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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Suggested Citation:"Part 1: Guidebook." National Academies of Sciences, Engineering, and Medicine. 2010. Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. Washington, DC: The National Academies Press. doi: 10.17226/14369.
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Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

Guidebook P A R T 1

5 Introduction 6 Chapter 1 What Are Soft Costs and Why Do They Matter? 7 Chapter 2 How and Who This Guidebook Helps: Audience and Circumstances 8 Chapter 3 What Are Soft Costs? 8 Standard Cost Categories 8 Definition of Soft Costs 9 What Are the Components of Soft Costs? 10 Timing of Soft Costs 10 Typical versus Less Typical Soft Costs 11 Issues in Categorization 11 What Soft Costs Are Not: It Depends on Perspective 13 Chapter 4 How Does the Federal New Starts Process Relate to Soft Costs? 13 When Does FTA Ask for Soft Cost Estimates? 14 Characteristics of the Federal Process That Affect Soft Costs 15 Federal versus Non-Federal Projects 16 Chapter 5 How Does the Construction Industry Estimate Soft Costs? 16 Early Phases 16 Later Phases 18 How Does This Practice Compare with Actual Costs? 20 Chapter 6 How to Estimate Soft Costs for a New Project 20 What This Method Is for and When to Use It 20 Art versus Science 21 Soft Cost Drivers 21 Quantifying Soft Costs 22 Four-Step Process 27 Applying These Steps: Two Example Projects 32 Appendix A FTA Capital Cost Database 34 Appendix B Soft Cost Estimation Worksheet 36 Appendix C Glossary C O N T E N T S

The purpose of TCRP Project G-10 was to research soft costs in major public transportation infrastructure projects, with the goal of producing a guide for transportation project sponsors to learn more about these costs and better estimate them in the future. This Guidebook is one of two final products from the project and is intended to summarize how the project’s research can be applied to practice. For more detailed information about Project G-10’s data collection, methodology, and statistical analysis, please refer to the Final Report in Part 2, which follows the Guidebook. 5 Introduction

6The price tag of a new urban fixed guideway transit line is one of the most visible and critical pieces of information in the public deliberation over whether to build the project. The project’s cost factors prominently in deciding mode and alignment during the project’s alternatives analysis (AA) and preliminary engineering (PE) phases, is repeated in the media, is debated by the stakeholders, and is a crucial input to the “cost-effectiveness” evaluation that forms the basis for the project’s eligibility and recommendation for federal funds. But what do these cost estimates really consist of? Most professionals are familiar with the “hard costs” of transit capital construction such as steel, concrete, rail cars and buses, or construc- tion labor. But what about costs for designing the project, obtaining permits, and managing the construction project? What about the cost of settling a real estate legal issue or testing a mechanical system before the project opens? These are included in the category called professional services or “soft costs” and have ranged from as low as 11% to as high as 54% of hard costs. On average, soft costs for federally funded transit projects account for about a 30% additional cost above hard costs—a significant part of the ever-important estimate of total project cost. Despite the importance and magnitude of professional services or soft costs, project managers may not always understand precisely why soft costs’ percentage of total project cost can span such a broad range, how to best estimate them early in project development, or even what types of soft costs there are. Furthermore, transit agencies may face tough public scrutiny over the accuracy and consistency of their cost estimates, scrutiny that is driven by perceptions that transit project capital costs have been underestimated in the past. Finally, while a great deal of research has targeted hard cost estimation techniques, very little literature exists on the composition and estimation of soft costs for transit projects. This Guidebook is designed to help fill that gap. It is intended to help transportation project sponsors better understand and estimate soft costs, especially during the initial phases of devel- oping a rail project. C H A P T E R 1 What Are Soft Costs and Why Do They Matter?

7This Guidebook is geared toward project managers and cost estimators working for transit agencies or other organizations attempting to plan and construct new rail transit projects. Projects will benefit most from this Guidebook during early planning phases, typically during alternatives analysis or preliminary engineering as the draft environmental impact statement (DEIS) is prepared. Exhibits 1 and 2 describe this document’s intended audience and circumstance. The definition and discussion of soft costs presented here is relevant to almost all kinds of major public transit capital infrastructure projects, but the methodology to estimate soft costs in Chapter 6 applies only to new rail construction projects. This Guidebook is designed to help practitioners in two ways: 1. By providing information. The first sections of this document supply basic information about what soft costs are, how transit agencies and their contractors estimate soft costs, how the estimates fit into the Federal Transit Administration’s New Starts process, and how project characteristics such as guideway length or project delivery method have tended to drive soft costs up or down in the past. 2. By presenting a soft cost estimation methodology. The final sections of this Guidebook provide a new tool to estimate project soft costs, based on both the characteristics of the project and the organizational attributes of its sponsor agency. This methodology is based on industry sur- veys, interviews, and an extensive analysis of the “as-built” costs of nearly 60 rail transit proj- ects over the past three decades. By the end of this Guidebook, the reader should be armed with a clear understanding of what soft costs are and how they are estimated, a new way to approximate soft costs for themselves using a blend of art and science, and a resulting estimate of soft costs for a given project firmly rooted in historical experience. C H A P T E R 2 How and Who This Guidebook Helps: Audience and Circumstances Exhibit 2. Projects this Guidebook addresses. This Guidebook is intended for:  A project manager or cost estimator  An employee or contractor for a transit agency or other sponsor agency (department of trans- portation, airports authority, planning board, etc.)  Anyone responsible for high-level budgeting and/or New Starts application This Guidebook addresses the following types of projects:  Urban public transit construction projects  Projects that are early in planning stages, such as alternatives analysis or preliminary engineering  Heavy or light rail  Projects that potentially need federal funding Exhibit 1. Who this Guidebook addresses.

8Generally, soft costs are the capital expenditures that are required to complete an operational transit project but that are not spent directly on activities related to brick-and-mortar construction, vehicle and equipment procurement, or land acquisition. Instead, these expenses are incurred on professional services that are necessary to complete the project, as described under the Standard Cost Categories (SCCs) below. Soft costs are the expenditures necessary to plan, design, and manage the project, while hard costs are the expenditures required for construction. As an analogy, a homeowner planning to build an addition to his or her house might hire a surveyor to measure the land and an architect to design the project and oversee construction. Fees for these professional services are soft costs to the project. Similarly, a transit agency seeking to expand or renew its infrastructure will hire surveyors, planners, engineers, architects, project and construction managers, and other professionals to plan, design, and develop the transit con- struction project. Standard Cost Categories The Federal Transit Administration (FTA) requires that all candidate and recipient projects for New Starts funds organize and report their project cost estimates in the same way, using the Standard Cost Category structure. This structure consists of ten major cost categories (as shown in Exhibit 3), each of which is further broken down into components. For example, the SCC 50 Systems cost category includes separate components for Train Control, Traction Power, Com- munications, and Fare Collection. This common cost-estimating structure allows FTA to compare cost estimates from different kinds of projects across the country on a consistent basis. Standard Cost Category 80, Professional Services, consists of eight separate components (see Exhibit 1), which together encompass all services and activities commonly associated with project soft costs (although some exceptions are discussed below). For this reason, this Guidebook has adopted the definition and structure of FTA SCC 80, Professional Services, as being equivalent to the definition of soft costs. Based on a review of existing literature, this definition is reasonable, consistent, and comprehensive for estimation purposes. Furthermore, using the SCC structure and the definition of SCC 80 is consistent with the historical analysis that underpins the new soft cost estimation methodology discussed later. Definition of Soft Costs This Guidebook considers soft costs to be equivalent to SCC 80 Professional Services, which FTA (U.S. Federal Transit Administration, 2008) defines as follows: [Soft costs include] all professional, technical and management services (and related professional liability insurance costs) related to the design and construction of fixed infrastructure during the preliminary C H A P T E R 3 What Are Soft Costs? Generally, soft costs are the capital expenditures that are required to complete an operational transit project, but which are not spent directly on activities related to brick-and- mortar construc- tion, vehicle and equipment pro- curement, or land acquisition. Instead, these expenses are incurred on pro- fessional services that are necessary to complete the project.

