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ASTM E964-06e1

(Practice)

Standard Practice for Measuring Benefit-to-Cost and Savings-to-Investment Ratios for Buildings and Building Systems

Standard Practice for Measuring Benefit-to-Cost and Savings-to-Investment Ratios for Buildings and Building Systems

SCOPE
1.1 This practice covers a procedure for calculating and interpreting benefit-to-cost ratios (BCR) and savings-to-investment ratios (SIR) as an aid for making building-related decisions.
1.2 A basic premise of the BCR and SIR methods is that future as well as present benefits and costs arising from a decision are important to that decision, and, if measurable in dollars, should be included in calculating the BCR and SIR.
1.3 Dollar amounts used to calculate BCR and SIR are all discounted, that is, expressed in time-equivalent dollars, either in present value or uniform annual value terms.

General Information

Status
Historical
Publication Date
31-Mar-2006
ICS
91.010.20 - Contractual aspects
Technical Committee
E06 - Performance of Buildings
Drafting Committee
E06.81 - Building Economics
Current Stage
Ref Project

Relations

Replaces
ASTM E964-06 - Standard Practice for Measuring Benefit-to-Cost and Savings-to-Investment Ratios for Buildings and Building Systems
Effective Date
01-Apr-2006
Replaced By
ASTM E964-06(2010) - Standard Practice for Measuring Benefit-to-Cost and Savings-to-Investment Ratios for Buildings and Building Systems
Effective Date
01-Oct-2010
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-2006
Referred By
ASTM E1121-15(2020)e1 - Standard Practice for Measuring Payback for Investments in Buildings and Building Systems
Effective Date
01-Apr-2006
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-Apr-2006
Referred By
ASTM E1185-15(2020)e1 - Standard Guide for Selecting Economic Methods for Evaluating Investments in Buildings and Building Systems
Effective Date
01-Apr-2006
Referred By
ASTM E3008/E3008M-16(2023) - Standard Classification for Transportation Surface Elements—UNIFORMAT II
Effective Date
01-Apr-2006
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-2006
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-2006
Referred By
ASTM E3130-21 - Standard Guide for Developing Cost-Effective Community Resilience Strategies
Effective Date
01-Apr-2006
Referred By
ASTM E917-17(2023) - Standard Practice for Measuring Life-Cycle Costs of Buildings and Building Systems
Effective Date
01-Apr-2006
Referred By
ASTM E1557-09(2020)e1 - Standard Classification for Building Elements and Related Sitework—UNIFORMAT II
Effective Date
01-Apr-2006
Referred By
ASTM E2204-15(2020)e1 - Standard Guide for Summarizing the Economic Impacts of Building-Related Projects
Effective Date
01-Apr-2006
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-2006
Referred By
ASTM E2103/E2103M-19 - Standard Classification for Bridge Elements—UNIFORMAT II
Effective Date
01-Apr-2006

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ASTM E964-06e1 - Standard Practice for Measuring Benefit-to-Cost and Savings-to-Investment Ratios for Buildings and Building SystemsASTM E964-06e1 - Standard Practice for Measuring Benefit-to-Cost and Savings-to-Investment Ratios for Buildings and Building Systems
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ASTM E964-06e1 - Standard Practice for Measuring Benefit-to-Cost and Savings-to-Investment Ratios for 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
´1
Designation: E964 – 06
Standard Practice for
Measuring Benefit-to-Cost and Savings-to-Investment Ratios
1
for Buildings and Building Systems
This standard is issued under the fixed designation E964; 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
´ NOTE—Footnotes updated editorially in August 2007.
INTRODUCTION
This is one in a series of practices for applying economic evaluation methods to building-related
decisions. Methods covered by this practice are benefit-to-cost ratio (BCR) and savings-to-investment
ratio (SIR). These are members of a family of economic evaluation methods that can be used to
measure the economic consequences of a decision over a specified period of time. The BCR is used
when the focus is on benefits (that is, advantages measured in dollars) relative to project costs. The
SIR, a variation of the BCR, is used when the focus is on project savings (that is, cost reductions)
relative to project costs.The family of methods includes, in addition to BCR and SIR, net benefits, net
savings, life-cycle cost, internal rate-of-return, adjusted internal rate-of-return, and payback (see
Practices E917, E1057, E1074, and E1121). Guide E1185 directs you to the appropriate method for
a particular economic problem.
BCR and SIR are numerical ratios that indicate the economic performance of a project by the size
oftheratio.Aratiolessthan1.0indicatesaprojectthatisuneconomic,aratioof1.0indicatesaproject
whose benefits or savings just equal its costs, and a ratio greater than 1.0 indicates a project that is
economic. While it is straightforward to use ratios to determine whether a given project is economic
or uneconomic, care must be taken to correctly interpret ratios when using them to choose among
alternative designs and sizes of a project, or to assign priority to projects competing for limited funds.
1. Scope 2. Referenced Documents
2
1.1 This practice covers a procedure for calculating and 2.1 ASTM Standards:
interpreting benefit-to-cost ratios (BCR) and savings-to- E631 Terminology of Building Constructions
investment ratios (SIR) as an aid for making building-related E833 Terminology of Building Economics
decisions. E917 Practice for Measuring Life-Cycle Costs of Buildings
1.2 A basic premise of the BCR and SIR methods is that and Building Systems
future as well as present benefits and costs arising from a E1057 Practice for Measuring Internal Rate of Return and
decision are important to that decision, and, if measurable in Adjusted Internal Rate of Return for Investments in Build-
dollars, should be included in calculating the BCR and SIR. ings and Building Systems
1.3 Dollar amounts used to calculate BCR and SIR are all E1074 PracticeforMeasuringNetBenefitsandNetSavings
discounted, that is, expressed in time-equivalent dollars, either for Investments in Buildings and Building Systems
in present value or uniform annual value terms. E1121 Practice for Measuring Payback for Investments in
Buildings and Building Systems
1
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
2
Building Economics. For referenced ASTM standards, visit the ASTM website, www.astm.org, or
Current edition approved April 1, 2006. Published April 2006. Originally contact ASTM Customer Service at service@astm.org. For Annual Book of ASTM
approved in 1983. Last previous edition approved in 2002 as E964 – 02. DOI: Standards volume information, refer to the standard’s Document Summary page on
10.1520/E0964-06E01. the ASTM website.
Copyright © ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959, United States.
1

