FACULTY OF ENGINEERING AND BUILT ENVIRONMENT
CIVIL ENGINEERING PROGRAMME
SESSION 2020/2021
SEMESTER 1
KKKH4133
ECONOMIC ENGINEERING AND PROJECT EVALUATION
ASSIGNMENT REPORT
NAME:
A165451 AZMIR NURHAQIM BIN JEFRIN ROZILEY GROUP 11
LECTURER:
DR. NORAINI BINTI HAMZAH
SUBMISSION DATE:
14 FEBRUARY 2021
,1.0 INTRODUCTION
Engineers involved in construction and evaluation of a project should have a basic understanding
of engineering economics. Engineering economics can be defined as the science that deals with
techniques of quantitative analysis useful for selecting a preferable alternative from several
technically viable ones. For most of the large projects, money is borrowed from investors or banks.
A cost benefit analysis, rate of return, pay out period and many more must be performed before
venturing into a project. Among several other factors, the project director must be familiar with
the cash flow, interest on the borrowed money and timely completion of the project. Familiarity
with interest rates, depreciation rates and salvage values of equipment are equally important in
understanding the economic viability of a project. All engineering projects use resources, such as
raw materials, money, labor and time. Any particular project can be undertaken in a variety of
ways, with each one calling for a different mix of resources. The engineer has to become aware of
the financial constraints on the problem, particularly if resources are very limited. In addition, an
engineering project can meet all other criteria but may cause detrimental environmental effects.
Finally, any project can be affected by social and politic constraints.
The decision to construct any plant depends on two major issues which are technical
feasibility and economic feasibility of the system. Once the technical feasibility of the system is
determined, economic feasibility is addressed. Before purchasing or replacing a major piece of
equipment, engineers must conduct a detailed cost analysis. The questions that need to be answered
include, should one take a loan, what will be the interest rate, how long it will take to pay off for
the new equipment, what will be the cash flow during this time period, what should be the rate of
depreciation, what should be the salvage value, etc. It is necessary to all engineering is the ability
to choose among several technically feasible solutions and to defend that choice credibly. The
skills permitting the selection of a good choice are common to all engineers and, for the most part,
are independent of which field is involved.
Engineering economics is important because it facilitates the establishment of verifiable
facts about a decision. The facts are important and necessary for the decision to be made. However,
the decision eventually made may be contrary to that suggested by analysis. One could not expect
an engineer to predict the future precisely, approximations are very useful. Engineering economics
analyses are quantitative in nature and most of the time the quantities used in economic evaluations
, are estimates. One way to control this uncertainty is to make sure that the information being used
is valid and as accurate as possible. Nothing is as useless or potentially dangerous as a precise
calculation made from inaccurate data. However, even accurate data from the past is of only
limited value when predicting the future. Even with sure knowledge of past events, the future is
still uncertain.
1.1 ECONOMIC EVALUATION
Project evaluation is a systematic and objective assessment of an ongoing or completed project.
The aim is to determine the relevance and level of achievement of project objectives, development,
effectiveness, efficiency, impact and sustainability. Evaluation is a process that critically examines
a program. It involves collecting and analyzing information about a program's activities,
characteristics, and outcomes. Its purpose is to make judgments about a program, to improve its
effectiveness, and/or to inform programming decisions (Patton, 1987). Evaluations also feed
lessons learned into the decision-making process of the project stakeholders, including donors and
national partners.
A project is accountable for achieving outcomes and contributing to development impact.
Since the achievement of broad, long-term development changes depends on many factors, it is
usually not possible to attribute impact to one project. All outcomes of a project should contribute
to the intended impact. Along the chain of results of a project, the relative influence of the project
decreases while the relative influence of the project partners increases as they develop capacity
and take over ownership of the project. Only when the project is gradually handed over to the local
partners can it achieve broader, long term, sustainable impact. Evaluation assesses how well
planning and managing for future outputs into outcomes. Impact is being done during the project
cycle. Because projects are collaborative efforts, partners have co-responsibility for achieving
outcomes and, ultimately, impact (for example, passing and implementing a new legislation
frequently takes much longer than the life of a project and is left in the hands of the national
partners).