What Are Soft Costs? 9 engineering, final design, and construction phases of the project. This includes environmental work, design, engineering and architectural services; specialty services such as safety or security analyses; and value engineering, risk assessment, cost estimating, scheduling, before and after studies, ridership modeling and analyses, auditing, legal services, administration and management, etc. by agency staff or outside consultants. The FTA directs applicants to classify any professional services directly related to right-of-way (ROW) acquisition (such as for appraisals and legal services) and vehicle procurement (such as engineering and design work) in their respective categories (SCC 60 and 70), not in SCC 80. What Are the Components of Soft Costs? Following the FTA’s Standard Cost Category structure, most rail transit project soft costs are divided into the eight components of Category 80 shown in Exhibit 3. While all costs in SCC 80 are primarily for professional services, they may be incurred by agency staff or outside consultants, depending on the project. Soft costs are classified into components based on either the timing or purpose of the cost, as follows: • 80.01–Preliminary Engineering—All costs are included in this stage of the project development process. This includes the costs of early design, negotiations for operations and/or maintenance, developing financial plans, and ridership studies. Under alternative project delivery arrangements, the contractor’s soft costs for preliminary engineering should be captured here, and the project sponsor may request that the contractor invoice and report costs under the SCC structure. • 80.02–Final Design—All costs associated with the final design (FD) stage. Costs for services similar to the above description are captured here. • 80.03–Project Management for Design and Construction—Project management oversight costs. Costs to support design, management, and administrative efforts for legal, technical, and environmental consultants are reported here. 10 Guideway & Track Elements (route miles) 20 Stations, Stops, Terminals, Intermodal (number) 30 Support Facilities: Yards, Shops, Admin. Bldgs 40 Sitework & Special Conditions 50 Systems 60 ROW, Land, Existing Improvements 70 Vehicles (number) 80 Professional Services 90 Unallocated Contingency 100 Finance Charges Total Project Cost (10–100) 80.01 Preliminary Engineering 80.02 Final Design 80.03 Project Management for Design and Construction 80.04 Construction Administration and Management 80.05 Professional Liability and Other Non-Construction Insurance 80.06 Legal; Permits; Review Fees by Other Agencies, Cities, etc. 80.07 Surveys, Testing, Investigation, Inspection 80.08 Start Up Exhibit 3. FTA Standard Cost Categories with Category 80 components.

10 Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects • 80.04–Construction Administration and Management—Quality control, quality assurance, and construction management during the construction phase. • 80.05–Insurance—Project insurance to cover professionals’ liability insurance, owner-provided builder’s risk, other agency insurance, etc. This component does not include construction contractors’ liability or general insurance. All construction contractors’ insurance costs should be reported in a corresponding hard cost category. • 80.06–Legal; Permits; Review Fees by Other Agencies, Cities, etc.—Costs associated with the local and state project approval process, and any legal costs. • 80.07–Surveys, Testing, Investigation, Inspection—Costs of alignment and facility surveys, security and safety inspections, material and geological testing, and inspection services. • 80.08–Start Up—Costs associated with the operational initiation of services and training of operations, maintenance, and supervisory staff. Timing of Soft Costs While some components of soft costs tend to relate to specific phases of project development over time, others tend to reflect costs incurred throughout the life of the project. For instance, most projects will incur all of their Preliminary Engineering expenses (SCC 80.01) early in their lifecycle, and Startup costs (SCC 80.08) will be spent near the end of the project. In contrast, Insurance costs (SCC 80.05) may be incurred over the life of the project. Typical versus Less Typical Soft Costs The types of soft costs encountered in rail transit construction projects in the United States can vary widely depending on project characteristics, local and state regulations, and the project administration practices and experience of the sponsor agency. As shown in Exhibit 4, certain typical soft cost components are normally required for any new rail construction project, while other soft cost components are encountered less frequently and may be unique to the project. As a result, some projects may incur no costs in some components, while other projects may incur costs in many or even all components. For example, most projects will incur significant soft costs for hiring a contractor or assigning employees to prepare preliminary engineering and design plans and help obtain environmental approval for a project. Similarly, nearly all projects require project administration and management. To take a contrasting example, most agencies take on significant soft costs to manage the construction project once the “shovel hits the dirt.” However, the exact nature of these costs depends on the agency: these costs could include salaries and wages of employees in the transit TYPICAL SOFT COSTS INCURRED IN MOST PROJECTS Design and engineering services for preliminary engineering and final design Transit agency staff managing project, development, construction, and customer information Reimbursement to external entities such as police, utilities, and other costs of local and state government Insurance LESS TYPICAL SOFT COSTS INCURRED IN SOME PROJECTS, DEPENDING ON CHARACTERISTICS Professional services to support acquiring real estate for right-of-way Third-party contractor managing construction Design and engineering services to re-design a project, due to unforseen circumstances Exhibit 4. Types of soft costs encountered in rail transit construction.

agency’s construction department or could be for an outside contractor managing construction. For projects that must connect with existing transit service when complete, such as a line extension, agency staff time may be required for train safety and testing procedures. The form and type of soft costs are not always applicable to all projects. Issues in Categorization Despite FTA’s clear classification of soft costs within SCC 80, situations may arise where it is not clear how or where a specific cost should be recorded, or whether a cost is considered soft. Much of this uncertainty is driven by inconsistencies in how certain types of costs have been understood and categorized in past projects and, by extension, how to budget for these costs in the future. Several potential issues arise. Two key examples are discussed below: Force Account Different agencies account for the salaries and wages of their employees supporting a new capital project (sometimes called “force account”) in different ways. Force account costs can range from a construction department manager in charge of the project, to a bus operator who works a weekend to provide alternative bus service around a temporary disruption caused by the project’s construction, to administrative employees who work primarily on capital projects, to rail maintenance-of-way employees who connect the new project to existing track. Some agencies will choose to pay these expenditures from their operating budget, while others will charge the costs directly to the capital project. In addition, the distinction between an employee overseeing overall construction and an employee directly supporting construction can be a difficult one and can affect whether the cost is assigned to SCC 80 or to a construction category (SCC 10–50). Regardless of past practices, FTA directs grantees to classify the costs of agency staff for flagging, alternative bus service, and access/protection costs in SCC 10–50 (or SCC 40.08, Temporary Facilities and Other Indirect Costs During Construction), not in Professional Services (SCC 80). Real Estate and Vehicle Soft Costs Many new rail projects incur the cost of professional services associated with acquiring real estate and procuring vehicles, which are typically distinct from the construction project. Examples of these services include agency staff overseeing and administering procurement, real estate and relocation consultants, vehicle engineers, property assessors, legal counsel, court expenses, insur- ance, warranty costs, and so on. These professional services are comparable to those found in SCC 80 in that they represent service costs that do not directly support construction. However, current FTA guidance requires that all soft costs related to real estate and vehicle procurement should be assigned to their respective cost categories (SCC 60 and 70, respectively), not Professional Services (SCC 80). FTA’s guidance, by excluding the costs for professional services associated with real estate and vehicles, establishes a relationship between soft costs or Professional Services (SCC 80) and costs for fixed infrastructure (SCC 10 through 50) that is comparable to the relationship found in any building project. What Soft Costs Are Not: It Depends on Perspective The term “soft costs” can mean different things to different people, depending on their institutional—or contractual—perspective. For example, the project sponsor will likely view soft costs as all expenditures on those professional services identified in Standard Cost Category 80. In addition, the distinction between an employee overseeing overall construction and an employee directly supporting con- struction can be a difficult one. What Are Soft Costs? 11 The term “soft costs” can mean different things to different people, depending on their institutional— or contractual— perspective.

12 Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects Expenditures in other categories reflect the sponsor’s expenditures on direct activities, perhaps primarily composed of payments to construction contractor(s) or a vehicle vendor. In contrast, general construction contractors may view their costs of contract administration, overhead, and related expenses as soft costs for their organization. Although these activities sound very similar to the types of services identified in SCC 80, they are the contractor’s (not the sponsor’s) costs and are therefore considered hard costs outside of SCC 80. To keep matters clear, this Guidebook defines soft costs from the perspective of the project sponsor. Note that in design–build (DB) or other turnkey contracting situations where the division between a contractor’s design and construction costs may be less transparent to a project sponsor, FTA still directs grantees to report design costs incurred by the design–build contractor in SCC 80.

