The first step is to identify the physics topic (or topics) that will anchor your project. These topics, objectives, or learning targets can come from your course curriculum; AP objectives; or local, state, or national standards.
Do not hold back from introducing future topics that could help students with their builds. Many times teachers feel that they need to teach topics sequentially, that students shouldn't learn about a topic prematurely. If the knowledge is needed for the project at hand, then there is no reason not to discuss it. For example, let's say you are doing an egg drop contest and it would help for your students to learn about pressure (since it is really pressure rather than force that cracks an egg). You can cover pressure at an elementary level, just enough so students can integrate the concept into their designs, and then spiral back to cover it in greater depth later. Spiraling has been shown to be an effective teaching method.
Find an engineering project that incorporates the topics of interest. It should be a project where students have to apply what they have learned in order to produce a product or preform a task.
Helpful Resources: There are many helpful resources out there, I like to use past Science Olympiad or JETS Design Challenges.
To begin, have students use the web and other resources to research the problem and find out what others have done to solve it. Students should identify the pros and cons of the different designs and identify components that they would you like to incorporate into their own designs.
Next, have students make sketches of their design ideas. I usually require students to sketch 3 preliminary designs and choose the best one for their final formal sketch.
Note: If you have time, it is always good to have students build a prototype, this is incredibly useful and can actually save a lot of time during the construction phase of the project.
During this phase students will build their devices. Note that building is an iterative process, students should look for flaws with their design and modify their builds accordingly to improve their builds. Students should continually test their device to make sure that all of its components are functioning as intended and be prepared to take apart and rebuild parts of their builds if they are not working well, this is all part of the engineering process. Make sure to stress, monitor, and assess productive student participation, safety, and clean up during the construction phase of the project.
Now it is time for students put their builds to the test! This can either be done with a contest (where students test their builds) or a showcase (where they present their builds to a panel). Note that the best panels are outside experts. Students value and get a lot out of having professionals critique and evaluate their builds, this can be incredibly inspiring for students.
The last stage of the project is for students to produce a paper that clearly communicates all of the thought that went into designing and constructing their builds. Students should also reflect on their designs and make recommendations for improvements. This is also where the students demonstrate that they used sound physics when designing their builds.