Whether a process company acts as the licensor of its own technology, or as the licensee of third party technology, it is normal for a contractor to contribute significantly in the realisation of the Company's overall objectives. There are three main areas where a contractor contributes in a licensing situation — the provision of proprietory technology, of services to the licensee and of services to the licensor. The paper examines each of these.
Four more books are reviewed in this article thereby concluding the major objective of this review series as formulated in Part I (Vol. I, No. 2, June, 1976, page 149). The author has therefore taken the opportunity to ‘take stock’ of all of the assessment ratings which these books have received with a view to making some recommendations to prospective students of engineering economics and their teachers. Four books in particular are recommended. These are (1) A Programme of Learning; by I.C.I., published by Methuen. (2) Capital Budgeting and Company Finance; by Merrett and Sykes, published by Longmans. (3) Engineering Economy; by Thuesen, Fabrycky and Thuesen, published by Prentice-Hall and (4) Principles of Engineering Economy; by Grant and Ireson, published by Ronald Press.
The production output of a chemical manufacturing facility only rarely remains at rated capacity throughout the plant's lifetime. The production life cycle often may be approximated by a segment of the normal distribution curve. A method is developed for computing the present worth of normally distributed cash flows and the discounted cash flow profitability index for facilities with a production life cycle which is approximated by the normal distribution curve. It is shown that the resulting value of the profitability is about the same as that for a plant operating steadily at 70% of rated capacity. Adoption of this simple criterion during early stages of project development results in a more realistic assessment of the long range attractiveness of the project.
Estimating factors, cost ratios and quantity ratios are estimating tools, developed from an analysis of the historic cost of capital investment projects. Whilst a plant is being built, however, these relationships are not static, but dynamic. Not only the relationships in themselves but also their changing value during the life of a project can be used to facilitate project cost control. The “S-curve” is the classic example in this field, but others have now been developed.
Using a case study, this paper illustrates the way in which the development and analysis of such ratios can contribute both to an assessment of the progress being made and the forecasting of potential trends whilst a project is under construction. The cost control engineer is thereby in a better position to give “early warnings” to project management in relation to the estimates of cost and time.
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