13 The FTA’s New Starts grant program makes available new funding per year to project sponsors (also called grantees) to construct transit infrastructure. The FTA requires candidate projects to adhere to a well-defined development and planning process, meeting multiple requirements and following a structured schedule of set milestones that can affect soft costs. Major transit capital project planning in the federal process involves the development of projects from an initial con- cept through final design, construction, and operation, and continuing through the eventual replacement of the project. Along with estimating hard project costs comes the estimation of soft costs. Over time, as a project becomes better defined, the soft cost estimation process increases in sophistication from the proportionate approximation to the more detailed or “bottom up” estimation for each functional aspect of soft costs. Sponsors seeking federal funds, typically from FTA’s New Starts or Small Starts grant program, usually follow a structured process to define, plan for, and build a transit project. Projects join a pipeline of other candidate projects to compete for federal funds, submitting a New Starts application every year in which the project and its sponsor are evaluated on a variety of criteria. Provided that grantees meet certain requirements, FTA periodically authorizes project sponsors to proceed to the next stage of planning or design, often funded in part by federal funds. Exhibit 5 describes these phases schematically and indicates where in the process the sponsor typically makes an estimate of all project costs, including soft costs, with the FTA Standard Cost Category workbook structure. FTA New Starts, the largest federal program for funding major new capital investments in public transportation, has several decision points for proceeding, also shown here. Each of these decision points requires an estimate of project capital costs, including the estimation of soft costs. Prior to these decision points, stages of technical analysis are required as shown in the devel- opment of each project. Sponsoring agencies are required to submit documentation, including detailed estimates for project capital costs, for evaluation by the FTA under the New Starts criteria process and the Project Management Oversight (PMO) process. Other initiatives, such as the Fixed Guideway Modernization Program, provide funds for rehabilitation or improvement of existing transit systems through similar means. When Does FTA Ask for Soft Cost Estimates? FTA requests cost estimates in the SCC format at each of the stages of project development: Planning, Alternatives Analysis, Preliminary Engineering, Final Design, and Construction. As noted above, grantees report soft cost estimates in SCC 80, Professional Services. Specific federal C H A P T E R 4 How Does the Federal New Starts Process Relate to Soft Costs? The FTA requires candidate projects to adhere to a well-defined development and planning process, meeting multiple requirements and following a struc- tured schedule of set milestones that can affect soft costs.

14 Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects requirements trigger the estimation of soft costs, such as the project evaluations required at each stage before approval to enter the next stage of project development. In addition, the ongoing project oversight and evaluation process requires additional project support efforts that are included in soft costs. These include, for example, project performance measure reporting, financial plan- ning, environmental impact review, and stakeholder outreach efforts. FTA first asks grantees for an estimate of project cost, including soft costs, before they allow the project to enter into PE. This initial estimate is typically a rough approximation. Sponsors usually issue a cost estimate once the project is in the PE phase as well, where again the soft cost estimates are typically conceptual in nature. Later, if and when the project progresses into final design, estimates of project cost become more accurate and well developed as the project itself becomes better defined. Chapter 5 describes how the industry normally estimates soft costs at these stages. Characteristics of the Federal Process That Affect Soft Costs The FTA’s New Starts (and Small Starts) process affects soft costs in several ways. First, as the project advances into PE, the FTA typically has discretion over when “the clock starts” and early planning costs begin to be attributed to the project. Many New Starts candidate projects grow out of broad transportation planning activities covering an entire metropolitan region, or an alternatives analysis analyzing a range of modes and projects within a transportation corridor. Because of this, the time at which a general planning activity becomes a singular project with a Locally Preferred Alternative is not always clear. Any costs incurred before FTA approves a grantee to enter PE are not included in a Full Funding Grant Agreement and the project’s SCC estimate. Because the FTA helps pinpoint this time, the federal process can “define in or out” some early soft costs. ROD = Record of Decision FFGA = Full Funding Grant Agreement Exhibit 5. Phases in FTA New Starts process timeline. Specific federal requirements trig- ger the estimation of soft costs, such as the project eval- uations required at each stage before approval to enter the next stage of project develop- ment. In addition, the ongoing project oversight and evaluation process requires additional project support efforts, which are included in soft costs.

Second, the federal process for new transit capital projects imposes some unique requirements on project sponsors that usually result in soft costs. For example, • The FTA requires grantees to estimate “transportation system user benefits” of the project by following certain procedures, typically resulting in some professional services soft costs for travel demand modeling. • During PE, the federal process tends to encourage grantees to analyze environmental impacts in concert with developing engineering plans, which can advance some engineering soft costs. • The FTA requires grantees to analyze the environmental justice impacts of a project, conduct a risk assessment process, and develop a project management plan, usually resulting in some soft costs. Federal versus Non-Federal Projects Despite the impact of the FTA’s New Starts project development process on soft costs, its impacts are probably not unique. Even if a project sponsor chooses to forego federal funds, the project may face state and local requirements that can affect soft costs in very similar ways to the FTA’s process throughout the project’s life: • During PE, the environmental reviews required at the state level can be as stringent as federal requirements. However, the sponsor may not be required to estimate ridership or develop a project management plan in the same way. • During final design, the amount of time required to develop construction plans is typically the same, although state and local review times can be shorter than federal. • In the construction phase, the major soft costs for managing the construction project are probably equivalent to a federal project. How Does the Federal New Starts Process Relate to Soft Costs? 15 Even if a project sponsor chooses to forego federal funds, the project may face state and local requirements, which may affect soft costs in very similar ways to the FTA’s process throughout the project’s life.

16 Sponsors of major new transit projects approach estimating soft costs differently, depending on how far along the project is in the planning process. Early Phases During the early phases of planning (alternatives analysis or preliminary engineering), a transit project is only conceptually defined, as are the soft costs. At these early stages, transportation planners usually identify a single corridor for construction but develop a range of options for more specific details such as mode, alignment, station locations, and, as a result, construction costs. Therefore, soft costs are usually treated as percentage add-ons to estimates of hard construction costs, as shown in Exhibit 6. Cost estimators apply default unit costs to approximate construction quantities, remediation, and other hard costs, and then simply add a percentage of hard costs for an initial soft cost estimate. How do cost estimators choose these percentages? They typically apply values for each soft cost component from a range based on historical experience and project characteristics, or soft cost “drivers.” For example, most estimators will choose higher multipliers for heavy rail than for bus rapid transit and lower multipliers if the sponsor plans to contract the project with an alternative delivery mechanism such as design–build. Exhibit 7 provides a more complete list, and Chapter 6 demonstrates a technique to tailor a soft cost estimate to a project. How large are the soft cost percentages? Based on a survey of cost estimators at transit agen- cies and consultants across the country, most cost estimators start with a midpoint for these add-ons representing around 25–35% of construction costs, as Exhibit 8 indicates. However, cost estimators almost always adjust up or down from these midpoints, so the ranges from which estimators choose the percentages extend higher or lower than these midpoints. Later Phases During the final design phase and as construction begins, estimates of soft costs based on a percentage of construction cost are replaced with more closely tailored, bottom-up estimates that are based on a more detailed understanding of the project than was available in earlier stages. Rather than simply multiplying a construction cost estimate by a percentage, project managers usually develop their own soft cost estimates based on project characteristics that are known with better certainty at this stage, such as the project’s work breakdown structure, staffing plans, design contract(s), and even the number and complexity of design drawings. For instance, administra- tion costs may be estimated based on an estimated headcount and project duration, which are in turn based on the construction schedule and number of contracts. C H A P T E R 5 How Does the Construction Industry Estimate Soft Costs?

How Does the Construction Industry Estimate Soft Costs? 17 Since the project’s specific characteristics are more well-defined in these later stages, sponsors also have a better idea of soft costs that are highly dependent on the specific project sponsor, such as: • Whether a third party will be managing construction; • How the sponsor will account for agency staff salaries and wages; • Who will bear insurance costs (sponsor agency or contractors); and • If the project will require significant effort for environmental work, permits, or public involvement. Construction Cost Soft Costs x Percentage = $ Guideway $ Vehicle Cost Vehicles $ Vehicle Soft Costs $ Stations $ Maintenance Yard $ Etc. $ TOTAL $ TOTAL $ Real Estate Cost Acquisitions $ RE Soft Costs $ TOTAL $ TOTAL PROJECT COST $ Exhibit 6. Cost estimation in early project phases. LOWER % SOFT COSTS MODE PROJECT DELIVERY Bus Rapid Transit Design–Build MIXED/MID-RANGE % SOFT COSTS Commuter Rail Light Rail Design–Bid–Build Elevated Alignment New Right-of-Way HIGHER % SOFT COSTS Heavy Rail Tunnel Alignment Differing Subsurface Conditions Design–Build–Operate–Maintain Full Turnkey ALIGNMENT OTHER CONDITIONS Exhibit 7. Project characteristics guiding soft cost percentage estimates within a range.

