Guidance for Cost Estimation and Management for Highway Projects During Planning, Programming, and Preconstruction (2007)

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A-iii C O N T E N T S A-1 B1 Budget Control A-1 B1.1 Budget by Corridor A-1 B1.2 Constrained Budget (Also see B2.2) A-2 B1.3 Standardized Estimation and Cost Management Procedures (Also see C4.6) A-4 B1.4 Summary of Key Scope Items (Original/Previous/Current) A-4 B1.5 Variance Reports on Cost and Schedule A-6 B2 Buffers A-6 B2.1 Board Approvals A-6 B2.2 Constrained Budget (Also see B1.2) A-8 B2.3 Management Approvals A-8 C1 Communication A-9 C1.1 Communication of Importance A-9 C1.2 Communication of Uncertainty A-10 C1.3 Communication within State Highway Agency A-12 C1.4 Definitive Management Plan A-15 C1.5 Proactive Conveyance of Information to the Public A-18 C1.6 Simple Spreadsheet (Also see C2.4, D2.8) A-21 C1.7 Year-of-Construction Costs (Also see E3.5) A-22 C2 Computer Software (Also see C3, D2, V1) A-22 C2.1 Agency Estimation Software (Also see C3.1, D2.2, P1.1) A-25 C2.2 Commercial Estimation Software (Also see C3.2, P1.2) A-26 C2.3 In-House Conceptual/Parametric Estimation Software A-29 C2.4 Simple Spreadsheet (Also see C1.6, D2.8) A-29 C3 Conceptual Estimation A-29 C3.1 Agency Estimation Software (Also see C2.1, D2.2, P1.1) A-31 C3.2 Commercial Estimation Software (Also see C2.2, P1.2) A-32 C3.3 Cost/Parameter Using Similar Projects A-33 C3.4 Cost/Parameter Using Typical Sections A-35 C3.5 Trns•port (Also see D2.9, P1.5) A-39 C4 Consistency A-40 C4.1 Cradle-to-Grave Estimators A-42 C4.2 Estimation Checklist (Also see P2.1, V3.1) A-43 C4.3 Estimation Manual (Guidelines)

A-44 C4.4 Estimator Training A-45 C4.5 Major Project Estimation Guidance A-46 C4.6 Standardized Estimation and Cost Management Procedures (Also see B1.3) A-49 C4.7 State Estimation Section A-49 C5 Constructability A-50 C5.1 Constructability Reviews A-51 C6 Creation of Project Baseline A-52 C6.1 Cost Containment Table (Also see I1.1, G1.2) A-52 C6.2 Estimation Scorecard (Also see I1.2) A-54 C6.3 Scope Change Form (Also see I1.4) A-57 C6.4 Scoping Documents (Also see P2.2) A-59 D1 Delivery and Procurement Method A-60 D1.1 Contract Packaging A-64 D1.2 Delivery Decision Support A-68 D2 Design Estimation A-69 D2.1 Analogous or Similar Project A-70 D2.2 Agency Estimation Software (Also see C2.1, C3.1, P1.1) A-71 D2.3 Cost Based, Bottom Up A-73 D2.4 Historical Bid Based (Also see P1.4) A-75 D2.5 Historical Percentages A-76 D2.6 Major Cost Items using Standardized Sections A-77 D2.7 Parametric Estimation A-83 D2.8 Spreadsheet Template (Also see C1.6, C2.4) A-85 D2.9 Trns•port (Also see C3.5, P1.5) A-88 D3 Design to Mandated Budget A-88 D3.1 Design to Cost A-91 D4 Document Estimate Basis and Assumptions A-91 D4.1 Project Estimation File A-94 E1 Estimate/Document Review A-94 E1.1 Estimate/Document Review—External A-95 E1.2 Estimate/Document Review—Internal A-96 E2 Estimate Review—External A-96 E2.1 Expert Team A-98 E3 Estimate Review—Internal A-98 E3.1 Formal Committee A-99 E3.2 Off-Prism Evaluation (Also see I3.2) A-101 E3.3 In-House/Peer A-102 E3.4 Round Table A-103 E3.5 Year-of-Construction Costs (Also see C1.7) A-104 G1 Gated Process A-104 G1.1 Checklist A-105 G1.2 Cost Containment Table (Also see C6.1, I1.1) A-107 I1 Identification of Changes A-107 I1.1 Cost Containment Table (Also see C6.1, G1.2) A-108 I1.2 Estimation Scorecard (Also see C6.2) A-iv

