The goal of nearly every project is to make money for the company. With few exceptions, a project must earn more for the company than the company could earn by putting the money required to fund the project into a bank or cash security. There is no point in taking the risk of spending money to buy equipment or change a process, if it will not yield a profit greater than putting the money somewhere else.

That means that every project must be evaluated to determine how much money it will yield. Management can then compare these numbers to the profits other proposed projects are expected to yield, and decide which projects to fund. (There are other considerations that go into these decisions, such as the impact a project will have on employees, but those are beyond the scope of this module.) When deciding whether to fund a project, the key question is: "will it earn a bigger profit here or somewhere else?" Engineers usually justify their projects by proving the savings (and other intangible benefits) they will yield. Savings have the same effect as revenues; they improve the company's profitability. As an engineer, you might propose using different materials to produce a product, for example, if the new material costs less but performs as well. Or you might propose insulating surfaces in order to reduce heat loss, thereby cutting back on energy costs.

This module will explore how engineers evaluate and justify their projects.

NOTE: Portions of this module's material were taken from Engineering Economics: Principles and Concepts, a module developed at The Ohio State University under the NSF sponsored Gateway Coalition (grant EEC-9109794). Contributing members include·Gary Kinzel, Project Supervisor and Amita Danak, Primary Author.

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