ECONOMIC ANALYSIS: ESTIMATING BENEFITS.

However, engineering economists must often also estimate benefits. Example benefits include sales of products, revenues from bridge tolls--and-electricpower sales, cost reductions from reduced material or labor costs, reduced time spent in trafficjams, and reduced risk of flooding.Many engineering projects are undertaken precisely to secure these benefits.

The cost concepts and cost estimatingmodels can also be applied to economic benefits.

Fixed and variable benefits, recurring and nonrecurring benefits, incremental benefits, and life-cycle benefits all have meaning. Also, issues regarding the type of estimate (rough, semidetailed, and detailed) as well as difficulties in estimation (one of a kind, time and effort, and estimator expertise) all apply directly to estimating benefits. Last, per unit, segmented, and indexed models are used to estimate benefits.The concept of triangulation is particularly important for estimating benefits.

The uncertainty in benefit estimates is also typically asymmetric, with a broader limit for negative outcomes. Benefits are more likely to be overestimated than underestimated, so an example set of limits might be (-50%, +20%). One difference between cost and benefit estimation is that many costs of engineering projects occur in the near future (for design and construction),but the benefits are further in the future.Because benefits are often further in the future, they are more difficult to estimate accurately, and more uncertainty is typical.

The estimation of economic benefits for inclusion in our analysis is an important step that should not be overlooked.Many of the models, concepts, and issues that apply in the estimation of costs also apply in the estimation of economic benefits.