Sustainability and Ethical Practices in Appraisal, Cost Engineering, and Engineering Economy in Nigeria

Sustainability and Ethical Practices in Appraisal, Cost Engineering, and Engineering Economy in Nigeria by: Engr Aloaye Wilson Alli, PhD MBA FNSE FCIPE CPEng FNIMechE presented at the Institution of Appraisal & Cost Engineers (IA&CE Nigeria) (A Division of the Nigerian Society of Engineers and a Member of the International Cost Engineering Council). On The occasion of the Institute 2024 IA&CE Technical Conference Thursday, September 5, 2024

Defining and Explaining the Keywords & Terms; Appraisal, Ethics and Ethical Practices, Cost Engineering and Engineering Economy

Appraisal
Ordinarily, Appraisal is a transitive verb, which denotes to consider comprehensively, to judge, to estimate or evaluate the worth, and to give expert judgment. The rapid increase in the significance of sustainability and ethical practices across various fields, including appraisal, cost engineering, and engineering economy, is not just a trend but a necessity.

Appraisal in the context of sustainability
Sustainability is about evaluating the long-term effects of projects or investments on environmental, social, and economic aspects. Traditional appraisal methods often prioritise short-term gains, but this paradigm has shifted with the adoption of ethical practices in projects.

For instance, we can conduct comprehensive environmental and social impact assessments, consider the well-being of communities affected by projects, and ensure transparency in decision-making processes.

By incorporating sustainability into appraisal, we can better understand a project’s environmental implications and make informed decisions that promote sustainable development. This minimises ecological harm and enhances the project’s long-term viability, offering a promising future for our environment and society.

Cost Engineering
Cost engineering involves estimating and managing the costs associated with engineering projects. Sustainable cost engineering integrates environmental and social factors into cost estimation models. This includes accounting for the costs of pollution, resource depletion, and social inequality, which are often externalised in traditional cost calculations.

Ethical cost engineering practices aim to ensure fair compensation for workers, prioritise safety standards, and avoid cost-cutting measures that Sustainability and Ethical Practices in Appraisal, Cost Engineering, and Engineering Economy in Nigeria compromise environmental or social well-being. Ethical considerations also extend to supply chain management, where cost engineers strive to source materials from suppliers transparently and ethically. This involves scrutinising suppliers’ labour conditions, environmental policies, and adherence to human rights standards.

Cost engineering decisions, such as resource allocation and trade-offs, can have significant ethical implications.

Cost engineers play a crucial role in promoting ethical practices in the following ways:

• 1. Transparency: Cost engineers should ensure that their methods and assumptions are clear and transparent, allowing stakeholders to understand the basis for their decisions.
• 2. Stakeholder engagement: Cost engineers should engage with stakeholders to understand their needs and concerns, ensuring that diverse perspectives are considered in decision-making.
• 3. Resource allocation: Cost engineers must consider the ethical implications of resource allocation decisions, ensuring that resources are used efficiently and effectively.
• 4. Trade-offs: Cost engineers must evaluate trade-offs between cost, schedule, and quality, considering the ethical implications of each option.

Ethical dilemmas that cost engineers may face include:

• 1. Conflicts of interest: Cost engineers may encounter conflicts between their professional obligations and personal interests.
• 2. Uncertainty and ambiguity: Cost engineers may face uncertain or ambiguous situations, requiring them to make decisions with limited information.
  Sustainability and Ethical Practices in Appraisal, Cost Engineering, and Engineering Economy in Nigeria
• 3. Stakeholder conflicts: Cost engineers may encounter conflicts between different stakeholders’ interests.

To address these ethical dilemmas, cost engineers can:

• 1. Apply ethical principles and frameworks (e.g., utilitarianism, deontology)
• 2. Seek guidance from professional organisations (e.g., AACE International)
• 3. Engage in open communication and collaboration with stakeholders
• 4. Document their decision-making processes and rationale
• 5. Continuously update their knowledge and skills to address emerging ethical issues.

Engineering Economy

Engineering Economy is a subset of economics that applies economic principles to engineering decisions. It involves evaluating the economic viability of engineering projects, products, and systems, considering cost, benefit, risk, and ROI. Its purpose is to maximize the economic value of engineering investments while minimizing costs and environmental impact.

In the context of engineering economy, sustainability is not just about resource allocation but about optimising it to maximise long-term value creation while minimising negative impacts on the environment and society. Ethical engineering economy practices, on the other hand, are about more than just fairness and accountability. They involve considering the needs of future generations, valuing ecosystem services, and avoiding projects that exacerbate social inequalities, thereby ensuring a more sustainable and equitable future.