A-109 I1.3 Project Baseline A-110 I1.4 Scope Change Form (Also see C6.3) A-111 I2 Identification of Risk (Also see R3) A-111 I2.1 Red Flag Items A-113 I2.2 Risk Charter A-116 I3 Identifying Off-Prism Issues A-116 I3.1 Environmental Assessment A-119 I3.2 Percentage of Total Project Cost (Also see E3.2) A-119 I3.3 Market Conditions A-121 P1 Plans, Specifications, and Estimates (PS&E) A-121 P1.1 Agency Estimation Software (Also see C2.1, C3.1, D2.2) A-122 P1.2 Commercial Estimation Software (Also see C2.2, C3.2) A-124 P1.3 Cost Based A-125 P1.4 Historical Bid Based (Also see D2.4) A-127 P1.5 Trns•port (Also see C3.5, D2.9) A-128 P2 Project Scoping A-128 P2.1 Estimation Checklist (Also see C4.2, V3.1) A-130 P2.2 Scoping Documents (Also see C6.4) A-131 P2.3 Work Breakdown Structure A-132 P3 Public Involvement A-132 P3.1 Meetings A-134 R1 Recognition of Project Complexity A-134 R1.1 Complexity Definitions A-135 R2 Right-of-Way A-137 R2.1 Acres for Interchange A-139 R2.2 Advanced Purchase (Right-of-Way Preservation) A-141 R2.3 Condemnation A-142 R2.4 Relocation Costs A-144 R2.5 Right-of-Way Estimator Training A-145 R2.6 Separate Right-of-Way Estimators A-148 R3 Risk Analysis (Also see I2) A-148 R3.1 Analysis of Risk and Uncertainty (Also see C1.2 and I2) A-149 R3.2 Contingency—Identified A-155 R3.3 Contingency—Percentage A-157 R3.4 Estimate Ranges A-159 R3.5 Programmatic Cost Risk Analysis A-163 V1 Validate Costs A-163 V1.1 Estimation Software (Also see C2, C3, D2, P1) A-164 V2 Value Engineering A-164 V2.1 Value Engineering A-167 V3 Verify Scope Completeness A-167 V3.1 Estimation Checklist (Also see C4.2, P2.1) A-v

B1 Budget Control Budget control tools assist in providing a disciplined approach to scope decisions that impact project cost. Budget control must begin early in project development. Two simple but essential principles of the budget control process must be clearly understood: (1) there must be a basis for comparison, and (2) only future costs can be controlled. B1.1 Budget by Corridor Budget control tools assist in providing a disciplined approach to scope decisions that impact project cost. Budget control must begin early in project development. Two simple but essential principles of the budget control process must be clearly understood: (1) there must be a basis for comparison, and (2) only future costs can be controlled. What Is It? Budgeting by corridor involves estimating and managing logical groups of smaller projects in transportation corridors. Transport corridors link major articulation points (e.g., hubs) on which freight and passenger movements converge. Most often, they lie at the intersection of economic, demographic, and geographic spaces as they perform both market-serving and market-connecting functions. Why? Developing estimates and budgets by corridors can assist with the challenges of long-range planning. First, projects in a corridor can be closely related in their physical and temporal characteristics. There is a link between transportation corridors and economic activities that can help to predict the needs, and thus the cost, of transportation projects. Estimating the need for improvements and reconstruction of corridors can be more accurate than estimating smaller projects individually. Addi- tionally, long-range planning tools (i.e., conceptual estimation tools) are aligned with corridor-scale estimates rather than smaller individual projects. What Does It Do? In addition to providing a logical grouping of projects with similar physical and temporal characteristics for more accu- rate estimates, budgeting by corridor allows planners and es- timators to better manage cost because they can budget a portfolio of projects rather than a single project. Project needs will change over time within the corridor. Budgeting by cor- ridor allows planners to reallocate moneys from one project to another within the corridor as needs dictate and better scope information becomes available over time. Used in conjunc- tion with the constrained budget and/or design to cost tools, budgeting by corridor can provide a means to manage a port- folio of projects in a logical manner. When? This tool is used for preparing long-range estimates during the planning phase of project development. Examples The Washington State DOT has created an Urban Corridors Office in the Seattle Metro area to manage the state’s largest corridors. The Seattle-based Urban Corridors Office directs six of the DOT’s largest projects, including the SR 99 (Alaskan Way Viaduct and Seawall Replacement Project), SR 520 (Bridge Replacement and HOV Project), and SR 509 (I-5 Freight and Congestion Relief, Access Downtown [Bellevue], I-90 Two-Way Transit and HOV, and I-405 Congestion Relief and Bus Rapid Transit Projects). More information can be found at http://www.wsdot.wa.gov/consulting/Ads/UrbanCorridors/ Misc/UCOOrganization.pdf. Tips A state highway agency may need to reorganize its manage- ment structure to effectively budget and control costs by cor- ridor. This tool should be used in conjunction with other tools, such as constrained budget and design to cost. Resources Washington State DOT Urban Corridors Offices: http:// www.wsdot.wa.gov/consulting/Ads/UrbanCorridors/Misc/ UCOOrganization.pdf. B1.2 Constrained Budget (Also See B2.2) Budgeting is a balancing act of meeting the agency’s objec- tives—responding to transportation needs—to the fullest extent possible within the limits of its financial capacity. To purposely budget a deficit results in the agency’s goals not being fully realized. The result is also the same when project estimates and, therefore, project budgets are at risk to grow over the approved baseline budget as development pro- gresses. Prudence requires that individual project budget growth not destroy the agency’s total program by requiring the diversion of funds to cover the deficit in a project. To optimize the agency’s programs, it is better to establish budget constraints early in the project development process and to demand that cost-effectiveness be a critical component of all project decisions. A-1

