[Code of Federal Regulations]
[Title 10, Volume 3]
[Revised as of January 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 10CFR436.18]

[Page 423-424]
 
                            TITLE 10--ENERGY
 
                    CHAPTER II--DEPARTMENT OF ENERGY
 
PART 436_FEDERAL ENERGY MANAGEMENT AND PLANNING PROGRAMS--Table of Contents
 
    Subpart A_Methodology and Procedures for Life Cycle Cost Analyses
 
Sec.  436.18  Measuring cost-effectiveness.

    (a) In accordance with this section, each Federal agency shall 
measure cost-effectiveness by combining cost data established under 
Sec. Sec.  436.16 and 436.17 in the appropriate mode of analysis as 
described in Sec.  436.19 through Sec.  436.22.
    (b) Federal agencies performing LCC analysis on computers shall use 
either the Federal Buildings Life Cycle Costing (FBLCC) software 
provided by DOE or software consistent with this subpart.
    (c) Replacement of a building energy or water system with an energy 
or water conservation measure by retrofit to an existing Federal 
building or by substitution in the design for a new Federal building 
shall be deemed cost-effective if--
    (1) Life cycle costs, as described by Sec.  436.19, are estimated to 
be lower; or
    (2) Net savings, as described by Sec.  436.20, are estimated to be 
positive; or
    (3) The savings-to-investment ratio, as described by Sec.  436.21, 
is estimated to be greater than one; or
    (4) The adjusted internal rate of return, as described by Sec.  
436.22, is estimated to be greater than the discount rate as set by DOE.
    (d) As a rough measure, each Federal agency may determine estimated 
simple payback time under Sec.  436.23, which indicates whether a 
retrofit is likely to be cost effective under one of the four 
calculation methods referenced in Sec.  436.18(c). An energy or water 
conservation measure alternative is likely

[[Page 424]]

to be cost-effective if estimated payback time is significantly less 
than the useful life of that system, and of the Federal building in 
which it is to be installed.
    (e) Mutually exclusive alternatives for a given building energy or 
water system, considered in determining such matters as the optimal size 
of a solar energy system, the optimal thickness of insulation, or the 
best choice of double-glazing or triple-glazing for windows, shall be 
compared and evaluated on the basis of life cycle costs or net savings 
over equivalent study periods. The alternative which is estimated to 
result in the lowest life cycle costs or the highest net savings shall 
be deemed the most cost-effective because it tends to minimize the life 
cycle cost of Federal building.
    (f) When available appropriations will not permit all cost-effective 
energy or water conservation measures to be undertaken, they shall be 
ranked in descending order of their savings-to-investment ratios, or 
their adjusted internal rate of return, to establish priority. If 
available appropriations cannot be fully exhausted for a fiscal year by 
taking all budgeted energy or water conservation measures according to 
their rank, the set of energy or water conservation measures that will 
maximize net savings for available appropriations should be selected.
    (g) Alternative building designs for new Federal buildings shall be 
evaluated on the basis of life cycle costs. The alternative design which 
results in the lowest life cycle costs for a given new building shall be 
deemed the most cost-effective.

[55 FR 48220, Nov. 20, 1990, as amended at 61 FR 32650, June 25, 1996]