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ASTM E1074-93(1998)e1

(Practice)

Standard Practice for Measuring Net Benefits for Investments in Buildings and Building Systems

Standard Practice for Measuring Net Benefits for Investments in Buildings and Building Systems

SCOPE
1.1 This practice provides a recommended procedure for calculating and interpreting the NB method in the evaluation of building designs and systems.

General Information

Status
Historical
Publication Date
31-Dec-1997
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 E1074-04 - Standard Practice for Measuring Net Benefits and Net Savings for Investments in Buildings and Building Systems
Effective Date
01-Apr-2004
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-Jan-1998
Referred By
ASTM E2103/E2103M-19 - Standard Classification for Bridge Elements—UNIFORMAT II
Effective Date
01-Jan-1998
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-Jan-1998
Referred By
ASTM E917-17(2023) - Standard Practice for Measuring Life-Cycle Costs of Buildings and Building Systems
Effective Date
01-Jan-1998
Referred By
ASTM E2204-15(2020)e1 - Standard Guide for Summarizing the Economic Impacts of Building-Related Projects
Effective Date
01-Jan-1998
Referred By
ASTM E1121-15(2020)e1 - Standard Practice for Measuring Payback for Investments in Buildings and Building Systems
Effective Date
01-Jan-1998
Referred By
ASTM E3130-21 - Standard Guide for Developing Cost-Effective Community Resilience Strategies
Effective Date
01-Jan-1998
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-Jan-1998
Referred By
ASTM E1185-15(2020)e1 - Standard Guide for Selecting Economic Methods for Evaluating Investments in Buildings and Building Systems
Effective Date
01-Jan-1998
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-Jan-1998
Referred By
ASTM E1765-16(2023) - Standard Practice for Applying Analytical Hierarchy Process (AHP) to Multiattribute Decision Analysis of Investments Related to Projects, Products, and Processes
Effective Date
01-Jan-1998
Referred By
ASTM E1557-09(2020)e1 - Standard Classification for Building Elements and Related Sitework—UNIFORMAT II
Effective Date
01-Jan-1998
Referred By
ASTM E3008/E3008M-16(2023) - Standard Classification for Transportation Surface Elements—UNIFORMAT II
Effective Date
01-Jan-1998

