ASTM E1369-07

NOTICE: This standard has either been superseded and replaced by a new version or withdrawn.
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Designation: E 1369 – 07
Standard Guide for
Selecting Techniques for Treating Uncertainty and Risk in
the Economic Evaluation of Buildings and Building
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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. Scope E1185 Guide for Selecting Economic Methods for Evalu-
ating Investments in Buildings and Building Systems
1.1 This guide covers techniques for treating uncertainty in
2.2 ASTM Adjuncts:
input values to an economic analysis of a building investment
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Discount Factor Tables, Adjunct to Practice E917
project. It also recommends techniques for evaluating the risk
thataprojectwillhavealessfavorableeconomicoutcomethan
3. Terminology
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what is desired or expected.
3.1 Definitions—For definitions of terms used in this guide,
1.2 The techniques include breakeven analysis, sensitivity
refer to Terminologies E631 and E833.
analysis,risk-adjusteddiscounting,themean-variancecriterion
and coefficient of variation, decision analysis, and simulation.
4. Summary of Guide
1.3 Thetechniquescanbeusedwitheconomicmethodsthat
4.1 This guide identifies related ASTM standards and ad-
measure economic performance, such as life-cycle cost analy-
juncts. It describes circumstances when measuring uncertainty
sis,netbenefits,thebenefit-to-costratio,internalrateofreturn,
and risk may be helpful in economic evaluations of building
and payback.
investments.This guide defines uncertainty, risk exposure, and
2. Referenced Documents risk attitude. It presents nonprobabilistic and probabilistic
3 techniques for measuring uncertainty and risk exposure. This
2.1 ASTM Standards:
guide describes briefly each technique, gives the formula for
E631 Terminology of Building Constructions
calculating a measure where appropriate, illustrates the tech-
E833 Terminology of Building Economics
niques with a case example, and summarizes its advantages
E917 PracticeforMeasuringLife-CycleCostsofBuildings
and disadvantages.
and Building Systems
4.2 Since there is no best technique for measuring uncer-
E964 Practice for Measuring Benefit-to-Cost and Savings-
tainty and risk in every economic evaluation, this guide
to-Investment Ratios for Buildings and Building Systems
concludes with a discussion of how to select the appropriate
E1057 Practice for Measuring Internal Rate of Return and
technique for a particular problem.
Adjusted Internal Rate of Return for Investments in Build-
4.3 This guide describes in detail how risk exposure can be
ings and Building Systems
measured by probability functions and distribution functions
E1074 Practice for Measuring Net Benefits and Net Sav-
(see Annex A1). It also describes how risk attitude can be
ings for Investments in Buildings and Building Systems
incorporated using utility theory and other approaches (see
E1121 Practice for Measuring Payback for Investments in
Annex A2).
Buildings and Building Systems
5. Significance and Use
5.1 Investments in long-lived projects such as buildings are
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This guide is under the jurisdiction ofASTM Committee E06 on Performance characterized by uncertainties regarding project life, operation
of Buildings and is the direct responsibility of Subcommittee E06.81 on Building
and maintenance costs, revenues, and other factors that affect
Economics.
projecteconomics.Sincefuturevaluesofthesevariablefactors
Current edition approved April 1, 2007. Published April 2007. Originally
are generally not known, it is difficult to make reliable
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
economic evaluations.
Marshall, Harold E.—Techniques for Treating Uncertainty and Risk in the Eco-
5.2 The traditional approach to project investment analysis
nomic Evaluation of Building Investments, National Institute of Standards and
has been to apply economic methods of project evaluation to
Technology, Special Publication 757, 1988.
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For referenced ASTM standards, visit the ASTM website, www.astm.org, or
contact ASTM Customer Service at service@astm.org. 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.
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E1369–07
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best-guess estimates of project input variables as if they were 6.1.6 Compute measures of worth and associated
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