Automation in Construction 14 (2005) 143 – 159

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Review article
Intelligent building research: a review
J.K.W. Wong a,*, H. Li a, S.W. Wang b
a
Department of Building and Real Estate, The Hong Kong Polytechnic University, Hunghom, Kowloon, Hong Kong
b
Department of Building Services Engineering, The Hong Kong Polytechnic University, Hunghom, Kowloon, Hong Kong

Abstract

Within the last two decades, substantial amount of literature on intelligent building has been generated. However, there is a
lack of systematic review of existing research efforts and achievements. A comprehensive review on existing research provides
great benefits to identify where more efforts are needed and therefore the future research directions. For this purpose, this paper
reviews the literature related to the subject area of intelligent building. Our review indicates that previous research efforts have
dealt mainly with three research aspects including advanced and innovative intelligent technologies research, performance
evaluation methodologies and investment evaluation analysis. It is also identified that among the three research aspects,
relatively less literature has been found addressing the issues of investment evaluation of intelligent buildings. Based on a
comprehensive literature review, the paper also summarizes a few future research directions, which are useful to researchers
working in this important area.
D 2004 Published by Elsevier B.V.

Keywords: Intelligent building; Definition; Performance evaluation; Investment evaluation; Net present value; Life cycle costing analysis; Cost
benefit analysis; Analytical hierarchy process; Fuzzy set theory

1. Introduction work has been focusing on the discussion of intelligent

The word ‘intelligent’ was first used to describe
buildings in the United States at the beginning of the
1980s. The concept of ‘intelligent building’ was stimu-
lated by the development of information technology
[47,56] and increasingly sophisticated demand for
‘comfort living environment and requirement for in-
creased occupant control of their local environments’
[94]. Research on intelligent building has been con-
ducted ubiquitously and research results have been
published in many academic journals. Much research
* Corresponding author. Tel.: +852-2766-5111; fax: +852-
2764-3374.
building technology development and performance
evaluation methodologies. However, little literature
has been devoted to addressing investment evaluation
techniques of intelligent buildings. Also, there exists
insufficient information and support for investment
decision-making at the conceptual stage of intelligent
building development. The growing investment on
intelligent buildings and the greater demand for demon-
strating its profitability of intelligent building have led to
the investigation for methods and techniques that can be
of assistance in evaluating intelligent building invest-
ments, preferably at the conceptual stage.
The purpose of this paper is to provide a succinct
and systematic review of the existing research in

0926-5805/$ - see front matter D 2004 Published by Elsevier B.V.

