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CHAPTER 3
What Are Soft Costs?
Generally, soft costs Generally, 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,
are the capital vehicle and equipment procurement, or land acquisition. Instead, these expenses are incurred on
expenditures that professional services that are necessary to complete the project, as described under the Standard
are required to 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.
complete an
As an analogy, a homeowner planning to build an addition to his or her house might hire a
operational transit surveyor to measure the land and an architect to design the project and oversee construction.
project, but which 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
are not spent and construction managers, and other professionals to plan, design, and develop the transit con-
directly on activities struction project.
related to brick-and-
mortar construc- Standard Cost Categories
tion, vehicle and The Federal Transit Administration (FTA) requires that all candidate and recipient projects
equipment pro- 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
curement, or land in Exhibit 3), each of which is further broken down into components. For example, the SCC 50
acquisition. Instead, 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
these expenses cost estimates from different kinds of projects across the country on a consistent basis.
are incurred on pro- Standard Cost Category 80, Professional Services, consists of eight separate components (see
fessional services Exhibit 1), which together encompass all services and activities commonly associated with project
that are necessary 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 complete the to the definition of soft costs. Based on a review of existing literature, this definition is reasonable,
project. 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
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