ASTM E1946-18(2023)

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.
Designation: E1946 − 18 (Reapproved 2023)
Standard Practice for
Measuring Cost Risk of Buildings and Building Systems
and Other Constructed Projects
This standard is issued under the fixed designation E1946; 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. Scope E2103/E2103M Classification for Bridge Elements—
UNIFORMAT II
1.1 This practice covers a procedure for measuring cost risk
E2168 Classification for Allowance, Contingency, and Re-
for buildings and building systems and other constructed
serve Sums in Building Construction Estimating
projects, using the Monte Carlo simulation technique as
E2514 Practice for Presentation Format of Elemental Cost
described in Guide E1369.
Estimates, Summaries, and Analyses
1.2 A computer program is required for the Monte Carlo
simulation. This can be one of the commercially available
3. Terminology
software programs for cost risk analysis, or one constructed by
3.1 Definitions—For definitions of general terms related to
the user.
building construction used in this guide, refer to Terminology
1.3 This standard does not purport to address all of the
E631; and for general terms related to building economics,
safety concerns, if any, associated with its use. It is the
refer to Terminology E833.
responsibility of the user of this standard to establish appro-
priate safety, health, and environmental practices and deter-
4. Summary of Practice
mine the applicability of regulatory limitations prior to use.
4.1 The procedure for calculating building cost risk consists
1.4 This international standard was developed in accor-
of the following steps:
dance with internationally recognized principles on standard-
4.1.1 Identify critical cost elements.
ization established in the Decision on Principles for the
4.1.2 Eliminate interdependencies between critical ele-
Development of International Standards, Guides and Recom-
ments.
mendations issued by the World Trade Organization Technical
4.1.3 Select Probability Density Function.
Barriers to Trade (TBT) Committee.
4.1.4 Quantify risk in critical elements.
4.1.5 Create a cost model.
2. Referenced Documents
4.1.6 Conduct a Monte Carlo simulation.
2.1 ASTM Standards:
4.1.7 Interpret the results.
E631 Terminology of Building Constructions
4.1.8 Conduct a sensitivity analysis.
E833 Terminology of Building Economics
E1369 Guide for Selecting Techniques for Treating Uncer-
5. Significance and Use
tainty and Risk in the Economic Evaluation of Buildings
5.1 Measuring cost risk enables owners of buildings and
and Building Systems
other constructed projects, architects, engineers, and contrac-
E1557 Classification for Building Elements and Related
tors to measure and evaluate the cost risk exposures of their
Sitework—UNIFORMAT II
construction projects. Specifically, cost risk analysis (CRA)
E2083 Classification for Building Construction Field
helps answer the following questions:
Requirements, and Office Overhead & Profit
5.1.1 What are the probabilities for the construction contract
to be bid above or below the estimated value?
5.1.2 How low or high can the total project cost be?
This practice is under the jurisdiction of ASTM Committee E06 on Perfor-
5.1.3 What is the appropriate amount of contingency to use?
mance of Buildings and is the direct responsibility of Subcommittee E06.81 on
Building Economics.
5.1.4 What cost elements have the greatest impact on the
Current edition approved May 1, 2023. Published May 2023. Originally
project’s cost risk exposure?
approved in 1998. Last previous edition approved in 2018 as E1946 – 18. DOI:
10.1520/E1946-18R23.
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 This practice is based, in part, on the article, “Measuring Cost Risk of Building
Standards volume information, refer to the standard’s Document Summary page on Projects,” by D. N. Mitten and B. Kwong, Project Management Services, Inc.,
the ASTM website. Rockville, MD, 1996.
Copyright © ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959. United States
E1946 − 18 (2023)
5.2 CRA can be applied to a project’s contract cost, con- downward search through the branches of the hierarchy.
struction cost (contract cost plus construction change orders), Conduct this search by repeatedly asking the question: Is it
and project cost (construction cost plus owner’s cost), depend- possible that this element could vary enough to cause the total
ing on the users’ perspectives and needs. This practice shall building cost to vary, up or down, by more than its critical
refer to these different terms generally as “project cost.”
variation? Terminate the search at the branch when a negative
answer is encountered. Examine the next branch until all
6. Procedure
branches are exhausted and the list of critical elements estab-
lished (denoted by asterisks in the last column of Table 1).
