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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8 Standard Cost Categories 8 Definition of Soft Costs 9 What Are the Components of Soft Costs? 10 Timing of Soft Costs 10 Typical versus Less Typical Soft Costs 11 Issues in Categorization 11 What Soft Costs Are Not: It Depends on Perspective 13 Chapter 4 How Does the Federal New Starts Process Relate to Soft Costs?
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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 definition and discussion of soft costs presented here is relevant to almost all kinds of major public transit capital infrastructure projects, but the methodology to estimate soft costs in Chapter 6 applies only to new rail construction projects. This Guidebook is designed to help practitioners in two ways: 1.
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. For this reason, this Guidebook has adopted the definition and structure of FTA SCC 80, Professional Services, as being equivalent to the definition of soft costs.
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Following the FTA's Standard Cost Category structure, most rail transit project soft costs are divided into the eight components of Category 80 shown in Exhibit 3. While all costs in SCC 80 are primarily for professional services, they may be incurred by agency staff or outside consultants, depending on the project.
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To take a contrasting example, most agencies take on significant soft costs to manage the construction project once the "shovel hits the dirt." However, the exact nature of these costs depends on the agency: these costs could include salaries and wages of employees in the transit TYPICAL SOFT COSTS INCURRED IN MOST PROJECTS Design and engineering services for preliminary engineering and final design Transit agency staff managing project, development, construction, and customer information Reimbursement to external entities such as police, utilities, and other costs of local and state government Insurance LESS TYPICAL SOFT COSTS INCURRED IN SOME PROJECTS, DEPENDING ON CHARACTERISTICS Professional services to support acquiring real estate for right-of-way Third-party contractor managing construction Design and engineering services to re-design a project, due to unforseen circumstances Exhibit 4. Types of soft costs encountered in rail transit construction.
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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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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)
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Along with estimating hard project costs comes the estimation of soft costs. Over time, as a project becomes better defined, the soft cost estimation process increases in sophistication from the proportionate approximation to the more detailed or "bottom up" estimation for each functional aspect 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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15 Even if a project sponsor chooses to forego federal funds, the project may face state and local requirements, which may affect soft costs in very similar ways to the FTA's process throughout the project's life.
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, a transit project is only conceptually defined, as are the soft costs. At these early stages, transportation planners usually identify a single corridor for construction but develop a range of options for more specific details such as mode, alignment, station locations, and, as a result, construction costs.
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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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: The initial phase in the project development process where the project sponsor brings conceptual designs to a finer level of detail, to approximately 30% design. Professional Services: FTA's SCC 80, Professional Services, covers all of those services and activities commonly associated with project soft costs.
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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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