ENG2000 Part II:
Economics and Management of
Engineering Design Projects
ENG2000: R.I. Hornsey
Intro 2: 1
Outline
• The second part of Engineering Design II covers
the administration of design projects
§ project management
§ engineering economics
• Both of these disciplines are at the heart of
successful management of the business side of
engineering
• And a large majority of engineering graduates will
be involved in management
§ either of engineering projects or in other fields
• You may not appreciate this knowledge yet, but it
will benefit your career!
ENG2000: R.I. Hornsey
Intro 2: 2
What is a project?
• The professional organisation for project
managers is the Project Management Institute
(PMI)
• By their definitions …
• 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
§ “a project is a complex, non-routine, one-time effort limited
by time, budget, resources, and performance specifications
designed to meet customers’ needs (Gray & Larson)”
ENG2000: R.I. Hornsey
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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
§ initiating, planning, executing, controlling, and closing
• And nine knowledge areas
§ Project Integration, Project Scope, Project Time, Project
Cost, Project Quality, Project Human Resources, Project
Communications, Project Risk Management and Project
Procurement
ENG2000: R.I. Hornsey
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• The phrase “project management” 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
• Today, project management is used globally by
multi-billion-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: R.I. Hornsey
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From Gray & Larson
ENG2000: R.I. Hornsey
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Engineering economics
• Engineering economics is the discipline which
deals with the management of the resources used
in a project
§ 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”
§ 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: R.I. Hornsey
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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 "highend" 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.
ENG2000: R.I. Hornsey
Gray & Larson
Intro 2: 8
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: R.I. Hornsey
Intro 2: 9
Outline of Part II
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•
•
•
WHMIS & OHS Act
Meetings, leadership and management
Project management tools
Economics
§ time value of money
§ cash flow
§ techniques for comparison (MARR and IRR)
ENG2000: R.I. Hornsey
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