6.1 Identify Critical Cost Elements:
Table 1 and Fig. 1 show the identification of critical elements
6.1.1 A project cost estimate consists of many variables.
Even though each variable contributes to the total project cost in the sample project using the hierarchical search technique.
risk, not every variable makes a significant enough contribu-
6.1.6 In the sample project, Group Element B10 Superstruc-
tion to warrant inclusion in the cost model. Identify the critical
ture has an estimated cost of $915 000 with an estimated
elements in order to simplify the cost risk model.
maximum variation of $275 000, which is more than $50 000,
6.1.2 A critical element is one which varies up or down
or 0.5 % of the estimated total building cost. It is therefore a
enough to cause the total project cost to vary by an amount
candidate for a critical element. However, when we examine
greater than the total project cost’s critical variation, and one
the Individual Elements that make up Superstructure, we
which is not composed of any other element which qualifies as
discover that Floor Construction has a estimated maximum
a critical element. This criterion is expressed as:
variation of $244 500, qualifying as a critical element; whereas
Roof Construction could only vary as much as $40 000, and
IF V .V (1)
Y CRIT
does not qualify. Since Floor Construction is now a critical
AND Y contains no other element X where V .V
X CRIT element, we would eliminate Superstructure, its parent, as a
critical element.
THEN Y is a critical element
6.1.7 Include overhead cost elements in the cost model,
where:
such as general conditions, profits, and escalation (see Classi-
fication E2083), and check for criticality as with the other cost
V 5 (2)
Y
elements. Consider time risk factors, such as long lead time or
Max. percentage variation of the element Y * Y’s anticipated cost
~ ! ~ ! dock strikes for imported material, when evaluating escalation
Total Project Cost
cost.
6.1.8 Allowance and contingency, as commonly used in the
construction cost estimates, include both the change element
V = Critical Variation of the Project Cost.
CRIT
and the risk element. The change element in allowance covers
6.1.3 A typical value for the total project cost’s critical
the additional cost due to incomplete design (design allow-
variation is 0.5 %. By experience this limits the number of
ance). The change element in contingency covers the addi-
critical elements to about 20. A larger V will lead to fewer
CRIT
tional cost due to construction change orders (construction
critical elements and a smaller V will yield more. A risk
CRIT contingency). The risk element in contingency covers the
analysis with too few elements is over-simplistic. Too many
additional cost required to reduce the risk that the actual cost
elements make the analysis more detailed and difficult to
would be higher than the estimated cost. However, the risk
interpret. A CRA with about 20 critical elements provides an
element in allowance and contingency is rarely identified
appropriate level of detail. Review the critical variation used
separately and usually included in either design allowance or
and the number of critical elements for a CRA against the
construction contingency. When conducting CRA, do not
unique requirements for each project and the design stage. A
include the risk element in allowance or contingency cost since
higher critical variance resulting in fewer critical elements is
that will be an output of the risk analysis. Include design
more appropriate at the earlier stages of design.
allowance only to the extent that the design documents are
6.1.4 Arrange the cost estimate in a hierarchical structure
incomplete. Include construction contingency, which repre-
such as UNIFORMAT II (Classification E1557 for Buildings or
sents the anticipated increase in the project cost for change
Classification E2103/E2103M for Bridges; Practice E2514
orders beyond the signed contract value, if total construction
provides a presentation format for elemental costs). Table 1
cost, instead of contract cost, is used. See Classification E2168
shows a sample project cost model based on a UNIFORMAT
for information on which costs are properly included under
II Levels 2 and 3 cost breakdown for a building. The
allowance and contingency.
UNIFORMAT II structure of the cost estimate facilitates the
6.1.9 The sample project represents a CRA conducted from
search of critical elements for the risk analysis. One does not
the owner’s perspective to estimate the construction contract
need to examine every element in the cost estimate in order to
value at final design. General conditions, profits, and escalation
identify those which are critical.
