Engineering and Engineering

Economy
 Introduction
• Engineering activities are not an end in themselves.
They are a means for satisfying human wants.
• Engineer concerns:
1) Materials and Forces of Nature
2) Needs of People
• Resource constraints
• Engineering projects need to be not just physically
feasible but economically also.
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 Why Engineering Economy is Important to Engineers
• Engineers design and create which involves economic decisions

• Economic analysis + Creative efforts

• Selection and Implementation from multiple alternatives

• Understanding and application of

1) Time value of money,

2) Economic equivalence

3) Cost estimation

• A proper economic analysis for selection and execution is a

fundamental task of engineering

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 Engineering and Science
• Engineering is application of science.

• Art of adopting skill and knowledge of science

• Accreditation Board for Engineering and Technology defines

Engineering as follows:

• “Engineering is a profession in which knowledge of the

mathematical and natural sciences are gained by study,
experience, and practice is applied with judgment to
develop ways to utilize economically the materials and
forces of nature for the benefit of mankind”.
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 Contd..
• Role of a scientist is to add to humankind’s
accumulated body of knowledge and discover universal
laws of behavior.
• Role of engineer is to apply this to particular situations
to produce products and services.
• Engineering activities rarely are carried out for the
satisfaction that may be derived from them directly.
Instead, their use is confined to satisfying human wants

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 Contd..
• Our dependence on Engineering
Transportation – Pamban Bridge, Bandra Worli sea link,
Hyperloop –IIT Madras and Indian Railways
Communication – social media, blogging, video chat
National defense – Robotics and Autonomous systems, IoMT,
satellite missiles
• Science is the foundation upon which engineer builds.
• Engineering activity is responsible for improvement in
general standard of living.

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 Time Value of Money
• Time Value of Money – Todays 1 Re will not be same
as tomorrows 1 Re.
• Corporate/individual investments are expected to earn
a return
1. Investment involves money
2. Money has a ‘time value’
• The time value of money is the most important
concept in engineering economy

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 Engineering Economy
• Engineering Economy involves
1. Formulating
2. Estimating
3. Evaluating expected economic outcomes of alternatives
designed to accomplish a defined purpose
• Easy-to-use math techniques simplify the evaluation.
• Estimates of economic outcomes can be deterministic or
stochastic in nature

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 General Steps for Decision Making Processes
1. Understand the problem – define objectives
2. Collect relevant information
3. Define the set of feasible alternatives
4. Identify the criteria for decision making
5. Evaluate the alternatives and apply sensitivity
analysis
6. Select the “best” alternative
7. Implement the alternative and monitor results
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Steps in an Engineering Economy Study

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 Bi-Environmental Nature of
Engineering
• Engineers are confronted with two environments:
• 1) Physical Environment
• 2) Economic Environment – Micro & Macro
• The success of engineering is to create products and
services with the knowledge of physical laws.
• However, the worth of these products and services lies
in their utility measured in economic terms.

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 Contd..
• Physical environment is governed by physical laws
which are more exact and much is known with
certainty.
• Economic environment is governed by economic laws
which are influenced by human behavior. These laws
are less exact compared to physical laws.
• Quantification is possible to a large extent in economic
environment due to similar reaction of human beings
over space and across time to similar events.
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 Contd..
• Engineers may have a tendency to disregard economic
environment.
• But role of an engineer goes much beyond physical
environment to economic and managerial as well.
• There is also an argument that engineers must confine
to physical factors and economic and humanistic
factors should be handled by others.
• However, keeping activities in such watertight
compartments is not possible.

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 Contd..
• Engineers can readily extend their inherent ability of
analysis to become proficient in the analysis of the
economic aspects of engineering application.
• Engineers who will be eventually engaged in
managerial activities will find such proficiency is
necessary.
• It is the objective of engineering economy to prepare
engineers to cope with bi- environmental nature of
engineering.