For this Integrated Design Project, we use Cost-Benefit Analysis (CBA). The purpose is to
ascertain the accuracy of any investment decision and provide a foundation for comparing it with
CIVIL ENGINEERING PROGRAMME
SESSION 2020/2021
SEMESTER 1
KKKH4133
ECONOMIC ENGINEERING AND PROJECT EVALUATION
ASSIGNMENT REPORT
NAME:
A165451 AZMIR NURHAQIM BIN JEFRIN ROZILEY GROUP 11
LECTURER:
DR. NORAINI BINTI HAMZAH
SUBMISSION DATE:
14 FEBRUARY 2021
,1.0 INTRODUCTION
Engineers involved in construction and evaluation of a project should have a basic understanding
of engineering economics. Engineering economics can be defined as the science that deals with
techniques of quantitative analysis useful for selecting a preferable alternative from several
technically viable ones. For most of the large projects, money is borrowed from investors or banks.
A cost benefit analysis, rate of return, pay out period and many more must be performed before
venturing into a project. Among several other factors, the project director must be familiar with
the cash flow, interest on the borrowed money and timely completion of the project. Familiarity
with interest rates, depreciation rates and salvage values of equipment are equally important in
understanding the economic viability of a project. All engineering projects use resources, such as
raw materials, money, labor and time. Any particular project can be undertaken in a variety of
ways, with each one calling for a different mix of resources. The engineer has to become aware of
the financial constraints on the problem, particularly if resources are very limited. In addition, an
engineering project can meet all other criteria but may cause detrimental environmental effects.
Finally, any project can be affected by social and politic constraints.
The decision to construct any plant depends on two major issues which are technical
feasibility and economic feasibility of the system. Once the technical feasibility of the system is
determined, economic feasibility is addressed. Before purchasing or replacing a major piece of
equipment, engineers must conduct a detailed cost analysis. The questions that need to be answered
include, should one take a loan, what will be the interest rate, how long it will take to pay off for
the new equipment, what will be the cash flow during this time period, what should be the rate of
depreciation, what should be the salvage value, etc. It is necessary to all engineering is the ability
to choose among several technically feasible solutions and to defend that choice credibly. The
skills permitting the selection of a good choice are common to all engineers and, for the most part,
are independent of which field is involved.
Engineering economics is important because it facilitates the establishment of verifiable
facts about a decision. The facts are important and necessary for the decision to be made. However,
the decision eventually made may be contrary to that suggested by analysis. One could not expect
an engineer to predict the future precisely, approximations are very useful. Engineering economics
analyses are quantitative in nature and most of the time the quantities used in economic evaluations
, are estimates. One way to control this uncertainty is to make sure that the information being used
is valid and as accurate as possible. Nothing is as useless or potentially dangerous as a precise
calculation made from inaccurate data. However, even accurate data from the past is of only
limited value when predicting the future. Even with sure knowledge of past events, the future is
still uncertain.
1.1 ECONOMIC EVALUATION
Project evaluation is a systematic and objective assessment of an ongoing or completed project.
The aim is to determine the relevance and level of achievement of project objectives, development,
effectiveness, efficiency, impact and sustainability. Evaluation is a process that critically examines
a program. It involves collecting and analyzing information about a program's activities,
characteristics, and outcomes. Its purpose is to make judgments about a program, to improve its
effectiveness, and/or to inform programming decisions (Patton, 1987). Evaluations also feed
lessons learned into the decision-making process of the project stakeholders, including donors and
national partners.
A project is accountable for achieving outcomes and contributing to development impact.
Since the achievement of broad, long-term development changes depends on many factors, it is
usually not possible to attribute impact to one project. All outcomes of a project should contribute
to the intended impact. Along the chain of results of a project, the relative influence of the project
decreases while the relative influence of the project partners increases as they develop capacity
and take over ownership of the project. Only when the project is gradually handed over to the local
partners can it achieve broader, long term, sustainable impact. Evaluation assesses how well
planning and managing for future outputs into outcomes. Impact is being done during the project
cycle. Because projects are collaborative efforts, partners have co-responsibility for achieving
outcomes and, ultimately, impact (for example, passing and implementing a new legislation
frequently takes much longer than the life of a project and is left in the hands of the national
partners).
For this Integrated Design Project, we use Cost-Benefit Analysis (CBA). The purpose is to
ascertain the accuracy of any investment decision and provide a foundation for comparing it with
