ASTM E1946-02

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Designation: E 1946 – 02
Standard Practice for
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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.
1. Scope 5. Significance and Use
1.1 This practice establishes a procedure for measuring cost 5.1 Building cost risk analysis (BCRA) provides a tool for
risk for buildings and building systems, using the Monte Carlo building owners, architects, engineers, and contractors to
simulation technique as described in Guide E 1369. measure and evaluate the cost risk exposures of their building
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1.2 A computer program is required for the Monte Carlo construction projects. Specifically, BCRA helps answer the
simulation. This can be one of the commercially available following questions:
software programs for cost risk analysis, or one constructed by 5.1.1 Whataretheprobabilitiesfortheconstructioncontract
the user. to be bid above or below the estimated value?
5.1.2 How low or high can the total project cost be?
2. Referenced Documents
5.1.3 Whatistheappropriateamountofcontingencytouse?
2.1 ASTM Standards:
5.1.4 What cost elements have the greatest impact on the
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E 833 Terminology of Building Economics building’s cost risk exposure?
E 1369 Guide for Selecting Techniques for Treating Uncer-
5.2 BCRA can be applied to a building project’s contract
tainty and Risk in the Economic Evaluation of Buildings cost, construction cost (contract cost plus construction change
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and Building Systems
orders), and project cost (construction cost plus owner’s cost),
E 1557 Classification for Building Elements and Related depending on the users’ perspectives and needs. This practice
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Sitework - UNIFORMAT II
shall refer to these different terms generally as “building cost.”
E 2168 Classification for Allowance, Contingency and Re-
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6. Procedure
serve Sums in Building Construction Estimating
6.1 Identify Critical Cost Elements:
3. Terminology
6.1.1 A building cost estimate consists of many variables.
3.1 Definitions—For definition of terms used in this guide, Even though each variable contributes to the total building cost
refer to Terminology E 833.
risk, not every variable makes a significant enough contribu-
tion to warrant inclusion in the cost model. Identify the critical
4. Summary of Practice
elements in order to simplify the cost risk model.
4.1 The procedure for calculating building cost risk consists
6.1.2 A critical element is one which varies up or down
of the following steps:
enough to cause the total building cost to vary by an amount
4.1.1 Identify critical cost elements.
greater than the total building cost’s critical variation, and one
4.1.2 Eliminate interdependencies between critical ele-
which is not composed of any other element which qualifies as
ments.
a critical element. This criterion is expressed as:
4.1.3 Select Probability Density Function.
IF V . V (1)
Y CRIT
4.1.4 Quantify risk in critical elements.
AND Y contains no other element X where V . V
X CRIT
4.1.5 Create a cost model.
THEN Y is a critical element
4.1.6 Conduct a Monte Carlo simulation.
4.1.7 Interpret the results.
where:
4.1.8 Conduct a sensitivity analysis.
V 5 (2)
Y
~Max. percentage variation of the element Y! * ~Y’s anticipated cost!
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Total Building cost
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
Building Economics.
Current edition approved Oct. 10, 2002. Published November 2002. Originally
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published as E 1946–98. Last previous edition E 1946–98. This practice is based, in part, on the article, “Measuring Cost Risk of Building
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Annual Book of ASTM Standards, Vol 04.11. Projects,” by Douglas N. Mitten and Benson Kwong, Project Management Services,
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Annual Book of ASTM Standards, Vol 04.12. Inc., Rockville, MD, 1996.
Copyright © ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959, United States.
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E1946–02
The change element in contingency covers the additional cost
due to construction change orders (construction contingency).
V = Critical Variation of the Building Cost.
CRIT The risk element in contingency covers the additional cost
6.1.3 A typical value for the total building cost’s critical
required to reduce the risk that the actual cost would be higher
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variation is 0.5% . By experience this limits the number of
than the estimated cost. However, the risk element in allow-
critical elements to about 20.Alarger V will lead to few
...