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Principles of Engineering Economy

The document outlines 7 principles of engineering economy for analyzing alternatives and making decisions: 1) Develop the alternatives that need analysis, 2) Only consider the differences in expected outcomes among alternatives, 3) Consistently develop outcomes from a single viewpoint, 4) Use a common unit of measurement to simplify analysis, 5) Consider all relevant criteria for selection, 6) Explicitly account for uncertainty in projected outcomes, 7) Revisit the decision by comparing projected and actual outcomes.

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Imam Fitriadi
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599 views2 pages

Principles of Engineering Economy

The document outlines 7 principles of engineering economy for analyzing alternatives and making decisions: 1) Develop the alternatives that need analysis, 2) Only consider the differences in expected outcomes among alternatives, 3) Consistently develop outcomes from a single viewpoint, 4) Use a common unit of measurement to simplify analysis, 5) Consider all relevant criteria for selection, 6) Explicitly account for uncertainty in projected outcomes, 7) Revisit the decision by comparing projected and actual outcomes.

Uploaded by

Imam Fitriadi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Principles of Engineering

Economy (1)
PRINCIPLE 1 DEVELOP THE ALTERNATIVES
The choice (decision) is among alternatives. The
alternatives
need to be identified and then defined for
subsequent analysis
PRINCIPLE 2 FOCUS ON THE DIFFERENCES
Only the differences in expected future outcomes
among the
alternatives are relevant to their comparison and
should be
considered in the decision
PRINCIPLE 3 USE A CONSISTENT
VIEWPOINT
The prospective outcomes of the alternatives,
economic and
others, should be consistently developed from a
defined viewpoint
(perspective)
PRINCIPLE 4 USE A COMMON UNIT OF
MEASURE
Using a common unit of measurement to
enumerate as many of
the prospective outcomes as possible will simplify
the analysis
and comparison of the alternatives

Principles Engineering
Economy (2)
PRINCIPLE 5 CONSIDER ALL RELEVANT
CRITERIA
Selection of a preferred alternative (decision
making) requires the
use of a criterion (or several criteria). The decision
process should
consider both the outcomes enumerated in the
monetary unit and
those expressed in some other unit of
measurement or made
explicit in a descriptive manner
PRINCIPLE 6 MAKE UNCERTAINTY EXPLICIT
Uncertainty is inherent in projecting (or estimating)
the future
outcomes of the alternatives and should be
recognized in their
analysis and comparison
PRINCIPLE 7 REVISIT YOUR DECISION
Improved decision making result from an adaptive
process; to the
extent practicable, the initial projected outcomes of
the selected
alternative should be subsequently compared with
actual result
achieved

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