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18 Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects Midpoint Estimated Soft Cost (% of Construction) SURVEY RESPONDENTS * Respondents estimate PE PE& FD as combined amount; PE displayed here using average split Exhibit 8. Midpoint soft cost estimates for all components during project planning phases. By entry into final design, the costs for PE are known, and the costs for final design, bidding, and construction should be estimated or quantified through an assessment of the projects' contract- ing methodology, the contract packages anticipated, the staff or consultants required, the proj- ect length, and other factors. In sum, the industry currently takes two different approaches to estimating soft costs, depending on how far along the project is, as illustrated in Exhibit 9. How Does This Practice Compare with Actual Costs? On average, the construction industry's current approach to estimating soft costs in early proj- ect phases corresponds fairly well to actual historical soft costs in past projects. This Guidebook relies on an examination of actual as-built cost data for 59 urban heavy and light rail transit projects IN EARLY PHASES IN LATER PHASES (PLANNING & PE) (FD & CONSTRUCTION) More art than science More science but still art Top down Bottom up Use default percentage Use real data available add-ons to construction Most design/engineering costs costs already spent Headcount Change from the default Construction schedule and within a range based on traffic impacts prior experience and Number of drawings knowledge of project Quantity and value of characteristics real estate Uncertain--could be within More certain--major changes margin of error of the con- to total SCC 80 line item are struction cost estimate itself rare, but some components introduced later Exhibit 9. Soft cost estimation approach by project phases.

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How Does the Construction Industry Estimate Soft Costs? 19 Exhibit 10. Comparing industry practice to actuals: Soft costs as a percentage of construction costs. adapted from capital cost databases developed for the FTA. As shown in Exhibit 10, this dataset shows that, on average, transit construction projects have historically incurred soft costs amount- ing to 31.3% of construction costs. The average survey response had as a beginning estimate a midpoint of 32.0% of construction costs for soft costs. The components of soft costs are fairly consistent as well. However, past projects have shown a much wider range of actual soft costs than estimators report. Most estimators surveyed for this Guidebook use ranges, or an "uncertainty band," of total soft cost estimates of around 10% of construction costs. In fact, past transit construction projects have shown a much wider range of actual costs of around 20%. How can such a wide range of actual soft costs be explained so that a project manager can better estimate them? The answer lies in the differences between projects, and the next section presents a tool to address these differences.