doi:10.1016/j.autcon.2004.06.001
144 J.K.W. Wong et al. / Automation in Construction 14 (2005) 143–159
intelligent building in order to identify and suggest
future research directions. This paper begins with the
discussion of the definition of intelligent buildings.
Then, the paper summarizes current research areas in
intelligent building into three sections. The first sec-
tion provides an overview of research in intelligent
building. The second section presents methodologies
for investment evaluation for investment evaluation of
intelligent building projects. The third section presents
future research directions.
2. Definitions of intelligent building
There have been a myriad of academic and tech-
nical literature discussing the definition of intelligent
buildings. According to the research conducted by
Wigginton and Harris [94], there exist over 30
separate definitions of intelligence in relation to
building. Early definitions of intelligent building
focused almost entirely centered on technology as-
pect and did not suggest user interaction at all
[47,72,94]. Cardin (1983, cited in Ref. [94]) defined
intelligent building as ‘one which has fully automated
building service control systems’. The Intelligent
Building Institution in Washington (1988, cited in
Refs. [29,56]) defined intelligent building as ‘one
which integrates various systems to effectively man-
age resources in a coordinated mode to maximize:
technical performance, investment and operating cost
savings, flexibility’.
The purely technological definition of intelligent
building has been criticized by many researchers. For
example, DEGW in mid-1980s found that buildings
which were unable to cope with changes in the
organizations that occupy them, or in the information
technology that they use, would become prematurely
obsolete or require substantial refurbishment or de-
molition. Authors such as Robathan [76], Loveday et
al. [59], Preiser and Schramm [74] and Wigginton
and Harris [94] suggested that intelligent buildings
must respond to user requirements. According to
Clements-Croome [29], there has been growing
awareness that the services systems and work pro-
cess management of a building have close relation-
ships with the well-being of human. The building
environment affects the wellbeing and comfort of
human in the workplace, and in turn it influences
human’s productivity, morale and satisfaction. Some
authors [9,18] suggested the intelligent building
accentuates a ‘multidisciplinary effort to integrate
and optimize the building structures, systems, serv-
ices and management in order to create a productive,
cost effective and environmentally approved envi-
ronment for the building occupants’.
Most recently, a number of authors have extended
the definition of intelligent building and have added
‘learning ability’ and ‘performance adjustment from
its occupancy and the environment’ in the definition
[94,98]. They proposed intelligent building is not only
able to react and change accordingly to individual,
organizational and environmental requirement, but is
also capable of learning and adjusting performance
from its occupancy and the environment.
On the other hand, it appears that different intel-
ligent building professional bodies also have different
understanding of intelligent building. So et al. [86]
pointed out both the intelligent building institutes in
the United States and the United Kingdom have
inconsistent interpretation of building intelligence.
The Intelligent Building Institute of the United States
defines an intelligent building as ‘one which provides
a productive and cost-effective environment through
optimization of its four basic elements including
structures, systems, services and management and
the interrelationships between them’ [94]. In contrast,
the UK-based European Intelligent Building Group
defines an intelligent building as ‘one that creates an
environment which maximizes the effectiveness of
the building’s occupants, while at the same time
enabling efficient management of resources with
minimum life-time costs of hardware and facilities’
[94]. The difference indicates the UK definition is
more focused on users’ requirements, while the US
definition is more concentrated on technologies.
In addition, So et al. [86] argued that ‘intelligent
buildings are not intelligent by themselves, but they
can furnish the occupants with more intelligence and
enable them to work more efficiently’. Moreover,
most existing definitions of intelligent buildings are
‘either too vague to be useful guidance for detailed
design which either places an unbalanced focus on
technologies only or do not fit that culture of Asia’.
The need of a precise intelligent building definition is
critical as ‘without a correct definition, new building
will not be optimally designed to meet the next
 J.K.W. Wong et al. / Automation in Construction 14 (2005) 143–159
century’ [86]. In response to this, So et al. [86]
suggested a two-level strategy to formulate an appro-
priate intelligent building definition. The first level
comprises nine ‘Quality Environment Modules
(QEM)’ (M1 – M9) and the second level includes
three areas of key elements which are functional
requirements, functional spaces and technologies.
Chow [27] proposed the inclusion of additional mod-
ules (M10) as supplement to the existing nine mod-
ules in order to deal with the health issues for
buildings. The revised ‘QEM’ (M1 – M10) includes:
n M1: environmental friendliness—health and ener-
gy conservation;
n M2: space utilization and flexibility;
n M3: cost effectiveness—operation and mainte-
nance with emphasis on effectiveness;
n M4: human comfort;
n M5: working efficiency;
n M6: safety and security measures—fire, earth-
quake, disaster and structural damages, etc.
n M7: culture;
n M8: image of high technology;
n M9: construction process and structure; and
n M10: health and sanitation.
Each of 10 key modules mentioned above will be
assigned a number of key elements in an appropriate
order of priority. So et al. [86] redefined intelligent
building as one which ‘designed and constructed
based on an appropriate selection of ‘Quality Envi-
ronmental Modules’ to meet the user’s requirements
by mapping with appropriate building facilities to
achieve long term building values’. So and Wong
[85] suggested that the new definition has two folds,
which enable the consideration of technologies, and
the needs of users. Also, this new definition gives
designers a clear direction and sufficient details to
enable a high quality intelligent building design
consistent with intelligent building definition, and to
provide a fair platform for users and the general public
to evaluate the performance of an intelligent building.
3. Previous intelligent building research
An overview of literature related to intelligent
building research works indicates that previous re-
145
search efforts have dealt mainly with three research
streams, including advanced/innovative technologies,
performance evaluation methodologies and invest-
ment evaluation analysis. Fig. 1 shows the framework
for intelligent building research and the connections
between the various research streams included. These
three research streams are further described in subse-
quent sections.
3.1. Research in advanced and innovative
technologies
A plethora of research efforts have been placed on
intelligent building technologies. Previous research
efforts in this stream have been focused on the
advanced development of system integration
[41,87,93], network protocol [8,21,22,28,37,82,83]
and building subsystem services, which include
HVAC system [15,61,68,84,87,90,94], lighting sys-
tem [48,70,87], fire protection system [48,87,89,90],
lift system [48,64,80,87], security system [87,89,90]
and communication system [38,87].
Technologically, intelligent building performs and
arranges differently from a conventional one. First,
intelligent building technologies are characterized
by a hierarchical presentation of system’s integra-
tion [9,23,24,31,41,43,47,82,87]. Building systems
and structure integration, as pointed out by Brad-
shaw and Miller [20], are to provide the ‘qualities
that create a productive and efficient environment
such as functionality, security and safety; thermal,
acoustical, air-quality and visual comfort; and build-
ing integrity’. According to Carlini [23,24] and
Arkin and Paciuk [9], many intelligent buildings
comprise three levels of system integration which
include:
n The top level which is dealt with the provision of
various features of normal and emergency build-
ing operation as well as the communication
management;
n The middle level which is performed by the
building automation system (BAS), energy man-
agement system (EMS), communication manage-
ment system (CMS) and office automation (OA)
system, which control, supervise and coordinate
the intelligent building subsystems. BAS would
perform the function of energy management
146 J.K.W. Wong et al. / Automation in Construction 14 (2005) 143–159

Fig. 1. Taxonomy of research in intelligent building.