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 Physical and Economic Efficiency
• There is limited resources and as a result it is
necessary to produce greatest output with
limited input.
• Opportunity cost: Cost of foregone alternative.
• Engineering is concerned with physical efficiency:
i.e. output/input.
• Physical efficiency is always less than 100%

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 Contd..
• At second level there is economic efficiency i.e. worth/cost.
• Economic efficiency must be over 100% to consider a
project.
• In final evaluation of ventures, even though engineering
plays a major role, economic efficiency must take
precedence over physical efficiency.
• Economic efficiency concept brings to the fore all
complexities of economic environment.

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 Engineering for Economic Competitiveness

• Producers strive for sustainable competitive advantage

in the market place. (Apple, Royal Enfield, Google,
Facebook, Kodak, Nestle)
• Through the life cycle approach to engineering,
economic competitiveness can be enhanced.
• Identification of need, conceptual/preliminary design,
detailed design and development,
production/construction, utilization and finally phase
out and disposal.
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 Contd..

• Generally, engineers have focused mainly on the

acquisition phase i.e. up to production/construction.
• However, recent experience shows that product
competitiveness cannot be achieved through efforts
applied largely after product comes in to market place.
For e.g. Tata Nano
• As a result, it is essential that engineers need to be
sensitive in the early stages of life cycle.

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 Ethics – Different Levels
• Universal morals or ethics – Fundamental beliefs:
stealing, lying, harming or murdering another are
wrong.
• Personal morals or ethics – Beliefs that an individual
has and maintains over time; how a universal moral is
interpreted and used by each person
• Professional or engineering ethics – Formal standard
or code that guides a person in work activities and
decision making
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 Code of Ethics for Engineers- Engineering Council of India

• Preamble: Engineering is a profession that puts scientific

knowledge to practical use. Professional Engineers and Consulting
Engineering Organisations , in the pursuit of their profession, affect
the quality of life of all people in the society and the quality of all
sectors of the economy. Therefore, ethics are fundamental to the
values of the profession. Accordingly, the services provided by
Professional Engineers and Consulting Engineering Organisations
(referred to as ‘Engineers) should adhere to the following code of
ethics while dealing with the public, clients, employers, employees
and the associates.
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 Code of Ethics for Engineers
• Article 1. Social Responsibility to Uphold Ethical Values of the
Society
• Public Safety: Shall ensure the safety, health and welfare of the
public.
• Compliance with Social Order: Abide by the laws of the land,
respect the local customs, uphold the human rights, safeguard
public property; abjure violence and acts of terrorism.
• Impartiality and Fairness: Treat fairly all persons regardless of such
factors as race, caste, religion, state, gender or national origin.
• Environment Protection & Improvement: shall strive to protect and
maintain clean, healthy and safe environments and comply with the
statutory requirements
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 Code of Ethics for Engineers
• Article 2. Responsibility to Maintain High Standards of Professional Quality

• Development of Technical and Managerial Skills: Engineers shall maintain state-of

the-art professional skills, continue professional development and provide
opportunity for the professional development of those working under their
command.

• Undertake Assignment where Professionally Competent: Shall perform service

only in the area of their technical competence.

• Performance Responsibility: Engineers shall seek work through fair and proper
methods, and shall take full responsibility for the task undertaken by them.

• Proper Verification of Documents and Production Processes: Shall approve only

those designs, which safely and economically meet the requirement of the client
and shall not approve anything which they consider to be unsound

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 Code of Ethics for Engineers
• Article 3: Obligation to Maintain High Standard of Personal Behaviour in a
Responsible Manner
• Honesty and Integrity in Professional Dealing.
• Compensation for Services Rendered. Engineers shall not engage in unhealthy
competition.
• Professional Relationship with the Employer
• Information Communication with Employers
• Mutual Obligation & Trust
• Self Promotion: Engineers shall build their reputation based on the merits of
services.
• Employers’ Business Secrets: Engineers shall not disclose confidential information
of the employer or client.
• Personal Conflict. Engineers shall disclose real or perceived conflicts of interest to
affected parties.

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