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What Are Soft Costs? 11 agency's construction department or could be for an outside contractor managing construction. For projects that must connect with existing transit service when complete, such as a line extension, agency staff time may be required for train safety and testing procedures. The form and type of soft costs are not always applicable to all projects. Issues in Categorization Despite FTA's clear classification of soft costs within SCC 80, situations may arise where it is not clear how or where a specific cost should be recorded, or whether a cost is considered soft. Much of this uncertainty is driven by inconsistencies in how certain types of costs have been understood and categorized in past projects and, by extension, how to budget for these costs in the future. Several potential issues arise. Two key examples are discussed below: Force Account Different agencies account for the salaries and wages of their employees supporting a new In addition, the capital project (sometimes called "force account") in different ways. Force account costs can range from a construction department manager in charge of the project, to a bus operator who distinction between works a weekend to provide alternative bus service around a temporary disruption caused by the an employee project's construction, to administrative employees who work primarily on capital projects, to overseeing overall rail maintenance-of-way employees who connect the new project to existing track. Some agencies will choose to pay these expenditures from their operating budget, while others will charge the construction and an costs directly to the capital project. In addition, the distinction between an employee overseeing employee directly overall construction and an employee directly supporting construction can be a difficult one and supporting con- can affect whether the cost is assigned to SCC 80 or to a construction category (SCC 1050). Regardless of past practices, FTA directs grantees to classify the costs of agency staff for flagging, struction can be alternative bus service, and access/protection costs in SCC 1050 (or SCC 40.08, Temporary a difficult one. Facilities and Other Indirect Costs During Construction), not in Professional Services (SCC 80). Real Estate and Vehicle Soft Costs Many new rail projects incur the cost of professional services associated with acquiring real estate and procuring vehicles, which are typically distinct from the construction project. Examples of these services include agency staff overseeing and administering procurement, real estate and relocation consultants, vehicle engineers, property assessors, legal counsel, court expenses, insur- ance, warranty costs, and so on. These professional services are comparable to those found in SCC 80 in that they represent service costs that do not directly support construction. However, current FTA guidance requires that all soft costs related to real estate and vehicle procurement should be assigned to their respective cost categories (SCC 60 and 70, respectively), not Professional Services (SCC 80). The term "soft FTA's guidance, by excluding the costs for professional services associated with real estate and vehicles, establishes a relationship between soft costs or Professional Services (SCC 80) and costs costs" can mean for fixed infrastructure (SCC 10 through 50) that is comparable to the relationship found in any different things to building project. different people, depending on What Soft Costs Are Not: It Depends on Perspective their institutional-- The term "soft costs" can mean different things to different people, depending on their institutional--or contractual--perspective. For example, the project sponsor will likely view soft or contractual-- costs as all expenditures on those professional services identified in Standard Cost Category 80. perspective.

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12 Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects Expenditures in other categories reflect the sponsor's expenditures on direct activities, perhaps primarily composed of payments to construction contractor(s) or a vehicle vendor. In contrast, general construction contractors may view their costs of contract administration, overhead, and related expenses as soft costs for their organization. Although these activities sound very 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. To keep matters clear, this Guidebook defines soft costs from the perspective of the project sponsor. Note that in designbuild (DB) or other turnkey contracting situations where the division between a contractor's design and construction costs may be less transparent to a project sponsor, FTA still directs grantees to report design costs incurred by the designbuild contractor in SCC 80.