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44 Collaborative Airport Capital Planning Handbook 5) Operation: The owner successfully operates the facility using the features and elements included in the design and constructed into the facility for the benefit of the owner consistent with the agency's mission and goals. The steps of the Implementation Phase are described in more detail below and are illustrated in Figure 6 earlier in this Chapter. Step 1: Project Planning and Definition Goal: The goals of Step 1 are to 1. Develop more detail on the scope, cost, schedule, funding source and operating impact of the projects included in the approved ACP before design, construction and/or implementation of the projects begins. 2. Establish an owner's expectations for project scope, budget and schedule, which will in turn provide guidance to the Leader who is managing the project team and stakeholders during the life of the project. Actions: The following is a list of actions, activities or tasks that should be completed during this step: Identify Stakeholders: Identify major players and stakeholders internal and external to the agency, their interest in the project, and their roles and responsibilities. Stakeholder Input: Solicit and obtain input and feedback from owner and other appropriate stakeholders on project scope and functional requirements at the beginning of the project def- inition phase and throughout the project planning process. Goals and Objectives: Define project goals and objectives with the owner and other appropri- ate stakeholders at the beginning of the process. These will be used as decision criteria during the alternatives analysis described below. Procure Consultant: Determine if the agency has internal resources to execute a project. If not, procure professional services, as necessary. Manage Consultant: Manage professional services firm, if necessary. Problem Definition: Examine and determine the cause of the problem that is driving the need for the project. Assess whether the project is really bigger or smaller than originally defined in the Development Phase. Assess the problem from multiple perspectives. For example, evalu- ate a terminal improvement project from the perspectives of the traveling public, the tenant and the maintenance department. Project Scope Development: With the owner and appropriate stakeholders, develop project scope in more detail to address the problem defined above. Ensure the project scope will meet the stakeholders' needs and the agency's goals and objectives. Reconcile the owner's needs and expectations if they are not in synch. Define the project benefits, objectives, approach, effects and interrelationships. Alternatives Development: Create a list of all possible solutions that address the defined prob- lem and of options to execute the project that meet the agency's goals and objectives, even those that may seem "out of the box" at first. Narrow the list down to the best alternatives that warrant formal assessment. Alternatives Analysis: Evaluate the list of best project alternatives against the decision criteria. Include a quantitative analysis of expenses, cost savings and risks, a qualitative analysis of cus- tomer needs, case studies of alternatives implementation at other airports, and the economic and operational feasibility of each alternative. Project Delivery Alternatives: For each project, evaluate project delivery options, identify the most appropriate option and document the logic behind the option selected. This deci- sion will be driven by the project aspect of greatest importance, scope, schedule or budget.

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The Nuts and Bolts: Development and Implementation 45 See the Additional Resources section at the end of this chapter for documents to assist with this task. Additional Data: Gather supplemental information to support project definition, budget esti- mation, project schedule and analysis of operating budget impact and long term business via- bility of a project, if required. Budget Estimate: Prepare a more detailed budget estimate using the detailed scope developed in this step. At a minimum, budget estimates should include categories as shown below in Figure 7. Budget/Cost estimating techniques for soft costs include 1. Simply calculating each cost as a percentage of construction, which will vary based on size and complexity of the project. 2. Calculating the number of drawings required for construction documents and multi- plying that times labor hours required to produce one sheet. 3. An agency's historic fees for similar projects or projects of similar size and complexity. 4. Historical median fee curves, scales and graphs published by organizations such as the American Society of Civil Engineers. Estimates of hard costs can be calculated using 1. Averages (by unit price) calculated from an agency's historical construction bids (averaged over a 3- to 5-year period in which the bidding climate remained relatively unchanged). 2. Unit prices for materials and equipment, assembly rates, square footage costs, labor and productivity rates, and overhead and markup data from sources such as RSMeans Con- struction Cost Data Books published by Reed Construction Data annually. Schedule: Prepare a more detailed schedule using the more detailed scope developed in this step. The schedule should include everything that is needed to successfully execute a proj- ect, including A list of functional, technical, administrative, testing and training tasks by project phase that need to be completed in an ordered sequence with begin and end dates, duration, and resources needed (including personnel, equipment and funding). The interdependencies between tasks (e.g., if one task cannot begin until another task ends). Key project meetings (with project team, owner and stakeholders) and important commu- nications (regular status updates, milestone updates, updates to approving authorities, etc.), at the appropriate times. Soft costs Include pre-design and planning services, survey, testing and investigations, basic design services, construction management and inspection services, environmental analysis and permitting, police or fire details, professional liability insurance, financing costs, advertising, legal fees, reimbursable expenses such as travel or printing, and post-construction expenses such as fees for building commissioning. Hard costs Include construction, furniture and equipment such as communication and/or computer systems. Escalation Account for inflation for projects that will be completed at a future date. Contingency Account for changes to project cost as a result of insufficient knowledge and/or unforeseen challenges. Can be calculated as a percentage of the entire project budget or of the construction cost estimate, which will decrease over time as more detail becomes available during design. Figure 7. Categories for budget estimates.