system and groups all relevant subsystems in ing (HVAC) systems, lighting system, fire
some occasions [43,60]; and protection system, vertical transportation sys-
n The bottom level which contains subsystems tem, security system and communication
including heating, ventilation and air-condition- system.
 J.K.W. Wong et al. / Automation in Construction 14 (2005) 143–159
Moreover, intelligent building allows interaction
and integration among building subsystem services
[48,70,84,87]. System integration is the process of
‘connecting systems, devices and programs together
in a common architecture so as to share and exchange
data’. Arkin and Paciuk [9] suggested the key to the
effective operation of intelligent building was not
related to the sophistication of the building services
systems, rather it was the integration among the
various systems, between the system and the building
structure. Examples of major intelligent building sys-
tems interaction include [48,87,90,93]:
n Fire alarm system would be integrated with other
building systems, such as HVAC, lighting and
security through BAS. HVAC systems can be used
to prevent the smoke from spreading by opening
exhaust dampers and closing outdoor air intake
dampers of the fire floor if there is a fire on one
floor of building;
n Vertical transportation system is interacted with fire
alarm or the security systems in order to define the
number of elevators required, the mode of
operation and in some instances the accessible
floor levels;
n Fire alarm program would be interfaced with
security to release specific locked doors under
alarm conditions;
n Security system is interfaced with the lighting and
HVAC subsystems to define activation of neces-
sary lighting paths and the specific room occupy
mode; and
n Facility management is integrated with BAS.
Ivanovich [53] reviewed current research in intel-
ligent building technologies. Contemporary research
efforts have been attempting to develop software with
the use of automated diagnostic tools introducing
neural networks, fuzzy logic, as well as other soft-
ware-intensive, artificial-intelligence-based technolo-
gies designed to detect problems, such as building
services systems/components, sensors [92] and con-
trol devices that are hard detected by human-beings.
The IEA BSC research program Annex 25 [51] and
Annex 34 [33], involving over 10 universities and
research institutions from different, conducted exten-
sive research on the methodology, strategy and appli-
cation of fault detection and diagnosis in HVAC
147
systems. Many researchers also paid efforts in devel-
oping intelligent control method to be used in modern
building management system for improving and opti-
mizing the energy and environmental performance of
buildings [91]. In addition, the application of wireless
technologies with buildings or networking building
systems is also a popular research area [37] which has
currently attracted attentions of many researchers and
industry practitioners. Typical intelligent building
technologies are summarized in Table 1.
3.2. Research in performance evaluation
methodologies
Apart from intelligent technologies research and
development, there have been substantial amount of
research devoting to evaluating intelligent building.
Serafeimidis [81] considered the evaluation process
as a feedback mechanism aimed to facilitate learning,
while [100] considered the process of evaluation as
‘a series of activities incorporating understanding,
measurement and assessment. It is either a conscious
or tacit process which aims to establish the value of
or the contribution made by a particular situation. . .
and can relate the determination of the worth of an
object’.
Building performance evaluation is a crucial proce-
dure which offers feedback function on the perfor-
mance of building materials and components for
future improvement and reference ([73]: cited in Ref.
[74]). Different authorities have tried to develop eval-
uation models to assess the performance of intelligent
building [9,47,73,74,85,98]. Early performance evalu-
ation models were developed by Manning in 1965 and
Markus et al. in 1972 [74]. Preiser and Schramm later
(in 1997) improved their evaluation models and pro-
posed an ‘integrative building performance evaluation
framework’ to evaluate and review the stance in all six
major phrases of building delivery and life cycle
including planning, programming, design, construc-
tion, occupancy and recycling. Many similar studies
have also been conducted attempting to measure the
level of intelligence that a building exhibited and to set
up criteria for selection of the best intelligent building
[47]. Preiser [75] developed the ‘post-occupancy eval-
uation process model (POE)’ in order to determine the
intelligence level of intelligent buildings. The POE
process model is generally executed in three stages.
148 J.K.W. Wong et al. / Automation in Construction 14 (2005) 143–159
Table 1
Intelligent building technologies and systems (adapted from Refs. [21,37,38,48,80,87,89])
Intelligent building Software/program
systems
BAS n Standard Protocol (i.e. BACnet,
LonWorks, etc.)
n Direct Digital Control (DDC)
HVAC system n Software program such as Duty
Cycle Program, Unoccupied
Period Program, Chillers Optimum
Start-stop Program, Unoccupied
Night Purge Program, Enthalpy
Program, Load Reset Program,
Zero-energy Band Program and
Heating/cooling Plant Efficiency
Program; and
n Other specific programs for
HVAC operation
Lighting system n Occupied – unoccupied lighting
control program (time-based
lighting control program); and other
specific programs for lighting control
Vertical n Specific programs for lift
transportation operation and monitoring
system
Fire protection n Specific programs for fire
system protection and detection
Security system n Specific programs for security
protection, detection and safety
system
Communication n Private automatic branch
system exchanges (PABX), integrated
service digital network (ISDN),
local area network (LAN) and
Internet system, and other
software program enabling remote
building control and monitoring
Hardware/device
n Network control units, operator
workstations, network expansion
units, application specific
controllers and sensor system, etc.
n Air handling unit (AHU)
controller; distributed controller;
fully air-conditioned variable
air-volume system (VAV) controller,
centralized chiller plant; heating/
cooling elements located across the n Internet-based HVAC system allows
occupancy zones of the floor; and
other devices such as pressure,
temperature, flow sensors, etc.
n Charge-coupled device (CCD)
cameras, intelligent lighting
controller (ILC)/lighting
management system controller,
motion detectors, light sensor,
and other device such as touch
switch, etc.
n Lift sensors and passenger
detectors, neural network-based
controller, and other devices such
as CCD camera, etc.
n Intelligent fire controller (IFC),
fully addressable automatic fire
alarm and detector (sensor)
system
n Intelligent Access Controller
(IAC);
n CCTV surveillance, e-Card access,
motion detectors, intruder alarm
system and special presence
detection sensors
n Traditional telephone systems;
aerials, transmission cables,
amplifiers, mixers, splitters, repeat
amplifiers, attenuators and final
TV outlets; and dish antennas for
satellite communication
Recent development
n Use of Web-enabled devices for
the building automation system
which allows remote building
control and monitoring by
interaction of the central BAS
workstation with the remote
dial-up system via modem.
n Computer vision system (allows
counting of number of residents
within an air-conditioned space
and informs the control system of
the distribution of the residents)
authorized users keep close contact
with the BAS wherever the user is
n Internet-based lighting system
n Advanced drives and artificial
intelligence based supervisory
control
n Computer vision technologies have
been used in intelligent building in
counting the number of passengers
and to aid lift control
n Sophisticated fire alarm systems
which include stand-alone
intelligent fire alarms and
intelligent initiating circuit sensors
n Internet-based security system
n Use of Web-enabled devices
which allows remote building
control and monitoring
 J.K.W. Wong et al. / Automation in Construction 14 (2005) 143–159
First, to develop compatible data collection instructions
in the conceptual phase; second, to apply and pilot
testing of evaluation instruments in field studies on
intelligent office building; third, to carry out compar-
ative analysis of data collected and development of
recommendations and guidelines for the utilization of
the data-gathering instruments worldwide. Preiser and
Schramm [74] applied the POE process model to
evaluate intelligent building in the cross-cultural con-
text and suggested that the POE model could ‘enhance
building performance evaluation in intelligent build-
ings especially in a long-term, continuing basis’ be-
cause the evaluation system allows the ‘tracking of
performance of new high-tech systems and their effects
on building occupants as well as the effectiveness of
these systems in general’.
Without a rating system, it is difficult to classify
and justify the level of intelligence of intelligent
buildings. Therefore, there have been many studies
trying to develop rating systems for the intelligent
building. One of the essential performance rating
systems was the ‘building rating method’ developed
by DEGW in 1995 based on the ‘building IQ rating
method’ and the ‘building quality assessment’ (de-
veloped by Intelligent Buildings Europe Work). The
method employs five categories of factors which are
combined to produce overall assessments of the
suitability of intelligence provided by the subject
building. On the other hand, Arkin and Paciuk [9]
developed a ‘‘Magnitude of Systems’ Integration’’
Index (MSIR) to examine the level of systems’
integration of intelligent buildings according to the
extent of integration among their systems, and be-
tween systems and the building’s structure. This
assessment methodology can be used for evaluation
and comparison of single aspect of building’s intel-
ligence and to create a unified index for evaluation
of system’s integration in intelligent buildings. This
model has been adapted by other researchers in the
intelligent building performance evaluation such as
Yang and Peng, 2001 [98]. More recently, the Asian
Institute of Intelligent Buildings [85] constructed a
quantitative assessment method, namely the intelli-
gent building index (IBI). The individual assessment
index for this methodology was originated from the
nine ‘Quality Environment Modules’ (M1 – M9),
each index possesses a score which is a real number
(within the range of 1– 100) calculated by a conver-
149
sion formula. A building can be ranked from A to E
to indicate the overall intelligent performance. A
summary of the hierarchical development of intelli-
gent building assessment methods is illustrated in
Table 2.
However, some of the performance evaluation
models have been criticized for fraught with problems
of fairness and partially subjective assessment.
According to So and Wong [85], the shortcomings
identified are in the following areas:
n Inconsistence between final assessment index and
human thinking;
n Slightly different assessment in terms of the weight
or priorities of elements for each individual
intelligent building project;
n Important elements do not receive sufficient
emphasis and less important elements are ignored;
n Current assessment method do not contain a
learning curve and unable to evolve from time to
time; and
n Binary approach of each rule or question is not a
good practice. The mere provision of a particular
facility, or system, in a building is not a conclusion
of its intelligence.
In response to insufficiencies of existing perfor-
mance evaluation models, researchers have currently
attempted to construct a set of objective evaluation
model in order to reflect the performance and justified
price of intelligent building. For example, So and Wong
[85] suggested the criteria for an efficient performance
evaluation model which states as follows:
n Encourage well-balanced performances, emphasize
important elements but, at the same time, discour-
age total ignorance of minor subjects;
n Consistent with human preferences while random
judgments must be minimized;
n Practically extension of the utility theory, measur-
ing all levels of building performances, weighting
as attributes and combining them systematically, to
form the overall intelligent building index; and
n Have learning ability and able to be upgraded and
modified from time to time.
Further research is needed to develop performance
evaluation models that can meet the above criteria.
150 J.K.W. Wong et al. / Automation in Construction 14 (2005) 143–159

