Sullivian W.G, Wicks E.M and Koelling C.P (2012)

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
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 … d e s ig n & build … wha t ty p e o f

d e s ig n inv o lv e d ?
 Designing involves economic decisions…s iz e m in o r m a x ?

A= 1 2 5 m 2 , p ro v id e 4Y2 0 (Are a 1 3 0 m 2 no t 4Y2 5 (Are a =
1 35m2
 Engineers must be able to incorporate economic analysis into

their creative efforts …Pro je c t A, but 2 0 c o m p a ny s ubm it te nd e r
fo r this p ro je c t. .

Why Engineering Economy is Important to
Engineers
 Often engineers must select and implement from multiple

alternatives..a p a a ka n te rja d i a p a bila 1 p ile p a ta h s e m a s a ke rja
p iling d ila kuka n?
 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 o f c o m p a ny s ubm it 3
te nd e r, whic h a re 3 BQ. . . whic h o ne the be s t p ric e ? ?

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
c a re fully d e fine the p ro ble m , the n the c ho ic e (d e c is io n) is
a m o ng a lte rna tiv e s . The a lte rna tiv e s ne e d to be id e ntifie d a nd
the n d e fine d fo r s ubs e q ue nt a na ly s is .
• Focus on the differences

o nly the d iffe re nc e s in e x p e c te d future o utc o m e s a m o ng the
a lte rna tive s a re re le v a nt to the ir c o m p a ris o n a nd s ho uld be
c o ns id e re d in the d e c is io n.

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

the p ro s p e c tiv e o utc o m e s o f the a lte rna tiv e s , e c o no m ic a nd
o the r, s ho uld be c o ns is te ntly d e v e lo p e d fro m a d e fine d
v ie wp o int (p e rs p e c tiv e )
• Use a common unit of measure

us ing a c o m m o n unit o f m e a s ure m e nt to e num e ra te a s m a ny o f
the p ro s p e c tiv e o utc o m e s a s p o s s ible will s im p lify the a na ly s is
o f the a lte rna tiv e s .

• Consider all relevant criteria
s e le c tio n o f a p re fe rre d a lte rna tiv e (d e c is io n m a king ) re q uire s the
us e o f a c rite rio n (o r s e v e ra l c rite ria ). The d e c is io n p ro c e s s s ho uld
c o ns id e r bo th the o utc o m e s e num e ra te d in the m o ne ta ry unit a nd
tho s e e x p re s s e d in s o m e o the r unit o f m e a s ure m e nt o r m a d e
e x p lic it in a d e s c rip tiv e m a nne r.
• Make uncertainty explicit

ris k a nd unc e rta inty a re inhe re nt in e s tim a ting the future o utc o m e s
o f the a lte rna tive s a nd s ho uld be re c o g niz e d in the ir a na ly s is a nd
c o m p a ris o n.

• Revisit your decisions
im p ro v e d d e c is io n m a king re s ults fro m a n a d a p tiv e p ro c e s s ; to
the e x te nt p ra c tic a ble , the initia l p ro je c te d o utc o m e s o f the
s e le c te d a lte rna tiv e s ho uld be s ubs e q ue ntly c o m p a re d with
a c tua l re s ults a c hie v e d .

No Principle of eng. economy Example issue
1 Develop the alternatives SMART Tunnel

c a re fully d e fine the p ro ble m , the n
the c ho ic e (d e c is io n) is a m o ng
a lte rna tiv e s
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 Choose expected decision alternative (2) & (3)
o nly the d iffe re nc e s in e x p e c te d 2. Redesign, sampling & lab testing for others action approval from
authorities
future o utc o m e s a m o ng the
a lte rna tiv e s a re re le va nt to the ir 3. New improvement technologist
c o m p a ris o n a nd s ho uld be
c o ns id e re d in the d e c is io n.
3 Use a consistent viewpoint 2. Redesign, sampling & lab testing for others action approval from
authorities
the p ro s p e c tiv e o utc o m e s o f the a. melibatkan masa untuk merekabentuk & menyiapkn
a lte rna tiv e s , e c o no m ic a nd o the r, laporan serta mendapatkan kelulusan oleh pihak
s ho uld be c o ns is te ntly d e v e lo p e d berkuasa tempatan.
fro m a d e fine d v ie wp o int b. melibatkan kos dan pekerja mahir bagi membuat
penyelenggaraan
(p e rs p e c tiv e )
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 2. Redesign, sampling & lab testing

