ECONOMIC ANALYSIS

All engineers must make tradeoffs in the four domains shown in Figure. Good engineers follow a disciplined and structured approach when developing a product or system. Costing hardware, software, and integration requires an understanding of many MPTs and terminology, but few engineers have received this formal training. Once technical characteristics have been ascertained from the requirements, selecting the right MPTs is critical to accurately determining costs early in the development cycle and estimating realistic LCC.

The most common engineering cost analysis techniques are those often taught in engineering economy and include the time value of money.. The ability to conduct relevant economic analysis is key to technologically innovative solutions grounded in business reality. 

Simulationbased costing has become the methodology of choice for estimating cost and schedule for large systems. Although complex and data intensive, SBC has tremendous utility in assessing risk and variability.

Because of complexity and technology, the costing of complex systems has become a tremendous challenge. Most cost estimators understand how to cost hardware and to a lesser extent software. However, we are still developing tools and processes for costing the integration and interfaces of complex systems. As engineers design and develop scale to larger and more complex systems, system of systems (SoS), and enterprises, our ability to determine costs becomes less relevant and reliable.