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ASTM E1946-98

(Practice)

Standard Practice for Measuring Cost Risk of Buildings and Building Systems

Standard Practice for Measuring Cost Risk of Buildings and Building Systems

SCOPE
1.1 This practice establishes a procedure for measuring cost risk for buildings and building systems, using the Monte Carlo simulation technique as described in Guide E 1369.  
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
09-Apr-1998
ICS
91.010.20 - Contractual aspects
Technical Committee
E06 - Performance of Buildings
Drafting Committee
E06.81 - Building Economics
Current Stage
Ref Project

Relations

Replaced By
ASTM E1946-02 - Standard Practice for Measuring Cost Risk of Buildings and Building Systems
Effective Date
10-Oct-2002

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ASTM E1946-98 - Standard Practice for Measuring Cost Risk of Buildings and Building SystemsASTM E1946-98 - Standard Practice for Measuring Cost Risk of Buildings and Building Systems
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ASTM E1946-98 - Standard Practice for Measuring Cost Risk of Buildings and Building Systems
English language
9 pages
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NOTICE: This standard has either been superseded and replaced by a new version or
withdrawn.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 1946 – 98
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 Practice for
1
Measuring Cost Risk of Buildings and Building Systems
This standard is issued under the fixed designation E 1946; 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.
3
1. Scope construction projects. Specifically, BCRA helps answer the
following questions:
1.1 This practice establishes a procedure for measuring cost
5.1.1 What are the probabilities for the construction contract
risk for buildings and building systems, using the Monte Carlo
to be bid above or below the estimated value?
simulation technique as described in Guide E 1369.
5.1.2 How low or high can the total project cost be?
1.2 A computer program is required for the Monte Carlo
5.1.3 What is the appropriate amount of contingency to use?
simulation. This can be one of the commercially available
5.1.4 What cost elements have the greatest impact on the
software programs for cost risk analysis, or one constructed by
building’s cost risk exposure?
the user.
5.2 BCRA can be applied to a building project’s contract
2. Referenced Documents
cost, construction cost (contract cost plus construction change
orders), and project cost (construction cost plus owner’s cost),
2.1 ASTM Standards:
2
depending on the users’ perspectives and needs. This practice
E 833 Terminology of Building Economics
shall refer to these different terms generally as “building cost.”
E 1369 Guide for Selecting Techniques for Treating Uncer-
tainty and Risk in the Economic Evaluation of Buildings
6. Procedure
2
and Building Systems
6.1 Identify Critical Cost Elements:
E 1557 Classification for Building Elements and Related
2 6.1.1 A building cost estimate consists of many variables.
Sitework - UNIFORMAT II
Even though each variable contributes to the total building cost
3. Terminology risk, not every variable makes a significant enough contribu-
tion to warrant inclusion in the cost model. Identify the critical
3.1 Definitions—For definition of terms used in this guide,
elements in order to simplify the cost risk model.
refer to Terminology E 833.
6.1.2 A critical element is one which varies up or down
4. Summary of Practice
enough to cause the total building cost to vary by an amount
greater than the total building cost’s critical variation, and one
4.1 The procedure for calculating building cost risk consists
which is not composed of any other element which qualifies as
of the following steps:
a critical element. This criterion is expressed as:
4.1.1 Identify critical cost elements.
4.1.2 Eliminate interdependencies between critical ele-
IF V . V (1)
Y CRIT
ments.
AND Y contains no other element X where V . V
X CRIT
4.1.3 Select Probability Density Function.
THEN Y is a critical element
4.1.4 Quantify risk in critical elements.
where:
4.1.5 Create a cost model.
4.1.6 Conduct a Monte Carlo simulation.
V 5 (2)
Y
4.1.7 Interpret the results.
~Max. percentage variation of the element Y! * ~Y’s anticipated cost!
4.1.8 Conduct a sensitivity analysis.
Total Building cost
5. Significance and Use
5.1 Building cost risk analysis (BCRA) provides a tool for
V 5 Critical Variation of the Building Cost.
CRIT
building owners, architects, engineers, and contractors to
6.1.3 A typical value for the total building cost’s critical
measure and evaluate the cost risk exposures of their building
4
variation is 0.5% . By experience this limits the number of
critical elements to about 20. A larger V will lead to fewer
CRIT
1 3
This practice is under the jurisdiction of ASTM Committee E-6 on Performance This practice is based, in part, on the article, “Measuring Cost Risk of Building
of Buildings and is the direct responsibility of Subcommittee E06.81 on Building Projects,” by Douglas N. Mitten and Benson Kwong, Project Management Services,
Economics. Inc., Rockville, MD, 1996.
4
Current edition approved April 10, 1998. Published June 1998. Curran, Michael W., “Range Estimating—Measuring Uncertainty and
2
Annual Book of ASTM Standards, Vol 04.11. Reasoning With Risk,” Cost Engineering, Vol 31, No. 3, March 1989.
1

---------------------- Page: 1 ----------------------
NOTICE:¬This¬standard¬has¬either¬been¬superseded¬and¬replaced¬by¬a¬new¬version¬or
discontinued.¬Contact¬ASTM¬International¬(www.astm.org)¬for¬the¬latest¬information.¬
E 1946
critical elements and a smaller V will yield more. A risk represents the anticipated increase in the project cost for
CRIT
analysis with too few elements is over-sim
...

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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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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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