Engineering Economics Takes Two Hands
President Truman once famously asked for a one-handed economist, because they were always saying “on one hand ... but on the other ...”
Economics really does take two hands: every choice has costs and benefits. And it’s more important than ever to make smart, informed decisions when managing public resources. The pressures utilities face are rising. Information technology, social media and globalization have made our world more connected and bring increased expectations on public agencies.
Engineering and Economics Make a Perfect Pair
Many engineers will remember the engineering economics section of the P.E. exam. To some people outside the profession, engineering and economics may not seem that related at first glance, but in fact, they make a perfect pair when dealing with capital improvements and delivering effective public service infrastructure.
At its core, economics is the study of how we make decisions and allocate resources in a constrained environment. Engineers work every day with agencies to implement projects within our resource constraints, whether those resources are land, labor, materials or cost. Together we also plan for the supply of critical resources like water, wastewater collection and treatment, and stormwater management. Almost every good or service we consume relies on these basic needs.
Introducing our Two-Handed Economics Series
Our Two-Handed Economics series explores how we bring an economic mindset to projects in order to offer new ideas and frameworks for planning. Our first article examines how to optimize capital improvement program implementation. Future articles in the series will cover a number of topics that relate to infrastructure investment, implementation, and best practices for using economic models in decision making. We will tackle ideas such as:
- Financial planning for mega projects and programs
- Consumer confidence in water
- Strategic funding
- Market externalities and national policy
- Decision science
- Risk modeling
- Cost-benefit analysis
- Business case evaluation
- Dynamic prioritization and asset renewal forecasting
- Presenting decisions to stakeholders
Learn How To Excel in CIP Planning
Optimizing the implementation of Capital Improvement Program ensures that projects align with community goals while bringing best value for cost. This process starts by evaluating value and risk for each project or alternative. Identifying how projects add value and reduce risk leads to prioritization and smart, phased implementation.