x t
– Estimating, ..slab
– Evaluating …how many mixer lorry want to order???
expected economic outcomes of alternatives
designed to accomplish a defined purpose
• Easy-to-use math techniques simplify the evaluation, ex :

Teorem Pithagoras
• Estimates of economic outcomes can be deterministic or

stochastic in nature.ex : Progress Curve (S-curve)
Electronic spreadsheets are a
powerful addition to the analysis
arsenal.
• Most engineering economy problems can be
formulated and solved using a spreadsheet.
• Large problems can be quickly solved.
• Proper formulation allows key parameters to be
changed.
• Graphical output is easily generated.
• Give example of spreadsheets that engineer use in
design for civil engineering???

General Steps for Decision Making
Processes
1. Understand the problem ..define objectives .. Ex :
broken pile
2. Collect relevant information…why that happen (condong
semasa setting piling work)
3. Define the set of feasible alternatives..discuss any
solution (korek semula? biarkan tanpa cukup bil pile ikut
size asal?redesign footing?)
4. Identify the criteria for decision making..list out
i.korek semula
ii. ikut saiz asal tanpa cukup bil pile
iii. redesign footing
Cont..General Steps for Decision
Making Processes
5. Evaluate the alternatives and apply sensitivity analysis..
i.korek semula…akan mengganggu struktur tnh
ii. ikut saiz asal tanpa cukup bil pile…x boleh tanggung
load structure..
iii. redesign footing…boleh tanggung load structure
6. Select the “best” alternative…..choose (iii) redesign
7. Implement the alternative and monitor results....action
(submit drawing for aprovals)
Cont..General Steps for Decision
Making Processes
No Decision Making Example issue
Processes
1 Understand the problem broken pile
(define objectives )
2 Decision Making Processes condong semasa setting piling work
3 Define the set of feasible Senaraikan semua kebarangkalian
alternatives..discuss any solution..korek semula? biarkan tanpa cukup bil
solution pile ikut size asal? redesign footing etc.
4 Identify the criteria for decision i.korek semula
making..list out ii. ikut saiz asal tanpa cukup bil pile
iii. redesign footing
5 Evaluate the alternatives and i.korek semula…akan mengganggu struktur tnh
apply sensitivity analysis.. ii. ikut saiz asal tanpa cukup bil pile…tidak
boleh tanggung load structure..
iii. redesign footing…boleh tanggung load
structure
6 Select the “best” alternative.. (iii) redesign
choose
7 Implement the alternative and submit drawing for approvals
monitor results.. action
Steps in an Engineering Economy
Study
Take Home Quiz 1
1.Find one (1) problem economic issues
related on building and construction
2. Solve the problem by following the

fundamental principles of engineering
economy
3. Your submission should not more than 1

a4 paper.


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Engineering Economy

Blank, L.T, A.Tarquin (2012)

involves the systematic

Copyright ©2012 by Pearson Education, Inc.

 Engineers design and create …design & build…what

 Designing involves economic decisions…size min or

 Engineers must be able to incorporate economic

 Often engineers must select and implement from

 Understanding and applying time value of money,

 A proper economic analysis for selection and

Copyright ©2012 by Pearson Education, Inc.

• Focus on the differences

Copyright ©2012 by Pearson Education, Inc.

• Use a consistent viewpoint

• Use a common unit of measure

Copyright ©2012 by Pearson Education, Inc.

• Make uncertainty explicit

Copyright ©2012 by Pearson Education, Inc.

Copyright ©2012 by Pearson Education, Inc.

Propose all decision alternative

Copyright ©2012 by Pearson Education, Inc.

Copyright ©2012 by Pearson Education, Inc.

4 Use a common unit of measure 2. Redesign, sampling & lab testing

5 Consider all relevant criteria

7 Revisit your decisions Choose the best decision ..no (3)

Copyright ©2012 by Pearson Education, Inc.

• Easy-to-use math techniques simplify the evaluation, ex :

• Estimates of economic outcomes can be deterministic or

Copyright ©2012 by Pearson Education, Inc.

2. Solve the problem by following the

3. Your submission should not more than 1

Copyright ©2012 by Pearson Education, Inc.

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