Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects (2010) / Chapter Skim
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Guidebook P A R T 1
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16 Early Phases 16 Later Phases 18 How Does This Practice Compare with Actual Costs? 20 Chapter 6 How to Estimate Soft Costs for a New Project 20 What This Method Is for and When to Use It 20 Art versus Science 21 Soft Cost Drivers 21 Quantifying Soft Costs 22 Four-Step Process 27 Applying These Steps: Two Example Projects 32 Appendix A FTA Capital Cost Database 34 Appendix B Soft Cost Estimation Worksheet 36 Appendix C Glossary C O N T E N T S
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The purpose of TCRP Project G-10 was to research soft costs in major public transportation infrastructure projects, with the goal of producing a guide for transportation project sponsors to learn more about these costs and better estimate them in the future. This Guidebook is one of two final products from the project and is intended to summarize how the project's research can be applied to practice.
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It is intended to help transportation project sponsors better understand and estimate soft costs, especially during the initial phases of developing a rail project. C H A P T E R 1 What Are Soft Costs and Why Do They Matter?
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The final sections of this Guidebook provide a new tool to estimate project soft costs, based on both the characteristics of the project and the organizational attributes of its sponsor agency. This methodology is based on industry surveys, interviews, and an extensive analysis of the "as-built" costs of nearly 60 rail transit projects over the past three decades.
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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)
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Soft costs are classified into components based on either the timing or purpose of the cost, as follows: • 80.01–Preliminary Engineering -- All costs are included in this stage of the project development process. This includes the costs of early design, negotiations for operations and/or maintenance, developing financial plans, and ridership studies.
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• 80.08–Start Up -- Costs associated with the operational initiation of services and training of operations, maintenance, and supervisory staff. Timing of Soft Costs While some components of soft costs tend to relate to specific phases of project development over time, others tend to reflect costs incurred throughout the life of the project.
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. 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.
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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.
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FTA New Starts, the largest federal program for funding major new capital investments in public transportation, has several decision points for proceeding, also shown here. Each of these decision points requires an estimate of project capital costs, including the estimation of soft costs.
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Characteristics of the Federal Process That Affect Soft Costs The FTA's New Starts (and Small Starts) process affects soft costs in several ways.
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Federal versus Non-Federal Projects Despite the impact of the FTA's New Starts project development process on soft costs, its impacts are probably not unique. Even if a project sponsor chooses to forego federal funds, the project may face state and local requirements that can affect soft costs in very similar ways to the FTA's process throughout the project's life: • During PE, the environmental reviews required at the state level can be as stringent as federal requirements.
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Therefore, soft costs are usually treated as percentage add-ons to estimates of hard construction costs, as shown in Exhibit 6. Cost estimators apply default unit costs to approximate construction quantities, remediation, and other hard costs, and then simply add a percentage of hard costs for an initial soft cost estimate.
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LOWER % SOFT COSTS MODE PROJECT DELIVERY Bus Rapid Transit Design–Build MIXED/MID-RANGE % SOFT COSTS Commuter Rail Light Rail Design–Bid–Build Elevated Alignment New Right-of-Way HIGHER % SOFT COSTS Heavy Rail Tunnel Alignment Differing Subsurface Conditions Design–Build–Operate–Maintain Full Turnkey ALIGNMENT OTHER CONDITIONS Exhibit 7. Project characteristics guiding soft cost percentage estimates within a range.
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How Does This Practice Compare with Actual Costs? On average, the construction industry's current approach to estimating soft costs in early project phases corresponds fairly well to actual historical soft costs in past projects.
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However, past projects have shown a much wider range of actual soft costs than estimators report. Most estimators surveyed for this Guidebook use ranges, or an "uncertainty band," of total soft cost estimates of around 10% of construction costs.
