cost effectiveness

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DESIGN OBJECTIVES Acce ssib le Ae st he t ics C o st - Ef f e ct ive Ut iliz e C o st Manag e me nt T hro ug ho ut t he Planning , D e sig n, and D e ve lo p me nt Pro ce ss Use Eco no mic Analysis t o Evaluat e D e sig n Alt e rnat ive s C o nsid e r N o n- Mo ne t ary B e ne f it s such as Ae st he t ics, Hist o ric Pre se rvat io n, Se curit y, and Saf e t y Funct io nal / O p e rat io nal Hist o ric Pre se rvat io n Pro d uct ive Se cure / Saf e Sust ainab le B UILD IN G T YPES SPAC E T YPES D ESIG N D ISC IPLIN ES PR O D UC T S & SYST EMS

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Cost–Ef f ective

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by the WBDG Cost- Effective Committee Last updated: 01-24-2011

OVERVIEW

LO G IN

Aesthetic Challenges Aesthetic Opportunities Within This Page Overview

"We no lo nger build buildings like we used to , no r do we pay fo r them in the same way. Buildings to day are...life suppo rt systems, Major Resources co mmunicatio n terminals, data manufacturing centers, and much mo re. They are incredibly expensive to o ls that must be co nstantly adjusted to functio n efficiently. The eco no mics o f building has beco me as co mplex as its design."

(Wilso n, in fo rewo rd to Ruegg & Marshall, 19 9 0 ) Every o wner wants a co st-effective building. But what do es this mean? In many respects the interpretatio n is influenced by an individual's interests and o bjectives.

Balancing Security/Safety and Sustainability Objectives Building Integrated Photovoltaics (BIPV) Construction Phase Cost Management VIEW ALL RELAT ED (15) VIEW RESO URCE PAG E INDEX

Is it the lo west first-co st structure that meets the pro gram?

Is it the design with the lo west o perating and maintenance co sts?

Is it the building with the lo ngest life span ?

Is it the facility in which users are mo st pro ductive?

Is it the building that o ffers the greatest return o n investment?

While an eco no mically efficient pro ject is likely to have o ne o r mo re o f these attributes, it is impo ssible to summarize co st-effectiveness by a single parameter. Determining true co st-effectiveness requires a life-cycle perspective where all co sts and benefits o f a given pro ject are evaluated and co mpared o ver its eco no mic life.

In eco no mic terms, a building design is deemed to be co st-effective if it results in benefits equal to tho se o f alternative designs and has lo wer life-cycle co sts. Fo r example, the HVAC system alternative that satisfies the heating and co o ling requirements o f a building at the minimum lifecycle co st, is the co st-effective HVAC system o f cho ice.

The federal go vernment has numero us mandates that define pro gram go als with the expectatio n PDFmyURL.com

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that they be achieved co st-effectively.

The challenge is o ften ho w to determine the true co sts and the true benefits o f alternative decisio ns. Fo r example, what is the eco no mic value in electric lighting savings and pro ductivity increases o f pro viding daylight to wo rkplace enviro nments? Or, what is the value o f saving histo ric structures? Alternately, what is the co st o f a building integrated pho to vo ltaic system (BIPV), given that it may replace a co nventio nal ro o f?

The fo llo wing three o verarching principles asso ciated with ensuring co st-effective co nstructio n reflect the need to accurately define co sts, benefits, and basic eco no mic assumptio ns.

Ut ilize Co st and Value Engine e ring T hro ugho ut t he Planning, De sign, and De ve lo pm e nt Pro ce ss As mo st pro jects are autho rized/funded witho ut a means o f increasing budgets, it is essential that the pro ject requirements are set by co nsidering life-cycle co sts. This will ensure that the budget suppo rts any first-co st premium that a life-cycle co st-effective alternative may incur. Once a budget has been established, it is essential to co ntinually test the viability o f its assumptio ns by emplo ying co st management thro ugho ut the design and develo pment pro cess. An aspect o f co st management is a co st co ntro l practice called Value Engineering (VE). VE is a systematic evaluatio n pro cedure directed at analyzing the functio n o f materials, systems, pro cesses, and building equipment fo r the purpo se o f achieving required functio ns at the lo west to tal co st o f o wnership.