Furthermore, ethical engineering economy practices entail engaging stakeholders in decision-making, ensuring their voices are heard and their concerns addressed. This participatory approach fosters trust and

Sustainability and Ethical Practices in Appraisal, Cost Engineering, and Engineering Economy in Nigeria accountability, ultimately leading to more sustainable and socially responsible outcomes.

2. Engineering Economy and Sustainability
The Engineering Economy plays a crucial role in sustainability by evaluating the economic viability of sustainable engineering solutions. Sustainable engineering aims to minimise environmental impact while maximising economic and social benefits. Engineering Economy helps to:

• Evaluate the cost-effectiveness of sustainable materials and technologies
• Assess the economic benefits of energy efficiency and renewable energy systems
• Analyze the return on investment for sustainable infrastructure projects
• Compare the economic viability of different sustainable engineering options
• Identify opportunities for cost savings and resource optimization

To address these ethical dilemmas, cost engineers should

1. Apply ethical principles and frameworks (e.g., utilitarianism, deontology)
2. Seek guidance from professional organisations (e.g., AACE International)
3. Engage in open communication and collaboration with stakeholders
4. Document their decision-making processes and rationale
5. Continuously update their knowledge and skills to address emerging ethical issues.

Integrating Engineering Economy and Sustainability

Integrating Engineering Economy and sustainability, engineers can create solutions that balance economic, environmental, and social responsibilities, leading to more sustainable and responsible engineering practices. The relationship between engineering economy and sustainable development is that engineering economy provides a framework for evaluating the economic viability of sustainable development projects. Engineering economy can support sustainable decision-making by applying engineering economy principles and techniques, engineers can make informed economic decisions, evaluate project viability, and optimize resource allocation. The Commonly applied principles are

1. Life Cycle Costing (LCC):

Evaluating the total cost of ownership of a product or system over its entire life cycle, considering environmental and social costs. LCC is a method that considers all costs associated with a product, system, or project over its entire life cycle, from acquisition to disposal. It includes:

✓Initial costs (acquisition, installation)
✓Operating costs (energy, maintenance, repairs)
✓Maintenance and repair costs
✓Upgrade and replacement costs
✓Disposal costs

It is applied to:

✓Evaluate the total cost of ownership.
✓Compare different alternatives or options.
✓Identify cost-saving opportunities.
✓Support decision-making for long-term investments.

2. Environmental Cost Accounting (ECA):

Assigning monetary values to environmental impacts, such as carbon emissions or water usage, to inform decision-making. ECA is a method that assigns monetary values to environmental impacts, such as:
Sustainability and Ethical Practices in Appraisal, Cost Engineering, and Engineering Economy in Nigeria

✓Air and water pollution
✓Greenhouse gas emissions
✓Resource depletion
✓Waste generation

ECA is applied to:

✓Evaluate the environmental impacts of products or processes
✓Identify opportunities for cost savings through environmental improvements

3. Cost-Benefit Analysis (CBA):

Comparing the costs and benefits of sustainable development projects, including non-monetary benefits like improved public health or environmental quality.

4. Return on Investment (ROI) Analysis:

Evaluating the financial return on investment for sustainable development projects.
Applicable Principles and Techniques in Engineering Economy

1.Present Worth Analysis (PWA)
2.Annual Worth Analysis (AWA)
3.Future Worth Analysis (FWA)
4.Internal Rate of Return (IRR) analysis
5.Benefit-cost ratio (BCR) analysis
6.Payback Period Analysis
7.Sensitivity Analysis
8.Decision Trees
9.Expected Value analysis

The Principles of Engineering Economy

1. Time Value of Money: Recognizing that a Naira today is worth more than a Naira in the future due to interest and inflation.
2. Present Worth (PW) = Future Amount / (1 + i)^n
   Future Worth (FW) = Present Amount x (1 + i)^n
   Annual Worth (AW) = PW x i / (1 – (1 + i)^(-n)) 2.
3. Equivalent Value: Comparing costs and benefits at the same point in time using present worth, annual worth, or future worth.
   Present Worth (PW) = Σ (Cash Flow / (1 + i)^n)
   Annual Worth (AW) = PW x i / (1 – (1 + i)^(-n))
   Future Worth (FW) = PW x (1 + i)^n
4. Cost-Benefit Analysis: Evaluating options by comparing costs and benefits.
   Benefit-Cost Ratio (BCR) = Σ Benefits / Σ Costs
   Net Present Value (NPV) = Σ (Benefits – Costs) / (1 + i)^n
5. Return on Investment (ROI): Evaluating investments based on their return.
   ROI = (Gain from Investment – Cost of Investment) / Cost of Investment
6. Payback Period: Determining how long it takes for an investment to break even.
   Payback Period = Initial Investment / Annual Cash Flow
7. Sensitivity Analysis: Analyzing how changes in variables affect outcomes
   ΔNPV / ΔVariable = Partial Derivative of NPV concerning Variable
8. Risk and Uncertainty: Considering uncertainty and risk in economic decisions.
   Expected Value (EV) = Σ (Probability x Outcome)
   Standard Deviation (σ) = √(Σ (Probability x (Outcome – EV)^2))
9. Incremental Analysis: Evaluating the additional costs and benefits of incremental changes.
   ΔNPV = NPV of New Option – NPV of Existing Option
10. Mutually Exclusive Alternatives: Choosing between options that cannot be implemented simultaneously.
    ΔNPV = NPV of New Option – NPV of Existing Option
11. Repeatability: Considering the potential for repeated investment projects

