Externalities in construction

NRM3: Order of cost estimating and cost planning for building maintenance works, published by the Royal Institute of Chartered Surveyors (RICS) defines ‘externalities’ as: ‘…the quantifiable costs or benefits that specifically occur when the actions of organisations and individuals have an effect on people other than themselves, such as non-construction costs, income and wider social and business costs.’

The Green Book, Central Government Guidance On Appraisal And Evaluation, Published by HM Treasury in 2018, suggests that externalities: ‘…occur when consuming or producing a good or service produces benefits or costs for others that are not directly involved in the consumption or production.’

AR5 Climate Change 2014: Impacts, Adaptation, and Vulnerability, Glossary, published by the Intergovernmental Panel on Climate Change (IPCC) suggests that: ‘Externalities arise from a human activity when agents responsible for the activity do not take full account of the activity’s impacts on others’ production and consumption possibilities, and no compensation exists for such impacts. When the impacts are negative, they are external costs. When the impacts are positive, they are external benefits.’

ICMS: Global Consistency in Presenting Construction Life Cycle Costs and Carbon Emissions, 3rd edition, November 2021, published by the ICMS (International Cost Management Standard) Coalition, defines externalities as: ‘Quantifiable cost or benefit that occurs when the actions of organisations and individuals have an effect on people other than themselves, e.g. non-construction costs, income and wider social and business costs (ISO 15686-5). In the context of carbon emissions, these are benefits or loads beyond the system boundary including reuse, recovery and recycling potential.’

[edit] Related articles on Designing Buildings

• Annual equivalent cost.
• Approximate quantities cost plan.
• Bill of quantities.
• Contract sum.
• Cost plan.
• External costs.
• Initial cost appraisal.
• NRM.
• Pre-tender estimate.
• Stakeholders.
• Third party dependencies.

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