This document discusses decision making and professional ethics in engineering economic decisions. It begins by classifying problems as simple, intermediate, or complex. The rational decision making process involves 9 steps: recognizing the problem, setting goals/objectives, gathering data, identifying alternatives, selecting evaluation criteria, constructing a model, predicting outcomes, choosing the best alternative, and auditing results. Professional ethics are important to consider, as codes of ethics guide engineers' decisions. Situations involving safety compromises or unfair advantages can raise ethical issues.

1. (i). Decision Making
(ii). Professional Ethics and
Economic Decisions
Dr. Mohsin Siddique
Assistant Professor
msiddique@sharjah.ac.ae
1
Date: 15/09/2014
Engineering Economics
University of Sharjah
Dept. of Civil and Env. Engg.

2. 2
Part I
(i). Decision Making

3. Outcome of Today’s Lecture
3
After completing this lecture…
The students should be able to:
Distinguish between simple and complex problems
Describe the role and purpose of engineering economic
analysis
Describe and give examples of the nine steps in the economic
decision making process
Select appropriate economic criteria for use with different type
of problems
Describe common ethical issues in engineering economic
decision making

4. Engineering Economics
4
Engineering economy involves formulating,
estimating and evaluating the expected outcomes of
alternatives designed to accomplish a defined
purpose.
Mathematical techniques are used to simplify economic
evaluation of alternative and these techniques are equally
good for individual, business or government projects.
Thus this course may also offer you an economic analysis tool
for making decisions such as car purchase, house purchase,
and major purchase on credit card etc

5. Decision Making
5
Decision Making is broad topic.
It’s is a major aspect of every human existence.
We are surrounded by sea of problems which may be
classified depending on difficulty level as given below;
1. Simple Problems
2. Intermediate Problems
3. Complex Problems

6. Decision Making: Problem classification
6
1. Simple Problems
These are simple and hence does not require time or effort
i. Should I pay cash or use my credit card?
ii. Do I buy a semester parking pass or use the parking meters?
iii. Shall we replace a burned out motor?
iv. If we use three crates of item a week, how many crates should we
buy at a time?
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7. Decision Making: Problem classification
7
2. Intermediate Problems
These primarily present economic problems
i. Should I buy or lease my next car?
ii.Which equipment should be selected for a new assembly line?
iii.Which materials should be used for new building?
iv.What size of air condition should be economical?
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8. Decision Making: Problem classification
8
3. Complex Problems
These are mixture of economic, political and humanistic elements.
i.The decision of Mercedez Benz to build an automobile assembly
plant in Tuscaloosa Alabama illustrates a complex problem?
ii. Allocation of annual budget of a corporation/government
ministry?
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Engineering Economic analysis is most suitable for intermediate and
economic aspect of complex problems

9. Decision Making: Role of Engineering
Economics
9
Decisions are made routinely to choose alternative over another by
individuals everyday life
By engineers on the job
By managers who supervise activities
By corporate president who operates a business and
By government officials who work for public good
(and also worth to mention you guys who make decisions in you studies,
social life etc…..)
Most decisions involve MONEY, called CAPITAL or CAPITAL
FUND, which is usually limited.
Therefore, in order to make decision where and how to invest
CAPITAL with a goal of ADDINGVALUE in future, several
alternatives are analyzed to anticipate the outcome of project.

10. Decision Making: Role of Engineering
Economics
10
Engineers play a ital role in capital investment decisions
based on their ability and experience to design, analyze,
and synthesize.
Decision are based on two factors
Economic and non-economic
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Engineering economic thus deals with Economic Factors

11. Decision Making: Role of Engineering
Economics
11
Engineering economic analysis is suitable for intermediate and
complex problems which have following three qualities
1.The problem is important enough to justify our giving it serious
thought and effort
2.The problem cannot be worked in one head – that is, a careful
analysis requires that we organize the problem and all the various
consequences, and this is just too much to be done all at one
3. The problem has economic aspects important in reaching a
decision

