1、Designation: E964 06 (Reapproved 2010)Standard Practice forMeasuring Benefit-to-Cost and Savings-to-Investment Ratiosfor Buildings and Building Systems1This standard is issued under the fixed designation E964; the number immediately following the designation indicates the year oforiginal adoption or
2、, in the case of revision, the year of last revision. A number in parentheses indicates the year of last reapproval. Asuperscript epsilon () indicates an editorial change since the last revision or reapproval.INTRODUCTIONThis is one in a series of practices for applying economic evaluation methods t
3、o building-relateddecisions. Methods covered by this practice are benefit-to-cost ratio (BCR) and savings-to-investmentratio (SIR). These are members of a family of economic evaluation methods that can be used tomeasure the economic consequences of a decision over a specified period of time. The BCR
4、 is usedwhen the focus is on benefits (that is, advantages measured in dollars) relative to project costs. TheSIR, 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
5、 benefits, netsavings, life-cycle cost, internal rate-of-return, adjusted internal rate-of-return, and payback (seePractices E917, E1057, E1074, and E1121). Guide E1185 directs you to the appropriate method fora particular economic problem.BCR and SIR are numerical ratios that indicate the economic
6、performance of a project by the sizeof the ratio.Aratio less than 1.0 indicates a project that is uneconomic, a ratio of 1.0 indicates a projectwhose benefits or savings just equal its costs, and a ratio greater than 1.0 indicates a project that iseconomic. While it is straightforward to use ratios
7、to determine whether a given project is economicor uneconomic, care must be taken to correctly interpret ratios when using them to choose amongalternative designs and sizes of a project, or to assign priority to projects competing for limited funds.1. Scope1.1 This practice covers a procedure for ca
8、lculating andinterpreting benefit-to-cost ratios (BCR) and savings-to-investment ratios (SIR) as an aid for making building-relateddecisions.1.2 A basic premise of the BCR and SIR methods is thatfuture as well as present benefits and costs arising from adecision are important to that decision, and,
9、if measurable indollars, should be included in calculating the BCR and SIR.1.3 Dollar amounts used to calculate BCR and SIR are alldiscounted, that is, expressed in time-equivalent dollars, eitherin present value or uniform annual value terms.2. Referenced Documents2.1 ASTM Standards:2E631 Terminolo
10、gy of Building ConstructionsE833 Terminology of Building EconomicsE917 Practice for Measuring Life-Cycle Costs of Buildingsand Building SystemsE1057 Practice for Measuring Internal Rate of Return andAdjusted Internal Rate of Return for Investments in Build-ings and Building SystemsE1074 Practice for
11、 Measuring Net Benefits and Net Savingsfor Investments in Buildings and Building SystemsE1121 Practice for Measuring Payback for Investments inBuildings and Building SystemsE1185 Guide for Selecting Economic Methods for Evaluat-ing Investments in Buildings and Building SystemsE1369 Guide for Selecti
12、ng Techniques for Treating Uncer-tainty and Risk in the Economic Evaluation of Buildings1This practice is under the jurisdiction of ASTM Committee E06 on Perfor-mance of Buildings and is the direct responsibility of Subcommittee E06.81 onBuilding Economics.Current edition approved Oct. 1, 2010. Publ
13、ished November 2010. Originallyapproved in 1983. Last previous edition approved in 2006 as E964 061. DOI:10.1520/E0964-06R10.2For referenced ASTM standards, visit the ASTM website, www.astm.org, orcontact ASTM Customer Service at serviceastm.org. For Annual Book of ASTMStandards volume information,
14、refer to the standards Document Summary page onthe ASTM website.1Copyright ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959, United States.and Building SystemsE1765 Practice for Applying Analytical Hierarchy Process(AHP) to Multiattribute Decision Analysis of
15、InvestmentsRelated to Buildings and Building SystemsE1946 Practice for Measuring Cost Risk of Buildings andBuilding SystemsE2204 Guide for Summarizing the Economic Impacts ofBuilding-Related Projects2.2 ASTM Adjuncts:Discount Factor Tables, Adjunct to Practices E917, E964,E1057, E1074, and E112133.
