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Engineering Economy, Fifteenth Edition © 2008, McGraw-Hill Copyright ©2012 by Pearson Education, Inc.
All rights reserved Upper Saddle River, New Jersey 07458 7-
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.6
Public Sector Project Characteristics
Copyright ©2012
Slide by PearsonBlank
to accompany Education, Inc.
Engineering Economy, Fifteenth Edition
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling © 2008, McGraw-Hill and Tarquin Basics of Jersey 07458
Upper Saddle River, New 7-
All rights reserved All rights
Engineering Economy, 2008reserved.7
▶ Funding: Public projects use taxes, fees, bonds (and gifts) for
funding; taxes and fees are collected from
‘users’ of project services; funding examples are
federal/state taxes of various sorts, tolls, surcharge
fees.
Copyright ©2012
Slide by PearsonBlank
to accompany Education, Inc.
Engineering Economy, Fifteenth Edition
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling © 2008, McGraw-Hill and Tarquin Basics of Jersey 07458
Upper Saddle River, New 7-
All rights reserved All rights
Engineering Economy, 2008reserved.8
Public Sector Project Estimates
Analysis requires estimates as accurate as possible for costs,
benefits, and disbenefits
Description Example
Costs: expenditures to the • Bridge construction cost
government to build, maintain, & • Annual cost of drug abusers’
operate project; salvage/sales value treatment program
possible
Benefits: advantages to public;
income and savings
• New jobs and salary money
• Reduced property taxes
• Lower transportation costs due to
less gas used
Copyright ©2012
Slide by PearsonBlank
to accompany Education, Inc.
Engineering Economy, Fifteenth Edition
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling © 2008, McGraw-Hill and Tarquin Basics of Jersey 07458
Upper Saddle River, New 7-
All rights reserved All rights
Engineering Economy, 2008reserved.9
Public Sector Project Estimates
Disbenefits: expected undesirable, negative consequences of
project to owners – the public; usually these are economic
disadvantages estimable in monetary units
Disbenefits are not always included in the analysis; subject
to political and special interest argumentation
Copyright ©2012
Slide by PearsonBlank
to accompany Education, Inc.
Engineering Economy, Fifteenth Edition
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling © 2008, McGraw-Hill and Tarquin Basics of Jersey 07458
Upper Saddle River, New 7-
All rights reserved All rights
Engineering Economy, 2008reserved.
10
Types of Public Project Contracts
❑ Traditional Construction Contract
Copyright ©2012
Slide by PearsonBlank
to accompany Education, Inc.
Engineering Economy, Fifteenth Edition
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling © 2008, McGraw-Hill and Tarquin Basics of Jersey 07458
Upper Saddle River, New 7-
All rights reserved All rights
Engineering Economy, 2008reserved.
11
❑ Public-Private Partnership
➢ Often called BOT (Build-Operate-Transfer) contract
➢ Contractor partially or completely responsible for financial
arrangements
➢ Contractor operates and maintains system for specified time period.
Contract includes these funds
➢ Ownership transferred to government in future. This stage is often
negotiated in different ways
➢ Profit margin is specified for contractor during time of involvement
Copyright ©2012
Slide by PearsonBlank
to accompany Education, Inc.
Engineering Economy, Fifteenth Edition
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling © 2008, McGraw-Hill and Tarquin Basics of Jersey 07458
Upper Saddle River, New 7-
All rights reserved All rights
Engineering Economy, 2008reserved.
12
5.2 Perspective and Terminology for Analyzing
Public Projects
For government projects, the owners are ultimately the
taxpayers.
Q1a Justify each of the following cash flows whether a benefit, disbenefit, or
cost.
i. RM1 million per year maintenance of road by local authority. (2 marks)
ii. Expenditure of RM90 million for construction of a new UTHM interchange
to reduce traffic congestion. (2 marks)
iii. Decrease of RM500,000 per year in car accident repairs because of good
street lighting maintenance. (2 marks)
iv. RM650,000 per year loss of revenue by villagers because of housing
development project right-of-way purchases. (2 marks)
v. RM500,000 extra expenses of travel agency in petrol payment due to
petrol subsidy reduction. (2 marks)
N=25
Copyright ©2012 by Pearson Education, Inc.
Engineering Economy, Fifteenth Edition
Upper Saddle River, New Jersey 07458
By William G. Sullivan, Elin M. Wicks, and C. Patrick Koelling
All rights reserved.
FINAL EXAMINATION
SEMESTER I
SESSION 2013/2014
▶
(b) Apply the B-C ratio method for both conventional and
modified cases using PW and AW methods with the study
period of 20 years and a MARR of 20% per year to
determine whether the project should be proceed.
(16 marks)