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ASTM E1074-93(1998)e1 - Standard Practice for Measuring Net Benefits for Investments in Buildings and Building SystemsASTM E1074-93(1998)e1 - Standard Practice for Measuring Net Benefits for Investments in Buildings and Building Systems
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ASTM E1074-93(1998)e1 - Standard Practice for Measuring Net Benefits for Investments in Buildings and Building Systems
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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
An American National Standard
e1
Designation: E 1074 – 93 (Reapproved 1998)
Standard Practice for
Measuring Net Benefits for Investments in Buildings and
Building Systems
This standard is issued under the fixed designation E 1074; 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.
e NOTE—Footnote 5 of this standard was editorially corrected in September 1998.
INTRODUCTION
The net benefits (NB) method is part of a family of economic evaluation methods that provide
measures of economic performance of an investment over some period of time. Included in this family
of evaluation methods are life-cycle cost analysis, benefit-to-cost and savings-to-investment ratios,
internal rates of return, and payback analysis.
The NB method, sometimes called the net present value method, calculates the difference between
discounted benefits (or savings) and discounted costs as a measure of the cost effectiveness of a
project. The NB method is used to decide if a project is cost effective (net benefits greater than zero)
or which size or design competing for a given purpose is most cost effective (the one with the greatest
net benefits).
1. Scope Computer Program and User’s Guide to Building Mainte-
nance, Repair, and Replacement Database for Life-Cycle
1.1 This practice provides a recommended procedure for
Cost Analysis,
calculating and interpreting the NB method in the evaluation of
Adjunct to Practices E 917, E 964, E 1057, E 1074, and
building designs and systems.
E 1121
2. Referenced Documents
3. Terminology
2.1 ASTM Standards:
3.1 Definitions—For definitions of terms used in this
E 833 Terminology of Building Economics
practice, refer to Terminology E 833.
E 917 Practice for Measuring Life-Cycle Costs of Buildings
and Building Systems
4. Summary of Practice
E 964 Practice for Measuring Benefit-to-Cost and Savings-
2 4.1 This practice is organized as follows:
to-Investment Ratios for Buildings and Building Systems
4.1.1 Section 2, Referenced Documents—Lists ASTM stan-
E 1057 Practice for Measuring Internal Rate of Return and
dards referenced in this practice.
Adjusted Internal Rate of Return for Investments in Build-
4.1.2 Section 3, Definitions—Addresses definitions of terms
ings and Building Systems
used in this practice.
E 1121 Practice for Measuring Payback for Investments in
4.1.3 Section 4, Summary of Practice—Outlines the con-
Buildings and Building Systems
tents of the practice.
E 1185 Guide for Selecting Economic Methods for Evalu-
2 4.1.4 Section 5, Significance and Use—Explains the appli-
ating Investments in Buildings and Building Systems
cation of the practice and how and when it should be used.
2.2 ASTM Adjuncts:
4.1.5 Section 6, Procedures—Summarizes the steps in mak-
Discount Factor Tables,
3 ing NB analysis.
Adjunct to Practice E 917
4.1.6 Section 7, Compute NB—Describes calculation proce-
dures for NB.
4.1.7 Section 8, Applications—Explains circumstances un-
This practice is under the jurisdiction of ASTM Committee E-6 on Performance
der which the NB method is appropriate.
of Buildings and is the direct responsibility of Subcommittee E06.81 on Building
Economics.
Current edition approved Jan. 15, 1993. Published March 1993. Originally
published as E 1074 – 85. Last previous edition E 1074 – 91.
2 4
Annual Book of ASTM Standards, Vol 04.11. Available from ASTM Headquarters. Order PCN 12-509171-10 for the 3.5 in.
Available from ASTM Headquarters. Order PCN 12-509179-10. disk. Order PCN 12-509172-10 for the 5.25 in. disk.
Copyright © ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959, United States.
e1
E 1074 – 93 (1998)
TABLE 1 Calculation of Net Benefits
A B
Net Cash Flow SPV Factor
Year, t Benefits, B , dollars Costs, C , dollars PVNB, dollars
t t
B − C , dollars fori=15%
t t
0 0 10 000 −10 000 1.000 −10 000
1 4 000 3 000 +1 000 0.8696 +870
2 11 500 4 500 +7 000 0.7561 +5 293
3 10 000 4 000 +6 000 0.6575 +3 945
4 8 000 5 000 +3 000 0.5718 +1 715
Total 33 500 26 500 +7 000 +1 823
A
To find the PVNB of the net cash flow for each discounting period, the single present value (SPV) discount factor is multiplied times the net cash flow. For an explanation
of discounting factors and how to use them, see Discount Factor Tables, adjunct to Practice E 917.
4.1.8 Section 9, Report—Identifies information that should 7. NB Computation
be included in a report of a NB analysis.
7.1 Computation of net benefits for any given project
requires the estimation, in dollar terms, of differences between
5. Significance and Use
benefits, and differences between costs, for that project relative
5.1 The NB method provides a measure of the economic to a mutually exclusive alternative. The mutually exclusive
performance of an investment, taking into account all relevant
alternative may be a similar design/system of a different scale,
monetary values associated with that investment over the a dissimilar design/system for the same purpose, or the do
investor’s study period. The NB measure can be expressed in
nothing case. Benefits can include (but are not limited to)
either present value or equivalent annual value terms, taking revenue, productivity, functionality, durability, resale value,
into account the time value of money.
and tax advantages. Costs can include (but are not limited to)
5.2 The NB method is used to decide if a given project is initial investment, operation and maintenance (including en-
cost effective and which size or design for a given purpose is ergy consumption), repair and replacements, and tax liabilities.
most cost effective when no budget constraint exists. 7.2 Eq 1 is used to compute the present value of net benefits
5.3 The net benefits method can also be used to determine
(PVNB) for the proposed project relative to its mutually
the most cost effective combination of projects for a limited
exclusive alternative.
budget; that is, the combination of projects having the greatest
N
t
aggregate net benefits and fitting within the budget constraint.
PVNB 5 ~B 2 C !/~1 1 i! (1)
(
t t
t50
6. Procedures
where:
B = dollar value of benefits in period t for the building or
t
6.1 The recommended steps for applying the NB method to
system being evaluated less the counterpart benefits
an investment decision are summarized as follows:
in period t for the mutually exclusive alternative
6.1.1 Make sure that the NB method is the appropriate
against which it is being compared,
economic measure (see Guide E 1185),
C = dollar costs, including investment costs, in period t
t
6.1.2 Identify objectives, alternatives, and constraints,
for the building or system being evaluated, less the
6.1.3 Establish assumptions,
counterpart costs in period t for the mutually exclu-
6.1.4 Compile data (see the adjunct entitled “Computer
sive alternative against which it is being compared,
Program and User’s Guide to Building Maintenance, Repair,
N = number of discounting time periods in the study
and Replacement Database for Life-Cycle Cost Analysis”),
period, and
6.1.5 Convert cash flows to a common time basis (discount-
i = the discount rate per time period.
ing),
5 7.3 Eq 2 can be used to convert the present value of net
6.1.6 Compute NB and compare alternatives, and
benefits to annual value terms, where N is the number of years
6.1.7 Make final decision, based on NB results as well as
in the study period.
consideration of risk and uncertainty, unquantifiable effects,
N N
and funding constraints (if any). AVNB 5 PVNB · [~i~1 1 i! !/~~1 1 i! 2 1! (2)
6.2 Since the steps mentioned in 6.1.1-6.1.4 and in 6.1.7 are
where AVNB = annual value of net benefits.
treated in detail in Practice E 917 and briefly in Practices E 964
7.4 For a given problem and data set, solutions in either
and E 1121, they are not discussed in this practice. In calcu-
present value or annual value terms will be time equivalent
lating NB, these four steps should be followed exa
...

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5.1 The NB (NS) method provides a measure of the economic performance of an investment, taking into account all relevant monetary values associated with that investment over the investor’s study period. The NB (NS) measure can be expressed in either present value or equivalent annual value terms, taking into account the time value of money.  
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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.  
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SIGNIFICANCE AND USE
4.1 Program and project estimates are a necessary part of planning and implementing any program of work.  
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4.4 They are also of use in risk management, and also provide a consistent list of major activity phases for use in program and project time schedules.
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1.1 This classification establishes a classification of cost summaries for use when estimating program and project costs.  
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1.3 This classification is not based on permanent physical elements of construction (as defined and classified in Classification E1557 for example); rather, the classification items are cost components common to most program and project estimates.  
1.4 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.  
1.5 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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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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