---------------------- Page: 1 ----------------------
´1
E964 – 06
E1185 Guide for Selecting Economic Methods for Evaluat- 5.5 The BCR or SIR can be used as an aid to select the
ing Investments in Buildings and Building Systems economically efficient set of projects among many competing
E1369 Guide for Selecting Techniques for Treating Uncer- for limited funding. The efficient set of projects will maximize
tainty and Risk in the Economic Evaluation of Buildings aggregate net benefits or net savings obtainable for the budget.
and Building Systems
6. Procedure
E1765 Practice for Applying Analytical Hierarchy Process
6.1 The recommended steps for carrying out an economic
(AHP) to Multiattribute Decision Analysis of Investments
evaluation using the BCR or SIR method are summarized as
Related to Buildings and Building Systems
follows:
E1946 Practice for Measuring Cost Risk of Buildings a
...

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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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4.3 These users include owners, developers, facilities programmers, cost planners, estimators, schedules, architects and engineers, specification writers, operating and maintenance staff, manufacturers, educators, financial managers, and comptrollers.  
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4.4.3 Such sums may be general or specific in scope, may be planned to be spent or may only be included as possible mitigation for unplanned events and requirements.  
4.4.4 To distinguish between these sums, and in recognition of their differing purpose, they are described, and classified here, using the terms allowance, contingency, or reserve.
Note 1: Section 5 includes a generic statement of purpose for each of the three terms and provides a sub-classification that distinguishes between sums included for specific purposes and for non-specific, that is, general purposes. In cost budgeting, conceptual and design estimating especially, an estimator may intuitively recognize...
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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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5.4.1 Risk exposure is the probability of investing in a project that will have a less favorable economic outcome than what is desired (the target) or is expected.  
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4.1 Standard practices for measuring the economic performance of investments in buildings and building systems have been published by ASTM. A computer program that produces economic measures consistent with these practices is available.4 Discount Factor Tables has been published by ASTM to facilitate computing measures of performance for most of the practices.  
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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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4.1 Program and project estimates are a necessary part of planning and implementing any program of work.  
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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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Standard Practice for Measuring Benefit-to-Cost and Savings-to-Investment Ratios for Buildings and Building Systems

SIGNIFICANCE AND USE
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.  
5.2 The ratio indicates discounted dollar benefits (or savings) per dollar of discounted costs.  
5.3 The BCR or SIR can be used to determine if a given building or building system is economic relative to the alternative of not having it.  
5.4 The BCR or SIR computed on increments of benefits (or savings) and costs can be used to determine if one design or size of a building or system is more economic than another.  
5.5 The BCR or SIR can be used as an aid to select the economically efficient set of projects among many competing for limited funding. The efficient set of projects will maximize aggregate net benefits or net savings obtainable for the budget.
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1.1 This practice covers a procedure for calculating and interpreting benefit-to-cost ratios (BCR) and savings-to-investment ratios (SIR) as an aid for making building-related decisions.  
1.2 A basic premise of the BCR and SIR methods is that future as well as present benefits and costs arising from a decision are important to that decision, and, if measurable in dollars, should be included in calculating the BCR and SIR.  
1.3 Dollar amounts used to calculate BCR and SIR are all discounted, that is, expressed in time-equivalent dollars, either in present value or uniform annual value terms.  
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 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.  
1.6 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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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.  
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