ABSTRACT
This chapter deals with the economic evaluation of engineering projects. The purpose of economic evaluation is to identify the benefits and costs of a project and hence to determine whether it is justified on economic grounds. Economic evaluation is aimed at assessing whether the value of the final products exceeds the value of the resources used by the project. The opportunity cost concept has particular significance in public sector evaluation. In project evaluation the marginal costs are the additional costs of undertaking the project compared with not undertaking it. Various economic criteria have been proposed for use in comparing engineering projects. The economic life of an engineering system ends when the incremental benefits of keeping the system operating for one more year are less than the incremental costs of maintenance and repair for one more year. The only incremental costs are petrol and oil, tyres, and maintenance and repairs.