NPV of Repeat Investment = NPV of Initial Investment x (1 + i)^n
Where
•i = interest rate or discount rate
•n = number of periods
•Cash Flow = positive or negative cash flow at each period
•Benefits = positive cash flows or returns
•Costs = negative cash flows or expenses

Case Study:

A company wants to reduce its environmental impact by implementing a sustainable manufacturing process. Using engineering economy, they conducted an LCC analysis and found that the new process will save them NGN100,000,000:00 million over 5 years.

They also conduct an ECA and find that the new process will reduce their carbon emissions by 50%. Based on this analysis, they decided to implement a sustainable manufacturing process. By applying engineering economy principles, the company can make an informed decision that supports sustainable development while also improving its bottom line.

3.Ethics and Ethical Practices

Ethics in engineering refers to the moral principles and values that guide engineers’ decisions and actions. Ethical practices in engineering involve applying these principles to ensure that engineering work is performed with integrity, responsibility, and respect for others. Key ethical principles in engineering include:

✓Honesty and integrity: Being truthful and transparent in all professional interactions.
✓Respect for life and safety: Prioritizing human safety and well-being in all engineering endeavours.
✓Social responsibility: Considering the broader social implications of engineering work.
✓Environmental sustainability: Minimizing environmental impact and promoting sustainable development.
✓Fairness and justice: Ensuring equal opportunities and treating all individuals with respect and dignity.
✓Accountability: Taking responsibility for one’s actions and their consequences.
Ethical practices in engineering involve:

1.Professional Integrity
✓Adhering to ethical codes and standards
✓Maintaining objectivity and impartiality
✓Avoiding conflicts of interest
✓Respecting confidentiality

2. Responsibility and Accountability
✓Taking ownership of design and development decisions
✓Ensuring safety and reliability
✓Minimizing harm to people and the environment
✓Being transparent and accountable

3.Respect for Human Rights and Dignity

✓Avoiding discrimination and bias
✓Promoting inclusivity and diversity
✓Respecting privacy and autonomy
✓Supporting human well-being

4.Fairness and Justice
✓Ensuring equal access to resources and opportunities
✓Promoting social justice and equality
✓Addressing ethical dilemmas and conflicts
✓Supporting sustainable development

Fundamental Cannons in Engineering Practice

1.Following ethical codes and standards (e.g. COREN Code of Ethics).
2.Conducting thorough risk assessments and safety analyses.
3.Considering diverse perspectives and stakeholders’ interests.
4.Prioritizing environmental sustainability and social responsibility.
5.Maintaining confidentiality and intellectual property rights.
6.Continuously updating knowledge and skills to ensure competence.
7.Reporting and addressing unethical behaviour.

4. Sustainability in Engineering

1.Environmental Sustainability
✓Minimizing environmental impact
✓Conserving natural resources
✓Reducing greenhouse gas emissions
✓Implementing renewable energy solutions

2.Social Sustainability
✓Respecting human rights
✓Promoting social justice
✓Supporting community development
✓Ensuring workplace safety and health

3.Economic Sustainability
✓Optimizing resource utilization
✓Reducing waste and pollution
✓Implementing cost-effective solutions
✓Supporting sustainable development

Sustainability and ethical practices are crucial in appraisal and cost engineering practices in Nigeria, ensuring that projects are executed with integrity, social responsibility, and environmental stewardship. Here’s an expanded explanation:

Sustainability:
1. Environmental Impact Assessment (EIA): Conducting EIAs to identify potential environmental risks and opportunities for sustainable practices.
2. Green Building Practices: Encouraging energy-efficient and sustainable building materials in project design.
3. Social Sustainability: Ensuring that projects benefit local communities and promote social justice.
4. Economic Viability: Ensuring that projects are financially viable and provide long-term economic benefits.

Ethical Practices:
1. Transparency and Accountability: Ensuring that appraisal and cost engineering practices are transparent, accountable, and free from corruption.
2. Integrity and Honesty: Maintaining integrity and honesty in all professional interactions and transactions.
3. Conflict of Interest: Avoiding conflicts of interest and ensuring that personal interests do not compromise professional judgment.
4. Respect for Local Culture and Communities: Respecting local culture, traditions, and communities in project planning and execution.
5. Compliance with Regulations: Ensuring that projects comply with relevant regulations, standards, and laws.