18 Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects 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 PE M id po in t E st im at ed S of t C os t (% of C on str uc tio n) SURVEY RESPONDENTS * Respondents estimate PE & FD as combined amount; PE displayed here using average split Exhibit 8. Midpoint soft cost estimates for all components during project planning phases. IN EARLY PHASES (PLANNING & PE) More art than science Top down Use default percentage add-ons to construction costs Change from the default within a range based on prior experience and knowledge of project characteristics Uncertain—could be within margin of error of the con- struction cost estimate itself IN LATER PHASES (FD & CONSTRUCTION) More science but still art Bottom up Use real data available • Most design/engineering costs already spent • Headcount • Number of drawings • Quantity and value of real estate • Construction schedule and traffic impacts More certain—major changes to total SCC 80 line item are rare, but some components introduced later Exhibit 9. Soft cost estimation approach by project phases.

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. Exhibit 10. Comparing industry practice to actuals: Soft costs as a percentage of construction costs. How Does the Construction Industry Estimate Soft Costs? 19

20 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 C H A P T E R 6 How to Estimate Soft Costs for a New Project

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. Soft Cost Drivers 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 starting point a survey of cost estimators and follows up with analysis of actual historical costs. The cost estimating tool described in this Guidebook is based on an extensive analysis of the primary drivers of soft costs in past transit projects and the strength of the relationship between 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 databases developed for the FTA, the Guidebook analysis measures the cumulative effect of how changes in a variety of project attributes affect resulting soft cost expenditures. In particular, this Guidebook identifies three different kinds of drivers of soft costs, which correspond to steps in this new methodology: • Some drivers of soft costs in past projects can be measured mathematically, and their effects on 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). • Some soft cost drivers must be measured categorically or qualitatively with some degree of judgment based on knowledge of the project (e.g., whether the project development phase is 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 working relationship between agency and contractors, the quality of engineering expertise, or agency accounting policies). Although a multitude of characteristics were tested to develop this Guidebook, only the combination of attributes that best explained the changing relationship between construction and soft costs is presented here. Quantifying Soft Costs First, how should soft costs be measured for cost estimating purposes? Soft costs can be expressed 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 costs can easily be quantified in nominal terms, but predicting future soft costs using such a 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 has only a construction cost estimate at this stage. How to Estimate Soft Costs for a New Project 21 The cost estimating tool described in this Guidebook is based on an exten- sive analysis of the primary drivers of soft costs in past transit projects and the strength of the relationship between drivers and actual soft cost expenditures for projects constructed over the past four decades in the United States. Although a multi- tude of characteris- tics were tested to develop this Guidebook, only the combination of attributes that best explained the changing relation- ship between con- struction and soft costs is presented here.

22 Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects Therefore, while each of these indicators quantifies soft costs in some way, it is suggested that the most appropriate measure for a soft cost estimate is as a percentage of hard construction costs (excluding real estate and vehicle costs).1 Four-Step Process The recommended estimation technique contains four steps: 1. Begin with default averages. As a starting point, begin with average actual historical soft costs for each component. 2. Adjust based on mathematical relationships. Next, adjust the soft cost estimate following the numerical relationship between the project’s characteristics and historical soft costs. 3. Adjust based on categorical relationships. Next, increase or decrease the soft cost percent- ages based on how the project fits into any of several unique situations. 4. Apply judgment. Finish the estimate by applying some degree of discretion based on knowl- edge about the unique and intangible qualities of the project and its sponsor. To simplify the analytical procedure, this technique consolidates the eight components in FTA’s Standard Cost Category 80 into five basic components for estimation purposes, as shown in Exhibit 11. Once estimation of these components is completed, the five categories are converted back into FTA’s structure. The five components broadly align with FTA’s SCC structure, but they combine some categories that are either a relatively small cost (e.g., Other) or are so similar to other categories that many agencies lump them together for estimating purposes (e.g., Project Management for Design and Construction, and Construction Administration and Management). The following describes the four steps in more detail: Step 1: Begin with Default Averages As a first step in estimating soft costs, begin with the default soft cost percentages as defined in Exhibit 12. These values are based on average actual historical as-built costs. They are consis- 1Because the FTA instructs project sponsors to classify professional services costs related to vehicles and real estate into SCC 60 and 70, it is inappropriate to include real estate and vehicle costs as hard costs for the purposes of this Guidebook. 80.01 Preliminary Engineering 80.02 Final Design 80.03 Project Management for Design and Construction 80.04 Construction Administration and Management 80.05 Professional Liability and Other Non-Construction Insurance 80.06 Legal; Permits; Review Fees by Other Agencies, Cities, etc. 80.07 Surveys, Testing, Investigation, Inspection 80.08 Start Up Exhibit 11. Mapping SCC 80 components to categories applied in this Guidebook. Exhibit 12. Default soft cost averages.

How to Estimate Soft Costs for a New Project 23 tent with average midpoint estimates currently used in the industry, and so provide a safe and well-established starting point for estimation purposes. It is important to continue past this step, however. These default averages only begin to estimate a project’s expected soft costs. The averages are a “naïve” starting point from which to quantify soft costs, because they only describe a “typical” project sponsored by a “typical” agency in “typical” conditions. Transit construction projects and their sponsors come in all shapes and sizes, and no project is entirely “typical.” Step 2: Adjust Based on Mathematical Relationships In this step, adjust the default percentages based on the project’s characteristics that have been shown mathematically. Alignment Length Transit capital projects with alignments (length of track or guideway) that stretch for longer distances tend to incur somewhat higher soft costs as a percentage of construction cost. Recom- mended adjustments to the default values are summarized in Exhibit 13. Add 1.3% to the total soft costs percentage estimate for every 10,000 linear feet of guideway2 constructed, with 0.9% added to PM/CA and 0.4% to Other. Be sure to perform this calculation proportionately if the project would construct more or less than 10,000 linear feet of guideway. For example, for 5,000 linear feet, add 0.45% to PM/CA and 0.2% to Other. Construction Costs Other things being equal, more expensive construction projects tend to display somewhat smaller soft cost percentages than less costly projects, mostly because their construction adminis- tration, project management, insurance, and other costs do not rise proportionally to construction costs. Recommended adjustments to the default values are summarized in Exhibit 14. For every $1 billion in construction cost estimate, subtract 6.0%: 4.5% from PM/CA, 1.0% from Insurance, and 0.5% from Other. It may seem counterintuitive to adjust up for alignment length and down for construction cost, since both measures broadly describe the magnitude of the project. Historically, however, these two measures in tandem are good predictors of soft costs and will capture the special cases where short, expensive projects (such as a tunnel project) or long, less-expensive projects (such as service on existing right-of-way or in less developed areas) tend to demonstrate differing soft costs. Mode Heavy rail projects tend to incur somewhat higher soft costs than light rail, perhaps due to their relative complexity. Heavy rail projects can typically involve constructing guideway and systems that have been designed to more rigorous engineering standards that support more complex systems, move higher passenger volumes, and operate at higher speeds relative to light rail. Therefore, recommended adjustments to the default values are summarized in Exhibit 15. If the project is heavy rail, add 6.0% to the total soft cost percentage: add 1.5% to PE, 3.5% to PM/CA, and 1.0% to Insurance. Exhibit 13. Alignment length formula. 2Length of guideway should measure only the length of the construction from beginning to end, regardless of double tracking, track miles, etc. Exhibit 14. Construc- tion costs formula. Exhibit 15. Mode formula.