12. Examples of Engineering economic
Analysis
12
Engineering economic analysis focuses on costs, revenues and
benefits that occur at different times.
For example, when a civil engineer designs a road, a dam or a
building, the construction cost occurs in the near future while the
benefits to users begin only when construction is finished and then
continue for long time.
Moreover, Engineering Economic Analysis is used to answer many
different questions
Which engineering projects are worthwhile?
Which engineering projects should have high priority?
How should the engineering projects be designed?
It can also answer questions that are personally important
How to achieve long term financial benefits
How to compare different ways to finance purchase etc

13. Engineering Economics is for future
13
Engineering economic analysis is primarily about
Future..
What is expected to occur.
The estimates and decisions usually involve four elements
1. Cash flow
2.Time of occurrence
3. Interest rate for time value of money
4. Measure of economic worth for selecting an alternative
Since variations in future are unknown due to changing
circumstances and unplanned events, so Sensitivity
Analysis is also utilized in decision making.

14. Example 1.1 (Engineering Economy by Blank & Tarquin)
14
An engineer is performing an analysis of warranty costs for drive train
repairs within the first five years of ownership of luxury cars purchased in
the US. He found the average cost to be $570 per repair from the data
taken over a 5 years period.
Year Avg.
cost,
$/repair
2006 525
2007 430
2008 619
2009 650
2010 625
300
350
400
450
500
550
600
650
700
2005 2006 2007 2008 2009 2010 2011
Avg.Cost,$
year
Avg. cost, $/repair

15. Example 1.1
15
For five years
Avg. cost/repair for five
year is $ 570
Range: $430 - $650
Range: -25%+15% of
570
300
350
400
450
500
550
600
650
700
2005.5 2006 2006.5 2007 2007.5 2008 2008.5 2009 2009.5 2010 2010.5Avg.Cost,$
year
Avg. cost, $/repair
However data trends for
last three years is different
than the first two years of
ownership !!
For last three years
Avg. cost/repair year is
$ 630
Range: $619 - $650
Range: -5%+5% of 630
Since the data should be more inclusive of
historic data thus a range of, say +15% to
-25% of $570 is recommended.

16. The Decision Making Process
16
1. Irrational Decision making
2. Rational Decision making
Irrational Decision Making
Yes or No with no obvious reasons
Blind eye decision
Examples:
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17. The Decision Making Process
17
Rational Decision Making
It is complex process that
contains nine essential elements
as shown in figure.
Reading assignment: read page 4- 13 of text book

18. The Decision Making Process
18
1. Recognize Problem:
It’s the starting point in rational
decision making
Example:
1. Discovery of substantial amount
of mercury in several species of
ocean fish
2. Auto accidents,
3. Burned motor, exhausted supply
of parts

19. The Decision Making Process
19
2. Goal or Objectives:
Can be overall goal or objective
of a company or person
Example:
A personal goal could be to lead a
pleasant and comfortable life
To pay off loan by the end of this
year
And firm’s goal can be to run
profitably
The plant must produce 300 golf
cart in two weeks

20. The Decision Making Process
20
3. Assemble Relevant Data
Good data/information=good decision
Sources
Published data and information
Survey
Knowledge and Experience
In engineering decision making, an important
source of data is a firm’s own accounting
system (cash flow, cost and benefit in
company’s operation).
Accounting data focuses on past information
and engineering judgment must often be
applied to estimate present or future values.

21. The Decision Making Process
21
4. Identify alternative
A good alternative is always
desirable and produce optimal
results
A good listing of alternative will
produce both practicable or
impracticable alternatives
Only the feasible alternatives
are retained for analysis

22. The Decision Making Process
22
5. Select the Criterion to
Determine the Best
Alternative
For decision making there must
be a criterion to judge which is
best alternative.
Judgment results are typical,
worst, bad, fair, good, better or
best
It’s relative rather than absolute.
e.g. 3 days jail or $200 fine for
traffic violation.