What Is It? Highway projects often are authorized with resource limi- tations, particularly budget limitations. The projects are usu- ally reconstructions, extensions, or additions to existing roadways. State highway agencies are often willing to under- take these projects with a specific cost commitment approach, which typically means that these projects have to be completed within a fixed budget. Scope definition for such projects is directly related to the funds available. The constrained budget tool is perceived as a regulatory mechanism to evaluate and limit project scope to the absolutely necessary items alone and prevent any cost overruns. Why? Highway projects involve a huge sum of monetary resources, which often involve a significant amount of consideration and give and take by legislators. The need and feasibility of a proj- ect has to be adequately justified while funds are being sought. In a resource-limited environment, some projects may be approved based on a limited resource allocation—budget. A mechanism is required to carefully monitor and use resources for such projects. The constrained budget tool was developed with these requirements in mind. What Does It Do? This tool is used to constantly evaluate whether or not the total project cost is within a predefined or mandated budget while attempting to scope and design the project within the fixed budget. The tool can also be perceived as a cost-cutting technique. The tool also ensures that critical elements of the project are sufficiently included in the scope. This tool causes designers to seek innovative and low-cost designs as a means of meeting the cost restraints. When? This tool is used early in the project development process— in the programming and preliminary design phase. The tool is needed when a budget has been mandated and when no increases will be allowed. Examples The state of Washington has recently passed several gas taxes that included legislated line-item budgets for different projects. These budgets are considered fixed and cannot be increased. Cost estimates for many of these projects were prepared based on limited scope. WSDOT has initiated project control and reporting procedures to ensure that these constrained budgets are met. Tips When developing a project under a constrained budget, the state highway agency should use a number of different tools to support this method. For example, Tool D3.1, design to cost, is an excellent tool to help ensure that the design is constantly being assessed from a cost estimate perspective. Tool V2.1, value engineering, should be used to evaluate different design alternatives to determine the lowest-cost option that provides the most scope for a project. Other budget control tools should also be used in conjunction with this tool. One issue that state highway agency estimators have to care- fully consider under the constrained budget tool is artificially reducing costs to maintain the budget as the design is devel- oped. The integrity strategy should be followed to prevent this pressure from occurring. Resources WSDOT (2006). Project Management On-Line Guide. www. wsdot.wa.gov/Projects/ProjectMgmt. Project Management Institute (2004). A Guide to the Project Management Body of Knowledge: PMBOK Guide, Third Edi- tion, Project Management Institute. B1.3 Standardized Estimation and Cost Management Procedures (Also See C4.6) The objective of standardizing procedures is to establish a common basis for all state highway agency project participants to follow when preparing cost estimates and to manage costs in a similar manner over the project development process. Change occurs frequently on projects as they are developed. Changes come from, for example, added scope, design devel- opment, and different site conditions than anticipated. Adopt- ing standard procedures will aid project participants when making decisions regarding potential changes to current bud- gets, with the goal of controlling the project baseline budget. The integration of both cost estimation practice and cost esti- mation management through standardized procedures is a critical feature to successfully managing cost escalation. What Is It? This tool establishes a set of standards and procedures within a state highway agency to guide the preparation of esti- mates and management of costs through the various stages of project development. The objective is to provide a coherent policy basis for alleviating cost escalation by consistently pro- viding timely feedback on the potential impact of changes to project budgets. Procedures provide a basis for how costs are managed, including who has authority to make decisions regarding changes to current budgets. A-2

