9780632056064

Engineering Project Appraisal

by
  • ISBN13:

    9780632056064

  • ISBN10:

    0632056061

  • Format: Paperback
  • Copyright: 2001-07-01
  • Publisher: Wiley-Blackwell
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Summary

Today, practicing engineers need to understand the economic, environmental and social contexts of a development project and be able to resolve problems that arise in these areas. Accredited professional engineering courses (including SARTOR approved courses) now require students to develop an awareness of the economic, financial, social and environmental factors of a development project, along with an understanding of risk analysis and quality systems. Therefore, to be successful, engineering projects must be properly planned and those plans assessed and evaluated on their merits. This book provides details on the evaluation techniques required to assess project plans, and information on both economic and non-economic methods of project appraisal. Working examples and case studies are given to illustrate the applicability of each set of techniques. Engineering Project Appraisal will prove an invaluable and informative guide for both students and practitioners involved in the area of engineering project planning.

Table of Contents

Preface xi
Introduction 1(6)
PART 1 ECONOMICS-BASED PROJECT APPRAISAL TECHNIQUES 7(172)
Decision-making and Project Appraisal
9(27)
Decision-making context
9(1)
Techniques for decision-making
10(10)
Non-analytical decision-making
10(2)
Analytical decision-making
12(1)
Reasoned choice
12(1)
Classical rational decision-making
13(3)
Behavioural decision-making
16(2)
Irrational decision-making
18(1)
Political involvement in the project planning process
18(2)
Primacy of the rational model
20(1)
Decision-making conditions
20(2)
Certainty
21(1)
Risk
21(1)
Uncertainty
21(1)
Project planning process
22(7)
Identifying project options
22(2)
Identifying attributes/criteria of evaluation
24(2)
Methods for engineering project appraisal
26(3)
Example of a decision process
29(3)
Case study 1: Economic analysis of alternative port access routes for a major city
30(1)
Case study 2: Multi-criteria analysis of alternative waste management strategies for a region
31(1)
Summary
32(1)
Review of succeeding chapters
33(1)
References
34(2)
Basic Tools for Economic Appraisal
36(22)
Introduction
36(1)
The time value of money
36(1)
The estimation of interest
37(1)
Simple and compound interest
38(2)
Nominal and effective interest rates
40(1)
Nominal interest rates
40(1)
Effective interest rates
41(1)
Continuous compounding
41(1)
Time equivalence
42(2)
Economic computation
44(13)
Symbols
44(1)
Formulae for single payments
45(1)
Uniform series formulae
46(3)
Geometric series formulae
49(4)
Calculations involving unknown interest rates
53(1)
Calculation of unknown years
54(1)
Additional examples
55(2)
Summary
57(1)
Present Worth Evaluation
58(14)
Introduction
58(1)
Present worth - the comparison process
59(11)
Comparing options with equal lives
59(1)
Comparing options with unequal lives
60(2)
Comparing options with infinite lives
62(3)
Life-cycle cost analysis
65(2)
Payback comparison method
67(3)
Summary
70(2)
Equivalent Annual Worth Computations
72(12)
Introduction
72(1)
The pattern of capital recovery
72(1)
Modifying annual payments to include salvage value
73(2)
Evaluating a single project
75(1)
The comparison process
76(6)
Introduction
76(1)
Equal life projects
77(1)
Lease or buy?
77(1)
Projects with different lives
78(2)
Projects with infinite lives
80(2)
Summary
82(2)
Rate of Return Computation
84(18)
Introduction
84(1)
Minimum Acceptable Rate of Return (MARR)
84(1)
Internal Rate of Return (IRR)
84(1)
IRR for a single project
85(7)
Calculating IRR for a single project using present worth
85(2)
Calculating IRR for a single project using annual worth
87(1)
Single projects with more than one possible rate of return
87(1)
External rate of return
88(1)
Historical External Rate of Return (HERR)
89(1)
Project Balance Method
90(1)
Unequal lives
91(1)
Incremental analysis
92(7)
Introduction
92(2)
Using rate of return analysis for ranking multiple mutually exclusive options
94(4)
Using IRR to analyse options with different lives
98(1)
Summary
99(3)
Benefit-Cost Ratio, Depreciation and Taxation
102(11)
Introduction
102(1)
Costs, benefits and disbenefits
102(1)
Estimating the benefit-cost ratio for a single project
103(1)
Comparing mutually exclusive options using incremental benefit-cost ratios
104(1)
Depreciation
105(3)
Introduction
105(1)
Straight-Line Method
106(1)
Declining Balance Method
106(2)
Taxation
108(3)
Summary
111(2)
Benefit - cost ratio
111(1)
Depreciation
111(2)
Cost Benefit Analysis of Public Projects
