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Introduction 11 What has driven soft cost expenditures in the past; and How soft costs can be estimated in the future. Increasing the integrity, accuracy, and reliability of soft cost estimates will improve the indus- try's public perception and deliver public transportation infrastructure more cost-effectively. The ultimate objective of the researchers was a guidebook for estimating soft costs for major transit capital projects that walks a project sponsor through each step in building up a soft cost estimate. 1.3. Definition of 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 con- struction, vehicle and equipment procurement, or land acquisition. Instead, these expenses are incurred on ancillary professional services that are necessary to complete the project. Soft costs are the expenditures necessary to develop and manage the project, whereas hard costs are the expenditures required for construction. Soft costs are a necessary part of a construction project because building or rehabilitating transit infrastructure requires more than the direct payments made to a general construction contractor or a vehicle vendor. The Federal Transit Administration requires that all candidate and recipient projects of 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 categories (as shown in Table 4), 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, Communications, and Fare Collection. Standard Cost Category 80, Professional Services, consists of eight separate components that together encompass all services and activities commonly associated with project soft costs (although some exceptions are discussed below). In addition, a literature review on soft costs concludes that the existing engineering, technical and international professional literature on the definition of soft costs is consistent with the FTA's description of SCC 80, Professional Services, in the Standard Cost Category Workbook (U.S. FTA, Table 4. FTA Standard Cost Categories and Category 80 components. 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 80.01 Preliminary Engineering 90 Unallocated Contingency 100 Finance Charges 80.02 Final Design Total Project Cost (10100) 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

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12 Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects 2008). 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. For this reason, the researchers for this project adopted the definition and structure of FTA SCC 80, Professional Services, as being equivalent to the definition of soft costs. The FTA's char- acterization (U.S. FTA, 2008), restated below, is therefore a reasonable and consistent definition and has been used throughout the project: [Soft costs include] all professional, technical and management services (and related professional liability in- surance costs) related to the design and construction of fixed infrastructure during the preliminary 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. It is important to keep in mind institutional or contractual perspective when referring to soft costs. Although this research views soft costs from the perspective of the project sponsor or FTA, the classification of soft costs within the construction industry can take on somewhat different meanings, depending on institutional context. As Figure 4 illustrates, the project sponsor will likely view soft costs as the non-construction professional services costs identified in Standard Cost Category 80. Expenditures in other cost categories reflect the sponsor's expenditures on direct activities, perhaps primarily composed of payments to the vehicle vendor or construction contractor. The construction contractor, in turn, may view some portion of their total construction con- tract as indirect or soft costs for their organization, such as the cost of contract administration, home office overhead, and related expenses that are built into the contract amount. These indi- rect costs represent real costs of doing business to the construction contractor, but since they cannot be clearly attributable to a specific project, the construction contractor is likely to charge various projects in some proportional manner. In addition, some costs that are clearly attributable a specific project cannot be attributed to physical components of the project (such as concrete or steel), and these may be referred to as "general conditions." While these activities sound 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. These multiple perspectives on indirect or soft costs are illustrated schematically in Figure 4. To keep matters clear, this research assumes the perspective of a transit agency sponsoring major construction where at least some design and all construction work is to be performed by Sponsor Agency Total Project Capital Costs and FTA's "Hard" Construction Costs Veh/R.E. Costs "Soft" Costs Perspective Focus of this Construction Report "Hard" Construction Contract Contractor's Perspective "Direct" Costs "Indirect" Costs Project "Direct" Construction Perspective Project Direct "General Conditions" Figure 4. Capital costs from sponsor, contractor, and project perspectives.