23. The Decision Making Process
23
5. Select the Criterion to
Determine the Best Alternative
Several possible criterions are
1. Create least disturbance to environment
2. Improve the distribution of wealth
among people
3. Minimize the expenditure of money
4.Ensures that the benefits to those who
gain from the decision are greater than
losses
5. Minimize the time to accomplish the
goal or objective
6. Minimize um-employment
7. Maximize profit
Maximum profit in one normally used in engineering decision making

24. The Decision Making Process
24
5. Select the Criterion to
Determine the Best Alternative
When using Maximize Profit all
problems fall into three categories
1. Neither input nor output fixed
e.g., a firm having more work than it
can handle
2.Fixed input
e.g., a project engineer having
budget of $35000 to complete a
project
3. Fixed output
e.g., a job of surveying a tract of land

25. The Decision Making Process
25
6. Constructing a model
Constructing the interrelation
between the decision making
elements is frequently called
model building or constructing
the model
Output = f(data, information etc)
In economic decision making the
model is mathematical.

26. The Decision Making Process
26
7. Predicting the Outcome of
each Alternative
A model and data are used to
predict out come of each model.
Each model might have variety of
outcome
e.g., Selecting motor cycle rather
than bicycle may make fuel supplier
happy but may make neighbors
unhappy.

27. The Decision Making Process
27
7. Predicting the outcome of
each Alternative
To choose the best alternative
way the outcomes for each
alternative must be stated in a
comparable way which are usually
in the form of cost and benefit
(monetary consequences).
However, the project may have
also non monetary
consequences.

28. The Decision Making Process
28
7. Predicting the outcome of
each Alternative
Consequences can be categorized as
1. Market consequences. These
have established market price.
2. Extra-market consequences.
These are not directly priced in
market.
3. Intangible consequences.
These cannot be numerically
determined. e.g., loss of worker’s
job due to automation or
landscaping around office.

29. The Decision Making Process
29
8. Choosing the best alternative
The alternative to be chosen is the
one that meets the choice criterion
after considering both the
(1) numerical consequences
and (2) consequences not included
in the monetary analysis (Intangible
consequences)

30. The Decision Making Process
30
9.Audit of results
An audit of results is the comparison
of what happened against the
predictions.
Did the results of decision making
analysis agree with its projections?
If so then economic analysis is
accurate and if not then find what
was over looked ?

31. 31
Part II
(ii). Professional Ethics and Economic Decisions
(Ref. Engineering Economy by Blank &Tarquin)
Date: 17/09/2014

32. Outcome of Today’s Lecture
32
After completing this lecture…
The students should be able to:
Distinguish between morals and ethics
Understand the role of Code of ethics
Describe common ethical issues in engineering economic
decision making

33. Professional Ethics and Economic Decisions
33
The terms morals and ethics are commonly used
interchangeably, yet they have slightly different interpretations.
Morals
personal rules of right and wrong behavior
e.g. derived from a person’s upbringing, religious beliefs
Ethics
a code or system of rules defining moral behavior for a
particular society

34. Professional Ethics and Economic Decisions
34
1. Universal or common
morals:
2. Individual or personal
morals:
3. Professional or engineering
ethics

35. Professional Ethics and Economic Decisions
35
1. Universal or common morals :These are fundamental
moral beliefs held by virtually all people. Most people agree
that to steal, murder, lie, or physically harm someone is wrong.
Example: Consider theWorld Trade Center buildings in NewYork
City. After their collapse on September 11, 2001, it was apparent
that the design was not sufficient to withstand the heat generated
by the fire storm caused by the impact of an aircraft.The structural
engineers who worked on the design surely did not have the intent
to harm or kill occupants in the buildings. However, their design
actions did not foresee this outcome as a measurable possibility.
Did they violate the common moral belief of not doing harm
to others or murdering ?

36. Professional Ethics and Economic Decisions
36
2. Individual or personal morals: These are the moral beliefs
that a person has and maintains over time.
These usually parallel the common morals in that stealing, lying,
murdering, etc. are immoral acts.
It is quite possible that an individual strongly supports the common
morals and has excellent personal morals, but these may conflict
from time to time when decisions must be made.

37. Professional Ethics and Economic Decisions
37
Example:
Consider the engineering student
who genuinely believes that
cheating is wrong. If he or she
does not know how to work
some test problems, but must
make a certain minimum grade
on the final exam to graduate,
the decision to cheat or not on
the final exam is an exercise in
following or violating a personal
moral.

