Saturday, October 24, 2009
Engineering Economy Analysis Procedure through Design Process
Andy’s Blog (Oct, 18- 24 2009)
My first reading on Engineering Economy book (chapter 1.2 and chapter 1,3), “The Principles and of Engineering Economy through the Design process”, I conclude that the design is not followed the engineering economy analysis procedure which are proven that problem definition is unclear, no development whether alternatives analysis, decision criteria and prospective outcome were generated and result that the selected design is wrong and away from the objectives.
For this purpose, I lead on discussion with the engineer to develop the engineering economy analysis procedure. Here is summarized but it is still in completed report as well as learning process to determine the unit of measurement to analyze and select the preferred alternative ( I wish my “mentor from the hell” would have some suggestions on it and whether the subject above could be strengthen in manner so be good paper topic for CCE ?)
- Problem Definition
- Mining at a new hill at Songko requires civil material resource at post mine area to construct the mining road for next 3 years mine life time.
- Current active civil material resources is located 5 km down to the hill.
- There is potential civil material resource at the Solia post mine area where is located 2 km of the hill that is required for access road development.
- There is an opportunity to rehabilitate
- Development of Investment Alternatives
Option 1 : Maintain current active civil material resources with long haul distance about 7 km
Option 2 : New investment to construct a shortcut road to have access to current mine road at Solia.
Option 3 : New investment to construct a new road to access the
- Development of prospective Outcomes and cash flow for each alternatives
“What are the differences” are the first step need to identify for each alternatives :
| Parameter | Alternative 1 | Alternative 2 | Alternative 3 |
| Haul Distance to Songko | 5 km | 1.5 km | 2.0 km |
| New Road development | None | 700 meter | 300 meter |
| Road development material | None | 300,000 ton | 100,000 ton |
| Investment | None | $600,000 | $300,000 |
| Annual cost Saving | None | N/A (Short haul distance) | N/A(short haul distance) |
| Other Benefit | None | - rehabilitate Solia forward - get civil material to supply Songko while road constructed (cost saving) | - rehabilitate Solia forward - access road is ready shortly to get civil material from Solia |
| Operational Risk | delayed on material supply due to long haul distance | Drill/blast at hard rocks massive and boulders during construction | Easy to construct as short road and soil material |
- Selection of a Decision Criterion
Choose the alternative that give maximizes overall profitability.
- Analysis and Comparison Alternatives
Considering the time value of money by using Equivalent worth method each alternatives (Economy Engineering chapter 6) to analyze and compare the alternatives.
- Selection of the Preferred Alternatives
Choose the alternative that give maximizes overall profitability which is presented the greatest positive equivalent worth.
7. Performance Monitoring and post evaluation of results.
During the project implementation till finished.
BR,
Dr. PDG, GAPPS Workshop #17, University of Maryland, Washington, DC
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