Table 2
Intelligent building performance assessment methods (adapted from Refs. [19,27,85])
Year Research agency Details of assessment methods
1983 DEGW Orbit 1: multi-client study (building use studies)
1985 DEGW Orbit 2: degree of matching between the building, the organizations
occupying it and IT (using nine key organizations issues and eight key
IT issues)
1988 Camegie Mellon University Measures of quality, satisfaction and efficiency (using six performance
criteria and five system integration criteria)
1991 Kuala Lumpur City Hall Guidelines specifying features of office buildings based on location, design,
systems and services (six-star, five-star and four-star).
1992 Intelligent Building Research Group Building IQ rating method: considering needs (10 for individual user,
15 for organizational, 6 for local environmental and 5 for global
environmental). Project was not completed
1992 Intelligent Building in Europe Project Intelligent building rating: key questions based on building shell
characteristics, services and applications (not published)
1992 – 1994 Holland, New Zealand and Canada Development of three evaluation methodologies to evaluate the quality
of buildings and the suitability for different tenant types: real estate norm,
building quality assessment, and serviceability tools and methods
1995 DEGW Building rating method: involving five sections (A – E) including namely
(A) building site/location (7 items), (B) building shell issues (14 items),
(C) building skin issues (3 items), (D) organizational and work process
issues (11 items), and (E) building services and technology (12 items)
where the result is an overall score by combination of all items
1997 Arkin and Paciuk Magnitude of systems’ integration: to determine the level of systems’
integration in intelligent buildings. ‘‘MSI’’ was used to evaluate as objective
index that quantifies and summarizes the various aspects of integration
(Eq. (1)). A simple cumulative index is obtained by summing all the ratings
(Ri) attributed to the integration features of various systems in the building,
and then dividing the sum by the number of available systems;
XNS
Ri
i¼t
MSI ¼ ð1Þ
NS

