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As concisely as possible the theory is this: At ultimate strength load levels concrete

cracks - a lot, at smaller service level loads it is assumed to not crack as much. So
the factors in 10.11.1 are a "best guess" of what cracking values occur at ultimate
load levels and the 1.43 factor is a "best guess" of what cracking occurs at service
levels.
You are correct that for a 1ST ORDER ELASTIC ANALYSIS, you will get the exact same
load distribution rather you use ultimate cracking: 0.35Ig for beams and 0.7Ig for
columns, or service cracking: or 0.5Ig for beams and 1.0Ig for columns, as the
relative ratio is the same. In fact, sometimes for structures where I judge that 2nd
order effects will be relatively minor, I do just use the service cracking values so
that I can directly use the deflections and still design the building using the load
distribution provided. Where second order effects are not minor, this is an invalid
assumption as described in point 2 below.
To answer your question of what is the point of using cracked moments of inertia, it
is many fold:
1. The moment distribution is different than if full moments of inertia were used for
all members. Note that in both the service and ultimate load cases the columns are
assumed to be cracked less than the beams. This affects the load distribution
differently than not assuming any cracking.
2. When a 2nd order analysis is carried out, the magnitude of building sway
deflection affects the "Delta" portion of the P-Delta moment magnification
effects. So you WILL get different load distributions depending on if you use service
or ultimate level cracking, because those values affect the lateral sway magnitude
of the building. At ultimate loads, the builing is cracked more, will sway more, and
will experience increased P-delta effects.
3. The seismic drift limits in the IBC are based upon an ultimate analysis (as
earthquakes are already ultimate loads). Therefore you need to use ultimate load
crack factors to determine the building drift for comparison.
4. Wind drift values are normally taken based on a 10-year wind (0.7W) - which is a
service level load and therefore based on building drift using service level crack
factors.