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46 Collaborative Airport Capital Planning Handbook The schedule can be as simple as a table or a bar graph timeline produced with Microsoft Excel or as sophisticated as a Gantt chart produced with Microsoft Office Project or a cost-loaded sched- ule produced with Primavera P6. All are scalable to any size project for any size organization. Operating Budget Impact: Calculate the approximate impact a project will have on the oper- ating budget and airport rates and charges. New and expanded facilities require additional labor, materials, energy and equipment to operate and maintain as well as debt service for bonds to finance the project. These are all impacts to the annual operating budget that must be quantified and which will impact airport rates and charges. Long-Term Business Viability Analysis: Calculate the approximate long-term business viability of a project. This can be calculated by doing an IRR, ROI, and BCA or other analyses used to determine the long-term business viability of a project. See pages C-8 to C-13 of Appendix C for BCAD's Business Case Form. The purpose of this analysis is to determine how the benefits (such as cost savings and offsetting revenues and/or user charges) justify the expense of a project. Potential Funding Sources: Evaluate all potential funding sources and identify the optimum funding sources. Funding sources could include, but are not limited to, cash reserves, AMT and non-AMT airport bonds, PFCs, CFCs, local and state grants, FAA AIP grants (entitlement, discretionary and letter of intent programs), TSA grants, airport operating revenue and other potential funding sources. Every airport uses a different combination of these funding sources depending on the individual airport's financial situation and the type of project being considered. Small airports (GA, non-hub and small-hub) are more dependent on AIP grants than large- or medium-hub airports. The larger airports, where projects tend to be more expensive, are more likely to participate in the tax-exempt bond market or finance capital projects with PFCs. Project Risk Assessment: Define and assess the risks associated with the scope, cost and sched- ule developed for the project and develop measures to mitigate those risks, including calcu- lating a contingency fund, if necessary. A project risk assessment consists of risk identification followed by probability and impact assessment. There are five steps in a project risk assess- ment as described below: 1. The project team, the owner and the appropriate stakeholders together identify all the likely sources of risk affecting quality, safety, performance, technology, project duration, and cost that could occur on a project and the impact these risks could have on achieving the project goals and objectives. A Risk Register is created to monitor and track those risks. A Risk Register is a table of all the risks affecting the project and the impact they could have on the project. The register is a spreadsheet that calculates a risk rating for each risk that is equal to the likelihood the event will happen (likely, possible or remote) multiplied by the severity of the impact (from none to severe or catastrophic). 2. Assess the likelihood (e.g., probability) of each event happening. 3. Estimate the Minimum, Most Likely and Maximum for the cost and time of each risk iden- tified. These elements, in conjunction with the probability of the event happening (Step 2), are needed to complete the Monte Carlo simulation and generate the Risk Register that ranks the risks by a combination of highest probability and impact on the project, high to low. The simulation further Compelling Practice #10 computes the overall project upset cost and time to com- Project Risk Assessments plete based on the information provided. This provides a basis for the level of contingency that may be needed to PANYNJ conducts project risk assessments regularly. accommodate these events should they not be mitigated. PANYNJ uses risk assessments to allocate project risk 4. Prepare a Mitigation and Management Plan for each sig- and establish contingencies for projects so that nificant risk item to eliminate the risk as early as possible, funds are available in the event the cost goes up or minimize risk that cannot be completely eliminated, and the schedule gets extended or delayed. address any new risks that become apparent throughout the project.

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The Nuts and Bolts: Development and Implementation 47 5. Formalize the monitoring of the Plan into a risk management activity, establish systematic reviews in the project schedule, establish metrics, and track your top 10 risks week by week. Coordination: Solicit and obtain input and feedback from the owner and other appropriate stakeholders throughout the project planning and definition process. Invoices: Review and approve invoices and change orders for the consultant(s). Coordinate with Finance to ensure proper coding for funding and cost recovery. Cash Flow: Prepare and submit realistic cash flow projections on project expenditures to the Finance Department, quarterly at a minimum and monthly where possible. Progress Reporting: Track and report on progress of project planning and definition to the appropriate stakeholders monthly. See page D-7 of Appendix D for a sample project status report. Final Funding Approval: Identify potential funding sources and amounts and confirm fund- ing with the Finance Department before proceeding to the next step, Design. Authorization: Obtain authorization to proceed to next step from the appropriate party or parties (Implementation Step 2: Design). When: Project planning and definition occurs after the ACP is approved and prior to design, construction and/or implementation of a project in the ACP. Leader: Lead Technical Department (See Step 3 of the Development phase for a description of a Lead Technical Department.) Partner: CMT Methods: The following is a list of techniques that should be used to communicate and col- laborate with Partners during this step: Collaborate in meetings and/or via collaboration technology with The owner to define and agree upon the scope of the project. Other Technical Departments to refine and agree upon the project definition, as needed. The Finance Department to discuss and confirm project funding. Communicate with the CMT in writing on A project definition memorandum or manual prior to design commencing in the next step, as appropriate. A memo that identifies the Project Manager and his or her role and responsibilities. Communicate with Finance in writing to Transmit cash flow projections. Communicate with the Executive Leader in writing on Documentation required to seek approval from Approving Authorities for expenditures like project authorizations Products: The following is a list of written documents, processes, data, events, and/or other benefits that will be produced during this step: A memo identifying the project manager, when appropriate. Defined goals and objectives developed collaboratively with stakeholders for each project in the ACP. A revised Project Scope for each project in the ACP. Contract(s) with professional services firm, as required. Alternatives Analysis reports. A revised Project Budget Estimate for each project in the ACP. A revised Project Schedule for each project in the ACP. Completed CIP Project Impact on Operating Budget forms. Long-Term Business Viability Analyses using ROI, IRR and/or BCA methods, as appropriate. Project Risk Assessment for each project in the ACP.