16、Terminology3.1 DefinitionsFor definitions of terms used in thispractice, refer to Terminologies E631 and E833.4. Summary of Practice4.1 This practice identifies related ASTM standards andadjuncts. It outlines the recommended steps for carrying out ananalysis using the BCR or SIR method, explains eac
17、h step, andgives examples. This practice discusses the importance ofspecifying objectives, alternatives, and constraints at the outsetof an evaluation. It identifies data and assumptions needed forcalculating BCRs and SIRs, and shows how to calculate theratios. This practice emphasizes the importanc
18、e of correctlyinterpreting the meaning of the ratios in different applications,and of taking into account uncertainty, unquantified effects, andfunding constraints. It identifies requirements for documenta-tion and recommends appropriate contents for a BCR or SIRreport. This practice also explains a
19、nd illustrates the applica-tion of the BCR and SIR methods to decide whether to acceptor reject a project, how much to invest in a project, and how toallocate limited investment funds among competing uses.5. Significance and Use5.1 The BCR and SIR provide measures of economicperformance in a single
20、number that indicates whether aproposed building or building system is preferred over amutually exclusive alternative that serves as the base forcomputing the ratio. It may be contrasted with the life-cyclecost (LCC) method that requires two LCC measures to evaluatethe economic performance of a buil
21、ding or building systemone for each alternative.5.2 The ratio indicates discounted dollar benefits (or sav-ings) per dollar of discounted costs.5.3 The BCR or SIR can be used to determine if a givenbuilding or building system is economic relative to the alter-native of not having it.5.4 The BCR or S
22、IR computed on increments of benefits (orsavings) and costs can be used to determine if one design orsize of a building or system is more economic than another.5.5 The BCR or SIR can be used as an aid to select theeconomically efficient set of projects among many competingfor limited funding. The ef
23、ficient set of projects will maximizeaggregate net benefits or net savings obtainable for the budget.6. Procedure6.1 The recommended steps for carrying out an economicevaluation using the BCR or SIR method are summarized asfollows:6.1.1 Identify objectives, constraints, and alternatives (seeSection
24、7),6.1.2 Compile data and establish assumptions for the evalu-ation (see Section 8),6.1.3 Compute BCR or SIR (see Section 9),6.1.4 Analyze the BCR or SIR results and make a decision,taking into account uncertainty, unquantified effects, and fund-ing or cash-flow constraints (see Section 10), and6.1.
25、5 Document the evaluation and prepare a report ifneeded (see Section 11).7. Objectives, Constraints, and Alternatives7.1 First, the decisionmakers objectives should be clearlyspecified. This is crucial to defining the problem and determin-ing the suitability of the BCR or SIR method. Second,constrai
26、nts that limit potential alternatives for accomplishingthe objectives should be identified. Third, alternatives that aretechnically and otherwise feasible in light of the constraintsshould be identified.7.2 The example in this section illustrates the objective,constraints, and alternatives for a bui
27、lding investment thatcould be evaluated using the BCR method. The decisionmak-ers objective is to maximize net benefits (profits) frominvestment in new stores in a national chain. The problem is tochoose locations for the stores. There are two constraints: (1)the chain already has a sufficient numbe
28、r of stores in thenortheast, and (2) there is only enough investment capital toopen five stores. Twelve alternative locations (excluding loca-tions in the northeast) are identified as potentially profitable.The BCR can help the decisionmaker identify which five of thetwelve potential locations will
29、maximize aggregate net benefits(profits) from the available budget. The approach is to computea BCR for each location and rank the locations in descendingorder of their BCRs. If the budget cannot be fully allocated byselecting locations in descending order of their BCRs, thecomputation of aggregate
30、net benefits is recommended toconfirm that aggregate net benefits are maximized by theselected locations.7.3 The example in this section describes the objective,constraints, and alternatives for a building investment thatcould be evaluated using the SIR method. The building is a jail.The objective i
31、s to reduce the cost of maintaining a target levelof security (as might be measured by number of escapees peryear). Constraints are that techniques to increase security mustbe unobtrusive to the surrounding neighborhood and must havelow maintenance. The superintendent of prisons is evaluatingwith th
32、e SIR method a new perimeter detection device thatcosts 1 million dollars to install, and reduces labor costs forguards by 30 %. If the SIR is greater than 1.0, the device isdeemed cost effective.8. Data and Assumptions8.1 Guidelines for compiling data and making assumptionsare treated in detail in
