Standard Guide for Selecting Techniques for Treating Uncertainty and Risk in the Economic Evaluation of Buildings and Building Systems
|Publication Date:||1 November 2011|
This guide covers techniques for treating uncertainty in input values to an economic analysis of a building investment project. It also recommends techniques for evaluating the risk that a project will have a less favorable economic outcome than what is desired or expected.2
The techniques include breakeven analysis, sensitivity analysis, risk-adjusted discounting, the mean-variance criterion and coefficient of variation, decision analysis, simulation, and stochastic dominance.
The techniques can be used with economic methods that measure economic performance, such as life-cycle cost analysis, net benefits, the benefit-to-cost ratio, internal rate of return, and payback.
2 For an extensive overview of techniques for treating risk and uncertainty, see Marshall, H.E., Techniques for Treating Uncertainty and Risk in the Economic Evaluation of Building Investments, National Institute of Standards and Technology, Special Publication 757, 1988.