38. Professional Ethics and Economic Decisions
38
3.Professional or Engineering ethics: Professionals in a specific
discipline are guided in their decision making and performance of
work activities by a formal standard or code (called code of ethics).
The code states the commonly accepted standards of honesty and
integrity that each individual is expected to demonstrate in her or
his practice.
Each engineering profession has its own code of ethics,The Code of
Ethics for Engineers are published by engineering societies with
which the engineers affiliate like ASCE, IEEE, NSPE etc.

39. What is a Code of Ethics?
A code of ethics provides a framework for ethical judgment
for a professional.
A code of ethics serves as a starting point for ethical decision
making.
Express the rights, duties and obligations of members of the
Profession
Do not express new ethical principles, but coherently restate
existing standards of responsible engineering practice.
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40. Professional Ethics and Economic Decisions
40
Lets take example of Code of Ethics for Engineers published by the
National Society of Professional Engineers (NSPE).
It includes numerous sections that have direct or indirect economic
and financial impact upon the designs, actions, and decisions that
engineers make. Some examples are given below
“Engineers, in the fulfillment of their duties, shall hold paramount the
safety, health, and welfare of the public .”
“Engineers shall not accept financial or other considerations , including
free engineering designs, from material or equipment suppliers for
specifying their product.”
“Engineers using designs supplied by a client recognize that the designs
remain the property of the client and may not be duplicated by the
engineer for others without express permission.”

41. Professional Ethics and Economic Decisions
41
Many money-related situations, such as those that follow, can have ethical
dimensions.
In the design stage:
Safety factors are compromised to ensure that a price bid comes in as low
as possible.
Family or personal connections with individuals in a company offer unfair
or insider information that allows costs to be cut in strategic areas of a
project.
A potential vendor offers specifications for company-specific equipment,
and the design engineer does not have sufficient time to determine if this
equipment will meet the needs of the project being designed and costed.

42. Professional Ethics and Economic Decisions
42
Many money-related situations, such as those that follow, can have ethical
dimensions.
While the system is operating:
Delayed or below-standard maintenance can be performed to save money
Opportunities to purchase cheaper repair parts can save money
Safety margins are compromised because of cost, personal inconvenience
to workers, tight time schedules, etc.

43. The Accident at Bhopal India
43
A good example of the last item—safety is compromised while
operating the system—is the situation that arose in 1984 in Bhopal,
India (Martin and Schinzinger 2005, pp. 245–8)
A Union Carbide plant manufacturing the highly toxic pesticide
chemical methyl isocyanate (MIC) experienced a large gas leak from
high-pressure tanks.
Some 500,000 persons were exposed to inhalation of this deadly gas
that burns moist parts of the body.
There were 2500 to 3000 deaths within days,
and over the following 10-year period, some 12,000 death claims
and 870,000 personal injury claims were recorded.

44. The Accident at Bhopal India
44
Causes of accidents:
Safety practices were clearly violated due to cost-cutting measures,
insufficient repair parts, and reduction in personnels to save salary
money !!!
Moreover masks, gloves, and other protective gear were not worn
by workers in close proximity to the tanks containing.

45. The Accident at Bhopal India
45
Many ethical questions
arise when corporations
operate in international
settings where the
corporate rules, worker
incentives, cultural practices,
and costs in the home
country differ from those in
the host country.
Often these ethical dilemmas are fundamentally based in
the economics that provide cheaper labor, reduced raw
material costs, less government oversight, and a host of
other cost-reducing factors.

46. Professional Ethics and Economic Decisions
46
In concluding, when an
engineering economy study is
performed, it is important for
the engineer performing the
study to consider all ethically
related matters to ensure
that the cost and revenue
estimates reflect what is
likely to happen over the
project once the project
system is operating.

47. Example1.2 (Engineering Economy by Blank Tarquin)
47
Jamie is an engineer employed by Burris, a United States–based
company that develops sub- way and surface transportation systems
for medium-sized municipalities in the United States and Canada. He
has been a registered professional engineer (PE) for the last 15
years.
Last year, Carol, an engineer friend from university days who works
as an individual consultant, asked Jamie to help her with some cost
estimates on a metro train job. Carol offered to pay for his time and
talent, but Jamie saw no reason to take money for helping with data
commonly used by him in performing his job at Burris.
The estimates took one weekend to complete, and once Jamie
delivered them to Carol, he did not hear from her again; nor did he
learn the identity of the company for which Carol was preparing the
estimates.