Installation Conditions A project to construct a new, stand-alone transit line that is not adjacent to any previous service will usually require less design costs than projects to extend or expand an existing rail line. When a construction project interacts with existing transit service in any way, more engineering and design work has typically been required in the final design phase. Working on or near an active rail right-of-way poses additional logistical challenges that must be planned for, and may also trigger additional safety requirements. Extending a rail line will mean integrating the new track and station(s) into the older infrastructure, and additional work is usually required to ensure that signal, power, safety, and other systems operate compatibly. Recommended adjustments to the default values are summarized in Exhibit 16. If the project is to be installed under no active adjacent or adjoining rail service, subtract 4.0%: 3.0% from PE and 1.0% from FD. Delivery Method When sponsors choose to procure their projects through an alternative delivery mechanism such as design–build, design–build–own–maintain, or construction manager/general contractor, these projects have historically incurred lower soft costs. In addition, these alternative delivery methods tend to frontload more design and planning costs in preliminary engineering. However, these project’s lower soft costs may be partially the result of differences in measure- ment rather than a real reduction in cost. Contractors may simply categorize their costs in dif- ferent ways than transit agencies (in the construction line item, for example), which makes that project’s soft costs as a percent of construction appear low. Recommended adjustments to the default values when estimating soft costs in early project phases are summarized in Exhibit 17. If the project is to be delivered through a non-traditional (i.e., outside of design–bid–build) mechanism, add 1.0% to PE, subtract 1.0% from FD, and subtract 7.0% from PM/CA. Note that in a design–build or other alternative project delivery method where the division between a contractor’s design and construction costs may be less transparent to a project spon- sor, FTA still directs grantees to report design costs incurred by the design–build contractor in SCC 80. A word of caution on delivery method: alternative project delivery methods entail a cultural shift in the way the sponsoring agency develops and executes these projects. Because these alter- native methods are not yet very common in the United States, the project’s sponsor may not fully understand them. For example, being unfamiliar with the required level of design or the heavy focus on performance-based/functional specification under a design–build, some transit agen- cies may continue to work in a more traditional mode (i.e., prescriptive specifications and higher level of design), unknowingly duplicating soft costs. If the alternative delivery method is relatively new to the project sponsor, subtract a lower per- centage (e.g., 3.0 or 4.0%) from PM/CA, depending on the level of project sponsor support required. Economic Conditions The overall health of the economy, as well as the level of construction activity, can affect the construction bids a transit project sponsor can expect to receive. If the construction sector or economy at large is in a downturn when a project sponsor accepts bids, contractors may reduce their bids due to economic forces. In this case, soft costs computed as a percentage of the engi- 24 Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects Exhibit 16. Installation conditions formula. Exhibit 17. Delivery method formula.

neered construction cost estimate might look relatively higher simply because the bid construction cost is lower. Historically, some change in soft costs can be attributed to the rate of Gross Domestic Product (GDP) growth when construction contracts are bid, after accounting for other variables. Although GDP growth rises and falls with the economy, it has historically risen an average of 2.5% to 3.0% per year. It is difficult to use this driver to estimate soft costs for a project years away from construction since future GDP growth is difficult to predict. If the project is to be advertised for bid within a year, however, for every percentage point the U.S. GDP has grown since the previous year, subtract 1.5% from the soft cost percentage: 1.0% from FD and 0.5% from PM/CA. Conversely, for every percentage point the U.S. GDP has shrunk since the previous year, add 1.5 percentage points to the soft cost estimate to the same components. These recommended adjustments to the default values are summarized in Exhibit 18. For example, suppose a project will be advertised within months, but the economy is strong and this year’s GDP is 4% higher than last year’s. A transit agency sponsor might expect relatively higher construction bids because of the market demand for construction expertise. If construction costs are high, soft costs as a percent of construction costs will likely fall, so an estimator using this methodology might subtract up to 4 × 1.5% = 6.0% from the soft cost estimate. Step 3: Adjust Based on Categorical Relationships In this step, adjust the soft cost percentages based on characteristics of the project or its context. These characteristics may be more difficult to assess for a given project, and cannot always be measured as a “yes” or “no.” Therefore, with this methodology it is recommended to adjust percentage estimates up to a certain limit. Deciding to what degree any project fits into the categories shown in this section will require some degree of judgment and professional experience. Unusually Long Project Development Phase A significant component of engineering and design cost is simply the salaries and benefit costs of planners working on the project. When the early project development phases for a project take an unusually long time, these costs tend to continue to be charged to the project, increasing overall soft costs. Historically, when more than approximately five to seven years elapse between entering preliminary engineering and the beginning of construction, projects have shown higher soft cost percentages on the order of 7.0% of construction costs. Some judgment will be required to predict a construction date and determine when the planning stages begin. If the overall project development phases will likely continue longer than seven years, and if planning and engineering work continue steadily, make the recommended adjustments to the default values summarized in Exhibit 19. Add up to 1.0% to PE costs and up to 6.0% to FD. Apply fewer percentage points depending on the length of the planning process. Unusual Political Influence When public involvement or political pressures are high, such as in a contentious design and planning process, soft costs tend to rise relative to construction costs, as much as 6.0%. When, for example, multiple planning boards, citizen advisory councils, and officials must approve the design, and could even call for a redesign, make the recommended adjustments to the default How to Estimate Soft Costs for a New Project 25 Subtract 1.5% TOTAL for every percentage point the U.S. GDP has grown since the previous year, if project to be advertised for bid within one year: Exhibit 18. Economic conditions formula. Add up to 7.0% TOTAL if the overall planning phase will continue longer than five to seven years. Apply fewer percentage points for shorter planning phase: Exhibit 19. Unusually long project develop- ment phase formula.

26 Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects values summarized in Exhibit 20. Add up to 6.0%: up to 1.5% to FD and up to 4.5% to PM/CA. While intuitively a more contentious planning process would tend to drive up costs earlier in project development (such as PE), the data on which this Guidebook is calibrated indicate that actual cost percentage increases occur earlier—in FD and PM/CA. Agency Tendency to Minimize Capital Charges When a transit agency sponsors a construction project, it usually contributes some of its own labor and even materials. Agency employees often inspect construction activities, monitor safety, administer the contract, acquire property, manage the project, and perform many other tasks. As opening day approaches, agency staff contribute time coordinating testing, training, safety inspections, and shared tasks with other agencies. The agency chooses whether to charge these expenditures to the capital project (either directly or as an overhead-type allocation) or to absorb them into the operating budget, and project sponsors each have different internal policies for this. In the past, agencies that have strongly tended to minimize capital expenditures have shown a re- duction of up to 6.0% in soft costs as a percentage of construction. Recommended adjustments to the default values are summarized in Exhibit 21. Depending on the sponsor agency’s internal policy on capitalizing costs, subtract 3.0% from the PM/CA, 1.0% from Insurance, and 2.0% from Other. Step 4: Apply Judgment At this point, this methodology has produced a set of five soft cost percentages for PE, FD, PM/CA, Insurance, and Other that are tailored to a given project based on its characteristics and some judgment about its context. However, these more objective techniques must always be tempered with some degree of discretion based on knowledge about the unique and intangible qualities of the project and its sponsor. Rely on the characteristics in Exhibit 22 to add to or subtract from the resulting soft-cost percentage estimate. If this methodology has resulted in an unintuitive or unusually low percentage estimate, use judgment to adjust to a more reasonable percentage. For example, any negative values could Exhibit 21. Capital minimization formula. However, these more objective techniques must always be tempered with some degree of discretion based on knowledge about the unique and intangible qualities of the project and its sponsor. Exhibit 22. Characteristics influencing soft cost percentages. Exhibit 20. Unusual political influence formula.

