Roles of engineers in economic decisions

An engineer's work consumes money, material and time, so engineers take part in nearly every economic decision of an organisation. Their roles are:

1. Developing and defining alternatives. The engineer generates technically feasible options and estimates their cost and performance. Example: for a village water supply, options are gravity flow, pumping from a borehole, or a lift scheme.
2. Estimating cash flows. Engineers estimate initial investment, operating and maintenance cost, benefits, salvage value and life. Example: a mechanical engineer estimates the capital cost, power consumption and life of a new pump.
3. Applying economic analysis. Using PW, AW, IRR, B/C ratio and break-even tools to rank alternatives. Example: comparing two machines of different cost and life by annual worth.
4. Choosing the best alternative with managers. The engineer recommends the option that gives the best return within technical and budget limits, e.g. to buy or to lease a generator.
5. Considering risk and non-monetary factors. Safety, environment, reliability and uncertainty in estimates are analysed by sensitivity analysis. Example: effect of a 20% cost overrun on a bridge project.
6. Cost control and project monitoring. Comparing actual cost with budget or standard, finding variances, and taking corrective action.
7. Replacement and maintenance decisions. Deciding whether to repair or replace ageing equipment such as a transformer or a bulldozer.
8. Pricing and production planning. Break-even analysis for deciding the production level of a product.
9. Public-sector evaluation. Calculating benefit-cost ratio of roads or hydropower schemes.

Good engineering decisions therefore need both technical skill and economic judgment.