ASTM E1369-07e1

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

SCOPE
1.1 This guide covers 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: 31-Mar-2007
• ICS: 91.010.20 - Contractual aspects
• Technical Committee: E06 - Performance of Buildings
• Drafting Committee: E06.81 - Building Economics

Relations

• Replaces: ASTM E1369-07 - Standard Guide for Selecting Techniques for Treating Uncertainty and Risk in the Economic Evaluation of Buildings and Building Systems
• Effective Date: 01-Apr-2007
• Replaced By: ASTM E1369-07e2 - Standard Guide for Selecting Techniques for Treating Uncertainty and Risk in the Economic Evaluation of Buildings and Building Systems
• Effective Date: 01-Apr-2007
• Referred By: ASTM E1557-09(2020)e1 - Standard Classification for Building Elements and Related Sitework—UNIFORMAT II
• Effective Date: 01-Apr-2007
• Referred By: ASTM E2204-15(2020)e1 - Standard Guide for Summarizing the Economic Impacts of Building-Related Projects
• Effective Date: 01-Apr-2007
• Referred By: ASTM E964-15(2020)e1 - Standard Practice for Measuring Benefit-to-Cost and Savings-to-Investment Ratios for Buildings and Building Systems
• Effective Date: 01-Apr-2007
• Referred By: ASTM E2103/E2103M-19 - Standard Classification for Bridge Elements—UNIFORMAT II
• Effective Date: 01-Apr-2007
• Referred By: ASTM E1804-16(2023) - Standard Practice for Performing and Reporting Cost Analysis During the Design Phase of a Project
• Effective Date: 01-Apr-2007
• Referred By: ASTM E3035-15(2020) - Standard Classification for Facility Asset Component Tracking System (FACTS)
• Effective Date: 01-Apr-2007
• Referred By: ASTM E1074-15(2020)e1 - Standard Practice for Measuring Net Benefits and Net Savings for Investments in Buildings and Building Systems
• Effective Date: 01-Apr-2007
• Referred By: ASTM E1185-15(2020)e1 - Standard Guide for Selecting Economic Methods for Evaluating Investments in Buildings and Building Systems
• Effective Date: 01-Apr-2007
• Referred By: ASTM E2506-15(2020)e1 - Standard Guide for Developing a Cost-Effective Risk Mitigation Plan for New and Existing Constructed Facilities
• Effective Date: 01-Apr-2007
• Referred By: ASTM E1699-14(2020) - Standard Practice for Performing Value Engineering (VE)/Value Analysis (VA) of Projects, Products and Processes
• Effective Date: 01-Apr-2007
• Referred By: ASTM E3130-21 - Standard Guide for Developing Cost-Effective Community Resilience Strategies
• Effective Date: 01-Apr-2007
• Referred By: ASTM E1057-15(2020)e1 - Standard Practice for Measuring Internal Rate of Return and Adjusted Internal Rate of Return for Investments in Buildings and Building Systems
• Effective Date: 01-Apr-2007
• Referred By: ASTM E3008/E3008M-16(2023) - Standard Classification for Transportation Surface Elements—UNIFORMAT II
• Effective Date: 01-Apr-2007

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
e1
Designation: E 1369 – 07
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 E1369; the number immediately following the designation indicates the year of
original adoption or, in the case of revision, the year of last revision.Anumber in parentheses indicates the year of last reapproval.A
superscript epsilon (e) indicates an editorial change since the last revision or reapproval.
1
e NOTE—Footnotes updated editorially in August 2007.
1. Scope E1121 Practice for Measuring Payback for Investments in
Buildings and Building Systems
1.1 This guide covers techniques for treating uncertainty in
E1185 Guide for Selecting Economic Methods for Evalu-
input values to an economic analysis of a building investment
ating Investments in Buildings and Building Systems
project. It also recommends techniques for evaluating the risk
2.2 ASTM Adjuncts:
thataprojectwillhavealessfavorableeconomicoutcomethan
4
2 Discount Factor Tables, Adjunct to Practice E917
what is desired or expected.
1.2 The techniques include breakeven analysis, sensitivity
3. Terminology
analysis,risk-adjusteddiscounting,themean-variancecriterion
3.1 Definitions—For definitions of terms used in this guide,
and coefficient of variation, decision analysis, and simulation.
refer to Terminologies E631 and E833.
1.3 Thetechniquescanbeusedwitheconomicmethodsthat
measure economic performance, such as life-cycle cost analy-
4. Summary of Guide
sis,netbenefits,thebenefit-to-costratio,internalrateofreturn,
4.1 This guide identifies related ASTM standards and ad-
and payback.
juncts. It describes circumstances when measuring uncertainty
2. Referenced Documents and risk may be helpful in economic evaluations of building
3 investments.This guide defines uncertainty, risk exposure, and
2.1 ASTM Standards:
risk attitude. It presents nonprobabilistic and probabilistic
E631 Terminology of Building Constructions
techniques for measuring uncertainty and risk exposure. This
E833 Terminology of Building Economics
guide describes briefly each technique, gives the formula for
E917 PracticeforMeasuringLife-CycleCostsofBuildings
calculating a measure where appropriate, illustrates the tech-
and Building Systems
niques with a case example, and summarizes its advantages
E964 Practice for Measuring Benefit-to-Cost and Savings-
and disadvantages.
to-Investment Ratios for Buildings and Building Systems
4.2 Since there is no best technique for measuring uncer-
E1057 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-
concludes with a discussion of how to select the appropriate
ings and Building Systems
technique for a particular problem.
E1074 Practice for Measuring Net Benefits and Net Sav-
4.3 This guide describes in detail how risk exposure can be
ings for Investments in Buildings and Building Systems
measured by probability functions and distribution functions
(see Annex A1). It also describes how risk attitude can be
1
This guide is under the jurisdiction ofASTM Committee E06 on Performance
incorporated using utility theory and other approaches (see
of Buildings and is the direct responsibility of Subcommittee E06.81 on Building
Annex A2).
Economics.
Current edition approved April 1, 2007. Published April 2007. Originally
5. Significance and Use
approved in 1990. Last previous edition approved in 2002 as E1369–02.
2
For an extensive overview of techniques for treating risk and uncertainty, see
5.1 Investments in long-lived projects such as buildings are
Marshall, Harold E.—Techniques for Treating Uncertainty and Risk in the Eco-
characterized by uncertainties regarding project life, operation
nomic Evaluation of Building Investments, National Institute of Standards and
and maintenance costs, revenues, and other factors that affect
Technology, Special Publication 757, 1988.
3
For referenced ASTM standards, visit the ASTM website, www.astm.org, or
contact ASTM Customer Service at [e-mail]. For Annual Book of ASTM
4
Standards volume information, refer to the standard’s Document Summary page on Available from ASTM International Headquarters. Order Adjunct No.
the ASTM website. ADJ091703.
Copyright © ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959, United States.
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e1
E1369–07
projecteconomics.Sincefuturevaluesofthesevariablefactors 6.1.3 Decide whether an uncertainty and risk evaluation is
are generally not known, it is difficult to make reliable needed, and, if so, choose the appropriate technique (see
economic evaluations. Sections 5, 7, 8, and 10).
6.1.4 Compile data and establ
...