ASTM E1946-12

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

SIGNIFICANCE AND USE
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. Specifically, cost risk analysis (CRA) helps answer the following questions:
What are the probabilities for the construction contract to be bid above or below the estimated value?
How low or high can the total project cost be?
What is the appropriate amount of contingency to use?
What cost elements have the greatest impact on the project’s cost risk exposure?
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.

General Information

• Status: Historical
• Publication Date: 31-Mar-2012
• ICS: 91.010.20 - Contractual aspects
• Technical Committee: E06 - Performance of Buildings
• Drafting Committee: E06.81 - Building Economics

Relations

• Replaces: ASTM E1946-07 - Standard Practice for Measuring Cost Risk of Buildings and Building Systems
• Effective Date: 01-Apr-2012
• Referred By: ASTM E3372-23 - Standard Guide for Schedule Performance Index, Schedule Beta (β<inf>s</inf >)
• Effective Date: 01-Apr-2012
• Referred By: ASTM E1369-15(2020)e1 - Standard Guide for Selecting Techniques for Treating Uncertainty and Risk in the Economic Evaluation of Buildings and Building Systems
• Effective Date: 01-Apr-2012
• 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-2012
• Referred By: ASTM E3008/E3008M-16(2023) - Standard Classification for Transportation Surface Elements—UNIFORMAT II
• Effective Date: 01-Apr-2012
• 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-2012
• Referred By: ASTM E917-17(2023) - Standard Practice for Measuring Life-Cycle Costs of Buildings and Building Systems
• Effective Date: 01-Apr-2012
• Referred By: ASTM E3035-15(2020) - Standard Classification for Facility Asset Component Tracking System (FACTS)
• Effective Date: 01-Apr-2012
• 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-2012
• Referred By: ASTM E2103/E2103M-19 - Standard Classification for Bridge Elements&#x2014;UNIFORMAT II
• Effective Date: 01-Apr-2012
• 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-2012
• Referred By: ASTM E2168-10(2023) - Standard Classification for Allowance, Contingency, and Reserve Sums in Building Construction Estimating
• Effective Date: 01-Apr-2012
• Referred By: ASTM E2691-20 - Standard Practice for Job Productivity Measurement
• Effective Date: 01-Apr-2012

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 − 12
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.Anumber in parentheses indicates the year of last reapproval.A
superscript epsilon (´) indicates an editorial change since the last revision or reapproval.
1. Scope 4.1.1 Identify critical cost elements.
4.1.2 Eliminate interdependencies between critical ele-
1.1 Thispracticecoversaprocedureformeasuringcostrisk
ments.
for buildings and building systems and other constructed
4.1.3 Select Probability Density Function.
projects, using the Monte Carlo simulation technique as
4.1.4 Quantify risk in critical elements.
described in Guide E1369.
4.1.5 Create a cost model.
1.2 A computer program is required for the Monte Carlo
4.1.6 Conduct a Monte Carlo simulation.
simulation. This can be one of the commercially available
4.1.7 Interpret the results.
softwareprogramsforcostriskanalysis,oroneconstructedby
4.1.8 Conduct a sensitivity analysis.
the user.
5. Significance and Use
2. Referenced Documents
5.1 Measuring cost risk enables owners of buildings and
2
2.1 ASTM Standards:
other constructed projects, architects, engineers, and contrac-
E631Terminology of Building Constructions
tors to measure and evaluate the cost risk exposures of their
3
E833Terminology of Building Economics
construction projects. Specifically, cost risk analysis (CRA)
E1369Guide for Selecting Techniques for Treating Uncer-
helps answer the following questions:
tainty and Risk in the Economic Evaluation of Buildings
5.1.1 Whataretheprobabilitiesfortheconstructioncontract
and Building Systems
to be bid above or below the estimated value?
E1557Classification for Building Elements and Related
5.1.2 How low or high can the total project cost be?
Sitework—UNIFORMAT II
5.1.3 Whatistheappropriateamountofcontingencytouse?
E2103Classification for Bridge Elements—UNIFORMAT
5.1.4 What cost elements have the greatest impact on the
II
project’s cost risk exposure?
E2168Classification for Allowance, Contingency, and Re-
5.2 CRA can be applied to a project’s contract cost, con-
serve Sums in Building Construction Estimating
struction cost (contract cost plus construction change orders),
and project cost (construction cost plus owner’s cost), depend-
3. Terminology
ing on the users’ perspectives and needs. This practice shall
3.1 Definitions—Fordefinitionsofgeneraltermsusedinthis
refer to these different terms generally as “project cost.”
guide,refertoTerminologyE631;andforgeneraltermsrelated
to building economics, refer to Terminology E833.
6. Procedure
6.1 Identify Critical Cost Elements:
4. Summary of Practice
6.1.1 A project cost estimate consists of many variables.
4.1 Theprocedureforcalculatingbuildingcostriskconsists
Even though each variable contributes to the total project cost
of the following steps:
risk, not every variable makes a significant enough contribu-
tiontowarrantinclusioninthecostmodel.Identifythecritical
1 elements in order to simplify the cost risk model.
This practice is under the jurisdiction of ASTM Committee E06 on Perfor-
mance of Buildings and is the direct responsibility of Subcommittee E06.81 on 6.1.2 A critical element is one which varies up or down
Building Economics.
enough to cause the total project cost to vary by an amount
Current edition approved April 1, 2012. Published April 2012. Originally
greater than the total project cost’s critical variation, and one
approved in 1998. Last previous edition approved in 2007 as E1946–07. DOI:
10.1520/E1946-12.
2
For referenced ASTM standards, visit the ASTM website, www.astm.org, or
3
contact ASTM Customer Service at [e-mail]. For Annual Book of ASTM Thispracticeisbased,inpart,onthearticle,“MeasuringCostRiskofBuilding
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 − 12
whichisnotcomposedofanyotherelementwhichqualifiesas Roof Construction could only vary as much as $40000, and
a critical element. This criterion is expressed as: does not qualify. Since Floor Construction is now a critical
element, we would eliminate Superstructure, its parent, as a
IF V .V (1)
Y CRIT
critical element.
ANDY containsnootherelementX whereV .V 6.1.7 Include overhead cost elements in the cost model,
X CRIT
such as general conditions, profits, and escalation, and check
THENY isa criticalelement
for
...

