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ASTM E1946-18

(Practice)

Standard Practice for Measuring Cost Risk of Buildings and Building Systems and Other Constructed Projects

Standard Practice for Measuring Cost Risk of Buildings and Building Systems and Other Constructed Projects

SIGNIFICANCE AND USE
5.1 Measuring cost risk enables owners of buildings and other constructed projects, architects, engineers, and contractors to measure and evaluate the cost risk exposures of their construction projects.3 Specifically, cost risk analysis (CRA) helps answer the following questions:  
5.1.1 What are the probabilities for the construction contract to be bid above or below the estimated value?  
5.1.2 How low or high can the total project cost be?  
5.1.3 What is the appropriate amount of contingency to use?  
5.1.4 What cost elements have the greatest impact on the project’s cost risk exposure?  
5.2 CRA can be applied to a project's contract cost, construction cost (contract cost plus construction change orders), and project cost (construction cost plus owner's cost), depending on the users’ perspectives and needs. This practice shall refer to these different terms generally as “project cost.”
SCOPE
1.1 This practice covers a procedure for measuring cost risk for buildings and building systems and other constructed projects, using the Monte Carlo simulation technique as described in Guide E1369.  
1.2 A computer program is required for the Monte Carlo simulation. This can be one of the commercially available software programs for cost risk analysis, or one constructed by the user.  
1.3 This standard does not purport to address all of the safety concerns, if any, associated with its use. It is the responsibility of the user of this standard to establish appropriate safety, health, and environmental practices and determine the applicability of regulatory limitations prior to use.  
1.4 This international standard was developed in accordance with internationally recognized principles on standardization established in the Decision on Principles for the Development of International Standards, Guides and Recommendations issued by the World Trade Organization Technical Barriers to Trade (TBT) Committee.

General Information

Status
Historical
Publication Date
31-Aug-2018
ICS
91.010.20 - Contractual aspects
Technical Committee
E06 - Performance of Buildings
Drafting Committee
E06.81 - Building Economics
Current Stage
Ref Project

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ASTM E1946-18 - Standard Practice for Measuring Cost Risk of Buildings and Building Systems and Other Constructed ProjectsASTM E1946-18 - Standard Practice for Measuring Cost Risk of Buildings and Building Systems and Other Constructed Projects
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ASTM E1946-18 - Standard Practice for Measuring Cost Risk of Buildings and Building Systems and Other Constructed Projects
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REDLINE ASTM E1946-18 - Standard Practice for Measuring Cost Risk of Buildings and Building Systems and Other Constructed ProjectsREDLINE ASTM E1946-18 - Standard Practice for Measuring Cost Risk of Buildings and Building Systems and Other Constructed Projects
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REDLINE ASTM E1946-18 - Standard Practice for Measuring Cost Risk of Buildings and Building Systems and Other Constructed Projects
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Standards Content (Sample)