33、Practice E917, and therefore they arediscussed only briefly here.3Available from ASTM International Headquarters. Order Adjunct No.ADJE091703.E964 06 (2010)28.2 To calculate BCR or SIR, estimates typically are neededfor revenue or other benefits; acquisition costs, including costsof planning, design
34、, engineering, construction, purchase, in-stallation, land, and site preparation; utility costs, includingcosts of energy, water, and sewage; nonenergy operating andmaintenance costs; repair and replacement costs; resale orretention values; disposal costs; insurance costs; and, if appli-cable, funct
35、ional use costs.8.3 Information is also needed regarding the study period,discount rate, tax rates and applicable tax rules, and, if anintegral part of the investment package, the terms of financing.(These topics are treated in Section 8 of Practice E917.)8.4 The outcome of an analysis will vary, de
36、pending on thedata estimates and assumptions. Thus, it is important to selectcarefully the assumed values for critical parameters to arrive ata realistic solution.8.5 If the outcome appears particularly sensitive to the valueassigned to a given parameter, and the estimate is of poor orunknown qualit
37、y, the analyst may wish to improve the qualityof the data. (Sensitivity analysis, a useful technique foridentifying critical parameters, is treated in Section 10.3 ofPractice E917.)8.6 According to personal preference or organizationalpolicy, the analyst normally adopts a simplified model ofcash-flo
38、w timing to describe the occurrence of costs andbenefits within each year; elects whether to express discountedamounts in present-value dollars or in annual-value dollars;and decides whether to work in constant dollars using a realdiscount rate or in current dollars using a nominal discountrate. (Th
39、ese topics are treated in Section 8 of Practice E917.)8.7 The level of effort that goes into the evaluation mayrange from an inexpensive, back-of-the-envelope calculationintended to provide a ball-park estimate, to an expensive,detailed, thoroughly documented analysis intended to with-stand scrutiny
40、 and to provide as much accuracy as possible.Different levels of effort are appropriate for different circum-stances. (Factors influencing the level of effort are discussed inthe paragraph on comprehensiveness in Section 8 of PracticeE917.)9. Calculation of BCR and SIR49.1 In concept, the BCR and SI
41、R are simple: benefits (orsavings) divided by costs, where all dollar amounts arediscounted to present or annual values.9.2 In practice, it is important to formulate the ratio so as tosatisfy the investors objective. This requires attention to theplacement of costs in the numerator and denominator.
42、Tomaximize net benefits from a designated expenditure, it isnecessary to place in the denominator only that portion of costson which the investor wishes to maximize returns. For ex-ample, to maximize the return on investor equity, place onlythat part of the investment budget representing investorseq
43、uity funds in the denominator of the ratio; deduct other costsfrom benefits or savings in the numerator. On the other hand,to maximize the return on the total of equity and borrowedinvestment funds, place their sum in the denominator of theratio.9.3 Formulation is important because changing the plac
44、e-ment of cost and benefit items can induce changes in the ratio.Changing the placement of a cost item from the denominator(where it increases costs) to the numerator (where it decreasesbenefits or savings) will not cause a project that appearseconomic by one formulation of the ratio to appear uneco
45、-nomic by a different formulation. But changes in the numericalvalue of the ratio can affect relative rankings of competing,independent projects, and thereby influence investment deci-sions.9.4 Biasing effects, detrimental to economic efficiency, canresult from certain formulations of the BCR and SI
46、R ratios. Forexample, when allocating an investment budget among com-peting projects that differ significantly in their maintenancecosts, placing maintenance costs in the denominator withinvestment costs tends to bias selection away from projectswith relatively high maintenance costs, even when they
47、 offerhigher net benefits (profits) than competing projects. Similarbiasing effects can occur in the placement of other noninvest-ment costs such as energy or labor costs. This outcome reflectsthe fact that adding a given amount to the denominator of aratio reduces the quotient more than does subtra
48、cting anidentical amount from the numerator. Placing all noninvest-ment costs in the numerator will eliminate this bias when theobjective is to maximize the return on the investment budget.9.5 Eq 1 and 2 provide formulations of the BCR and SIRthat avoid biasing effects, and allow the analyst flexibi
49、lity inchoosing the part of the investment budget on which tomaximize the return. Eq 1 is used when benefits predominate,and Eq 2 when a projects primary advantage is lower costs.BCR 5(t50NBt2 Ct!/1 1 i!t(t50NIt/1 1 i!t(1)where:BCR = benefit-to-cost ratio,Bt= benefits in period t; that is, advantages in revenue orperformance, measured in dollars, of the building orsystem as compared with a mutually exclusivealternative (See Note 1),Ct= costs in period t, excluding investment costs that areto be placed in the denominator for the building orsystem, less counterpart costs in