be restored to zero. Further, if the net effect of adjustments suggested here results in soft cost estimates below 15% or above 50%, apply judgment as well. In the decades of historical experience analyzed to support this Guidebook, no transit project has shown soft costs lower than 11% or higher than 54% of construction costs. Finally, convert the soft cost percentages from the five components estimated here back into the eight components called for in FTA’s SCC structure. • For Project Management and Construction Administration, divide the soft cost percentage estimate between SCC Components 80.03 and 80.04, 60% of the estimate to Project Management, and 40% to Construction Administration. This ratio is based on a consistent pattern with historical projects over time. • For Other soft costs, some judgment will be required based on knowledge of the project sponsor. However, this estimate is relatively small, making the sub-allocation to SCC components less precise. Begin by dividing the soft cost percentage estimate for Other costs developed here into even thirds between SCC components 80.06, 80.07, and 80.08. Then, adjust using the following guidelines: – 80.06 Legal; Permits; Review Fees by Other Agencies, Cities, etc. If the project falls under the purview of multiple municipalities, counties, or other political jurisdictions, or if the project requires multiple difficult permits, increase this component’s share. Otherwise, leave this component with roughly one-third of the Other costs. – 80.07 Surveys, Testing, Investigation, Inspection. The base one-third allocation is likely sufficient for this component. – 80.08 Start Up. If the sponsor agency capitalizes startup and operations testing, maintain or possibly increase the estimate. Otherwise, decrease this component’s share, potentially to zero. Applying These Steps: Two Example Projects How might this four-step process be applied to a real project? The following provides a case study on two hypothetical but nevertheless “typical” situations: Shelbyville Light Rail Springfield’s Metropolitan Transit Authority (MTA) has just finished an alternatives analysis on the Shelbyville corridor. As a result of this process, the MTA has selected light rail as a Locally Preferred Alternative and believes that the project can use an existing freight right-of-way. This will be Springfield’s first rail transit service. The planned 7.5-mile alignment begins at an inter- modal hub in downtown Springfield with connections to Amtrak, and extends north through several neighborhoods in another county before terminating in Shelbyville. The new rail service will leave downtown on a new flyover from the terminal, and then the new tracks will be laid parallel to an existing freight line, with additional grade crossings constructed or reconstructed as needed, as shown in Exhibit 23. The project will require some re-grading and mitigation work that will impact the Pockomock Swamp, an environmentally sensitive area. MTA plans to construct the project using a construction manager/general contractor (CM/GC) project delivery approach with a guaranteed maximum price, and hopes to open the line for service by 2014. MTA has a preliminary construction cost estimate of $425 million based on construction quantities and unit costs, and a ridership forecast from a forecasting model from the design consultant team. The construction cost estimate includes a contingency and is expressed in year- of-expenditure dollars, escalated at 3.75% per year. How to Estimate Soft Costs for a New Project 27 Exhibit 23. Schematic map of Shelbyville Light Rail.

28 Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects Based on this information, MTA feels the project may be a good candidate for federal New Starts funds. Therefore, the project manager’s next task is to assemble a capital cost budget in FTA’s SCC format. But while MTA has chosen an alignment, many details are still left to be decided, such as the exact location of the new rail maintenance facility, coordination with the existing freight railroad, and traffic impacts downtown from the flyover construction. To estimate a value for SCC 80, MTA turns to this Guidebook’s methodology. Step 1: Begin with Default Averages Begin with the default averages suggested in Exhibit 12, totaling 29.5 percentage points. Step 2: Adjust Based on Mathematical Relationships • Alignment length. The Shelbyville line will be approximately 39,200 linear feet, so MTA adds 3.92 × 1.3% = 5.1% to PM/CA and Other, for a total of 34.6% • Construction costs. A construction price tag of $425 million implies a reduction of 0.425 × 6.0% = 2.6% points across PM/CA, Insurance, and Other, to total 32.0%. • Mode. This project is light rail, so no adjustment is necessary. • Installation conditions. The project is sharing the right-of-way with an active railroad, which may create challenges for design and construction teams. Therefore, MTA makes no reduction to the soft cost estimate. • Delivery method. Since MTA expects to hire a CM/GC, this will likely reduce MTA’s costs of project oversight but may require some extra effort during preliminary engineering. Deduct 8.0% from PM/CA and FD, and add 1.0% to PE, for a total of 25.0%. • Economic conditions. The project manager hopes to advertise the project for bid within the next year, and the economy is currently growing after recovering from a fairly strong recession. The project manager looks up the U.S. GDP from the U.S. Bureau of Economic Analysis website. Since the latest quarter’s data shows that the GDP has increased by 1% since last year, MTA subtracts 1.5% from FD and PM/CA, for a new total of 23.5%. Step 3: Adjust Based on Categorical Relationships • Long development phase. This project has so far been progressing quickly, so no adjustment is necessary. • Political influence. This project is subject to review from both the Shelbyville and Springfield City Councils, who have historically disagreed on many issues. Because of this uncertainty, MTA adds 2.0%, 1.51.% to PM/CA and 0.5% to FD, for a new total of 25.5% • Agency tendency to minimize capital charges. This is MTA’s first rail project, and the proj- ect manager has no reason to expect this tendency of the agency, so no adjustment is necessary. Step 4: Apply Judgment After arriving at an estimate of soft costs at 25.5% of construction costs, MTA’s project manager reviews the estimate for reasonableness based on the project sponsor’s knowledge. Relying on judgment, the project manager makes the following changes: • Deducts 2.0% from FD because of existing right-of-way. The existing freight railroad company has so far been a cooperative partner in the project, and the project manager expects to rely MTA feels the proj- ect may be a good candidate for fed- eral New Starts funds. Therefore, the project man- ager’s next task is to assemble a capi- tal cost budget in FTA’s SCC format. But while MTA has chosen an align- ment, many details are still left to be decided. . . . To estimate a value for SCC 80, MTA turns to this Guidebook’s methodology.

How to Estimate Soft Costs for a New Project 29 on their technical expertise throughout the project, saving some professional service costs. The new total is 23.5%. • Adds 1.0% to PE to account for environmental mitigation. The project manager is uncertain about what the state’s Department of Environmental Protection will require to mitigate any impacts on the Pockomock Swamp and expects the planning process will take time and money. The MTA’s new total is now 24.5%. Finally, the five component estimates need to be split between SCC 80 components. The estimate of 9.1% for PM/CA is split 9.1% × 6.0% = 5.5% to SCC 80.03, and 9.1% × 4.0% = 3.6% to SCC 80.04. MTA splits the base estimate of 2.4% for Other as follows: 1.0% to SCC 80.06, 1.0% to SCC 80.07, and 0.4% to SCC 80.08. MTA’s final estimate is shown in Exhibit 24. West County Light Rail Project The XYZ Transit Agency (XTA) is planning a light rail transit project to serve communities in parts of West County. The project, known as the West County Light Rail Transit (WCLRT) project, is a 10.4-mile extension of the existing XTA Light Rail Transit North/South Line, including seven new stations. Planning initially began in 1998 when XTA envisioned the project as a busway along an arterial roadway, but the original design met with some public opposition and controversy. XTA has since refined its plans and is now advancing the project. The design is at the conceptual level. After XTA circulated the draft environmental impact statement (EIS) and held public hearings, the light rail build alternative was selected as the Locally Preferred Alternative in October 2003. Since then, XTA designers and planners have revisited and refined the build alternative, have begun detailing stations, and have decided on two-track operations. The project will extend from the 3400 South/Main Station, follow the lead track to the Central Maintenance Facility, proceed along XTA right-of-way through several cities, and then turn south for the final two stations, as shown on Exhibit 25. The project will include 18 additional light rail vehicles and additional storage tracks at the Central Maintenance Facility. This configu- ration requires the light rail system to share tracks with freight trains in several areas, necessitating a temporal separation of passenger and freight operations. XTA plans to complete preliminary engineering and final design under a traditional design– bid–build delivery method. XTA hopes to complete design by October 2004, sign a full funding grant SCC 80.01 80.02 80.03 80.04 80.05 80.06 80.07 80.08 80.00 *Total slightly off due to rounding. SOFT COST ESTIMATE AS PERCENTAGE OF CONSTRUCTION COST 3.0% 8.5% 5.5% 3.6% 1.6% 1.0% 1.0% 0.4% 24.5%* COMPONENT Preliminary Engineering Final Design Project Management for Design and Construction Construction Administration and Management Professional Liability and Other Non-Construction Insurance Legal; Permits; Review Fees by Other Agencies, Cities, etc. Surveys, Testing, Investigation, Inspection Start Up Total Professional Services Exhibit 24. Hypothetical Shelbyville Light Rail soft cost estimate. Exhibit 25. Schematic map of XTA’s West County Light Rail transit project.