This document is not anASTM standard and is intended only to provide the user of anASTM 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:E1946–07 Designation: E1946 – 12
Standard Practice for
Measuring Cost Risk of Buildings and Building
SystemsMeasuring Cost Risk of Buildings and Building
1
Systems 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.
2. Referenced Documents
2
2.1 ASTM Standards:
E631 Terminology of Building Constructions
E833 Terminology of Building Economics
E1369 GuideforSelectingTechniquesforTreatingUncertaintyandRiskintheEconomicEvaluationofBuildingsandBuilding
Systems
E1557 Classification for Building Elements and Related SiteworkUNIFORMAT II
E2103 Classification for Bridge ElementsUNIFORMAT II
E2168 Classification for Allowance, Contingency, and Reserve Sums in Building Construction Estimating
3. Terminology
3.1 Definitions—For definitions of general terms used in this guide, refer to TerminologiesTerminology E631and ; 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.
4.1.7 Interpret the results.
4.1.8 Conduct a sensitivity analysis.
5. Significance and Use
5.1Building cost risk analysis (BCRA) provides a tool for building owners, architects, engineers, and contractors to measure and
evaluate the cost risk exposures of their building construction projects.
5.1 Measuring cost risk enables owners of buildings and other constructed projects, architects, engineers, and contractors to
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 approvedAprilApr. 1, 2007.2012. PublishedApril 2007.2012. Originally approved in 1998. Last previous edition approved in 20022007 as E1946 – 027.
DOI: 10.1520/E1946-07.10.1520/E1946-12.
2
For referencedASTM standards, visit theASTM website, www.astm.org, or contactASTM Customer Service at [e-mail]. For Annual Book of ASTM Standards
volume information, refer to the standard’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 – 12
3
measure and evaluate the cost risk exposures of their construction projects. Specifically, BCRA helps answer the following
questions: 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 building’sproject’s cost risk exposure?
5.2BCRA5.2 CRAcan be applied to a building 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 “building“project cost.”
6. Procedure
6.1 Identify Critical Cost Elements:
6.1.1 A buildingproject cost estimate consists of many variables. Even though each variable contributes to the total
buildingprojectcostrisk,noteveryvariablemakesasignificantenoughcontributiontowarrantinclusioninthecostmodel.Identify
the critical elements in order to simplify the cost risk model.
6.1.2 A critical element is one which varies up or down enough to cause the total buildingproject cost to vary by an amount
great
...