1998 Harrison et al. Building rating method (results matrix): based on the building rating method
constructed by DEGW (1995) and demonstrated its use in evaluations
through the two plots of the categories (A – B/C, D – E). The categories are
each dimensioned as percent and the four quadrants of each plot are
considered to indicate the building’s performance
2002 Preiser and Schramm Post-occupancy evaluation process model (POE): three phases of process
model include:
n First phase: planning POE involves liaison
with client, performance criteria and
planning the data collection process;
n Second phase: conducting POE involves
methods and instruments—initiating data
collection, monitoring data collection and
analyzing data;
n Third phase: applying POE involves
reporting findings, recommending actions
and reviewing outcomes

2002 So and Wong (AIIB) Intelligent building index (IBI): quantitative assessment methods for IB
which was originated from the nine ‘Quality Environment Modules’
(M1 – M9)
 J.K.W. Wong et al. / Automation in Construction 14 (2005) 143–159
3.3. Research in investment evaluation analysis
Another stream of research has been focusing on
evaluating economic and financial aspects of intelli-
gent building, which is referred as the investment
feasibility evaluation of intelligent building projects.
Investment to intelligent building has increased
dramatically in the Asia Pacific region in recent years
[62]. A number of authors [26,94] suggested that the
growing interest in investment has been credited to
potential benefits that an intelligent building delivered
to the investors. These benefits include ‘reducing
operating and occupancy costs; providing a flexible,
convenient and comfortable environment for occu-
pants; offering advanced technological facilities to-
gether with reduced maintenance costs; and
improving operational effectiveness, efficiency and
marketability’. However, many investors have the
mentality of ‘high-risk and low-return’ towards in-
vestment in intelligent building. This mentality may
be explained by following reasons [57,88,98]:
n Investors are unaware of the total cost in relation
to the built asset that their business required;
n Investors are failed to observe the connections
between initial capital cost, operating and mainte-
nance cost as well as the equipping of the building
with automation and communication;
n Investors are lack of information and support for
investment decision-making at the conception
stage of intelligent building development.
There is a growing demand for tools to support
intelligent building investment decision-making. For
example, Choi [101] pointed out that the financial
viability of intelligent building is the major concern of
the developers. Wong et al. [95] argued that many
investors would consider cost and benefit when they
decide whether it is worthwhile to invest in a new
technology. Also, Mawson [63] remarked the neces-
sity of justifying the intelligent building investment on
the basis of cost and benefit related to the users or
investors’ business priorities in order to illustrate the
profitability of intelligent building investment. De-
spite all these, however, there is still a lack of
generally accepted tool for supporting intelligent
building investment decision making. Many prevail-
ing investment evaluation techniques were extended
151
conceptually and functionally from the traditional
investment decision making techniques [47,95]. The
apparent insufficiency of traditional investment eval-
uation techniques has been identified by many authors
[49,99] as these techniques have ‘failed to reflect the
dynamic and constantly hanging reality of busi-
nesses’. These techniques have also failed to provide
a comprehensive picture of developers’ returns on
investment. It is for this reason that the development
of new investment evaluation model has become the
focus of intelligent building research.
4. Investment considerations and evaluation
techniques for intelligent building
Traditionally, investors use various types of meth-
ods to assess the financial feasibility of a proposed
project. Some property investors review historic per-
formance and request assessment of future perfor-
mance of property portfolios in formulating the
investment strategy decision [3]. Others apply evalu-
ation techniques to review the project feasibility and
adherence to their goals [4]. Many of the investment
evaluation techniques aims to compare project bene-
fits against costs in an attempt to ‘determine accept-
ability, and to set a ranking order among competing
projects’ [5]. Therefore, before the evaluation of
investment project, the project costs and benefits need
to be identified and classified. Without such identifi-
cation works, it is difficult to assess and judge the
financial viability of the project.
Many authors have attempted to identify and
classify the cost components of intelligent building.
Flax [39] emphasized the importance of technologies,
data systems, and telecommunication in the total
building and fit-out capital costs of intelligent build-
ing. Myers [70] identified six types of costs including
in an intelligent building project: equipment costs,
installation costs, commissioning costs, spares costs,
special software costs and staff/training costs. In the
evaluation of project costs of intelligent building,
Hetherington [48] suggested the assessment should
be made on ‘a project by project basis taking into
account the overall project size, the number of
intended work stations and the nature of each intelli-
gent building system to be implemented’. Wong et al.
(2001) [95] attempted to analyze and examine the
152 J.K.W. Wong et al. / Automation in Construction 14 (2005) 143–159