Why? Changes often impact costs, and the necessity to constantly monitor these impacts in relation to the budget is necessary to control cost escalation. The most effective cost management system is one that will allow the project team to develop designs and make decisions regarding design alternatives with full knowledge of the cost impact of their decisions. Standardized cost management procedures should facilitate controlling cost escalation throughout programming and design of project development. They also can help establish a cost-conscious atmosphere within the project team environment. What Does It Do? These procedures formalize project cost control approaches that will be followed throughout the project development phases through a standardized process for (1) monitoring proj- ect development for potential changes to the budget, (2) sub- mitting potential changes, and (3) obtaining management approval of these changes. This cost control process aids the project team in monitoring costs and alerts the team to any major impacts with regard to the current budget. When? Standardized procedures must be established at an agency level for guiding project development work, specifically for cost estimation and cost management. The procedures should be applied throughout the project development process. How- ever, cost management can only begin when a baseline scope, cost, and schedule are set. Examples The Missouri DOT has developed a set of estimation and cost management procedures that are applied from need identifica- tion through to the final design stages. These procedures are closely tied to the Missouri DOT project development process. There are clear definitions of terms and the identification of a timeline for the different steps to be followed for a project to be realized. As a need is transformed into a real project, based on available information, appropriate estimation techniques are indicated to accurately derive cost estimates. Further, signifi- cant tasks—such as public input, environmental considera- tions, and the proper channels to obtain approvals as cost estimates are developed—have been incorporated into the Mis- souri DOT procedures (see C4.6 example). An outline of the contents of the Missouri DOT procedure is provided below: 1-02.1 PURPOSE 1-02.2 GENERAL OVERVIEW 1-02.3 NEEDS INDENTIFICATION 1-02.4 NEEDS PRIORITIZATION 1-02.5 INITIAL PROJECT ESTIMATES 1-02.6 PROJECT SCOPING 1-02.7 PROJECT SCOPING MEMORANDUM 1-02.8 PROJECT SCOPING CHECKLISTS 1-02.9 PROJECT PRIORITIZATION 1-02.10 STIP COMMITMENTS 1-02.11 SCOPE CHANGES 1-02.12 PROJECT COST ESTIMATES 1-02.13 ENGINEER’S ESTIMATE 1-02.14 BID ANALYSIS PROCESS 1-02.15 RECOMMENDATION FOR AWARD OR REJEC- TION OF BIDS A tracking system for potential amendments to budgets is also covered in the Missouri DOT procedures to monitor changes and update the estimate accordingly. A set of submittal and approval forms indicating changes and justification of these changes to current budgets keeps key personnel informed of cost variations. An example of a project control form for scope changes included in the Missouri DOT procedure can be found under Tool C6.3, scope change form. Tips Budget control can only begin once a baseline cost estimate is prepared for a project. Cost management procedures should include project control forms and directions on when and how to complete these forms. Further, the procedures should iden- tify levels of approval for accepting changes to the budget based on dollar size of the change. Smaller cost changes can be approved at the project level, while larger cost changes would require region/district or headquarter’s management approval. Resources Becker, Daniel (2003). “Controlling Construction Costs During Design,” AACE Transactions, AACE International, Vol. F-5, 1–4. Schloz, Michael J. (1977). “Project Cost Management Dur- ing Conceptual Engineering,” AACE Transactions, AACE International, 167–172. Sturgis, Robert P. (1967). “For Big Savings—Control Costs while Defining Scope,” AACE 11th National Meeting, AACE International, Vol. 67-C.3, 49–52. Missouri DOT (2004). “Chapter 1, General Information: Needs Identification Project Scoping and STIP Commit- ments,” Section 1-02, Project Development Manual, Revi- sion April, 12, 2004. www.modot.org/business/manuals/ projectdevelopment.htm. Project Management Institute (2004), A Guide to the Pro- ject Management Body of Knowledge: PMBOK Guide, Third Edition. A-3

B1.4 Summary of Key Scope Items (Original/Previous/Current) Developing and tracking key scope items can aid in budget control by immediately indicating changes in those items as the project progresses through project development. Listing these key items at each project development phase and with each estimate assists in communication among all team members. What Is It? A summary of key scope items is a list or outline of the most important elements of a project. These items should be iden- tified early, during the project scoping process (see also C6.4 and P2.2). These items ultimately define the project budget and schedule. Why? Defining project scope clearly lays the groundwork for accu- rate estimation and more efficient project delivery by defining and setting project limits. Communication of these items allows for tracking of project scope changes, as well. What Does It Do? Summarizing key scope items makes team members aware of the estimate basis and fundamental project assumptions. Each key scope item will represent a group of smaller tasks and scope components. Estimates can be prepared according to each key scope item or division of the project. When a new scope item arises, the team will be immediately aware of the change. When? The list of key scope items should be done as early as possi- ble in the project development process, preferably during the scoping process. If a project does not use a formal scoping process, a list can typically be completed during the conceptual estimation process. The summary of key scope items should be used for conceptual estimation, budget control, and project control. Examples The Minnesota DOT uses a summary of key scope items to clearly define the project (see Figure B1.4). Although simple, the summary of key scope items can be used extensively throughout project development to track budget and sched- ule progression. Tips As a means to monitor budget and schedule variances, compare original and current project scopes at key project development milestones and when changes arise. Resources California DOT Division of Design. Project Develop- ment Procedures Manual. www.dot.ca.gov/hq/oppd/pdpm/ pdpmn.htm. South Dakota DOT. Scope Summary—Road Design Manual. www.sddot.com/pe/roaddesign/docs/rdmanual/rdmch03.pdf. B1.5 Variance Reports on Cost and Schedule Variance reports on changes in cost and schedule provide a mechanism for budget control through tracking changes and alerting project personnel of changes. What Is It? This is a tool for alerting project personnel, particularly management, to deviations from the project budget or plan. It enhances management’s ability to control project cost and schedule. Why? Early identification of differences in project cost and sched- ule can help to ensure proper resource allocation. Discrepan- cies between estimated or planned costs or schedule can be harmful to the project. If a project’s costs increase, additional funds will need to be allocated. If a project’s schedule increases, additional funds may also have to be allocated to compensate for inflation, rising land values, or other time-related factors. If the project costs decrease, the additional resources can be allo- cated elsewhere; however, care should be taken to not redirect money that will have to be requested later due to not realizing that the deviations were inaccurate or not recognizing that unfavorable differences in funds (an increase in funding needs) were a possibility in the future. If the project schedule decreases, the availability of funds and other resources needs to be assessed given the new time frame. What Does It Do? Variance reports create a transparent notification system for alerting project personnel of deviations in project costs or schedule. When? Variance reports need to be completed regularly through- out project development. A-4

