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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 8