project costs of both intelligent building and conven-
tional building. The findings suggested the total
project costs of intelligent building were generically
higher than that of conventional building by 8%, and
the expenditures on building services were higher than
conventional building project by 5%. Simply because,
the intelligent building involved more application of
advanced technological materials and components in
building services systems than the conventional build-
ing. Apart from project costs, many authors have tried
to evaluate the benefits generated by the intelligent
building (e.g., [8,10,22,31,32,39,47,48,58,70,88].
Flax [39] pointed out intelligent building can mini-
mize the cost on all ongoing expenses (i.e., power, air-
conditioning, environmental controls) and reduce re-
location cost of individuals and services, or large
group revisions. Suttell [88] suggested intelligent
building can improve the productivity of building
operations, and reduce energy consumption of the
facility which can be quantified in dollar terms.
In the area of investment evaluation, a plethora of
evaluation techniques have been developed to assist
investors to examine and evaluate the economic
desirability of projects. Remer and Nieto [78,79]
identified 25 different techniques for project invest-
ment evaluation. Among these techniques, net present
value (NPV), internal rate of return (IRR) and pay-
back period (PB) are often used to appraise capital
investment in building projects [20,54,67]. These
techniques are based on ‘time-cost-of-money’ princi-
ples and are used in slightly varied procedures to
estimate the expected investment monetary returns
[67]. However, research related to investment evalu-
ation of intelligent building projects are very limited.
Only a few authors or research groups (e.g., Refs.
[14,54,95,98]) developed techniques and models to
assist the process of intelligent building investment
evaluation. Our overview of empirical studies for the
intelligent building investment evaluation revealed
that the three most commonly mentioned approaches
are the NPV method, life cycle costing analysis
(LCCA) and cost benefit analysis (CBA). A summary
of the empirical studies and research efforts reviewed
are illustrated in Table 3.
4.1. Net present value method
One of the most commonly used investment eval-
uation techniques in the construction industry today is
the NPV method. The NPV is a traditional technique
designed to ‘net the present value of the investment
from the present value of the benefit of the project’
[4]. It examines cash flows of a project over a given
time period and resolves them to one equivalent
present date cash flow by using various economic
evaluation factors [78]. The basic rule of net present
value method is to accept the project with a positive
net present value and reject if the value is negative.

