ASTM E1369-98

Standard Guide for Selecting Techniques for Treating Uncertainty and Risk in the Economic Evaluation of Buildings and Building Systems

SCOPE
1.1 This guide recommends techniques for treating uncertainty in input values to an economic analysis of a building investment project. It also recommends techniques for evaluating the risk that a project will have a less favorable economic outcome than what is desired or expected.
1.2 The techniques include breakeven analysis, sensitivity analysis, risk-adjusted discounting, the mean-variance criterion and coefficient of variation, decision analysis, and simulation.
1.3 The techniques can be used with economic methods that measure economic performance, such as life-cycle cost analysis, net benefits, the benefit-to-cost ratio, internal rate of return, and payback.

General Information

• Status: Historical
• Publication Date: 09-Sep-1998
• ICS: 91.010.20 - Contractual aspects
• Technical Committee: E06 - Performance of Buildings
• Drafting Committee: E06.81 - Building Economics

Relations

• Replaced By: ASTM E1369-02 - Standard Guide for Selecting Techniques for Treating Uncertainty and Risk in the Economic Evaluation of Buildings and Building Systems
• Effective Date: 10-Oct-2002

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NOTICE: This standard has either been superseded and replaced by a new version or
withdrawn.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: E 1369 – 98 An American National Standard
AMERICAN SOCIETY FOR TESTING AND MATERIALS
100 Barr Harbor Dr., West Conshohocken, PA 19428
Reprinted from the Annual Book of ASTM Standards. Copyright ASTM
Standard Guide for
Selecting Techniques for Treating Uncertainty and Risk in
the Economic Evaluation of Buildings and Building
1
Systems
This standard is issued under the fixed designation E 1369; 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 (e) indicates an editorial change since the last revision or reapproval.
5
1. Scope Discount Factor Tables, Adjunct to Practice E 917
Computer Program and User’s Guide to Building Mainte-
1.1 This guide recommends techniques for treating uncer-
nance, Repair, and Replacement Database for Life-Cycle
tainty in input values to an economic analysis of a building
Cost Analysis, Adjunct to Practices E 917, E 964, E 1057,
investment project. It also recommends techniques for evalu-
6
E 1074, and E 1121.
ating the risk that a project will have a less favorable economic
2
outcome than what is desired or expected.
3. Terminology
1.2 The techniques include breakeven analysis, sensitivity
3.1 Definitions—For definitions of terms used in this guide,
analysis, risk-adjusted discounting, the mean-variance criterion
refer to Terminology E 833.
and coefficient of variation, decision analysis, and simulation.
1.3 The techniques can be used with economic methods that
4. Summary of Guide
measure economic performance, such as life-cycle cost analy-
4.1 This guide identifies related ASTM standards and ad-
sis, net benefits, the benefit-to-cost ratio, internal rate of return,
juncts. It describes circumstances when measuring uncertainty
and payback.
and risk may be helpful in economic evaluations of building
2. Referenced Documents investments. This guide defines uncertainty, risk exposure, and
risk attitude. It presents nonprobabilistic and probabilistic
2.1 ASTM Standards:
3 techniques for measuring uncertainty and risk exposure. This
E 833 Terminology of Building Economics
guide describes briefly each technique, gives the formula for
E 917 Practice for Measuring Life-Cycle Costs of Buildings
4
calculating a measure where appropriate, illustrates the tech-
and Building Systems
niques with a case example, and summarizes its advantages
E 964 Practice for Measuring Benefit-to-Cost and Savings-
4
and disadvantages.
to-Investment Ratios for Buildings and Building Systems
4.2 Since there is no best technique for measuring uncer-
E 1057 Practice for Measuring Internal Rate of Return and
tainty and risk in every economic evaluation, this guide
Adjusted Internal Rate of Return for Investments in Build-
4 concludes with a discussion of how to select the appropriate
ings and Building Systems
technique for a particular problem.
E 1074 Practice for Measuring Net Benefits for Investments
4 4.3 This guide describes in detail how risk exposure can be
in Buildings and Building Systems
measured by probability functions and distribution functions
E 1121 Practice for Measuring Payback for Investments in
4 (see Annex A1). It also describes how risk attitude can be
Buildings and Building Systems
incorporated using utility theory and other approaches (see
E 1185 Guide for Selecting Economic Methods for Evalu-
4 Annex A2).
ating Investments in Buildings and Building Systems
2.2 ASTM Adjuncts:
5. Significance and Use
5.1 Investments in long-lived projects such as buildings are
characterized by uncertainties regarding project life, operation
1
and maintenance costs, revenues, and other factors that affect
This guide is under the jurisdiction of ASTM Committee E-6 on Performance
of Buildings and is the direct responsibility of Subcommittee E06.81 on Building
project economics. Since future values of these variable factors
Economics.
are generally not known, it is difficult to make reliable
Current edition approved Sept. 10, 1998. Published April 1999. Originally
economic evaluations.
published as E 1369 – 90. Last previous edition E 1369 – 93.
2
For an extensive overview of techniques for treating risk and uncertainty, see 5.2 The traditional approach to project investment analysis
Marshall, Harold E.—Techniques for Treating Uncertainty and Risk in the Eco-
nomic Evaluation of Building Investments, National Institute of Standards and
Technology, Special Publication 757, 1988.
5
Available from ASTM Headquarters. Order PCN 12-509179-10.
3
Annual Book of ASTM Standards, Vol 04.07.
6
Available from ASTM Headquarters. Order PCN 12-509171-10 for the 3.5 in.
4
Annual Book of ASTM Standards, Vol 04.11.
disk. Order PCN 12-509172-10 for the 5.25 in. disk.
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