Use Eco no m ic Analysis t o Evaluat e De sign Alt e rnat ive s In additio n to first co sts, facility investment decisio ns typically include pro jected co st impacts o f, energy/utility use, o peratio n and maintenance and future system replacements. At the beginning o f each pro ject, establish what eco no mic to o ls and mo dels will be used to evaluate these building investment parameters. The metho do lo gies o f life-cycle co st analysis (LCCA) will typically o ffer co mpariso ns o f to tal life-cycle co sts based upo n net present values. Other metho ds usually used as supplementary measures o f co steffectiveness to the LCCA include Net Savings, Savings-to -Investment Ratio s, Internal Rate o f Return, and Payback.

Co nside r No n-Mo ne t ary Be ne f it s such as Ae st he t ics, Hist o ric Pre se rvat io n, Se curit y, and Saf e t y Mo st eco no mic mo dels require analysts to place a do llar value o n all aspects o f a design to generate final results. Nevertheless it is difficult to accurately value certain no n-mo netary building attributes, such as fo rmality (fo r example, o f a federal co urtho use) o r energy security. The o bjective o f a LCCA is to determine co sts and benefits o f design alternatives to facilitate info rmed decisio n-making. Co sts can be mo re readily quantified than benefits because they no rmally have do llar amo unts attached. Benefits are difficult because they o ften tend to have mo re intangibles. In so me cases, these no n-mo netary issues are used as tiebreakers to quantitative analyses. In o ther instances, no n-mo netary issues can o verride quantitatively available co st co mpariso ns, fo r example, renewable energy applicatio n. These co st-effectiveness principles serve as driving o bjectives fo r co st management practices in PDFmyURL.com

the planning, design, co nstructio n, and o peratio n o f facilities that balance co st, sco pe, and quality. Analyzing the enviro nmental co sts thro ugh Life Cycle Assessment (LCA) can be co mplementary to the do llar co st implicatio ns o f the design, materials selectio n, and o peratio n o f buildings. The LCA metho do lo gy, which can enhance info rmatio n gleaned fro m an LCC, includes definitio n o f go al and sco pe, an invento ry assessment, life-cycle impact assessment, and interpretatio n-an iterative pro cess.

Note: Information in these Cost-Effective pages must be considered together with other design objectives and within a total project context in order to achieve quality, high performance buildings.

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MAJOR RESOURCES Mandat es Co de o f Federal Regulatio ns, 10 CFR 436 .a Executive Order 13423, "Strengthening Federal Enviro nmental, Energy, and Transpo rtatio n Management" Natio nal Energy Co nservatio n Po licy Act OMB Circular A-9 4—Guidelines fo r Benefit-Co st Analysis o f Federal Pro grams

WBDG Design Objectives Aesthetics, Pro ductive, Secure / Safe , Sustainable Project Management Pro ject Planning, Management, and Delivery

Publicat ions A Guide to Integrating Value Engineering, Life-Cycle Costing and Sustainable Development Federal Facilities Co uncil, 20 0 1.

Air Force Military Construction and Family Housing Economic Analysis Guide 1996.

Building Economics for Architects by Tho rbjo ern Mann. New Yo rk: Van No strand Reinho ld, 19 9 2. ISBN 0 -442-0 0 38 9 -7.

Building Economics: Theory and Practice by Ro salie Ruegg and Haro ld Marshall. New Yo rk: Van No strand Reinho ld, 19 9 0 . ISBN 0 -442-26 417-8 .

Facilities Standard for the Public Buildings Service, P100 (GSA)—Chapter 1.7 Life-Cycle Co sting GSA LEED® Cost Study Life-Cycle Costing Manual for the Federal Energy Management Program (PDF 9 .73MB, 224 p g s ) NIST HB 135 19 9 5 Editio n.

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NAVFAC Economic Analysis Handbook 19 9 3.

Project Estimating Requirements, P120 (GSA) Standards on Building Economics, 6th ed. ASTM, 20 0 7. ASTM Sto ck #: BLDGECON0 7 , ISBN13: 9 78 -0 -8 0 31-56 9 5-1.

Ot hers U.S. Department o f Energy (DOE) Office o f Federal Energy Management Pro grams (FEMP) BACK TO TO P

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