• R/Bentuk semula & kelulusan ambil masa yang lama
us ing a c o m m o n unit o f m e a s ure m e nt to • Kos yang tinggi
e num e ra te a s m a ny o f the p ro s p e c tiv e • pekerja mahir yang terlatih
o utc o m e s a s p o s s ible will s im p lify the a na ly s is
o f the a lte rna tive s . 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

s e le c tio n o f a p re fe rre d a lte rna tiv e (d e c is io n Review again all criteria
m a king ) re q uire s the us e o f a c rite rio n (o r
s e v e ra l c rite ria ). The d e c is io n p ro c e s s s ho uld
c o ns id e r bo th the o utc o m e s e num e ra te d in the
m o ne ta ry unit a nd tho s e e x p re s s e d in s o m e
o the r unit o f m e a s ure m e nt o r m a d e e x p lic it in a
d e s c rip tiv e m a nne r.

6 Make uncertainty explicit Advantages

ris k a nd unc e rta inty a re inhe re nt in •Minimized cracking and spalling
•Less repair and maintenance needed
e s tim a ting the future o utc o m e s o f •Better aesthetical appearance of the tunnel
the a lte rna tiv e s a nd s ho uld be •No limitations for M&E to drill
re c o g niz e d in the ir a na ly s is a nd •Higher durability
c o m p a ris o n. 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 Choose the best decision ..no (3)

im p ro v e d d e c is io n m a king re s ults
fro m a n a d a p tive p ro c e s s ; to the
e x te nt p ra c tic a ble , the initia l
p ro je c te d o utc o m e s o f the s e le c te d
a lte rna tiv e s ho uld be s ubs e q ue ntly
c o m p a re d with a c tua l re s ults
a c hie ve d .

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 Processes Example issue
1 Understand the problem (define broken pile

objectives )
2 Decision Making Processes condong semasa setting piling work
3 Define the set of feasible Senaraikan semua kebarangkalian solution..korek
alternatives..discuss any solution semula? biarkan tanpa cukup bil 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 apply i.korek semula…akan mengganggu struktur tnh
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
Engineering Economy, Fifteenth Edition 1-19 Copyright ©2012 by Pearson Education, Inc.
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.


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Sullivian W.G, Wicks E.M and Koelling C.P (2012)

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Engineering Economy

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

1-2 Copyright ©2012 by Pearson Education, Inc.

involves the systematic evaluation

Copyright ©2012 by Pearson Education, Inc.

 Engineers design and create … d e s ig n & build … wha t ty p e o f

 Designing involves economic decisions…s iz e m in o r m a x ?

 Engineers must be able to incorporate economic analysis into

1-4 Copyright ©2012 by Pearson Education, Inc.

 Often engineers must select and implement from multiple

 Understanding and applying time value of money, economic

 A proper economic analysis for selection and execution is a

1-5 Copyright ©2012 by Pearson Education, Inc.

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.

1 Develop the alternatives SMART Tunnel

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

Copyright ©2012 by Pearson Education, Inc.

6 Make uncertainty explicit Advantages

•The use of SFRC as tunnel lining is uncommon

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 : Teorem

• Estimates of economic outcomes can be deterministic or

1-15 Copyright ©2012 by Pearson Education, Inc.

• Most engineering economy problems can be formulated and

Copyright ©2012 by Pearson Education, Inc.

1-17 Copyright ©2012 by Pearson Education, Inc.

1-18 Copyright ©2012 by Pearson Education, Inc.

1 Understand the problem (define broken pile

6 Select the “best” alternative.. (iii) redesign

1-20 Copyright ©2012 by Pearson Education, Inc.

2. Solve the problem follows the

Copyright ©2012 by Pearson Education, Inc.

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