NOTICE: This standard has either been superseded and replaced by a new version or withdrawn.
Contact ASTM International (www.astm.org) for the latest information
Designation: E1946 − 18
Standard Practice for
Measuring Cost Risk of Buildings and Building Systems
1
and Other Constructed Projects
This standard is issued under the fixed designation E1946; the number immediately following the designation indicates the year of
original adoption or, in the case of revision, the year of last revision. A number in parentheses indicates the year of last reapproval. A
superscript epsilon (´) indicates an editorial change since the last revision or reapproval.
1. Scope E2103/E2103M Classification for Bridge Elements—
UNIFORMAT II
1.1 This practice covers a procedure for measuring cost risk
E2168 Classification for Allowance, Contingency, and Re-
for buildings and building systems and other constructed
serve Sums in Building Construction Estimating
projects, using the Monte Carlo simulation technique as
E2514 Practice for Presentation Format of Elemental Cost
described in Guide E1369.
Estimates, Summaries, and Analyses
1.2 A computer program is required for the Monte Carlo
simulation. This can be one of the commercially available
3. Terminology
software programs for cost risk analysis, or one constructed by
3.1 Definitions—For definitions of general terms related to
the user.
building construction used in this guide, refer to Terminology
1.3 This standard does not purport to address all of the
E631; and for general terms related to building economics,
safety concerns, if any, associated with its use. It is the
refer to Terminology E833.
responsibility of the user of this standard to establish appro-
priate safety, health, and environmental practices and deter-
4. Summary of Practice
mine the applicability of regulatory limitations prior to use.
4.1 The procedure for calculating building cost risk consists
1.4 This international standard was developed in accor-
of the following steps:
dance with internationally recognized principles on standard-
4.1.1 Identify critical cost elements.
ization established in the Decision on Principles for the
4.1.2 Eliminate interdependencies between critical ele-
Development of International Standards, Guides and Recom-
ments.
mendations issued by the World Trade Organization Technical
4.1.3 Select Probability Density Function.
Barriers to Trade (TBT) Committee.
4.1.4 Quantify risk in critical elements.
4.1.5 Create a cost model.
2. Referenced Documents
4.1.6 Conduct a Monte Carlo simulation.
2
2.1 ASTM Standards:
4.1.7 Interpret the results.
E631 Terminology of Building Constructions
4.1.8 Conduct a sensitivity analysis.
E833 Terminology of Building Economics
E1369 Guide for Selecting Techniques for Treating Uncer-
5. Significance and Use
tainty and Risk in the Economic Evaluation of Buildings
5.1 Measuring cost risk enables owners of buildings and
and Building Systems
other constructed projects, architects, engineers, and contrac-
E1557 Classification for Building Elements and Related
tors to measure and evaluate the cost risk exposures of their
Sitework—UNIFORMAT II
3
construction projects. Specifically, cost risk analysis (CRA)
E2083 Classification for Building Construction Field
helps answer the following questions:
Requirements, and Office Overhead & Profit
5.1.1 What are the probabilities for the construction contract
to be bid above or below the estimated value?
5.1.2 How low or high can the total project cost be?
1
This practice is under the jurisdiction of ASTM Committee E06 on Perfor-
5.1.3 What is the appropriate amount of contingency to use?
mance of Buildings and is the direct responsibility of Subcommittee E06.81 on
Building Economics.
5.1.4 What cost elements have the greatest impact on the
Current edition approved Sept. 1, 2018. Published September 2018. Originally
project’s cost risk exposure?
approved in 1998. Last previous edition approved in 2012 as E1946–12. DOI:
10.1520/E1946–18.
2
For referenced ASTM standards, visit the ASTM website, www.astm.org, or
3
contact ASTM Customer Service at service@astm.org. For Annual Book of ASTM This practice is based, in part, on the article, “Measuring Cost Risk of Building
Standards volume information, refer to the standard’s Document Summary page on Projects,” by D. N. Mitten and B. Kwong, Project Management Services, Inc.,
the ASTM website. Rockville, MD, 1996.
Copyright © ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959. United States
1

---------------------- Page: 1 ----------------------
E1946 − 18
5.2 CRA can be applied to a project’s contract cost, con- downward search through the branches of the hierarchy.
struction cost (contract cost plus construction change orders), Conduct this search by repeatedly asking the question: Is it
and project cost (construction cost plus owner’s cost), depend- possible that this element could vary enough to cause the total
ing on the users’ perspe
...

