APPENDIX A
GLOSSARY

The following definitions are specific to life-cycle cost analysis and building economics, as discussed by the committee. Readers may wish to refer to the several texts and articles cited throughout this report for additional information or detailed discussion of these terms.


BENEFITS.

The shelter, services, and other mission support a building or other facility provides to its owners and users throughout the facility's lifetime; generally assumed to be positive and may be valued in monetary or other terms.

BUILDING PORTFOLIO.

A collection of buildings or other constructed facilities managed by a single agency or other owner.


COSTS.

Expenditures of funds required at a particular time to obtain the benefits of a facility, valued in monetary terms; not the same as disbenefits.

COSTS OF OWNERSHIP.

The total of all costs incurred, generally by the owners but also by the users, to obtain the benefits of a facility.


DESIGNERS.

Architects, engineers, and other professionals responsible for making technical recommendations about a facility's configuration, materials, mechanical systems, and other characteristics that determine future performance and cost.

DISBENEFITS.

Undesirable results obtained by a building's owners or users as a result of the building's performance; negative benefits; not the same as costs, although the terms are sometimes used interchangeably.

DISCOUNT RATE.

A measure of the economic time value of money, the opportunity cost of having funds or benefits available now versus at some



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Pay Now or Pay Later: Controlling Cost of Ownership from Design Throughout the Service Life of Public Buildings APPENDIX A GLOSSARY The following definitions are specific to life-cycle cost analysis and building economics, as discussed by the committee. Readers may wish to refer to the several texts and articles cited throughout this report for additional information or detailed discussion of these terms. BENEFITS. The shelter, services, and other mission support a building or other facility provides to its owners and users throughout the facility's lifetime; generally assumed to be positive and may be valued in monetary or other terms. BUILDING PORTFOLIO. A collection of buildings or other constructed facilities managed by a single agency or other owner. COSTS. Expenditures of funds required at a particular time to obtain the benefits of a facility, valued in monetary terms; not the same as disbenefits. COSTS OF OWNERSHIP. The total of all costs incurred, generally by the owners but also by the users, to obtain the benefits of a facility. DESIGNERS. Architects, engineers, and other professionals responsible for making technical recommendations about a facility's configuration, materials, mechanical systems, and other characteristics that determine future performance and cost. DISBENEFITS. Undesirable results obtained by a building's owners or users as a result of the building's performance; negative benefits; not the same as costs, although the terms are sometimes used interchangeably. DISCOUNT RATE. A measure of the economic time value of money, the opportunity cost of having funds or benefits available now versus at some

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Pay Now or Pay Later: Controlling Cost of Ownership from Design Throughout the Service Life of Public Buildings future date; may include allowance for inflation (nominal discount rate); generally expressed as an annual percentage rate; not the same as interest rate. ECONOMIC COSTS. Costs expressed in terms of their economic value, such that comparisons can be made among costs incurred in the past, present, or future. ECONOMIC LIFE. The period of time over which costs are incurred and benefits or disbenefits are delivered to an owner; an assumed value sometimes established by tax regulations or other legal requirements or accounting standards and not necessarily related to the likely service life of a facility or subsystems. EQUIVALENT ANNUAL VALUE. The amount of costs or benefits that, if received as a uniform annual amount for the duration of the economic life, would have a present value equal to all costs or benefits anticipated; computed using the discount rate; see economic cost, discount rate, and present value. FINANCIAL COSTS. Costs expressed in terms of monetary value at the time incurred. INFLATION. A rise in the general price level; also described as a general decrease in purchasing power of a given amount of funds. INTEREST RATE. The percentage cost incurred for use of funds (typically borrowed) over some period of time; typically expressed on an annual basis; typically includes amounts to account for expected inflation, time value of money (see real discount rate), and compensation for risk and administrative effort of lender who provides funds. LIFE-CYCLE. The sequence of events in planning, design, construction, use, and disposal (e.g., through sale, demolition, substantial renovation) during the economic or service life of a facility; may include changes in use and reconstruction. LIFE-CYCLE COSTS. The present value of all anticipated costs to be incurred during a facility's economic life. NET PRESENT VALUE. The sum of the present values of all costs and monetary-valued benefits of a facility over its economic life. NONMONETARY COSTS. Disbenefits not readily measurable in monetary terms, such as air pollution emissions or worker absenteeism. NONRECURRING COSTS. Costs incurred once, infrequently, or on an irregular basis during a facility's economic life, typically for repair or replacement of components or subsystems. NONQUANTIFIABLE COSTS. Disbenefits not readily measurable but attributed to a facility's performance, such as worker dissatisfaction or loss of readiness. PERFORMANCE. The degree to which a building or other facility serves its users and fulfills the purpose for which it was built or acquired. PORTFOLIO. See building portfolio. PRESENT VALUE. The amount of costs or benefits that would be equivalent, if incurred or received now, to an amount incurred or received in the past

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Pay Now or Pay Later: Controlling Cost of Ownership from Design Throughout the Service Life of Public Buildings or anticipated in the future; computed using the discount rate; see economic cost. RECURRING COSTS. Costs incurred on a recurring and generally regular basis throughout a facility's economic life, typically for operation, normal maintenance, and anticipated repair or replacement of building components or subsystems. SERVICE LIFE. The period of time over which a building, component, or subsystem provides adequate performance; a technical parameter that depends on design, construction quality, operations and maintenance practices, use, and environmental factors; not the same as economic life. TIME HORIZON. The period of time considered by an analyst or decision maker in choosing among alternative designs or management strategies; typically the economic life for such facilities decisions as lease or purchase, build or buy, and renew or replace. VALUE ENGINEERING. Currently defined by most federal agencies as an organized effort directed at analyzing the function of construction operations, systems, equipment, facilities, procedures, methods, and supplies for the cost consistent with the requirements for performance, reliability, quality, safety, and maintainability.

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