48. Example1.2 (Engineering Economy by Blank Tarquin)
48
Yesterday, Jamie was called into his supervisor’s office and told that
Burris had not received the contract award in Sharpstown, where a
metro system is to be installed.
The project estimates were prepared by Jamie and others at Burris
over the past several months.This job was greatly needed by Burris,
as the country and most municipalities were in a real economic
slump, so much so that Burris was considering furloughing several
engineers if the Sharpstown bid was not accepted.
Jamie was told he was to be laid off immediately, not because the bid
was rejected, but because he had been secretly working without
management approval for a prime consultant of Burris’ main
competitor. Jamie was astounded and angry. He knew he had done
nothing to warrant fi ring, but the evidence was clearly there.

49. Example1.2 (Engineering Economy by Blank Tarquin)
49
The numbers used by the competitor to win the Sharpstown award
were the same numbers that Jamie had prepared for Burris on this
bid, and they closely matched the values that he gave Carol when he
helped her.
Jamie was told he was fortunate, because Burris’ president had
decided to not legally charge Jamie with unethical behavior and to
not request that his PE license be rescinded.As a result, Jamie was
escorted out of his office and the building within one hour and told
to not ask anyone at Burris for a reference letter if he attempted to
get another engineering job.
Discuss the ethical dimensions of this situation for Jamie, Carol, and
Burris’ management.

50. Example 1.2 (Engineering Economy by Blank & Tarquin)
50
Solution: There are several obvious errors and omissions present
in the actions of Jamie, Carol and Burris’ management in this
situation. Some of these mistakes, oversights and possible code
violations are summarized here.
Jamei,
Did not learn identity of carol company was working for and whether the
company was to be a bidder on the sharpstown project.
Helped a friend with confidential data, probably innocently, without the
knowledge or approval of his employer.
Assisted a competitor, probably unknowingly, without the knowledge or
approval of his employer.
Likely violated, at least, Code of Ethics for Engineers regarding revealing
data, information etc without prior consent of the clients.

51. Example 1.2 (Engineering Economy by Blank & Tarquin)
51
Carol,
Did not share the intended use of Jamie work
Did not seek information from Jamie concerning his employers intention to
bid on the same project as her client
Misled Jamie in that she did not seek approval from Jamie to use and quote
his information and assistance.
Did not inform her client that portions
Burris,
Acted too fast in dismissing Jamie; they should have listened to Jamie and
conducted an investigation
Did not put him on administrative leave during a review
Possibly did not take Jamie’s previous good work record into account
These are not all ethical considerations; some are just plain good business
practices for Jamie, Carol, and Burris.

52. Problem 1.8 (Engineering Economy by Blank & Tarquin)
52
Claude is a fourth year engineering university student who has just been
informed by his instructor that he made a very low grade on his Spanish
language final test for the year.
Although he had a passing score prior to final, his final grade was so low
that he has now flunked the entire year and will likely have to extend his
graduation another semester or two.
Throughout the year, Claude, who hated the course and his instructor, has
copied homework, cheated on tests, and never seriously studied for
anything in the course. He did realized during the semester that he was
doing something that even he considered wrong morally and ethically. He
knew he had done badly on the final.
The classroom was reconfigured for the final exam in a way the he could
not get any answers from his class mates, and cell phones were collected
prior to exam, thus removing texting possibilities to friends outside the
class room who might help him in the final exam.

53. Problem 1.8 (Engineering Economy by Blank & Tarquin)
53
Claude is now face to face with the instructor in her office.The question to
Claude is “what have you been doing throughout this year to make passing
scores repeatedly, but demonstrate such a poor command of Spanish on
the final exam”
From ethical point of view what options does Claude have in his answer to
this question.Also discuss some of the possible effects that this experience
may have upon Claude’s future actions and moral dilemmas.
Answer:
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54. Problem 1.8 (Engineering Economy by Blank & Tarquin)
54
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55. Assignment of the week
55
Find an ethical story and discuss its aspects.
Submission date: 22. 09. 2014

56. 56
ThankYou
Feel Free to Contact
msiddique@sharjah.ac.ae
Phone: 06 50 50 943