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6 Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects Table 1. Types of soft costs encountered in rail transit construction. TYPICAL SOFT COSTS LESS TYPICAL SOFT COSTS INCURRED IN SOME INCURRED IN MOST PROJECTS PROJECTS, DEPENDING ON CHARACTERISTICS Design and engineering services for Professional services to support acquiring real preliminary engineering and final design estate for right-of-way Transit agency staff managing project, Third-party contractor managing construction development, construction, and customer information Reimbursement to external entities such Design and engineering services to re-design as police, utilities, and other costs of local a project, due to unforseen circumstances and state government Insurance The kinds of soft costs encountered in rail transit construction projects in the United States can vary widely depending on project characteristics, local regulations, and the administra- tion practices of the sponsor agency. Most new rail construction projects will incur certain "typical" soft cost expenditures, while other soft cost components can be unique to the proj- ect, as shown in Table 1. Evidence suggests that European cost estimators are also trying to standardize a defini- tion of soft costs, but the term is rarely comparable to how it is used in U.S. practice. The definition of soft costs to a transit agency can differ from a construction contractor or other stakeholders, depending on institutional context. The point of view of a U.S. transit agency is taken in this report. S.2. Soft Cost Estimation: State of the Practice Interviews with and a questionnaire administered to estimators revealed that cost esti- mators for transit construction projects follow different approaches to estimating soft costs Construction Cost depending on the phase of the project. Guideway $ Stations $ During early phases of planning [alternatives analysis (AA) or preliminary engineer- Maintenance Yard $ ing (PE)], a transit project is only conceptually defined, and the soft costs are as well. At Etc. $ these early stages, transportation planners usually identify a single corridor for construc- TOTAL $ tion but develop a range of options for more specific details such as mode, alignment, Soft Costs station locations, and, as a result, construction costs. Most attention is on construction x Percentage = $ costs at this phase since soft costs are difficult to predict given the conceptual nature of Vehicle Cost the project. Estimators apply default costs to approximate construction quantities, reme- Vehicles $ diation, and other "hard" costs, and then simply add a set of percentages of hard costs Vehicle Soft Costs $ (e.g., 30%) to approximate an initial soft cost estimate, as shown in Figure 1. TOTAL $ At this phase, the central question is what percentages to apply. Based on interviews and Real Estate Cost an industry questionnaire, most estimators report that they choose percentages from Acquisitions $ within a range for each soft cost component based on historical experience and project RE Soft Costs $ characteristics. Figure 2 shows the midpoint percentages used by 10 cost estimators rep- TOTAL $ resentative of the transit industry, broken down by the soft cost component. Typically, TOTAL PROJECT COST $ these "add-ons" represent an additional cost to the project of around 2535% of con- struction costs. Figure 1. Cost esti- mation in early project However, these midpoints are not applied blindly. Estimators may begin with these aver- phases. ages but choose higher or lower percentages from within a range based on their knowledge
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Summary 7 45% 40% Mid-Range Estimated Soft Cost 35% (% of Construction) 30% 25% 20% 15% 10% 5% 0% 1* 2* 3 6 7 4 8 9 5 10 Questionnaire Respondents Other Insurance + Legal Project Mgmt. and Construction Admin. FD PE *Respondents estimate PE + FD as combined amount; PE displayed here using average split Figure 2. Midpoint soft cost estimates for all components during project planning phases. of the project, the sponsor, and their experience with similar past projects. Table 2 lists some of the project characteristics that estimators generally use to guide their choice of a percent- age within a range during planning phases. Estimators report that they may choose figures up to 10% higher or lower than their starting points based on judgment and the character- istics of the project. During the final design (FD) and construction phases, estimates of soft costs based on a percentage of construction cost are replaced with more closely tailored, bottom-up estimates relying heavily on past experience with similar projects. For instance, adminis- tration costs may be estimated based on headcount multiplied by the duration of the project, as determined from construction schedules. Also at this stage, more costs are known: preliminary engineering work is largely complete, and the sponsor's contracts for construction management and any remaining design work may already be executed for an agreed-upon cost. Table 2. Project characteristics guiding soft cost percent estimates within a range. LOWER % MIXED/MID-RANGE HIGHER % SOFT COSTS % SOFT COSTS SOFT COSTS MODE Bus Rapid Transit Commuter Rail Heavy Rail Light Rail PROJECT DELIVERY DesignBuild DesignBidBuild DesignBuildOperateMaintain Full Turnkey ALIGNMENT Elevated Alignment Tunnel Alignment OTHER CONDITIONS New Right-of-Way Differing Subsurface Conditions