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12 Table 2.2. Cost estimating process (Anderson et al. 2007). Cost Estimating Step Description Determine estimate basis Document project type and scope including scope documents; drawings that are available (defining percent engineering and design completion); project design parameters; project complexity; unique project location characteristics; and disciplines required to prepare the cost estimate Prepare base estimate Prepare estimate, including documentation of estimate assumptions, types of cost data, and adjustments to cost data; application of appropriate estimating techniques, parameters, and cost data consistent with level of scope definition; coverage of all known project elements; coverage of all known project conditions; and check to ensure that estimate is consistent with past experience. Determine risk and set Identify and quantify areas of uncertainty related to contingency project knowns and unknowns; potential risks associated with these uncertainties; and appropriate level of contingency congruent with project risks. Review total cost Review estimate basis and assumptions, including estimate methods used to develop estimate parameters (e.g., quantities) and associated costs; completeness of estimate relative to project scope; application of cost data, including project-specific adjustments; reconciliation of current estimate with the baseline estimate (explain differences); and preparation of an estimate file that compiles information and data used to prepare the project estimate. the estimating steps, the project development phase dictates For example, attributes related to roadways, traffic control some level of variation in which the steps are performed. approaches, structures, right of way, utilities, environmental During the cost management process, potential changes requirements, and stakeholder involvement often are used to are monitored. Changes may include retiring previous risks distinguish different levels of project complexity. This ap- or adding newly identified risks. These risks relating to proach is used in the NCHRP Report 574 and captured in that changes may result in plus or minus adjustments to contin- report as a tool, Recognition of Project Complexity. This same gency and the overall project estimate. The impact of changes tool is included in the Appendix A of this guide (see Tool R1.1). must be evaluated and estimates reviewed. In relation to the Table 2.4 shows how the pavement attribute might change risk management process shown in Figure 1.1, the steps in based on the three levels of complexity described in the Table 2.3 align with risk mitigation and planning, risk alloca- Recognition of Project Complexity tool. The complexity sce- tion, and monitoring and controlling risks. nario that describes a project will impact the need for and de- gree of the cost estimation, risk analysis and cost manage- ment efforts. 2.7 Project Complexity and Impact Projects in the highest complex category (major projects), on Estimation and Risk which includes new highways, major relocations or recon- Management Process struction, may require a comprehensive quantitative assess- The level of effort expended for planning and developing ment of the project risks to determine their impact on the projects varies depending on project complexity. A project is overall cost and an appropriate amount of contingency to in- described in a number of ways, with some descriptions rely- clude in the cost estimate either at a project or program level. ing on project attributes to convey the complexity of a project. Moderately complex projects such as minor roadway reloca-

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13 Table 2.3. Cost estimate management process (Anderson et al. 2007). Cost Estimate Description Management Step Obtain appropriate Obtain management authorization to proceed by approvals review of current project scope and estimate basis; securing of approvals from appropriate management levels; approval of current estimate, including any changes from previous estimate; and release of estimate for its intended purpose and use. Determine estimate Communication approach is dependent upon the stakeholder who is communication approach receiving the information, but should consider mechanism for communicating the cost estimate for its intended purpose; level of uncertainty to be communicated in the estimate given the information upon which it is based, and; mechanism to communicate estimate to external parties. Monitor project scope Identify any potential deviation from the existing estimate basis, including and project conditions changes to scope; changes due to design development; changes in project risks; changes due to external conditions; the nature and description of the potential deviation; and whether the deviation impacts the project budget and/or schedule (potential increase or decrease). Evaluate potential impact Assess potential impact of change, including of change cost and time impact of the deviation; risk impact on project contingency; and recommendations as to whether to modify the project scope, budget, and/or schedule due to change. Adjust cost estimate Document changes to the baseline estimate, including appropriate approval of the deviation; the new project scope, new budget, and/or new schedule; and notifiy project personnel of the change. Table 2.4. Example complexity classification (pavement attributes). Most Complex (Major) Moderately Complex Non-complex (Minor) Projects Projects Projects New highways; major 3R and 4R projects which Maintenance betterment relocations do not add capacity. projects New interchanges Minor roadway relocations. Overlay projects, simple Capacity adding/major Certain complex (non-trail widening without right-of-way widening enhancements) projects. (or very minimum right-of-way Major reconstruction (4R; Slides, subsidence. take) little or no utility 3R with multi-phase traffic coordination control) Noncomplex enhancement Congestion Management projects without new bridges Studies are required (e.g., bike trails) Note: 4R is rehabilitation, restoration, resurfacing, or reconstruction