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20 Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects The market for construction management and design professional services itself can have an impact on construction costs and thereby the relative magnitude of soft costs. Contractors may bid lower if the market is weak, and vice versa. 3.2. Questionnaire of Transit Cost Estimators To supplement the interviews, a questionnaire on soft cost estimation was completed by tran- sit professionals and cost estimators at several consulting and engineering firms and transit agen- cies. The questionnaire was intended to build on the qualitative information gathered from the interviews by adding more quantitative information. The questionnaire had three objectives: to summarize the spectrum of soft cost percentages used in the industry by soft cost components, to identify the characteristics (or cost drivers) of a project that would change those percentages, and to measure how much the percentages might change within the range based on project char- acteristics. The questionnaire was transmitted to nine transit industry members of various sizes, from which 7 data points were collected--5 from transit agencies and 2 from agencies' planning consultants working on a specific capital project. Several respondents reported different estima- tion techniques and percentages at different project phases; this yielded a total of 10 data points for analysis. 3.3. Questionnaire Results: Magnitude of Estimated Soft Costs Results from the first section of the questionnaire revealed that most agencies and contractors estimate soft costs as a percent of construction costs roughly consistent with the SCC structure; however, they use a fairly wide range of percentages, depending on context. These results are pre- sented in Table 6. The questionnaire asked respondents to report a midpoint as well as a high and low percent- age for each cost component; however, some respondents supplied only a range or only an approx- imate midpoint. Where only a midpoint was noted, ranges are omitted, and where only high and low ranges were given, the mathematical average is shown. Some agencies provided percentage estimates that varied depending on project phase, resulting in multiple data points in the results presented in this document. Several respondents noted other soft costs that are estimated on some basis other than a fixed percentage of construction costs. For example: Respondent 7 usually reserves around $1 million for a before-and-after study, regardless of relative project magnitude; Respondent 9 estimates resource needs for agency force account and flagging work on a project- specific basis, without using a percentage; and Similarly, respondent 10 estimates startup costs not as a percentage of construction costs but on a project-specific basis. While most questionnaire respondents roughly followed the FTA SCC structure when esti- mating costs, there were some exceptions. For example, respondents 3, 4, and 5 use a single value to address both SCC 80.03, Project Management for Design and Construction, and 80.04, Con- struction Administration and Management. Respondents 1 and 2 estimate preliminary engineer- ing and final design with a single value as well. Some respondents noted a percentage multiplier to estimate planning efforts in the early phases of project development, such as alternatives analy- sis, whereas many did not. This may be because these costs are already largely spent by the time

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Table 6. Summary of soft cost percentages reported in questionnaire. Questionnaire Respondent: 1 2 3 4 5 6 7 8 9 10 Planning and Feasibility 2% for --- --- --- --- --- --- --- --- --- Environmental 80.01 Preliminary Engineering (complete, (complete, (included in Final Design 1-2% 3% 4% 7.5% same as at same as at 3% (3 to 5%) below) (<1 to 2+%) (2.3 to 3.8%) (3 to 6%) (7 to 8.5%) left) left) 80.02 Final Design (complete, 10% 11% 9-11% 9% 10% 8% 7.5% same as at 7% (6 to 10%) (6-15%) (7-16%) (<8 to 11+%) (7% to 10%) (7.5 to 12.5%) (7 to 12%) (7 to 8.5%) left) 80.03 Project Management for 8-10% 12% of PE, 8% 9% 18-20% 17-19% 10% 8% 9% Design and Construction (<8 to 10- then 12% of (4 to 6%) (5-12%) (6-12%) (15 to 20+%) (15 to 20%) (7.5 to 12.5%) (4 to 8%) (8.5 to 9.5%) 12%) FD for PMC 80.04 Construction 5% 5% 14.5% Administration & --- --- (included in Project Management above) 12% (6 to 10%) (3.8 to 6.3%) (2 to 5%) (14 to 15%) Management 80.05 Insurance 4% 4% 1.5-2% 1.5-2.5% 2% 0.1% 4% (3 to 7%) 1% (2-6%) (2-6%) (<1 to 2.5+%) (<1 to 2.5+%) (1 to 3%) (0.0 to 0.1%) 3% for (3 to 6%) Insurance and 80.06 Legal; Permits; Review 0-2% 0-2% 0.7% Legal Fees by other agencies, --- --- --- 0.25% (2 to 4%) 3% (0 to 2+%) (0 to 2+%) (0.5 to 0.9%) cities, etc. 80.07 Surveys, Testing, 2% 2% 0-2% 0-2% 1% 2.5% Investigation, Inspection --- --- (2 to 3%) 0.5% (1-4%) (1-4%) (0 to 2+%) (0 to 2+%) (0.8 to 1.3%) (2 to 3%) 80.08 Start up 3% for Start 2% 2% 3% 0.6% Not estimated --- --- 6% up and --- (0 to 2+%) (0 to 2+%) (2 to 4%) (0.5 to 0.8%) with % Artwork Other 4% of SCC 60 for ROW Engineering; Agency Force 7% of SCC 60 $1m for Account Work for Agency --- --- --- --- --- --- Before/After - Flagging ROW Costs; Study Costs: As 12% of SCC Needed 70 for Vehicle Design and Agency Costs Note: Midpoint reported first, figures in parentheses indicate upper and lower bound of range