Examples Cost containment tables are a simple but powerful form of variance reporting. Sections C6.1 and I1.1 contain excel- lent descriptions and examples of cost containment tables. Figure C6.1 can be used to create a variance report, which is simply a report that documents variances in cost to manage- ment as a project progresses through the development pro- cess. Variance reports are generated at key project milestones or when significant changes in the project occur. Tips Consider different variance report details and intervals depending on the level of complexity of the project or phase of project development. Intervals should be closer together on highly complex projects or projects that are in a phase of high activity. Even during periods of inactivity, projects should be regularly examined to ensure that there are no variances in project costs or schedule. Variances should be reported to appropriate levels of man- agement if the magnitude of the deviation warrants. Consideration should be given to the impact of multiple small deviations that alone do not account for much differ- ence from the budget or schedule but collectively amount to a problem. Safeguards should be in place to watch for this type of activity. Resources FHWA (2004). “Lessons Learned: Federal Task Force on the Boston Central Artery/Tunnel Project (Summary of 34 Rec- A-5 Figure B1.4. Minnesota scope summary form. PROJECT SCOPE SUMMARY FORM FOR COST ESTIMATES Purpose of this Form: To provide a summary record of the project scope associated with each project cost estimate Mn/DOT prepares. Directions for Completing this Form: This form is set up as a checklist of the possible elements, which may be included in a roadway/bridge construction project. The checklist also includes a column/space for approximate quantities and/or comments regarding each element. The Length Width Depth (LWD) method for early project cost estimates requires very specific quantities in specified units for these project elements. In this form units and quantities should be identified in general terms which define the project in a way which can be easily understood by people who currently are not directly working on the project. Date: T.H. S.P., if known: From: To: Brief Project Description: Cost Estimate Total: Summary Author/Estimator: Project Scope Doesn’t Element Includes Include Quantity/Comment Grading Aggregates Paving Bridge Approach Panels Mobilization Removal/Salvage Drainage Traffic Control Turf/Erosion Signing Lighting Temporary Construction Utilities Aesthetics Retaining Walls Noise Walls Bridges Signals/Traffic Management Systems Right of Way Project Development/ Delivery

ommendations).” www.fhwa.dot.gov/programadmin/mega/ lessonsa.htm. Federal Aviation Administration (FAA) uses “baseline instability” or variance from an origin to determine cost and schedule deviations. See www.faa.gov/acm/acm10/reports/ Instability/introduction.htm. Metropolitan Transportation Authority of New York, Sample of Variance Report can be found at www.mta.net/ board/Items/2005/04_April/20050407OtherSectorWES_ Item2D.pdf Washington DOT, Set of Deviation Guidelines: www. wsdot.wa.gov/NR/rdonlyres/76FAB4F0-7EBD-4104-9441- B80D690DE4C1/0/DVP.pdf. B2 Buffers The objective of buffers is to protect the state highway agency and particularly estimators from outside pressure that could bias or manipulate a project estimate. Buffers take the form of structured estimate approval processes. These formal estimate approvals obligate management and external parties to recog- nize and acknowledge changes in project scope and schedule. B2.1 Board Approvals On larger projects or on groups of smaller projects, a board will review and approve the estimate and schedule while rep- resenting all parties involved. Requiring board approval of all major decisions throughout project development, especially when defining the project scope, can help to contain project cost growth. What Is It? This is a tool commonly used to ensure that the focus and scope of a project remains clear and is understood by all parties, thereby providing guidelines and priorities to keep mangers and estimators on target. Estimators can feel pressure to maintain a project budget, particularly as scope changes or scope creep occurs. Requir- ing board approval for scope changes and cost increases can take some of this pressure off of the estimator and possibly prevent any optimistic biases from entering into the estimate. An estimator’s job is to estimate and support design. Estima- tors should not be asked to make large scope assumptions or to respond to outside requests for additions to scope. Board approvals help to ensure that scope responsibility is the purview of management. What Does It Do? The practice of using board approvals counters the internal and external pressures that often coerce project managers to make scope changes. Thus, the estimators have a clear under- standing of the project scope at all times. When? Board approvals can and should be used at key points dur- ing the development phase. Board approvals not only help to maintain clear scope definition, they also improve general communication between parties. (Also see C1.1, Communi- cation of Importance.) Examples Washington State DOT uses board approvals to increase communication between the state and local agencies as well as all other parties involved with the project. For instance, board approvals are often used to discuss and decide upon devia- tions from standard procedures or varying design options. Table B2.1 is an example of choices that would need to be con- sidered during a board meeting for approval. Involving key parties in scope decisions through a board approval process from the start of the design process can deter conflicts that may surface later in project development and place undue pressure on estimators to maintain unrealistic budgets. Tips Use a facilitator to ensure that board meetings progress fol- lowing the agenda and cover all of the required topics in a timely manner. Be prepared and take a proactive role; do not use board approvals as a crutch. Resources Washington State DOT, Design Manual. An online PDF ver- sion can be found at www.wsdot.wa.gov/fasc/Engineering Publications/Manuals/DesignManual.pdf. This file is very large (70 MB) and may take a long time to download. Washington State DOT, “Building Projects That Build Communities,” Chapter Three: Working Through Design, Review and Approval. An online PDF version can be fount at www.wsdot.wa.gov/biz/csd/BPBC_Final/#BPBC_Final. B2.2 Constrained Budget (Also See B1.2) Typically, an agency’s program of required projects outpaces its funding year after year. In such a fiscally constrained envi- ronment, it is inevitable that tough decisions have to be made, and the decision process becomes more difficult if funds must be reapportioned to pay for individual project cost growth dur- ing the development process. Therefore, one control approach is to push fiscal constraints down to the project or corridor level. Thus, it is better to establish budget constraints early in the project development process and to demand that evaluat- ing cost effectiveness is a critical component of all project deci- sions. This requirement is especially important when a budget is fixed due to some legislative constraint. A-6

