benefits from high-performance facilities (pp. 157-158). The consultant noted that anecdotal evidence indicated that the capabilities (learning curve) and capacities (market development) needed to design and construct high-performance buildings have developed rapidly across the architecture, engineering, and construction industry (p. 157), and these capabilities may lead to greater economic efficiency. Specifically, a study by Urban Catalyst Associates (2010) asserted that “costs for green buildings continue to decrease as materials become standard and practitioners become more proficient in new technologies” (p. 157).

The “learning curve” (in economic terms) refers to the rate of progress to achieve a stable production rate given the introduction of new processes, systems, and/or materials and may encompass both “labor learning” for specific skills and “organizational learning” to reflect the development and implementation of effective management practices of the new processes, systems, and/or materials (p. 157).

Market development was associated with achieving economies of scale, where the marginal cost to produce each unit decreases as the number of units increase (p. 157).

The consultant identified five factors that may specifically influence the incremental construction costs for high-performance buildings, as follows:

  • Learning curve and market development for manufacturers of high-performance equipment, materials, and systems, which may reduce their unit price costs;
  • Learning curve and capacity development for designers of high-performance buildings, which improves decision making and reduces the time required to plan, design, and manage such facilities; and
  • Learning curve, skill development, and organizational capacity development by general and specialty contractors, which improve the quality and reduce the time required to construct or renovate high-performance facilities. (p. 157)

Incremental construction costs as well as long-term operations and maintenance costs may be reduced through learning curve and capacity development, as follows:

  • Within owner organizations, which can improve the decision making during planning and design and improve operations management over time; and
  • For facilities managers, which can improve decision making during planning and design through integrated project teams, and improve the capture of benefits during operations and maintenance (p. 158).

COMMITTEE’S EVALUATION OF THE DOD CONSULTANT’S ANALYTICAL APPROACH

The committee’s evaluation of the DOD consultant’s analytical approach is comprised of three topics: the consultant’s methodology, data sources and the application of those data, and the applicability of the methodology to the DOD operating environment.

Consultant’s Methodology

The long-term benefit-cost analysis used by the DOD consultant to calculate NPV benefits and adjusted rate of return demonstrated the appropriate use of a traditional benefit-cost analysis. Payback was a required element to respond to Section 2830 of NDAA 2012, and the consultant also appropriately conducted a payback analysis.



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