In Nigeria, appraisal and cost engineering practitioners should prioritize sustainability and ethical practices to:
✓Promote environmentally responsible development.
✓Support economic growth and social progress.
✓Enhance the reputation of the profession.
✓Build trust with clients and stakeholders.
✓Contribute to the achievement of the United Nations’ Sustainable Development Goals (SDGs)

6. Integrating Sustainability and Ethical Practices in Engineering
Integrating sustainability and ethical practices, appraisal and cost engineering practitioners in Nigeria can ensure that projects are delivered with integrity, social responsibility, and environmental stewardship, ultimately contributing to a more sustainable and equitable built environment.

Ethical Practices in Engineering:
1.Professional Integrity
✓Adhering to ethical codes and standards
✓Maintaining objectivity and impartiality
✓Avoiding conflicts of interest
✓Respecting confidentiality

2.Responsibility and Accountability
✓Taking ownership of design and development decisions
✓Ensuring safety and reliability
✓Minimizing harm to people and the environment
✓Being transparent and accountable

3.Respect for Human Rights and Dignity
✓Avoiding discrimination and bias
✓Promoting inclusivity and diversity
✓Respecting privacy and autonomy
✓Supporting human well-being

4.Fairness and Justice
✓Ensuring equal access to resources and opportunities
✓Promoting social justice and equality
✓Addressing ethical dilemmas and conflicts
✓Supporting sustainable development

Integrating Sustainability and Ethical Practices in Engineering:

1.Sustainable Design and Development
✓Incorporating sustainability principles into design
✓Selecting materials and processes with minimal environmental impact
✓Optimizing energy efficiency and resource utilization
✓Ensuring safety and reliability

2.Ethical Decision-Making
✓Applying ethical principles in engineering decisions
✓Considering multiple perspectives and stakeholders
✓Evaluating short-term and long-term consequences
✓Prioritizing safety, sustainability, and social responsibility

3 Collaboration and Communication
✓Working with stakeholders and communities
✓Communicating ethical and sustainability considerations
✓Ensuring transparency and accountability
✓Fostering a culture of sustainability and ethics

Steps to foster Ethical Practices in Cost Engineering

1. Professional Development
✓ Continuing education and training in ethics and cost engineering
✓ Staying updated on industry standards and best practices
✓ Encouraging certification in cost engineering and ethics

2. Code of Ethics
✓ Adhering to a professional code of ethics (e.g., AACE International’s Code of Ethics)
✓ Understanding and applying ethical principles in cost engineering decisions

3. Transparency and Accountability
✓ communicating cost engineering methods and assumptions
✓ Providing accurate and unbiased cost estimates and reports
✓ Taking ownership of mistakes and errors

4. Stakeholder Engagement
✓ Collaborating with stakeholders to understand their needs and concerns
✓ Ensuring diverse perspectives are considered in cost engineering decisions
✓ Communicating cost engineering information in a clear and transparent manner

5. Conflict of Interest
✓ Avoiding conflicts of interest and disclosing potential conflicts
✓ Maintaining objectivity and impartiality in cost engineering decisions

6. Sustainability and Social Responsibility
✓ Considering environmental, social, and economic sustainability in cost engineering decisions
✓ Evaluating the social impact of cost engineering decisions

7. Ethical Dilemmas
✓ Identifying and addressing ethical dilemmas in cost engineering
✓ Applying ethical principles and frameworks to resolve dilemmas

8. Organizational Culture
✓ Fostering a culture of ethics and transparency within the organization
✓ Encouraging open communication and reporting of unethical behaviour

9. Continuous Improvement
✓ Regularly reviewing and updating cost engineering practices and procedures
✓ Encouraging feedback and suggestions for improvement

Conclusion
In conclusion, by embracing ethical principles and practices, cost engineers effectively promote public trust, ensure safety and sustainability, and contribute to responsible and beneficial technological advancements. This embrace innately addresses ethical implications and dilemmas in projects by promoting ethical practices that contribute to responsible decision-making in their field.

Integrating sustainability and ethical practices into appraisal, cost engineering, and engineering economy is not just a theoretical concept but a call to action for professionals in appraisal and cost engineering. In adopting and assimilating these principles, professionals can play a significant role in building a more sustainable and ethical future, empowering them with the responsibility to make a difference.

By applying engineering economy principles, and practice foundation, professionals and organisations will enable the determination of both economic and environmental factors, leading to more sustainable and cost-effective solutions and informed decisions that support sustainable development.

Thank you for your attention.