What Is It? The constrained budget tool restricts the project cost to a predefined limit and confines scope development within this cost constraint. Why? Scope development is often subject to external or internal pressures to maximize the scope for a project, which may have an impact on the estimator’s decisions when preparing cost estimates. The constrained budget tool reduces the impact of such potential barriers for an estimator by setting cost con- straints up front and then ensuring that the design is con- stantly tested against these cost constraints through frequent estimate updates. What Does It Do? This tool will require that the project team and estimators closely monitor project costs to keep costs within the fixed budget, as there is no possibility for seeking additional funds. This tool acts as a buffer because it, by default, protects the estimator from pressure to artificially reduce cost. When? This tool is used in programming and early in preliminary engineering and consistently acts a budget control mechanism throughout the design process. Examples The State of Washington has recently passed several gas taxes that included legislated line-item budgets for different projects. These budgets are considered fixed and cannot be increased. Cost estimates for many of these projects were pre- pared based on limited scope. WSDOT has initiated project control and reporting procedures to ensure that these con- strained budgets are met. As part of project control and report- ing procedures, quarterly reports are presented to region and headquarters management with the intent to provide the most current cost and reveal any potential cost increases so decisions can be made to realign cost estimates with the fixed budgets. This is an effort to reduce surprises and, in this way, protect the project team from downward biasing of costs simply to meet a given budget. Tips When developing a project under a constrained budget, the state highway agency should use a number of different tools to support this method. For example, Tool D3.1, Design to Cost, is an excellent tool to help ensure that the design is constantly being assessed from a cost estimation perspective. Tool V2.1, Value Engineering, should be used to evaluate different design alternatives to determine the lowest-cost option that provides the most scope for a project. Other budget control tools should also be used in conjunction with this tool. One issue that state highway agency estimators have to care- fully consider under the constrained budget tool is artificially A-7 Table B2.1. Sample of board meeting considerations.

reducing costs to maintain the budget as the design is devel- oped. Management can play an important role in reducing pressures to estimate on the low side. Resources Washington State DOT (2006), Project Management On- line Guide. www.wsdot.wa.gov/Projects/ProjectMgmt. Project Management Institute (2004). A Guide to the Project Management Body of Knowledge: PMBOK Guide, Third Edition. B2.3 Management Approvals Departments should establish a formal estimate approval process that requires all major project cost and schedule increases/decreases to be approved by at least two members of the department’s senior management. What Is It? This is a tool that supports the estimate integrity strategy by shielding the state highway agency estimators and consultant estimators from external and internal pressures to manipulate an estimate. Why? Two of the root causes of project cost growth and estimate inaccuracies are scope changes and schedule growth. If state highway agencies truly want accurate project estimates, espe- cially in the case of large or complex projects, they must have management structures in place that screen and control changes to project scope and schedule. What Does It Do? State highway agencies can protect designers and estimators from outside pressures that cause project cost growth by requiring senior management approvals of project scope (design) and schedule changes. This tool promotes estimate quality by establishing an organizational structure that shields lower-level designers and estimators from influences that can cause scope and schedule growth. It places the authority and responsibility for project scope and schedule changes where there is a much broader knowledge base of the project and its environment. The tool’s other important function is to ensure that management is kept appraised of a project’s current scope, cost, and schedule—no surprises. When? Before a project’s scope or schedule can be changed, man- agement must be made aware of the impacts of the change and provide formal (documented) approval. Examples Scope changes usually drive cost changes, so those author- ized to sign off on scope changes need to know the cost impacts. Therefore, the agency may structure the approval process based on the effect of the requested change on esti- mated project cost. To do this, it is necessary that an estimate of the cost effects of any scope change be submitted with the approval request. All major scope changes to a project must be approved by at least two members of the agency’s senior management, and a copy of the scope change approval letter is retained in the project estimation file. All major cost increases/decreases to a project must be approved by at least two members of the senior management. Such approvals must be in writing, and copies of the approval letters must be maintained both by project management and by those responsible for developing the project estimate (there should also be a copy in the estimation file). Tips An agency can set dollar limits that determine when agency management approval is required. These dollar limits can be graduated and tied to different levels of responsibility within the project team, within the management hierarchy of a region/district, or within the headquarters at a senior man- agement level. Resources Missouri DOT (2004). “Chapter 1, General Information: Needs Identification Project Scoping and STIP Commit- ments,” Section 1-02, Project Development Manual, Revi- sion April, 12, 2004. www.modot.org/business/manuals/ projectdevelopment.htm. C1 Communication Proper communication of project cost estimates can help to solve many cost escalation problems. Key communication points are the communication of importance and the commu- nication of uncertainty. A key question that must be commu- nicated with each estimate is “what decisions will be made from this estimate?” Estimators need to know the purpose of an estimate to know the appropriate level of effort to expend on an estimate. The decisions that will be made from the esti- mate must be communicated at the time the estimate is being generated. Likewise, estimators have an obligation to communicate the level of uncertainty associated with an esti- mate so that inappropriate decisions are not made from the estimate. A-8