113(39)
Introduction
113(1)
Historical background to Cost Benefit Analysis
114(2)
Theoretical basis for Cost Benefit Analysis
116(1)
The procedure of Cost Benefit Analysis
117(1)
Identifying the main project options
117(1)
Identifying costs and benefits
117(2)
Placing valuations on all costs and benefits/disbenefits
119(2)
Introduction
119(1)
Shadow pricing
119(1)
Non-market Valuation of costs/benefits
120(1)
Assessing and comparing the cost-benefit performance of options
121(3)
Sensitivity analysis
124(1)
Final decision
125(1)
Case study: The Cost Benefit Analysis of a highway improvement project
126(8)
Background to Cost Benefit Analysis for transport projects
126(2)
Introduction to case study
128(1)
Data
129(1)
Solution
130(4)
Advantages and disadvantages of traditional Cost Benefit Analysis
134(2)
Techniques for valuing non-economic impacts
136(10)
Introduction
136(1)
Techniques using surrogate market prices
136(5)
Contingent valuation method
141(5)
Integrating sustainability into Cost Benefit Analysis
146(1)
Using Cost Benefit Analysis within different areas of engineering
146(4)
Introduction
146(1)
Flood alleviation
147(1)
Health
148(1)
Agriculture/irrigation
148(1)
Transport
149(1)
Summary
150(1)
References
150(2)
Other Economic Analysis Techniques
152(27)
Introduction
152(1)
Cost-effectiveness
152(4)
Introduction
152(2)
Final comment
154(2)
The Planned Balance Sheet Method
156(8)
Introduction
156(1)
The relevance of pure Cost Benefit Analysis to planning problems
157(2)
Lichfield's Planned Balance Sheet
159(1)
Layout of the Planned Balance Sheet
160(4)
Conclusions
164(1)
Hill's Goal Achievement Matrix
164(12)
Introduction
164(1)
Goal Achievement Matrix and the rational planning process
165(1)
The basic steps used to form the matrix
165(1)
Formulating the objectives
166(1)
Evaluating costs and benefits within the Goal Achievement Matrix
167(1)
The structure of the Matrix
168(1)
Uncertainty within Goal Achievement Matrix
169(1)
The Simplified Goal Achievement Method
169(2)
An advanced version of the Goal Achievement Matrix
171(2)
Concluding notes on the Goal Achievement Matrix
173(3)
Summary
176(1)
References
177(2)
PART 2 NON-ECONOMICS-BASED PROJECT APPRAISAL TECHNIQUES 179(110)
Multi-criteria Analysis
181(14)
Introduction
181(1)
Multi-criteria evaluation models detailed within this text
182(2)
Simple non-compensatory methods
184(9)
Dominance
184(2)
Satisficing methods
186(2)
Sequential Elimination Methods
188(3)
Attitude-oriented methods
191(2)
Summary
193(1)
References
194(1)
The Simple Additive Model
195(44)
Background
195(1)
Introduction to the Simple Additive Weighting (SAW) Method
196(3)
Sensitivity testing
199(3)
Probabilistic additive weighting
202(5)
Introduction
202(1)
Expected value
203(1)
Variance
204(3)
Assigning weights to the decision criteria
207(13)
Presumption of equal weights
208(1)
Ranking system for obtaining weights
208(2)
Ratio system for obtaining weights
210(1)
Pairwise comparison weighting system
211(1)
The Resistance-to-Change Grid
212(2)
Hierarchy of weights
214(3)
Multiple weighting systems
217(2)
Scoring systems for the criteria
219(1)
Checklists
220(10)
Introduction
220(2)
Environmental Evaluation System
222(4)
Sondheim's Environmental Assessment Methodology
226(2)
Mongkol's Methodology
228(2)
Case study - Using the Simple Additive Weighting Model to choose the best transport strategy for a major urban centre
230(7)
Introduction
230(2)
Assessing the importance weightings for the decision criteria
232(1)
Assessment of each option on each of the sub-criteria
233(2)
Results of the Multi-Criteria Assessment
235(1)
Sensitivity analysis
236(1)
Summary
237(1)
References
237(2)
Analytic Hierarchy Process
239(19)
Introduction
239(1)
Hierarchies
240(1)
Establishing priorities within hierarchies
240(2)
Establishing and calculating priorities
242(14)
Introduction
242(1)
Deriving priorities using an approximation method
243(2)
Deriving exact priorities using the iterative eigenvector method
245(2)
Example of the Exact Method for determining priorities
247(9)
Relationship between AHP and the Simple Additive Weighting model (SAW)
256(1)
Summary
257(1)
References
257(1)
Concordance Techniques
258(26)
Introduction
258(1)
Concordance Analysis
258(3)
PROMETHEE I and II
261(8)
ELECTRE I
269(3)
Introduction
269(1)
Obtaining a ranking from the concordance and discordance indices
270(2)
Other Concordance Models
272(10)
Indifference and preference thresholds
272(1)
ELECTRE III and PROTIETHEE (5th Form)
273(9)
Summary
282(1)
References
283(1)
Concluding Comments
284(5)
Introduction
284(1)
Which project appraisal technique should one use?
284(2)
Future challenges
286(1)
References
286(3)
Index 289

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