02 buildings economics

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LECTURE ONE

WHY!!!During the energy crisis and ina5onary cycles of the 1970s and 1980s,

Building industry was faced with increasing ini5al construc5on costs andongoing opera5onal and maintenance expenses.

As a result, facility planners and designers began to use economic

analysis to evaluate alterna5ve construc6on materials , assemblies , andbuilding services with a goal to lower costs.

Today, building owners wishing to reduce expenses or increase protsu5lize economic analysis to improve their decision making during thecourse of planning, designing, and construc5ng a building.

Moreover, the global building industry demands the use of buildingeconomic analysis to determine the most economically efficient or cost-effec5ve choice among building alterna5ves.

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Course Goals

Study of factors affec5ng cost of buildingincluding:

1.

The building market,2. Construc5on cost,3. Es5mates and cost control,4. Time value of money

. Building life-cycle cost,6. Measuring the worth of investments,7. Deprecia5on and tax considera5on of cash-ows.

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LECTURE ONE

Figure 1 : Physical and Economic Components of an Engineering System

PhysicalEnvironment

EconomicsEnvironment

Engineers produce products andservices depending on physical laws

Assessing The worth of theseProducts/ Services In economic Terms

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Physical vs. Economics

Physical (efficiency ) = --------------system output(s)system input(s)

Economics (efficiency ) = --------------system output(s)system input(s)

Economics (efficiency ) = ------------system worthsystem cost

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Physical vs. EconomicsTHE PHYSICAL ENGINEERING PROCESS Determina6on of means (engineering proposals)

This step involves discovering what means exist to alter strategic factors in order toovercome limi5ng factors. In the previous example, one means was to buy (or rent) apump. Of course, if the woman had a garden hose, she might have been able to siphonthe water out of the pump. In other engineering applica5ons, it may be necessary tofabricate the means to solve problems from scratch.

Evalua6on of Engineering ProposalsIt is usually possible to accomplish the same result with a variety of means. Once

these means have been described fully, in the form of project proposals, economicanalysis can be employed to determine which among them, if any, is the best means forsolving the problem at hand.

Assistance in Decision MakingIt is commonplace for the nal decision-making responsibility to fall on the head(s)

of someone other than the engineer(s). The person(s) so charged, however, may not besufficiently knowledgeable about the technical aspects of a proposal to determine itsrelevant worth compared to other means. The engineer can help to bridge this gap.

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Physical vs. EconomicsENGINEERING ECONOMIC STUDIES

The four key steps in planning an economic study are :

Crea6ve Step : People with vision and ini5a5ve adopt the premise that be er

opportuni5es exist than are known to them. This leads to research, explora5on,and inves5ga5on of poten5al opportuni5es.

Deni6on Step : System alterna5ves are synthesized with economic requirementsand physical requirements, and enumerated with respect to inputs/outputs.

Conversion Step : The a ributes of system alterna5ves are converted to a commonmeasure so that systems can be compared.Future cash ows are assigned to each alterna5ve, consis5ng of the 5me-value

of money.

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LECTURE ONE

Physical vs. EconomicsENGINEERING ECONOMIC STUDIES

The four key steps in planning an economic study are :

Decision Step : Qualita5ve and quan5ta5ve inputs and outputs to/from each

system form the basis for system comparison and decision making. Decisions among system alterna5ves should be made on the basis of their

differences.

Examples :Infrastructure expenditure decision

Replace versus repair decisions

Selec6on of inspec6on method

Selec6on of a replacement for an equipment

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LECTURE ONE

Value Engineering

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Case Study

Alameda County Santa Rita Jail

A total saving in year of opera5on worth410000$

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LECTURE ONE

Course Assessments

Course Grade 100% Finals Course Work

Readings 30% Research 40% A endance 1 % Par5cipa5on 1 %

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Building Economics

Research 1Case Study on a Building type that Engineering

Economics played a great role in determining

the design decision making

.

Size: 4 A4 size pages ( So / Hard Copies)Deadline: Monday 24th of November, 12.00 am

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Reading 1

County of Alameda Santa Rita Jail Case Study, Smart Energy Strategies- Integra5ngSolar Electric Genera5on and Energy Efficiency, April 2002, PowerLightCorpora5on, and CMS Viron Energy Services

PDF format caseStudy.pdf

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Course OnlineCase Sensi6ve

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02 buildings economics

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