This document is not an ASTM standard and is intended only to provide the user of an ASTM standard an indication of what changes have been made to the previous version. Because
it may not be technically possible to adequately depict all changes accurately, ASTM recommends that users consult prior editions as appropriate. In all cases only the current version
of the standard as published by ASTM is to be considered the official document.
Designation: E1946 − 12 E1946 − 18
Standard Practice for
Measuring Cost Risk of Buildings and Building Systems
1
and Other Constructed Projects
This standard is issued under the fixed designation E1946; the number immediately following the designation indicates the year of
original adoption or, in the case of revision, the year of last revision. A number in parentheses indicates the year of last reapproval. A
superscript epsilon (´) indicates an editorial change since the last revision or reapproval.
1. Scope
1.1 This practice covers a procedure for measuring cost risk for buildings and building systems and other constructed projects,
using the Monte Carlo simulation technique as described in Guide E1369.
1.2 A computer program is required for the Monte Carlo simulation. This can be one of the commercially available software
programs for cost risk analysis, or one constructed by the user.
1.3 This standard does not purport to address all of the safety concerns, if any, associated with its use. It is the responsibility
of the user of this standard to establish appropriate safety, health, and environmental practices and determine the applicability of
regulatory limitations prior to use.
1.4 This international standard was developed in accordance with internationally recognized principles on standardization
established in the Decision on Principles for the Development of International Standards, Guides and Recommendations issued
by the World Trade Organization Technical Barriers to Trade (TBT) Committee.
2. Referenced Documents
2
2.1 ASTM Standards:
E631 Terminology of Building Constructions
E833 Terminology of Building Economics
E1369 Guide for Selecting Techniques for Treating Uncertainty and Risk in the Economic Evaluation of Buildings and Building
Systems
E1557 Classification for Building Elements and Related Sitework—UNIFORMAT II
E2083 Classification for Building Construction Field Requirements, and Office Overhead & Profit
E2103E2103/E2103M Classification for Bridge Elements—UNIFORMAT II
E2168 Classification for Allowance, Contingency, and Reserve Sums in Building Construction Estimating
E2514 Practice for Presentation Format of Elemental Cost Estimates, Summaries, and Analyses
3. Terminology
3.1 Definitions—For definitions of general terms related to building construction used in this guide, refer to Terminology E631;
and for general terms related to building economics, refer to Terminology E833.
4. Summary of Practice
4.1 The procedure for calculating building cost risk consists of the following steps:
4.1.1 Identify critical cost elements.
4.1.2 Eliminate interdependencies between critical elements.
4.1.3 Select Probability Density Function.
4.1.4 Quantify risk in critical elements.
4.1.5 Create a cost model.
4.1.6 Conduct a Monte Carlo simulation.
1
This practice is under the jurisdiction of ASTM Committee E06 on Performance of Buildings and is the direct responsibility of Subcommittee E06.81 on Building
Economics.
Current edition approved April 1, 2012Sept. 1, 2018. Published April 2012September 2018. Originally approved in 1998. Last previous edition approved in 20072012 as
E1946 – 07.E1946–12. DOI: 10.1520/E1946-12.10.1520/E1946–18.
2
For referenced ASTM standards, visit the ASTM website, www.astm.org, or contact ASTM Customer Service at service@astm.org. For Annual Book of ASTM Standards
volume information, refer to the standard’sstandard’s Document Summary page on the ASTM website.
Copyright © ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959. United States
1

---------------------- Page: 1 ----------------------
E1946 − 18
4.1.7 Interpret the results.
4.1.8 Conduct a sensitivity analysis.
5. Significance and Use
5.1 Measuring cost risk enables owners of buildings and other constructed projects, architects, engineers, and contractors to
3
measure and evaluate the cost risk exposures of their construction projects. Specifically, cost risk analysis (CRA) helps answer
the following questions:
5.1.1 What are the probabilities for the construction contract to be bid above or below the estimated value?
5.1.2 How low or high can the total project cost be?
5.1.3 What is the appropriate amount of contingency to use?
5.1.4 What cost elements have the greatest impact on the project’s cost risk exposure?
5.2 CRA can be applied to a project’s contract cost, construction cost (contract cost plus construction change orders), and project
cost (construction cost plus owner’s cost), depending on the users’users’ perspectives and needs. This practic
...