C1.1 Communication of Importance Every project estimate is important because cost is integral to project scope, and together cost and scope drive many of the project team’s design and schedule decisions. Cost estimation must be viewed as an important and integral part of the proj- ect development function. Cost estimators should understand how their estimates are going to be used to support the project development process. Additionally, the estimated costs that are presented to stakeholders outside of the project team cre- ate third-party expectations, and these expectations can have many positive and negative implications to the project and the state highway agency. What Is It? This is a tool that ensures that all project team members understand the importance of a given cost estimate and/or the cost estimation function. This understanding is necessary if costs are to be managed appropriately. Communication of importance serves to correctly convey the accuracy and vari- ability of an estimate. Why? During project development, team members and a variety of stakeholders need cost information to make decisions. Esti- mators should understand the nature of the decisions that will be made from their estimates. For example, a different level of importance—and a corresponding level of effort—should be placed on an estimate that is supporting a decision when com- paring options versus an estimate that is being released to external stakeholders as an ultimate project cost. What Does It Do? The communication of importance creates an understand- able and open communication path between all project partic- ipants. It lets estimators know the amount of effort they should expend on the estimate. It creates a transparency in the purpose of the estimate and helps to ensure that the wrong number will not be used for critical budgeting or design decisions. When? Communication of importance should happen throughout all phases of project development. It is particularly important during milestone updates and at critical points in the project development process. Examples The communication of importance is as much a philosophy as it is a tool. The simplest example is to always ask, “What decisions will be made from this estimate?” The use of milestone estimates to convey importance is also very helpful. Pennsylvania DOT uses the following milestones in their estimating process: • Program amount (amount approved by the Program Management Committee [PMC]) • Engineering and environmental (E&E) scoping field view • 30% (design field view) • 75% (after final design field view) • 95% (engineer’s estimate) • Bid amount By using these critical milestones, Pennsylvania DOT can convey the importance of these estimates. They know what decisions will be made at each of these milestone and what the current estimate is to communicate to external stakeholders. Estimates in support of design decisions will not be confused with milestone estimates. For more information on the Penn- sylvania DOT system, see C6.1, Cost Containment Table. Tips Through workshops and continued reinforcement of the concept, develop an agency understanding of accurate estimate importance and the impact that inaccurate estimates may have on a project and program. Resources The Construction Industry Institute has numerous tools available on its website. Search for “communication of importance” at www.construction-institute.org. C1.2 Communication of Uncertainty Properly communicating the uncertainty involved in an estimate will help to ensure that appropriate decisions are made from the estimate. Estimate uncertainty can be com- municated by providing a range estimate rather than a point estimate. Communication of estimate uncertainty can also be conveyed by simply listing the assumptions, allowances, unknowns, and contingencies included in an estimate. What Is It? Communication of estimate uncertainty involves an explicit means of conveying the accuracy of an estimate. There are numerous means of conveying uncertainty. Presenting a cost range is common early in project development, and presenting a contingency is common during final engineering. At any point in the process, list of allowances or project unknowns can be used to convey uncertainty. All means are intended to let designers and decision makers know the accuracy of, or poten- tial error in, a cost estimate. A-9

