engineering ecomomics inc

engineering ecomomics inc

The Importance of Economic Analysis in Engineering Projects

1. Introduction

Founded on the basic tenet that engineers should play a more active role in the economic analysis of the enterprises in which they are called upon to work without, however, neglecting the pure engineering aspects of their projects, and consequently their influence on the results, the essential workload of the economic planner of a firm engaged in anything from clothes pegs manufacture to space vehicles construction can only be alleviated through the collaboration of the practicing specialists of the various disciplines which contribute to the well-being of the enterprise. Finally, in an age of ever more specialized colleagues we should try to recall that economy as a word implies a general and inclusive function: a re-emergent industrial respect for economics would therefore, indeed, contribute to achieve that cherished state where every person is capable of earning a full and rewarding life in the community to which he belongs.

One of the non-technical difficulties that are frequently encountered by the prospective industrial developer concerns the status of economic analysis in the realization of some engineering project within his firm. To encourage the revitalization of industrial creation, Sir Henry Tizard has stressed the need for technical assessment and control. Treatment of the question posed, in so far as it is laden with considerable urgency in the sound development of the British economy in the post-Sputnik era, must therefore be directed, not merely to the initiation and judgment of the prospects of oncoming engineering projects, but to the improvement of the actual implementation of an acceptable economic analysis. This paper will provide a detailed introduction to the importance of economics in business, economics at the firm level, assessment and implementation of economic feasibility studies, appraisal criteria, improved decision making, technical decision, the economic density philosophy, and the design of an appropriate degree course in engineering economics for advanced technology courses.

2. The Role of Economic Analysis in Engineering

Option 2: There has been a growing interest in the role of economic evaluation in the activities of a project, such as feasibility analysis, which is in the competence of an engineer. This is at least one aspect that demonstrates the increasing importance of studying the subject. In recent years, there has been a change in the Brazilian market. Increasingly, companies seek to improve their models of financial, economic, and cost/benefit evaluation. The government is raising the quality of public service contracts, and we are a requirement in most of these contracts. Information about investors, risks, and how to estimate the project’s discount rate are the most sensitive inputs in the economic model. In the United States, the real discount rate required by investors to invest in clean energy projects is higher than traditional energy, such as coal and natural gas. There is also information about the slowdown in the flow of sustainable energy projects.

Option 1: Economic analysis has an important role in engineering activities. The aim of this paper is to show the importance of economic analysis in design and/or planning activities of an engineering project, analyzing the role of creating the mathematical modeling, leading to the evaluation and selection of solutions of the individual innovation, and later, by the study of the operational perspective, management and competition. It is based on current information that can help students and academics in general to understand the importance of the application of knowledge in engineering projects with a focus on FCA, since academic formation usually has many gaps for the market that awaits the newly formed in the scope of engineering. We approach the theories of FCA evaluation that will serve as parameters for the proposition of methods that help in this task. Thus, the next section will deal with the role of FCA in engineering project activities and the professional market.

3. Key Factors in Engineering Economics

Here are some key pieces that you can use. The first piece is planning. It’s important to first take the initiative to be successful in business economics. Business is defined as structures of data; production and satisfaction mechanisms are affiliated. In order to make sure wealth results can be accomplished, you need the relevant information from reliable sources. Projects must, therefore, be carefully designed to assure the company will be implemented correctly. Second, companies should be evaluated and completed using quality materials. Efficiency is a matter. Costs can be reduced when affordable materials are available. Performance is also an important ability aspect. Goods that function at an expected efficiency level are better at reducing demand values. Engineering goods that conduct appropriately increase the result of society.

The significant aspects of the tools used in engineering economics are: simple logic, statistical information, and comprehension. A thing of beauty in engineering economics is logic, which indicates that the engineer can crucially assign some values. Engineering is about numbers but engineering economics helps the engineer change perceptions in reality where there are details and calculations. The following points lay the foundation for the specialized acquisition in the function of the development, tools. The emphasis is above definitions, principles, and traditional hands.

4. Benefits of Economic Analysis in Engineering Projects

By addressing the problem in this manner, the engineer will be able to evaluate the plant soundness on the basis of a net present value, thus providing an objective method to make the sound technical and economic decisions necessary for the selection of the most profitable concept. The benefits of an adequate cost evaluation will be realized by studying the fundamental factors which generally result from a potentially realistic representation of the physical process. The investment risk will consequently be minimized by avoiding overinvestment and by correctly evaluating the various project revenues. In addition to these often-stated benefits, it is especially useful to properly compare various methods during the initial stages of a project, when the potential results of a change of approach are greatest. Finally, it will be shown later that proper configuration of the process, i.e., optimum process techniques, from an economic viewpoint, often will parallel good engineering practice.

e) Employ an adequate optimization technique in order to select the optimum size, spacing, and design elements of the production process.

d) Properly value the savings or revenue expected from the project by evaluating their economic worth.

c) Adequately take into account both the variations in process conditions (security of operation) and future expansions.

b) Represent the physical system in terms that reflect its operating characteristics and that realistically evaluate its future performance.

a) Define the problem properly, giving early consideration to both on-stream and long-term objectives.

To summarize, the proper application of a rigorous approach to economic analysis is essential to the success of a plant project. It is vital to:

5. Conclusion

An even more serious form of misunderstanding may arise in negative economic analyses. Projects that have superior engineering characteristics stand a good chance of being axed in the face of a negative economic analysis. This should not happen. A positive economic analysis is absolutely necessary, but a negative economic analysis should not necessarily lead to the rejection of a project. The positive technical arguments and the capital cost should be weighted more heavily by the client, providing the time required to lower the costs of the project to an acceptable level. In any case, the engineer’s input gathers in the economic analyses will significantly raise the client’s comfort level in justifying the project. Better understanding of the true economic characteristics of the projects being proposed by the client results in the making of better investment decisions. Finally, engineers need not be ashamed or apologize for performing economic analyses. The economic potential of a proposal reduces even the uncertainty of the engineering proposal.

Economic analysis of engineering projects is often not given the importance that it deserves. The principal, if not the only, goal of an enterprise, be it private, public or cooperative, is economic. Hence, any design proposal which achieves design stability and good performance at a low cost has an immediate commercial value. Not knowing the economic value of engineering services leaves the engineer without an important source of influence in client decisions. Engineers often focus all their presentations on the advantages of engineering services but neglect their economic aspects. Countless times, engineers have been heard complaining that fundamentally sound proposals have been turned down on apparent flimsy grounds grounded by stockholders and boards of the client’s corporations. Not explaining the economic advantages of the engineering projects with enough clarity allowed such rejections.