Table 3
Empirical studies for IB investment evaluation summary
Year Authors/researchers Approach/methodologies Evaluation tools
2001 Wong et al. Net present value approach systematic NPV method
assessment of financial viability of IB
by comparing two alternatives:
conventional and IB building
2001 (proceeding) ABSIC Group Cost benefit analysis approach ‘‘BIDS’’, Software-based evaluation model, evaluation
a multi-media decision support tool tool was not specified in the Report
based on the CBA framework However, according to Kingston [55], NPV
is also a basic tool of CBA approach
2001 (proceeding) Yang and Peng Life cycle costing approach accessing NPV/discounting method
the design alternatives which considering
all the significant costs of ownership
2003 Lohner (cited in Ref. [54]) Life cycle costing approach comparing NPV method
the life cycle cost of intelligent buildings
with different levels of integration
approach (non-integrated building,
partial integration, and full integration)
 J.K.W. Wong et al. / Automation in Construction 14 (2005) 143–159
When two or more projects are evaluated, the one
with higher present value is generally selected. The
NPV can be computed using the following formula
[4]; where NCFi represents the net cash flow from the
project at period i, k represents the capital cost and T is
the project life span.
" # " #
X T
NCFi XT
Ii
NPV ¼  solution which outperforms in functions and quality is
f f
f ¼1 ð1 þ kÞ j¼1 ð1 þ kÞ
Wong et al. [95] applied the NPV technique to analyze
the financial viability of two project alternatives:
conventional or intelligent building. The optimal
determination of building life cycles was integrated
into the analysis in order to provide a comprehensive
financial viability results for intelligent building. The
study concluded that the intelligent building was more
favorable option which had a higher property value at
the end of life cycle period. Despite its simplicity,
Wong et al. [95] noted that the reliability of the NPV
technique can be affected by the unavailability of
relevant cost and benefit data.
4.2. Life cycle costing analysis
The LCCA is another approach employed for the
evaluation of intelligent building investment. Gener-
ally, LCCA serves two major functions. First, it
applies in evaluation of alternatives in various aspects
[34]. It is used to examine the building performance
with different initial investment costs, different oper-
ating and maintenance and repair costs, and possibly
different lives [42]. Second, it can be used as an asset
management system throughout product’s life cycle
[36]. LCCA approach is widely applied in various
aspects of construction and building projects (e.g.,
Refs. [2,11,13,17,40,44,77,96,97]). For example,
Abraham and Dickinson [2] and Bogenstätter [17]
applied the LCCA to the prediction, optimization and
quantification of the construction cost during disposal
and design stages, respectively. Aye et al. [13]
employed the LCCA to evaluate project investment
options and make selection between competing alter-
natives, while Gluch and Baumann [44] used the
LCCA to determine the environmental decision-mak-
ing in building investment.
LCCA has been employed in a number of empir-
ical studies, as an investment evaluation technique of
153
intelligent building. Yang and Peng [98] used the
LCCA to assess various design alternatives. Their
approach starts with the selection of design alterna-
tives, and it then determines the capital cost and cost-
in-use for each alternative. The cash flow for each
option is converted to a common time basis for
rational comparison using the NPV technique. The
then recommended. In addition, Keel, 2003 [54]
applied the LCCA to compare and evaluate the total
investment life cycle costs of intelligent building at
different levels of integration (non-integrated build-
ing, partial integration and full integration). The NPV
method was used to calculate the life cycle cost of
each model of integration. Results suggested that the
fully integrated intelligent building had the lowest life
cycle cost compared with non-integrated and partially
integrated intelligent buildings.
4.3. Cost benefit analysis
The purpose of CBA is to give management ‘a
reasonable picture of the costs, benefits and risks
associated with a given project so that it can be
compared to other investment opportunities’ [30].
CBA has been traditionally applied to fields including
policies, programs, projects, regulations, demonstra-
tions and other government interventions [16,50].
Many capital investment projects [69] such as budget
planning, dams and airports construction, and safety
and environmental programs planning [52] have adop-
ted the CBA approach to compare the costs and
benefits. Similar to LCCA, the CBA technique relies
on the NVP method as the basis for analysis
[16,30,35,55,69]. In the use of the CBA technique,
attention should be paid to the following aspects.
First, project costs and benefits at each stage of the
life cycle are discounted into the present values.
Second, some studies suggest that information such
as development and operating costs, and tangible
benefits by time period must be obtained before
performing the CBA [30]. Third, analysis results can
be highly affected by the discount factors employed in
the CBA. Kingston [55] and Islas et al. [52] suggested
that wrong selection of discount rate would produce a
great variation in benefit/cost ratio. An unworthy
project may be recommended if the chosen rate is
154 J.K.W. Wong et al. / Automation in Construction 14 (2005) 143–159
too low as the distant benefits are underweighted
relative to near-term costs.
There are only several applications of CBA in
evaluating intelligent building investment. ABSIC
Group [14] employed CBA to evaluate the investment
in advanced and innovative building system. A soft-
ware program, named as the ‘Building Investment
Decision Support (BIDS)’ system, based on the CBA
framework was developed and incorporated within a
multi-media decision support tool. The analytical
approach was built on a three dimensional matrix:
design options, cost benefit factors, and scenarios. In
general, although the ABSIC’s model was very prac-
tical and suggestive, it is difficult to interpret the
nature of the methodologies based on the fact that it
is a program-based analytical model.
Limitations of existing techniques for evaluating
investment projects on intelligent building have been
recognized [4,5,49,67,99]. Many researchers pointed
out that traditional evaluation methods are unable to
accommodate the task of evaluating intelligent build-
ing projects. Specifically, Ho and Liu [49] critiqued
that the NPV method fails to ‘respond and capture
management’s flexibility to adapt or revise later
decision when, as uncertainty is revolved, future
events turn out differently from what management
expected at the beginning’. Akalu [4] also noted that
the NPV method would lead to different decision
results in mutually exclusive projects. The ‘equal class
of risk’ assumption in the NPV calculation for both
cash inflows and outflows of projects is not practical
in the real world. Moreover, Abdel-Kader and Dug-
dale [1] pointed out the use of ‘arbitrarily’ high hurdle
discount rates in the NPV calculation for new tech-
nology investment would affect the accuracy of eval-
uation. Many of these criticisms indicated that
traditional NPV based evaluation techniques are not
capable of evaluating investment relating to advanced
technologies or systems.
Akin to the NPV method, there are drawbacks in
the LCCA. One drawback is that the result is
subject to the availability and reliability of input
data due to the complexity of building process and
numerous components in a building [12,44]. The
accuracy of the result is highly dependent on the
assumptions and estimates made whilst collecting
data, as there is always an element of uncertainty
associated with the estimates and assumptions.
Macedo et al. (1978) [102] summarized some major
uncertainties of the LCCA:
n Differences between actual and expected perform-
ances of a system could affect future operation and
maintenance costs;
n Changes in operational assumptions arising from
modifications in user activities;
n Future technological advances that could provide
lower cost alternatives;
n Changes on the price level of a major resource such
as energy or manpower; and
n Errors in estimating relationship.
Furthermore, the LCCA fails to handle irreversible
decisions and the results are biased towards the
decision maker’s personal values [44].
The CBA approach has also revealed several
limitations in its capacity to evaluate building invest-
ment projects [30,46,69]. First, the standard CBA
approach considers only tangible benefits and is
unable to measure intangible benefits in financial
terms. Second, CBA fails to include a method for
coping with uncertainty during the evaluation of
investment opportunities [69].
4.4. Analytical hierarchy process
These identified limitations suggest the need to
develop new methods to evaluate intelligent building
investment projects. Recently, the analytical hierarchy
process (AHP), an evaluation approach which com-
bines the basics of qualitative and quantitative re-
search, is suggested to remedy the existing problems
[25]. The AHP is a decision analyzing and structuring
method developed by Saaty in 1970s [6,7,45,65,66].
AHP comprises a comprehensive framework which is
designed to ‘cope with the intuitive, the rational and
the irrational when the users make multi-objective,
multi-criterion and multi-actor decisions with and
without certainty for any number of alternatives’
[65]. AHP can be used to model a decision making
framework, which assumes a uni-directional hierar-
chical relationship among decision levels. AHP has
been applied in investment evaluation. For example,
Al-Harbi [7], Al Khalil [6] and Nassar et al. [71]
extended the AHP to evaluating and analyzing build-
ing and construction projects. Al-Harbi [7] applied
 J.K.W. Wong et al. / Automation in Construction 14 (2005) 143–159 155