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5.1 LCC analysis is an economic method for evaluating a project or project alternatives over a designated study period. The method entails computing the LCC for alternative building designs or system specifications having the same purpose and then comparing them to determine which has the lowest LCC over the study period.  
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SIGNIFICANCE AND USE
5.1 Measuring cost risk enables owners of buildings and other constructed projects, architects, engineers, and contractors to measure and evaluate the cost risk exposures of their construction projects.3 Specifically, cost risk analysis (CRA) helps answer the following questions:  
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SIGNIFICANCE AND USE
5.1 The BCR and SIR provide measures of economic performance in a single number that indicates whether a proposed building or building system is preferred over a mutually exclusive alternative that serves as the base for computing the ratio. It may be contrasted with the life-cycle cost (LCC) method that requires two LCC measures to evaluate the economic performance of a building or building system—one for each alternative.  
5.2 The ratio indicates discounted dollar benefits (or savings) per dollar of discounted costs.  
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5.4 The BCR or SIR computed on increments of benefits (or savings) and costs can be used to determine if one design or size of a building or system is more economic than another.  
5.5 The BCR or SIR can be used as an aid to select the economically efficient set of projects among many competing for limited funding. The efficient set of projects will maximize aggregate net benefits or net savings obtainable for the budget.
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1.1 This practice covers a procedure for calculating and interpreting benefit-to-cost ratios (BCR) and savings-to-investment ratios (SIR) as an aid for making building-related decisions.  
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1.3 Dollar amounts used to calculate BCR and SIR are all discounted, that is, expressed in time-equivalent dollars, either in present value or uniform annual value terms.  
1.4 The values stated in inch-pound units are to be regarded as standard. The values given in parentheses are mathematical conversions to SI units that are provided for information only and are not considered standard.  
1.5 This standard does not purport to address all of the safety concerns, if any, associated with its use. It is the responsibility of the user of this standard to establish appropriate safety, health, and environmental practices and determine the applicability of regulatory limitations prior to use.  
1.6 This international standard was developed in accordance with internationally recognized principles on standardization established in the Decision on Principles for the Development of International Standards, Guides and Recommendations issued by the World Trade Organization Technical Barriers to Trade (TBT) Committee.

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ASTM
ASTM E917-17(2023)(Practice)
Standard Practice for Measuring Life-Cycle Costs of Buildings and Building Systems

SIGNIFICANCE AND USE
5.1 LCC analysis is an economic method for evaluating a project or project alternatives over a designated study period. The method entails computing the LCC for alternative building designs or system specifications having the same purpose and then comparing them to determine which has the lowest LCC over the study period.  
5.2 The LCC method is particularly suitable for determining whether the higher initial cost of a building or building system is economically justified by reductions in future costs (for example, operating, maintenance, repair, or replacement costs) when compared with an alternative that has a lower initial cost but higher future costs. If a building design or system specification has both a lower initial cost and lower future costs relative to an alternative, an LCC analysis is not needed to show that the former is the economically preferable choice.  
5.3 If an investment project is not essential to the building operation (for example, replacement of existing single-pane windows with new double-pane windows), the project must be compared against the “do nothing” alternative (that is, keeping the single pane windows) in order to determine if it is cost effective. Typically the “do nothing” alternative entails no initial investment cost but has higher future costs than the proposed project.
SCOPE
1.1 This practice establishes a procedure for evaluating the life-cycle cost (LCC) of a building or building system and comparing the LCCs of alternative building designs or systems that satisfy the same functional requirements.  
1.2 The LCC method measures, in present-value or annual-value terms, the sum of all relevant costs associated with owning and operating a building or building system over a specified time period.  
1.3 The basic premise of the LCC method is that to an investor or decision maker all costs arising from an investment decision are potentially important to that decision, including future as well as present costs. Applied to buildings or building systems, the LCC encompasses all relevant costs over a designated study period, including the costs of designing, purchasing/leasing, constructing/installing, operating, maintaining, repairing, replacing, and disposing of a particular building design or system.  
1.4 The values stated in inch-pound units are to be regarded as standard. The values given in parentheses are mathematical conversions to SI units that are provided for information only and are not considered standard.  
1.5 This international standard was developed in accordance with internationally recognized principles on standardization established in the Decision on Principles for the Development of International Standards, Guides and Recommendations issued by the World Trade Organization Technical Barriers to Trade (TBT) Committee.

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