30 Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects agreement with the FTA in June 2005, and complete construction by June 2008. Most of the guide- way is at the street level, with only a very short tunnel (about 400 feet) near one of the stations. In March 2004, at the end of the conceptual design phase, XTA prepared a cost estimate that established a target budget of $302 million for SCC 10–70 (expressed as year-of-expenditure dollars escalated at 3.75% per year). Now, XTA wants to apply the methodology described in this Guidebook to estimate the WCLRT project’s soft costs as a percentage of the construction costs: Step 1: Begin with Default Averages As a first step in estimating soft costs for the project, XTA begins with the default soft cost percentages as defined in Exhibit 12, totaling 29.5% of construction costs. These numbers are based on average actual historical as-built costs. Step 2: Adjust Based on Mathematical Relationships • Guideway alignment length: The project is 10.4 miles long, or approximately 54,900 linear feet. This will require an upward adjustment of 5.49 × 1.3% = 7.1% to the soft-cost percentage estimate. • Construction costs: Construction costs for the project (the sum of SCC 10–70) are estimated at $302 million; however, SCC 70 accounts for $55 million to purchase 18 new vehicles, and no costs are estimated for real estate in SCC 60. Therefore, the construction cost estimate (SCC 10–50) totals $302 − $55 = $247 million. Since the Guidebook calls for subtracting 6.0% for every $1 billion in construction costs, XTA decreases the soft cost estimate by 0.247 × 6.0% = 1.5%. • Mode: This is a light rail project, so no adjustment is necessary. • Installation conditions: Since this project will share a freight right-of-way in some areas and will connect with existing light rail service on the North/South line, no adjustment is made. • Delivery method: The project is using a traditional design–bid–build delivery method, so no adjustment is made. • Economic conditions: The economy in West County is in relatively good shape, and construc- tion companies have steady business. GDP has grown 3% over the past year, so XTA deducts 3 × 1.5% = 4.5%, suspecting that construction bids may be somewhat high. Step 3: Adjust Based on Categorical Relationships In this step, XTA adjusts soft cost percentages based on certain characteristics of the project that may be more difficult to measure. • Unusually long project development phase: Given the past delays and controversy, XTA does not know if the project will progress as quickly as it would hope. Therefore, XTA decides to add 2.0% to the soft cost estimate for final design. • Unusual political influence: No extraordinary political influence is expected, so no adjustment to soft cost is necessary. • Agency tendency to minimize capital charges: The XTA has constructed light rail projects before and supports a fairly large construction staff through its operating budget. (These costs are not charged to specific capital projects.) Because of this, a −3.0% adjustment is applied. As a first step in estimating soft costs for the proj- ect, XTA begins with the default soft cost percent- ages as defined in Exhibit 12, totaling 29.5% of construc- tion costs. These numbers are based on average actual historical as-built costs.

How to Estimate Soft Costs for a New Project 31 Step 4: Apply Judgment XTA refers to Exhibit 16 and judges that the WCLRT project has several attributes that could increase or decrease soft costs as a proportion of construction costs. On the one hand, the West County area is fairly dense and growing rapidly, and the short tunnel section near one of the stations is under a historic district. These characteristics could increase soft costs. On the other hand, no environmental mitigation is required, the alignment is fairly straight- forward, and differing subsurface conditions present only a moderate risk. Therefore, XTA uses its judgment and does not consider any adjustment to its soft cost estimate at this step. Finally, XTA converts the resulting estimate for Other into the SCC components 80.06, 80.07, and 80.08. Because XTA does not normally capitalize startup and operations testing, SCC component 80.08, Start Up, is reduced to zero. Based on its analysis so far, XTA estimates soft costs for the WCLRT project at 29.6% of construction costs, as shown in Exhibit 26. SCC SOFT COST ESTIMATE AS PERCENTAGE OF CONSTRUCTION COSTCOMPONENT 80.01 80.02 80.03 80.04 80.05 80.06 80.07 80.08 80.00 2.0% 11.0% 8.0% 5.3% 1.3% 0.7% 0.7% 0.0% 29.0% Preliminary Engineering Final Design Project Management for Design and Construction Construction Administration and Management Professional Liability and Other Non-Construction Insurance Legal; Permits; Review Fees by Other Agencies, Cities, etc. Surveys, Testing, Investigation, Inspection Start Up Total Professional Services Exhibit 26. Hypothetical XTA West County Light Rail soft cost estimate.

32 The starting percentages and numerical adjustments established in this Guidebook were developed from univariate and multivariate regression analyses based and calibrated on detailed cost and project data for 59 past transit capital projects. The 59 projects in this database represent a wide range of rail projects constructed in the United States over the past four decades, with detailed costs roughly conforming to the SCC structure developed from FTA Capital Cost Databases. The projects: • Comprise 29 light rail and 30 heavy rail projects; • Have construction dates ranging from 1974 to 2008; • Have capital costs ranging from around $50 million to $2 billion in the year of construction, equivalent to a range of $90 million to over $5 billion in constant 2008 dollars; and • Are new rail lines, extensions of existing networks, and rehabilitation projects. Because this dataset contains soft costs for a broad distribution of projects, it provides a rea- sonable statistical basis for the estimation of future rail projects based on the analysis of actual, as-built soft costs for completed projects. Analytical Approach The analytical process applied to examine these past projects to develop a new soft cost esti- mation methodology is briefly summarized below. For a more detailed description, please see the Final Report in Part 2, which follows this Guidebook. First, the projects were plotted on a frequency distribution of soft costs as a percentage of construction costs, resulting in several projects being rejected as outliers due to extraordinarily high costs or other circumstances. Please refer to the Final Report for further details. Second, a set of characteristics was gathered for the projects, including the following: 1. Physical attributes, such as alignment length, profile (below grade, at grade, aerial, etc.), number of stations, or whether the project initiated new service or extended an existing line; 2. Installation conditions, such as whether the project interacted with other active rail transit lines; 3. Schedule information, including major milestones in the project lifecycle; 4. Characteristics of the project sponsor, such as experience level, internal policies on capital costs, and use of outside contractors; and 5. The context of the project development process, such as the level of public involvement, delivery method, or whether a significant redesign was necessary. For these last two characteristics, the definition and determination of values required some judgment based on knowledge of the project development process. A P P E N D I X A FTA Capital Cost Database

FTA Capital Cost Database 33 Third, many additional measures were derived from this primary dataset that were intended to capture other project characteristics, such as project magnitude (e.g., construction costs per linear foot), complexity (e.g., percent of alignment below grade), unique circumstances (e.g., real estate acquisition costs, project occurred prior to certain federal requirements), and many others. Fourth, this research analyzed each indicator’s statistical ability to predict the project’s actual soft costs, in total and as individual components. After several hundred univariate and multi- variate regressions, a single multivariate regression was developed that can explain approximately 60% of the change in soft cost percentages by variations in the projects’ characteristics (R2 = 0.58). Exhibit 27 shows the resulting coefficients from this regression, where the dependent variable is total soft costs as a percentage of construction costs. Using the projects contained in this FTA Capital Cost Database, the strongest correlation that could be produced is the regression described above. After testing many combinations of explana- tory independent variables, these nine could best predict the relationship between soft and hard costs. Although the strength of this correlation is not ideal, the relationship does highlight the importance of judgment in cost estimation. In addition, as more projects are included in this cost database, it may be possible to perform analysis with stronger cost relationships. Fifth, alternative multivariate regressions were examined that used different actual soft cost components (rather than total soft costs) as the dependent variable. The coefficient from the overall soft cost analysis was distributed to the soft cost components that correlated to the project characteristics in a statistically significant way. For example, alignment length showed an overall coefficient of around 1.4% per 10,000 linear feet regressed against overall soft costs, and this relationship was strongest when regressed against project management and other soft costs, so this Guidebook recommends adjusting the percentage estimate for those two components to a total of 1.4% per 10,000 linear feet. Finally, the starting points and recommended percentage adjustments were validated against the original projects to gauge how far off this Guidebook’s new methodology would have been. Some minor adjustments to the coefficients were made to minimize the sum of each component’s root mean square error (defined in the Glossary in Appendix C) for all projects. Exhibit 27. Multivariate regression results on soft costs as a percentage of hard costs.