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For example, a statistical analysis of historical costs demonstrates that heavy rail incurs higher soft costs as a percentage of construction cost -- about 6% more (as demonstrated later in Exhibit 27) , all other things being equal, so cost estimators can comfortably adjust their figures accordingly.
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Quantifying Soft Costs First, how should soft costs be measured for cost estimating purposes? Soft costs can be expressed in different terms: as a percentage of the total project, as a percentage of hard costs, as a nominal dollar amount, or in nominal dollars per linear foot of guideway constructed in the project.
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. The following describes the four steps in more detail: Step 1: Begin with Default Averages As a first step in estimating soft costs, begin with the default soft cost percentages as defined in Exhibit 12.
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Mode Heavy rail projects tend to incur somewhat higher soft costs than light rail, perhaps due to their relative complexity. Heavy rail projects can typically involve constructing guideway and systems that have been designed to more rigorous engineering standards that support more complex systems, move higher passenger volumes, and operate at higher speeds relative to light rail.
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Recommended adjustments to the default values when estimating soft costs in early project phases are summarized in Exhibit 17. If the project is to be delivered through a non-traditional (i.e., outside of design–bid–build)
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Apply fewer percentage points depending on the length of the planning process. Unusual Political Influence When public involvement or political pressures are high, such as in a contentious design and planning process, soft costs tend to rise relative to construction costs, as much as 6.0%.
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In the past, agencies that have strongly tended to minimize capital expenditures have shown a reduction of up to 6.0% in soft costs as a percentage of construction. Recommended adjustments to the default values are summarized in Exhibit 21.
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In the decades of historical experience analyzed to support this Guidebook, no transit project has shown soft costs lower than 11% or higher than 54% of construction costs. Finally, convert the soft cost percentages from the five components estimated here back into the eight components called for in FTA's SCC structure.
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Step 4: Apply Judgment After arriving at an estimate of soft costs at 25.5% of construction costs, MTA's project manager reviews the estimate for reasonableness based on the project sponsor's knowledge. Relying on judgment, the project manager makes the following changes: • Deducts 2.0% from FD because of existing right-of-way.
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MTA's final estimate is shown in Exhibit 24. West County Light Rail Project The XYZ Transit Agency (XTA)
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. Now, XTA wants to apply the methodology described in this Guidebook to estimate the WCLRT project's soft costs as a percentage of the construction costs: Step 1: Begin with Default Averages As a first step in estimating soft costs for the project, XTA begins with the default soft cost percentages as defined in Exhibit 12, totaling 29.5% of construction costs.
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Hypothetical XTA West County Light Rail soft cost estimate.
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The projects: • Comprise 29 light rail and 30 heavy rail projects; • Have construction dates ranging from 1974 to 2008; • Have capital costs ranging from around $50 million to $2 billion in the year of construction, equivalent to a range of $90 million to over $5 billion in constant 2008 dollars; and • Are new rail lines, extensions of existing networks, and rehabilitation projects. Because this dataset contains soft costs for a broad distribution of projects, it provides a reasonable statistical basis for the estimation of future rail projects based on the analysis of actual, as-built soft costs for completed projects.
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Fifth, alternative multivariate regressions were examined that used different actual soft cost components (rather than total soft costs) as the dependent variable.
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34 A P P E N D I X B Soft Cost Estimation Worksheet
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This worksheet describes the methodology for estimating soft costs for a transit infrastructure project outlined in Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects. The worksheet begins with a default soft cost estimate as a percentage of construction costs, and makes several adjustments based on the characteristics of the project and its sponsor.
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: Under this project delivery method, the design builder is also responsible for the operation and maintenance of the project, usually for a specified period of time. Dummy Variable: A type of variable included in a multivariate regression to represent a value of true (1)
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This Guidebook considers FTA's definition of professional services and soft costs as being equivalent. Project Management Oversight (PMO)
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of a new transit project into discrete work elements or tasks. 38 Estimating Soft Costs for Major Public Transportation Fixed Guideway Projects
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