ASTM E833-00

NOTICE: This standard has either been superseded and replaced by a new version or discontinued.
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Designation: E 833 – 00 An American National Standard
Standard Terminology of
Building Economics
This standard is issued under the fixed designation E 833; 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 the design, financing, engineering, construction, manage-
ment, operation, ownership, or disposition of buildings.
1.1 This terminology relates to the economic evaluation of
building system—an aggregation or assemblage of items
building construction as used in other standards under the
joined in regular interaction or interdependence in buildings
jurisdiction of ASTM Committee E-6 on Performance of
or building construction.
Building Constructions, and does not necessarily correspond to
capital cost—the costs of acquiring, substantially improving,
the terminology used in other areas of accounting and econom-
expanding, changing the functional use of, or replacing a
ics.
building or building system.
DEFINITIONS cash flow—the stream of monetary (dollar) values—costs and
benefits—resulting from a project investment.
adjusted internal rate-of-return (AIRR)—the compound
certainty equivalent technique—a technique used to adjust
rate of interest that, when used to discount the terminal
economic measures of project worth to reflect risk exposure
values of costs and benefits of a project over a given study
and risk attitude.
period, will make the costs equal the benefits when cash
DISCUSSION—Estimated project returns are multiplied by a certainty
flows are reinvested at a specified rate. (Syn. financial
equivalent factor (CEF) to determine the certainty equivalent amount a
management rate of return (FMRR))
decision maker finds equally acceptable to the estimated project
annual value—a uniform annual amount equivalent to the
returns.
project costs or benefits taking into account the time value of
money throughout the study period (Syn. annual worth, constant dollars—dollars of uniform purchasing power exclu-
equivalent uniform annual value).
sive of general inflation or deflation.
annual worth—See annual value.
DISCUSSION—Constant dollars are tied to a reference year.
annually recurring costs—those costs that are incurred in a
construction contingency—the funds added to estimated and
regular pattern each year throughout the study period.
base date—See base time. known costs in case of cost overruns during construction.
construction documents—materials that convey the physical,
base time—the date to which all future and past benefits and
costs are converted when a present value method is used aesthetic, technical, performance, and administrative re-
quirements necessary to initiate a contract for construction of
(usually the beginning of the study period) (Syn. base date).
benefit-cost analysis—a method of evaluating projects or the proposed project.
cost analysis—subdividing the project estimate into compo-
investments by comparing the present value or annual value
of expected benefits to the present value or annual value of nent parts to find and compare their relationship to previ-
expected costs. ously established historical costs.
cost effective—the condition whereby the present value ben-
benefit-to-cost ratio (BCR)—benefits divided by costs, where
both are discounted to a present value or equivalent uniform efits (savings) of an investment exceeds its present value
costs.
annual value (Syn. benefit-cost ratio).
breakeven analysis—a technique for determining that value of cost limitations—the budget boundaries for project elements.
cost model—the description of the project divided into discrete
a variable which results in benefits (savings) just equal to
costs. elements showing quantities and unit price for each element.
cost overruns—in project design or construction, or both, the
building decision—a decision regarding the design, financing,
engineering, construction, management, or operation of a unanticipated increase in cost due to factors such as unan-
ticipated site conditions, changes in the cost of building
building.
building economics—the application of economic analysis to materials, labor, weather, and labor disputes.
cost professional—in project design or construction, or both, a
person engaged in the occupation of understanding, manag-
This terminology is under the jurisdiction of ASTM Committee E-6 on
ing or estimating project costs, or a combination thereof.
Performance of Buildings and is the direct responsibility of Subcommittee E06.81
on Building Economics.
current dollars—dollars of purchasing power in which actual
Current edition approved Oct. 10, 2000. Published October 2000. Originally
prices are stated, including inflation or deflation.
published as E 833 – 81. Last previous edition E 833 – 98a.
Copyright © ASTM, 100 Barr Harbor Drive, West Conshohocken, PA 19428-2959, United States.
E 833
DISCUSSION—In the absence of inflation or deflation, current dollars
tion, construction, purchase, installation, property taxes and
equal constant dollars.
interest during the construction period, and construction
related fees (Syn. initial investment cost, initial cost).
decision analysis—a technique for making economic deci-
function—a purpose of the entire project or some portion
sions in an uncertain environment that allows a decision
thereof determined by the needs or desires of the user/owner
maker to include alternative outcomes, risk attitudes, or
and expressed in two words, an active verb and a measurable
subjective impressions about uncertain events in an evalua-
noun.
tion of investments.
function analysis—an examination of the project consisting of
design contingency—in project design/construction, the
(1) the determination of the project functions; (2) the
amount of funds added to the estimated construction costs to
examination and sorting of these functions into categories;
cover unanticipated construction costs due to the incom-
(3) the selection of the critical functions and arrangement
pleteness of the design, where the contingency is inversely
into a logical order; and (4) the determination of the project
proportional to the level of completeness of the design
cost allocated to performing each critical function.
documentation.
function, basic—a function that is necessary to achieve the
design development—the phase of a project consisting of
primary purpose of a building system or element.
drawings and document preparation to fix and describe the
future value—the value of a benefit or a cost at some point in
size and character of the building systems, material, and
the future, considering the time value of money (Syn. future
elements.
worth).
design program—the information detailing project function,
future worth—See future value.
purpose, and characteristics inclusive of floor area, func-
incremental cost (benefit)—the additional cost (benefit) re-
tional spaces, equipment, and building systems.
sulting from an increase in the investment in a building
differential price escalation rate—the expected percent dif-
project (Syn. marginal cost (benefit)).
ference between the rate of increase assumed for a given
inflation—a rise in the general price level, usually expressed
item of cost (such as energy), and the general rate of
as a percentage rate.
inflation.
initial cost—See first cost.
discounting—a technique for converting cash flows that occur
initial investment cost—See first cost.
over time to equivalent amounts at a common time.
internal rate of return (IRR)—the compound rate of interest
discount rate—the rate of interest reflecting the investor’s
that, when used to discount study period costs and benefits of
time value of money, used to determine discount factors for
a project, will make the two equal.
converting benefits and costs occurring at different times to
investment cost—first cost and later expenditures which have
a base time.
substantial and enduring value (generally more than one
DISCUSSION—The discount rate may be expressed as nominal or real.
year) for upgrading, expanding, or changing the functional
use of a building or building subsystem.
discount factor—a multiplicative number (calculated from a
life cycle—See study period.
discount formula for a given discount rate and interest
life-cycle cost (LCC) method—a technique of economic
period) that is used to convert costs and benefits occurring at
evaluation that sums over a given study period the costs of
different times to a common time.
initial investment (less resale value), replacements, opera-
discounted payback (DPB) period—the time required for the
tions (including energy use), and maintenance and repair of
cumulative benefits from an investment to pay back the
an investment decision (expressed in present or annual value
investment cost and other accrued costs considering the time
terms).
value of money.
maintenance and repair cost—the total of labor, material, and
economic evaluation methods—a set of economic analysis
other related costs incurred in conducting corrective and
techniques that consider all relevant costs associated with a
preventative maintenance and repair on a building, or on its
project investment during its study period, comprising such
systems and components, or on both.
techniques as life-cycle cost, benefit-to-cost ratio, savings-
marginal cost (benefit)—See incremental cost (benefit).
to-investment ratio, internal rate of re
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