Chapter 1 introduction to engineering economy

Copyright ©2012 by Pearson Education, Inc.
Upper Saddle River, New Jersey 07458
All rights reserved.
Engineering Economy, Fifteenth Edition
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
Engineering EconomyEngineering Economy
Sullivian
W.G, Wicks
E.M and
Koelling
C.P (2012)
Mohamad
Sirin, R
(2007)
Blank, L.T, A.Tarquin (2012)

1-2
Chapter1Chapter1
Introductionto
EngineeringEconomy

Engineering economy…
involves the systematic evaluation
of the economic merits of proposed
solutions to engineering problems.

1-4
Why Engineering Economy is Important to
Engineers
 Engineers design and create … de sig n & build… what type o f
de sig n invo lve d?
 Designing involves economic decisions…siz e m in o r m ax?
A= 1 25m 2, pro vide 4Y20 (Are a 1 30 m 2 no t 4Y25 (Are a =
1 35m 2
 Engineers must be able to incorporate economic analysis into
their creative efforts …Pro je ct A, but 20 co m pany subm it te nde r
fo r this pro je ct. .

1-5
Why Engineering Economy is Important to
Engineers
 Often engineers must select and implement from multiple
alternatives..apa akan te rjadi apabila 1 pile patah se m asa ke rja
piling dilakukan?
 Understanding and applying time value of money, economic
equivalence, and cost estimation are vital for engineers
 A proper economic analysis forselection and execution is a
fundamental task of engineering.. 1 o f co m pany subm it 3
te nde r, which are 3BQ. . . which o ne the be st 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
care fully de fine the pro ble m , the n the cho ice (de cisio n) is
am o ng alte rnative s. The alte rnative s ne e d to be ide ntifie d and
the n de fine d fo r subse q ue nt analysis.
• Focus on the differences
o nly the diffe re nce s in e xpe cte d future o utco m e s am o ng the
alte rnative s are re le vant to the ir co m pariso n and sho uld be
co nside re d in the de cisio n.

Cont…SEVEN (7) fundamental principles of
• Use a consistent viewpoint
the pro spe ctive o utco m e s o f the alte rnative s, e co no m ic and
o the r, sho uld be co nsiste ntly de ve lo pe d fro m a de fine d
vie wpo int (pe rspe ctive )
• Use a common unit of measure
using a co m m o n unit o f m e asure m e nt to e num e rate as m any o f
the pro spe ctive o utco m e s as po ssible willsim plify the analysis
o f the alte rnative s.

• Consider all relevant criteria
se le ctio n o f a pre fe rre d alte rnative (de cisio n m aking ) re q uire s the
use o f a crite rio n (o r se ve ralcrite ria). The de cisio n pro ce ss sho uld
co nside r bo th the o utco m e s e num e rate d in the m o ne tary unit and
tho se e xpre sse d in so m e o the r unit o f m e asure m e nt o r m ade
e xplicit in a de scriptive m anne r.
• Make uncertainty explicit
risk and unce rtainty are inhe re nt in e stim ating the future o utco m e s
o f the alte rnative s and sho uld be re co g niz e d in the ir analysis and
co m pariso n.

• Revisit your decisions
im pro ve d de cisio n m aking re sults fro m an adaptive pro ce ss; to
the e xte nt practicable , the initialpro je cte d o utco m e s o f the
se le cte d alte rnative sho uld be subse q ue ntly co m pare d with
actualre sults achie ve d.

No Principle of eng. economy Example issue
1 Develop the alternatives
care fully de fine the pro ble m , the n
the cho ice (de cisio n) is am o ng
alte rnative s
SMART Tunnel
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

2 Focus on the differences
o nly the diffe re nce s in e xpe cte d
future o utco m e s am o ng the
alte rnative s are re le vant to the ir
co m pariso n and sho uld be
co nside re d in the de cisio n.
Choose expected decision alternative (2) & (3)
2. Redesign, sampling & lab testing for others action approval from
authorities
3. New improvement technologist
3 Use a consistent viewpoint
the pro spe ctive o utco m e s o f the
alte rnative s, e co no m ic and o the r,
sho uld be co nsiste ntly de ve lo pe d
fro m a de fine d vie wpo int
(pe rspe ctive )
2. Redesign, sampling & lab testing for others action approval from
authorities
a. melibatkan masa untuk merekabentuk & menyiapkn
laporan serta mendapatkan kelulusan oleh pihak
berkuasa tempatan.
b. melibatkan kos dan pekerja mahir bagi membuat
penyelenggaraan
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

4 Use a common unit of measure
using a co m m o n unit o f m e asure m e nt to
e num e rate as m any o f the pro spe ctive
o utco m e s as po ssible willsim plify the analysis
o f the alte rnative s.
2. Redesign, sampling & lab testing
• R/Bentuk semula & kelulusan ambil masa yang lama
• Kos yang tinggi
• pekerja mahir yang terlatih
3. New technologist to prevent Crack– Steel fibre
Constructive:Constructive:
•Less material cost
•Labor reduction
•Less human error
Structural:Structural:
•Smaller crack width openings
•Higher durability
•Higher impact and abrasion resistance
•Higher fatigue strength
•Improved fire resistance properties
5 Consider all relevant criteria
se le ctio n o f a pre fe rre d alte rnative (de cisio n
m aking ) re q uire s the use o f a crite rio n (o r
se ve ralcrite ria). The de cisio n pro ce ss sho uld
co nside r bo th the o utco m e s e num e rate d in the
m o ne tary unit and tho se e xpre sse d in so m e
o the r unit o f m e asure m e nt o r m ade e xplicit in a
de scriptive m anne r.
Review again all criteria

6 Make uncertainty explicit
risk and unce rtainty are inhe re nt in
e stim ating the future o utco m e s o f
the alte rnative s and sho uld be
re co g nize d in the ir analysis and
co m pariso n.
Advantages
•Minimized cracking and spalling
•Less repair and maintenance needed
•Better aesthetical appearance of the tunnel
•No limitations for M&E to drill
•Higher durability
Disadvantages
•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
im pro ve d de cisio n m aking re sults
fro m an adaptive pro ce ss; to the
e xte nt practicable , the initial
pro je cte d o utco m e s o f the se le cte d
alte rnative sho uld be subse q ue ntly
co m pare d with actualre sults
achie ve d.
Choose the best decision ..no (3)

1-15
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???

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General Steps forDecision 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

1-18
Cont..General Steps forDecision 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)

1-19
Cont..General Steps forDecision Making
Processes
No Decision Making Processes Example issue
1 Understand the problem (define
objectives )
broken pile
2 Decision Making Processes condong semasa setting piling work
3 Define the set of feasible
alternatives..discuss any solution
Senaraikan semua kebarangkalian solution..korek
semula? biarkan tanpa cukup bil pile ikut size asal?
redesign footing etc.
4 Identify the criteria for decision
making..list out
i.korek semula
ii. ikut saiz asal tanpa cukup bil pile
iii. redesign footing
5 Evaluate the alternatives and apply
sensitivity analysis..
i.korek semula…akan mengganggu struktur tnh
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..
choose
(iii) redesign
7 Implement the alternative and
monitor results.. action
submit drawing for approvals

1-20
Steps in an Engineering Economy
Study

Take Home Quiz 1
1.Find one (1) problem economic issues
related on
building/construction/environment/
structure/materials/road & drainage/
others activities.
2. Solve the problem follows the
i. Principle of eng economy
ii. Decision making process.

Chapter 1 introduction to engineering economy

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