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Significance and Use
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
The ratio indicates discounted dollar benefits (or savings) per dollar of discounted costs.
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.
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.
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.
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.
2. Referenced Documents (purchase separately) The documents listed below are referenced within the subject standard but are not provided as part of the standard.
E631 Terminology of Building Constructions
E833 Terminology of Building Economics
E917 Practice for Measuring Life-Cycle Costs of Buildings and Building Systems
E1057 Practice for Measuring Internal Rate of Return and Adjusted Internal Rate of Return for Investments in Buildings and Building Systems
E1074 Practice for Measuring Net Benefits and Net Savings for Investments in Buildings and Building Systems
E1121 Practice for Measuring Payback for Investments in Buildings and Building Systems
E1185 Guide for Selecting Economic Methods for Evaluating Investments in Buildings and Building Systems
E1369 Guide for Selecting Techniques for Treating Uncertainty and Risk in the Economic Evaluation of Buildings and Building Systems
E1765 Practice for Applying Analytical Hierarchy Process (AHP) to Multiattribute Decision Analysis of Investments Related to Buildings and Building Systems
E1946 Practice for Measuring Cost Risk of Buildings and Building Systems and Other Constructed Projects
E2204 Guide for Summarizing the Economic Impacts of Building-Related Projects
ICS Number Code 91.010.20 (Contractual aspects)