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CHAPTER 6 How to Estimate Soft Costs for a New Project This Guidebook presents a new method, firmly rooted in historical experience, for estimating soft costs for a planned transit project. This section demonstrates a step-by-step process to estimate the relationship between hard costs and soft costs of a given transit project, based on certain known characteristics about the project and its sponsor. What This Method Is for and When to Use It It is important to note the kinds of projects this method is designed for: Heavy and light rail. This method was developed based on actual historical costs for heavy and light rail projects, with only limited data for commuter rail and Bus Rapid Transit (BRT) projects. Therefore, the following mathematical steps should not be applied to other public transportation capital infrastructure projects, such as commuter rail or BRT projects. A project in early, conceptual phases. This method is best applicable to projects in early planning phases, approximately until the project has completed an environmental impact statement. After that time, more defined information is likely available for a more bottom-up estimate tailored to the project. This Guidebook's process can then offer a "test of reasonableness" on the detailed, bottom-up estimate. Art versus Science Just as a homeowner cannot tell precisely how much an architect will charge for designing a new kitchen until the kind of remodeling desired is determined, a transit agency cannot tell exactly how much its hard and soft costs will be until the project is defined down to the last turnstile. In addition, every new rail construction project will be slightly different from the last and will encounter unforeseen events along the way, making it impossible to estimate future costs based on historical costs with absolute precision. Therefore, soft cost estimation must blend art with science. Part of a soft cost estimate can be built up in a fairly objective and numerical way by relying on past experience and the known relationships between a project's characteristics and historical costs, and this methodology applies such relationships. For example, a statistical analysis of historical costs demonstrates that heavy rail incurs higher soft costs as a percentage of construction cost--about 6% more (as demonstrated later in Exhibit 27), all other things being equal, so cost estimators can comfortably adjust their figures accordingly. Still another part of an estimate can be generated based on known cost relationships, using some judgment about the project and its context. For instance, history shows that an unusually 20