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How to Estimate Soft Costs for a New Project 21 long planning phase typically drives up soft cost's percentages. A long planning phase indicates that a higher soft cost percentage may be warranted. But how can an estimator know how long the planning process will take if that phase is still underway? Judgment, or art, is required. In the end, historical evidence and relationships cannot tell the whole story. Statistical analysis alone cannot explain the entire range of soft cost percentages shown in past projects, nor should it be relied on alone when developing a comprehensive estimate. Experienced construction managers have indicated that an estimate from a planning process cannot predict some important causes of soft costs, like the working relationship between a sponsor and contractor in the field. A good soft cost estimate needs the art of human judgment to complement the science of cost relationships. The cost estimating tool described in this Guidebook is Soft Cost Drivers based on an exten- To better quantify soft costs, it is important to understand what characteristics or variables can explain the relationship between construction costs and soft costs. This Guidebook takes as a sive analysis of the starting point a survey of cost estimators and follows up with analysis of actual historical costs. primary drivers of The cost estimating tool described in this Guidebook is based on an extensive analysis of the soft costs in past primary drivers of soft costs in past transit projects and the strength of the relationship between transit projects drivers and actual soft cost expenditures for projects constructed over the past four decades in the United States. With soft cost data on 59 urban rail transit projects adapted from capital cost and the strength databases developed for the FTA, the Guidebook analysis measures the cumulative effect of how of the relationship changes in a variety of project attributes affect resulting soft cost expenditures. between drivers In particular, this Guidebook identifies three different kinds of drivers of soft costs, which and actual soft cost correspond to steps in this new methodology: expenditures for Some drivers of soft costs in past projects can be measured mathematically, and their effects on projects constructed soft costs can be statistically analyzed (e.g., mode, length, construction cost estimate, delivery method, or the percent of the project's alignment below grade). over the past four Some soft cost drivers must be measured categorically or qualitatively with some degree of decades in the judgment based on knowledge of the project (e.g., whether the project development phase is United States. unusually long or the degree of political influence). Some drivers are very difficult to measure objectively and can only be measured with judgment, since industry experience shows that they can have significant impacts on soft costs (e.g., the Although a multi- working relationship between agency and contractors, the quality of engineering expertise, or tude of characteris- agency accounting policies). tics were tested Although a multitude of characteristics were tested to develop this Guidebook, only the to develop this combination of attributes that best explained the changing relationship between construction Guidebook, only and soft costs is presented here. the combination of attributes that Quantifying Soft Costs best explained the First, how should soft costs be measured for cost estimating purposes? Soft costs can be expressed changing relation- in different terms: as a percentage of the total project, as a percentage of hard costs, as a nominal dollar amount, or in nominal dollars per linear foot of guideway constructed in the project. Soft ship between con- costs can easily be quantified in nominal terms, but predicting future soft costs using such a struction and soft measure may not account for differences in project size. In addition, predicting soft costs as a share of the overall project cost is arithmetically problematic since the project manager typically costs is presented has only a construction cost estimate at this stage. here.