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22 Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects Table 7. FTA Standard Cost Categories combined to report questionnaire results. FTA SCC Category Shown Here 80.01 Preliminary Engineering Preliminary Engineering 80.02 Final Design Final Design 80.03 Project Management for Design and Construction Project Management and Construction 80.04 Construction Administration and Administration Management 80.05 Professional Liability and other Non- Construction Insurance Insurance and Legal 80.06 Legal; Permits; Review Fees by other agencies, cities, etc. 80.07 Surveys, Testing, Investigation, Surveys, etc. Inspection 80.08 Start Up Start Up an estimate is made or because the FTA directs agencies to exclude these costs in the SCC work- sheet instructions (U.S. FTA, 2008). This report combines several cost categories, as shown in Table 7 above: The following section compares the questionnaire responses for each cost component, again with some FTA SCC components combined for reporting purposes. Figure 5 shows the estimates for preliminary engineering provided by questionnaire respon- dents. Most agencies report a range of approximately 24%. Questionnaire respondents reported using a fairly consistent range of between 7 and 11% of construction costs to estimate final design costs, as shown in Figure 6. However, these estimates go as high as 16%. Note that the percentages for respondents 1 and 2 include an estimate of pre- liminary engineering soft costs as well. Responses were more varied as to the percentage of construction costs estimated for project management, construction management, and administration, as Figure 7 shows. Most estimates were in a range of around 719%, but some were as low as 5% and some were as high as 23%. 9% 8% PE Cost Estimate (% of 7% Construction) 6% 5% Upper Bound Estimated with FD Estimated with FD 4% Midpoint 3% Lower Bound 2% 1% 0% 1 2 3 4 5 6 7 8 9 10 Questionnaire Respondent Figure 5. Preliminary engineering soft cost estimates.

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Soft Cost Estimation: State of the Practice 23 18% 16% FD Cost Estimate (% of 14% Construction) 12% Upper Bound 10% Midpoint 8% 6% Lower Bound 4% 2% 0% 1* 2* 3 4 5 6 7 8 9 10 * Includes PE Questionnaire Respondent Figure 6. Final design soft cost estimates. The relatively wider variance between respondents here may be due to the definition of manage- ment costs in major infrastructure projects involving a sponsoring public entity and multiple contractors, and the demarcation of where agency oversight ends and contractor oversight begins. As the literature review indicated, the definition of soft costs can often depend on institutional perspective or a project sponsors' decision regarding how much oversight and management to retain for agency staff and how much to contract out. If an agency expects a construction con- tractor to assume more management responsibility, these costs might appear to the agency as a higher construction bid. Alternatively, a transit agency might segment a large construction proj- ect into multiple contracts and hire a third-party construction manager to be responsible for their coordination and integration. The division of management labor between agency staff, management contractor, and construction contractor can differ depending on the sponsor agency. Figure 8 and Figure 9 show that sponsors typically estimate around 24% of construction costs for insurance and legal soft costs, and another 12% for the cost of surveys, testing, and other costs. Similar to administration and management costs, however, these types of costs, particularly 30% Pjt Mgmt + Const. Admin. Cost Estimate (% of Construction) 25% 20% 15% Upper Bound 10% Midpoint 5% Lower Bound 0% 1 2 3 4 5 6 7 8 9 10 Questionnaire Respondent Figure 7. Project management and construction administration soft cost estimates.

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24 Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects 8% Insurance + Legal Cost Estimate 7% 6% (% of Construction) 5% 4% Upper Bound 3% Midpoint 2% Lower Bound 1% 0% 1 2 3 4 5 6 7 8 9 10 Questionnaire Respondent Figure 8. Insurance and legal soft cost estimates. insurance, can depend on the practice of the agency and local circumstances, and it can be diffi- cult to characterize industry-wide estimation patterns for these cost categories. Sponsors appear to estimate startup costs quite differently, with estimates ranging from 0% to 7% for this category, as Figure 10 shows. Note the wide range given by respondents 1 and 3, further supporting this uncertainty. When viewed as individual components or groups of components, as Figures 5 through 10 show, some estimators use fairly consistent soft cost percentages, while others vary more widely. However, some of the differences at the component level may be somewhat offset at the aggre- gate level. Figure 11, therefore, shows the sum of all soft cost components for each questionnaire response. The stacked bars represent midpoint estimates, while the error bars show the sum of the range of all elements. The midpoints of each soft cost component sum to approximately 2535% of construction costs fairly consistently, even though the individual soft cost compo- nents may differ somewhat from respondent to respondent. 4.5% Surveys, etc. Cost Estimate (% of 4.0% 3.5% 3.0% Construction) 2.5% Upper Bound 2.0% Midpoint 1.5% 1.0% Lower Bound 0.5% 0.0% 1 2 3 4 5 6 7 8 9 10 Questionnaire Respondent Figure 9. Surveys and other soft cost estimates.