34 A P P E N D I X B Soft Cost Estimation Worksheet

Soft Cost Estimation Worksheet 35 PE FD PM/C A I ns . O th er % % % % % Starting Def au lt s 2 .0 12 .0 12. 5 2.0 1. 0 A lignm en t Lengt h Enter one -w ay le ngt h of al ignm en t in lin ea r 0 .9 ×A = 0 .4 ×A = fe et di vi ded by 10, 000 (n ot tr ack- mi le s) A J K Construction Co st Es timate -4 .5 ×B = - 1. 0 ×B = - 0. 5 ×B = Enter SCC 10 th rou gh 50 onl y, in $ bi llio ns B L M N Mo de 1. 5 ×C = 3 .5 ×C = 1.0 ×C = Enter 1 fo r h eav y ra il, ze ro fo r li ght ra il C O P Q Ins tallation Conditions -3 .0 ×D = - 1. 0 ×D = D R S 1.0 ×E = - 1. 0 ×E = - 7. 0 ×E = E T U V -1.0 ×F = - 0. 5 ×F = F W X 1. 0 ×G = 6 .0 ×G = G Y Z 1. 5 ×H = 4 .5 ×H = H A A AB -3 .0 ×I = - 1. 0 ×I = - 2. 0 ×I = I AC AD AE O + R + T + Y = S + U + W + Z + AA = J + L + P + V + X + AB + AC = M + Q + AD = K + N + AE = PE FD PM /C A Ins . O ther 80 PROF ESSI ON AL SERVI CE S 80 .0 1 P re limi nary Engi n eer in g 80 .0 2 F in al Desi gn 80 .0 3 P ro je ct Mg m t. fo r De si gn and Co ns t. 80 .0 4 C ons tr uc ti on Ad mi ni st rati on & Mg mt . 80 .0 5 I ns urance 80 .0 6 Legal ; Pe rm it s; Re vi ew Fe es 80 .0 7 S ur veys , Te st ing, In ve st i gati on, In sp . 80 .0 8 S ta rt up PE + FD + PM /C A + Ins ur an ce + Othe r = T OT AL If pl ann in g phas e li kely to conti nue l onger th an 5- 7 ye ar s, en te r up to 1 Long Pr oje ct D evel opm en t Phase Enter 1 if pr oj ect w ill be in st a lle d under no ac ti ve adj acen t or ad jo in in g tr ans it se rv ic e De liv ery Me thod Economic Conditions Enter percenta ge po in t a nnua l ch ange in U. S. GD P fo r the late st quar te r (e.g ., "2 .5 " fo r 2.5% ) Enter zero fo r Des i gn-Bi d- Bu ild , 1 fo r ot her non- tr ad itio nal del iv ery me th od TO TA L Soft Co st Es timate Convert to SCC Components If p ubl ic in vo lv em en t or po litic al pres su re s are hi gh, en te r up to 1 Unusua l Politi cal Influ en ce Te ndency to Minimize Capital If s pon so r agen cy' s in te rn al pol ic ie s tend to mi ni mi ze capita l charge s, en te r up to 1 TO TA L Soft Co st Com pon en t Estima te M ul t ip ly So ft Co s t Pe rc en t a ge b y Co ns tr u c t i o n Co st E s t i m a t e PE FD PM CA In s. Le g al Survey Startup 60 % 40 % Di vi de in to ev en th ird s, th en adjust (s ee te xt ) This worksheet describes the methodology for estimating soft costs for a transit infrastructure project outlined in Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. The worksheet begins with a default soft cost estimate as a percentage of construc- tion costs, and makes several adjustments based on the characteristics of the project and its sponsor. Finally, the worksheet converts these percentages into the components of Standard Cost Category 80, Professional Services. Note: The Guidebook text forms an integral part of the calculations described below. Please refer to that document for more detailed instructions for completing this soft cost estimation.

36 Alignment: The specific route or path of a new transit line (horizontal alignment), and whether the line travels through a tunnel, at grade, or is on an aerial structure or other infrastructure (vertical alignment). Alternatives Analysis (AA): An early phase in planning for a major new transit construction project, where a project sponsor, with local community involvement, evaluates a transportation corridor and considers a range of fixed guideway and other transit alternatives. Construction Manager/General Contractor (CM/GC): Sometimes referred to as CM-at-Risk, a project delivery method whereby the construction manager acts as a consultant to the project sponsor for all pre-construction activities (e.g., project development and design phases), but as an equivalent of a general contractor during the construction phase. In most cases this project delivery method entails a commitment by the construction manager to deliver the project within a guaranteed maximum price. Cost-Effectiveness (CE): One metric by which FTA evaluates a potential New Starts project for funding. The measure is defined as: incremental annualized capital cost, plus incremental operating and maintenance cost, divided by the Transportation System User Benefits the project would provide. (Previously termed by the FTA as the Cost-Effectiveness Index, or CEI) Delivery Method: The structure and timing of a project sponsor’s relationships with its con- tractor(s) for design and construction. These methods describe how a project sponsor intends to implement a project, and typically include design–bid–build, design–build, and others. Design–Bid–Build (DBB): A traditional project delivery method whereby a project sponsor produces and finalizes design before receiving bids to construct the project. Design–Build (DB): A less traditional project delivery method whereby a project sponsor advances design work to a preliminary stage, and then the contractor (design builder) agrees to complete the work of finishing the design and then the building, facility, or systems installation to the point of readiness for operation or occupancy. Design–Build–Operate–Maintain (DBOM): Under this project delivery method, the design builder is also responsible for the operation and maintenance of the project, usually for a specified period of time. Dummy Variable: A type of variable included in a multivariate regression to represent a value of true (1) or false (0). Environmental Impact Statement (EIS): When planning a major federally funded transit project, the project sponsor may be required by the National Environmental Policy Act to study and predict environmental impacts resulting from the project. A P P E N D I X C Glossary

Glossary 37 Final Design: A project planning phase where the project sponsor brings preliminary engi- neering plans and designs to a finer level of detail before construction begins. Fixed Guideway Modernization: A federal capital grant program managed by the FTA designed to assist grantees to invest in existing rail and other fixed guideway infrastructure. Grants are apportioned by formula. Force Account: The compensation and benefits of a transit agency’s employees who are supporting a new capital project. Gross Domestic Product (GDP): The total value of goods and services produced by a nation. GDP is a measure of a country’s national income and outputs, and a good indicator of broad economic performance. Locally Preferred Alternative (LPA): The alignment and mode of a new transit project chosen during an alternatives analysis. New Starts: A federal capital grant program managed by the FTA designed to assist grantees to construct new public transportation infrastructure. National Environmental Policy Act of 1969 (NEPA): A comprehensive federal law requiring project sponsors to analyze the environmental impacts of any federally funded action, such as a New Start transit project. PM/CA: Abbreviation used in this Guidebook for project management and construction administration soft costs. Preliminary Engineering (PE): The initial phase in the project development process where the project sponsor brings conceptual designs to a finer level of detail, to approximately 30% design. Professional Services: FTA’s SCC 80, Professional Services, covers all of those services and activities commonly associated with project soft costs. This Guidebook considers FTA’s defini- tion of professional services and soft costs as being equivalent. Project Management Oversight (PMO): The process by which the FTA oversees grantees’ project development process to ensure the grantee is meeting all federal requirements. Project Management Plan (PMP): A plan that documents the roles, responsibilities, procedures, and processes in place to manage and deliver a federally funded transportation project. Right-of-Way (ROW) Acquisition: The process of acquiring the real estate or property ease- ments necessary for the transit project’s alignment. Root Mean Square Error: A statistical measure of the differences between actual values and the values predicted by a model. Small Starts: A federal capital grant program managed by the FTA, similar to New Starts but aimed at smaller transit infrastructure projects. Sponsor: The agency or organization with the responsibility of planning and constructing a major new transit infrastructure project. Standard Cost Categories (SCC): FTA’s standard structure for reporting and managing project costs. In the SCC, a project’s total capital budget is broken down into categories and components of expenditures.

Transportation System User Benefits: One metric FTA examines when evaluating an appli- cation for New Starts funds; the incremental estimated mobility impacts (in terms of weighted travel time) as compared to a baseline of a proposed New Starts project. Turnkey: A variation of a design–build project delivery method that includes financing or leasing mechanisms. Work Breakdown Structure: A structure to break down the work (and resulting costs) of a new transit project into discrete work elements or tasks. 38 Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects

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TRB’s Transit Cooperative Research Program (TCRP) Report 138: Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects defines and describes soft costs and provides a new suggested methodology to estimate soft costs based on historical projects. The report also examines detailed technical information about the data collection, methodology, and statistical analysis that was used to develop the suggested methodology.

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