are identified as critical elements. Since the design documents
6.1.5 Starting at the top of the cost estimate hierarchy (that
are 100 % complete, there is no design allowance. The contin-
is, the Group Element level), identify critical elements in a
gency in the cost element represents the risk element and is
therefore eliminated from the cost model. There is no construc-
tion contingency in the model since this model estimates
Curran, M. W., “Range Estimating—Measuring Uncertainty and Reasoning
With Risk,” Cost Engineering, Vol 31, No. 3, March 1989. construction contract cost only. If total project cost is desired,
E1946 − 18 (2023)
TABLE 1 Sample UNIFORMAT II Cost Model
GROUP INDIVIDUAL EST MAX/
ITEM GROUP ELEMENT INDIVIDUAL ELEMENT ELEMENT ELEMENT VARIATION
COST COST
A10 FOUNDATIONS $150 000 $45 000
A1010 Standard Foundations $100 000
A1030 Slab on Grade $50 000
A20 BASEMENT CONSTRUCTION $70 000 $30 000
A2010 Basement Excavation $20 000
A2020 Basement Walls $50 000
B10 SUPERSTRUCTURE $915 000 $275 000
B1010 Floor Construction $815 000 $244 500 *
B1020 Roof Construction $100 000 40 000
B20 EXTERIOR ENCLOSURE $800 000 $250 000
B2010 Exterior Walls $576 000 $172 800 *
B2020 Exterior Windows $204 000 $102 000 *
B2030 Exterior Doors $20 000 $8 000
B30 ROOFING $54 000 $20 000
B3010 Roof Coverings $54 000
C10 INTERIOR CONSTRUCTION $240 000 $72 000 *
C1010 Partitions $132 000 $45 000
C1020 Interior Doors $108 000 $30 000
C20 STAIRS $95 000 $40 000
C2010 Stair Construction $75 000
C2020 Stair Finishes $20 000
C30 INTERIOR FINISHES $916 000 $300 000
C3010 Wall Finshes $148 000 $45 000
C3020 Floor Finishes $445 000 $178 000 *
C3030 Ceiling Finishes $323 000 $129 200 *
D10 CONVEYING $380 000
D1010 Elevators & Lifts $380 000 $228 000 *
D20 PLUMBING $142 000 $45 000
D2010 Plumbing Fxtures $70 000
D2020 Domestic Water Distribution $30 000
D2030 Sanitary Waste $22 000
D2040 Rain Water Drainage $20 000
D30 HVAC $1 057 000 $550 000
D3010 Energy Supply $20 000 $8 000
D3020 Heat Generating Systems $80 000 $30 000
D3030 Cooling Generating Systems $275 000 $137 500 *
D3040 Distribution Systems $500 000 $300 000 *
D3050 Terminal & Package Units $60 000 $30 000
D3060 Controls and Instrumentation $217 000 $130 200 *
D3070 System Testing & Balancing $20 000 $10 000
D40 FIRE PROTECTION $270 000 $100 000
D4010 Sprinklers $220 000 $88 000 *
D4020 Standpipes $50 000 $15 000
D50 ELECTRICAL $985 000 $500 000
D5010 Electrical Service & Distribution $180 000 $108 000 *
D5020 Lighting & Branch Wiring $685 000 $411 000 *
D5030 Communication & Security $120 000 $45 000
G10 SITE PREPARATION $120 000 $45 000
G1030 Site Earthwork $120 000
G20 SITE IMPROVEMENT $800 000 $450 000
G2030 Pedestrian Paving $420 000 $252 000 *
G2050 Landscaping $380 000 $228 000 *
G30 SITE MECHANICAL UTILITIES $420 000 $126 000 *
G3010 Water Supply $120 000 $40 000
G3020 Sanitary Sewer $120 000 $42 000
G3030 Storm Sewer $140 000 $46 000
G3060 Fuel Distribution $40 000 $20 000
G40 SITE ELECTRICAL UTILITIES $200 000 $100 000 *
G4010 Electrical Distribution $100 000 $45 000
G4020 Site Lighting $25 000 $15 000
G4030 Site Communications & Security $75 000 $42 000
SUBTOTAL $7 729 000
GENERAL CONDITIONS $823 000 $411 500 *
SUBTOTAL $8 552 000
PROFIT (10 %) $855 200 $427 600 *
SUBTOTAL $9 407 200
ESCALATION (5 %) $470 360 $188 144 *
SUBTOTAL $9 877 560
CONTINGENCY (5 %) $493 878
$10 371 438
TOTAL CONSTRUCTION CONTRACT COST
* Meets criteria for critical elements
E1946 − 18 (2023)
FIG. 1 Identification of Critical Elements in the Sample Project
E1946 − 18 (2023)
add other project cost items to the cost model, such as below the low estimate and above the high estimate, and the
construction contingency, design fees, and project management highest probability at the most likely estimate. Straight lines
fees. connect these three points in a probability density function,
forming a triangle, thus giving the name triangular distribution.
6.2 Eliminate Interdependencies Between Critical Ele-
6.3.2 Because the triangular distribution function is only an
ments:
approximation, the low and high estimates do not represent the
6.2.1 The CRA tool works best when there are no strong
absolute lowest and highest probable value. As compared to the
interdependencies between the critical elements identified.
more realistic “normal distribution,” these values represent
Highly interdependent variables used separately will exagger-
th
about the first and 99 percentiles, respectively. In other words,
ate the risk in the total co
...