ENG2000 Part II:
Economics and Management of
Engineering Design Projects
ENG2000: Eshrat Arjomandi (Slides based on Richard Hornsey’s)
Intro 2: 1
Outline
• The second part of Engineering Design II covers
the economics and management of design
projects
• Both these disciplines are at the heart of
successful engineering projects
• And a large majority of engineering graduates will
be involved in management
ƒ either engineering projects or in other fields
• You may not appreciate this knowledge yet, but it
will benefit your career!
ENG2000: Eshrat Arjomandi (Slides based on Richard Hornsey’s)
Intro 2: 2
Career Paths in Engineering
• Managerial
ƒ Most traditional career path
ƒ One third of engineers opt for managerial careers
ƒ Control, organizational and supervision responsibilities
• Technical
ƒ Introduced in the late 50s
ƒ Technical activities are central to the activity of the engineer
with high degree of specialization
ƒ Has proved not to meet the expectations of engineers
ENG2000: Eshrat Arjomandi (Slides based on Richard Hornsey’s)
Intro 2: 3
Career Paths in Engineering
• Project Based
ƒ Engineers participate in a series of technical projects to
broaden their technical expertise
ƒ No clear progression
ƒ More popular with engineers
• Hybrid
ƒ Engineers do not opt for a particular career path. Rather
experience a wide range of careers
• Entrepreneurial
ƒ Decreasing job security, down sizing and outsourcing has
led to the popularity of engineers starting their own
companies
ENG2000: Eshrat Arjomandi (Slides based on Richard Hornsey’s)
Intro 2: 4
Determinants of Career Paths
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•
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•
•
Experience
Degree of professionalism
Desire for promotion
Desire for work-time investment
Public sector engineers and high-technology
business prefer technical
• Commitment to the organization
• Perception of fairness in promotion
ENG2000: Eshrat Arjomandi (Slides based on Richard Hornsey’s)
Intro 2: 5
What is a project?
• The professional organisation for project
managers is the Project Management Institute
(PMI: www.pmi.org)
According to PMI:
• A project is a temporary endeavour undertaken to
achieve a particular aim and to which project
management can be applied, regardless of the
project’s size, budget, or timeline
Gary and Larson define a project as:
• “a project is a complex, non-routine, one-time
effort limited by time, budget, resources, and
performance specifications designed to meet
customers’ needs”
ENG2000: Eshrat Arjomandi (Slides based on Richard Hornsey’s)
Intro 2: 6
What is project management?
• Project management is the application of
knowledge, skills, tools, and techniques to a
broad range of activities in order to meet the
requirements of a particular project. Project
management is comprised of five processes
ƒ initiating, planning, executing, controlling, and closing
• And nine knowledge areas
ƒ Project Integration, Project Scope, Project Time, Project
Cost, Project Quality, Project Human Resources, Project
Communications, Project Risk Management and Project
Procurement
ENG2000: Eshrat Arjomandi (Slides based on Richard Hornsey’s)
Intro 2: 7
History
•
•
•
•
1940s line managers used “over-the-fence” management to
manage projects.
The phrase “project management” (PM) began to emerge in
the late 1950s and early 1960s when the size, scope,
duration, and resources required for new projects began to
deserve more analysis and attention. Only limited to
defence and aerospace industries. Mostly informal PM.
70s and 80s companies began to use more formal
approaches
Today, project management is used globally by multibillion-dollar corporations, governments, and smaller
organizations alike as a means of meeting their customers’
or constituents’ needs by both standardizing and reducing
the basic tasks necessary to complete a project in the most
effective and efficient manner
ENG2000: Eshrat Arjomandi (Slides based on Richard Hornsey’s)
Intro 2: 8
Engineering economics
• Engineering economics is the discipline which
deals with the management of the resources used
in a project
ƒ particularly the financial aspects
• “Engineering economics is the science which
deals with the techniques of quantitative analysis
useful for selecting a preferable alternative from
several technically viable ones”
ƒ from Engineering Economics in Canada
• The aim is to identify as closely as possible the
economic facts associated with each of the
choices, thereby facilitating the decision-making
process
ENG2000: Eshrat Arjomandi (Slides based on Richard Hornsey’s)
Intro 2: 9
South American Adventures Unlimited
SA Adventures Unlimited was formed four years ago by Michael and Jill Rodriguez. Michael was a trained geologist, while Jill
had a masters degree in Spanish. They were both avid outdoor enthusiasts and fell in love while trekking across the Andes in
Chile. Upon graduation they seized upon the idea of starting their own specialized tour business that would focus on organizing
and leading "high-end" adventure trips in South America. Their first trip was a three-week excursion across Ecuador and Peru.
The trip was a resounding success, and they became convinced that they could make a livelihood doing something they both
enjoyed.
After the first year, Adventures Unlimited began to slowly expand the size and scope of the business. The Rodriguezes' strategy
was a simple one. They recruited experienced, reliable people who shared their passion for South America and the outdoors.
They helped these people organize specific trips and advertised the excursion over the Internet and in travel magazines.
Adventures Unlimited has grown from offering 4 trips a year to having 16 different excursions scheduled, including trips to
Central America. They now had an administrative support staff of 3 people and a relatively stable group of 5 trip planners/guides
whom they hired on a trip-by-trip contract basis. The company enjoyed a high level of repeat business and often used their
customers' suggestions to organize future trips.
Although the Rodriguezes were pleased with the success of their venture, they were beginning to encounter problems that
worried them about the future. A couple of the tours went over budget because of unanticipated costs, which eroded that year's
profit. In one case, they had to refund 30 percent of the tour fee because a group was stranded five days in Blanco Puente after
missing a train connection. They were also having a hard time maintaining the high level of customer satisfaction to which they
were accustomed. Customers were beginning to complain about the quality of the accommodations and the price of the tours.
One group, unfortunately, was struck by a bad case of food poisoning. Finally, the Rodriguezes were having a hard time tracking
costs across projects and typically did not know how well they did until after their taxes were prepared. This made it difficult to
plan future excursions.
The Rodriguezes shared these concerns around the family dinner table. Among the members in attendance was Michael's
younger brother, Mario, a student at a nearby university. After dinner, Mario approached Michael and Jill and suggested that they
look into what business people called "project management." He had been briefly exposed to project management in his
Business Operations class and felt that it might apply to their tour business.
1. To what extent does project management apply to Adventures Unlimited?
2. What kind of training in project management should the Rodriguezes, the administrative staff, and tour guides receive to
improve the operation of Adventures Unlimited? Try to identify major topics or skill sets that should be addressed.
Gray & Larson
ENG2000: Eshrat Arjomandi (Slides based on Richard Hornsey’s)
Intro 2: 10
Which car?
‘57 Chevy
‘97 Neon
‘93 Mercedes
Purchase
$12,000
$7,000
$20,000
Operation
$200/month
$50/month
$150/month
Resale
$13,000
$5,000
$20,000
From text book
ENG2000: Eshrat Arjomandi (Slides based on Richard Hornsey’s)
Intro 2: 11
Outline of Part II
• Economics
ƒ time value of money
ƒ cash flow
ƒ techniques for comparison (MARR and IRR)
• WHMIS & OHS Act
• Meetings, leadership and management
• Project management tools
ENG2000: Eshrat Arjomandi (Slides based on Richard Hornsey’s)
Intro 2: 12