AHP to the building contractor prequalification deci-
sion-making so that the client can determine the
contractor’s competence or ability to participate in
bidding. Al Khalil [6] employed AHP in the evalua-
tion and selection of an appropriate project delivery
method. Furthermore, Nassar et al. [71] applied AHP
as a decision-making technique to select the appro-
priate building materials and components based on a
set of user-specified criteria and their relative impor-
tance weights.
However, the usefulness of AHP in investment
evaluation has also been questioned by Chan et al.
[25]. They argued that AHP is basically concerned
with the analytical factors evaluation. AHP (as well as
the traditional evaluation methods) is based on the
concept of accurate measurement and crisp evaluation
(i.e., the measuring values must be exact and numer-
ical) where exact assessment data such as investment
cost, gross income, expenses, depreciation, salvage
value, are difficult to obtain in real world. Abdel-

Table 4
Comparison of investment evaluation approaches
Investment evaluation approaches
Current approaches
Life cycle costing (LCC)
Purpose/reasons Select the best design
alternatives based on the
life cycle costs
Basic tool NPV
Authors [93]; Lohner, 2003
Advantages n Enable investment
options to be more
effectively evaluated
n Consider the impact
of all costs rather than
only initial capital costs
n Facilitate choice
between competing
alternatives
Disadvantages/ n Fails to handle
limitations uncertainty and
irreversible decisions
n Poor availability and
reliability of data
n Relies on estimated
variables
n Biased results
n Conceptual confusion
CBA AHP
Select the best design Comprehensive framework
alternatives based on designed to cope with the
comparison of cost, intuitive, the rational and
tangible benefit and the irrational when we make
associated risk of design multi-objective,
alternatives multi-criterion and
multi-actor decisions with
and without certainty for
any number of alternatives
NPV Comparison matrices
[14] Not applied in IB yet
n Able to consider life n Considers tangible and
cycle cost and intangible, quantitatively
tangible benefits measurable and qualitative
factors
n Provide a reasonable n Hierarchical
picture of the costs, representation of a system
benefits, and risks n Provides more
associated with a given information on the structure
system development and function of a system in
project so that can the lower level
compare it to other n Provides an overview of
investment opportunities the actors and their purposes
in the upper levels
n Considers only n Not consider any
tangible benefits assessment regarding
‘linguistic terms’
n No consideration of n Does not reflect the
uncertainty qualitative and subjective
nature of many factors
n Exact assessment data is
difficult to obtain in real world
Recommended approach
Fuzzy multi-criteria
decision-making method
(combining AHP and fuzzy
set theory)
An integration of risks
financial and non-financial
factors in investment
evaluation. Based on AHP
with fuzzy set theory
AHP and fuzzy set theory
Not applied in IB yet
n Able to deal quantitatively
with imprecision or
uncertainty
n To tackle the ambiguities
involved in the process and to
assure a more convincing
and effective decision-making
n Lacks empirical evidence for
their applicability and wide
acceptance in construction
industries
156 J.K.W. Wong et al. / Automation in Construction 14 (2005) 143–159

Table 5 with advanced and innovative intelligent technolo-

Literature review summary gies; performance evaluation methodologies; and,
Research area The research subject Credible publications investment evaluation analysis (Table 5 listed main
Definition Defining IB [9,18,23,26,27,29,47, credible publications in these research aspects). The
56,59,72,77,85,86,94] paper also revealed that relatively less attention has
Advanced and System integration, [8,21,28,32,37,41,70,
been paid to addressing investment evaluation of
innovative building automation 82,83,87,93]
technologies system and intelligent building. Simultaneously, the growing
communication network amount of investment in intelligent buildings in recent
HVAC system [15,33,48,51,61,68, years has led to a great demand for better methods and
70,84,87,90,91,92,94] techniques for evaluating investments in order to
Lighting system [48,70,87]
maintain investment profitability.
Fire protection system [48,87,89,90]
Lift system [48,64,80,87] The paper further proposes a ‘fuzzy multi-criteria
Security system [48,87,89,90] decision-making method’ (FMCDCM), which com-
Communication system [38,87] bining the use of fuzzy set theory with AHP, to
Performance Evaluation and Intelligent Buildings overcome the inefficiencies of traditional evaluation
evaluation construction of Europe Work (cited
techniques. FMCDCM has been applied in problems
performance models and in Refs. [9,19,47,74,
indexes for IB 75,98]), the Asian related to technology selection and advanced manu-
Institute of facturing investment evaluation. By using the
Intelligent Buildings FMCDCM, it is expected that ambiguities involved
(cited in Ref. [85]) in the evaluation process can be minimized.
Investment Construction of investment [14,95,98]; Lohner
evaluation evaluation techniques (2003, cited in
and methodologies for IB Ref. [54])
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