Why? Projects are not well defined in the early stages of their development. Identification and communication of the pro- ject’s early stage uncertainty and the fact that unknowns can impact scope and estimated costs will help in managing proj- ect expectations. What Does It Do? Communication of uncertainty creates transparency in the estimation process. It buffers estimators by conveying that esti- mates are not absolute, but rather predictions based upon the best information known at the time. This tool allows for more prudent decisions to be made from cost estimates. When? The identification and communication of the uncertainty in relation to project scope and cost unknowns helps in man- aging project cost in all phases of project development, but particularly in the programming and preliminary design phase. As the project moves from programming through pre- liminary design, the amount of uncertainty in the estimate should diminish. Good cost management techniques com- municate specifically how the design process has removed the uncertainty. Examples Examples of communication of uncertainty can be seen under the risk analysis method, R3.1. The following illustration from Washington State DOT’s Cost Estimate Validation Process (CEVP) program is an excel- lent example of how to convey uncertainty concisely to the project team and any number of stakeholders. The Washington State DOT CEVP summary example (Fig- ure C1.2) is an excellent demonstration of how to convey esti- mate uncertainty. It provides a cost range, rather than a point estimate, for both cost and schedule. It lists the risks associated with the project so that readers understand what is driving the uncertainty in an estimate. It also lists changes from periodic or milestone estimates. While the CEVP example may be too elaborate for most projects, the point of communicating estimates with a range or with a list of risks is applicable to most projects. Tips Transparently convey the uncertainty of each estimate. An estimate with uncertainty is not a bad estimate; it is a realistic estimate. Conveying uncertainty will allow better decisions to be made from estimate information. Resources Caltrans Office of Project Management Process Improve- ment (2003). Project Risk Management Handbook. FHWA (2004). “Major Project Program Cost Estimating Guidance.” http://www.fhwa.dot.gov/programadmin/mega/ cefinal.htm. Molenaar, K. R. (2005). “Programmatic Cost Risk Analy- sis for Highway Mega-Projects,” Journal of Construction Engi- neering and Management, Vol. 131, No. 3. Washington State DOT (2006). Cost Estimating Valida- tion Process (CEVP) website. www.wsdot.wa.gov/Projects/ ProjectMgmt/RiskAssessment. C1.3 Communication within State Highway Agency Developing a project-specific communication plan that includes all types of internal communication among project team members is required for successful project execution. This communication plan should include issues related to cost estimation practice and cost estimation management. What Is It? Communication is the exchange of specific information. Both cost estimation management and cost estimation prac- tice involve many information exchanges. Timely and accu- rate information transmission is often attributed to efficient project organizational structures. Cost estimation manage- ment and cost estimation practice involve multiple parti- cipants within a state highway agency, often at different locations, such as in regions/districts or headquarters. Even within regions/districts, there may be multiple office loca- tions. Hence, there is a need to establish channels for efficient communication. Why? Communication tools and techniques ensure the timely and appropriate generation, collection, storage, and retrieval of project information. A project communication plan has to be developed identifying who is responsible for what infor- mation or data, and how and when this project participant can be reached to obtain that specific information. State highway agencies have different teams working on different aspects of a project, such as pavement design and estimation, right-of- way estimation, bridge design and estimation, and project risk analysis. The estimator must consult with such teams to incorporate current cost into the estimate. This communica- tion interaction should be covered in the project communica- tion plan. A-10

A-11 Figure C1.2. WSDOT CEVP summary example.

What Does It Do? A communication plan establishes a logical channel for project participants internal to the state highway agency to interact with each other. A good plan will eliminate ambigui- ties like where to find what information and whom to consult for a specific problem in relation to the many different aspects of the project (including cost estimation management and cost estimation practice). In particular, the communication plan should identify who needs to be notified when changes are made that impact scope, cost, and/or schedule. When? An internal communication plan is used during all phases of the project development. However, this plan must be created as early as possible and may have to be updated as newer par- ticipants join the project team. The project team must be informed of any changes. Examples Lead project personnel can assign team members to create a stakeholders analysis with input from all participants, and then a communication matrix can be formulated. This process involves collection of data, such as different modes of com- municating with different stakeholders (stakeholders as used in this example means project team members), period of unavailability, and alternative contact information. The top of Figure C1.3 shows a sample stakeholder analysis. Subsequently, a communication matrix is formulated matching the work breakdown structure (WBS) with all deliv- erables and timelines clearly indicated, as shown in the bottom of Figure C1.3. This will help eliminate ambiguities in deter- mining responsible participants at any point in the project and will help reduce any delays caused by a communication blackout. Table C1.3 shows the table that Washington State DOT uses to structure the internal communication plan. The table addresses communication between and among the teams as well as communication protocols. The table helps to ensure that communication is open, honest, continuous and efficient. Tips A formal list of all project participants and their contact information must be created for every project, along with the participants’ duties and responsibilities. A portion of this list must be dedicated to communication related to cost estima- tion practice and cost estimation management. Educate and train project participants within a state high- way agency on the importance of efficient communication. Ensure project participant awareness of the project commu- nication plan. Resources Harder, Barbara T., Neil J. Pedersen, Tom Warne, and Bar- bara Martin (July-August 2005). “On Budget and On Time,” TR News, Transportation Research Board. Caltrans (2003). Project Communication Handbook. www. dot.ca.gov/hq/projmgmt/documents/pchb/project_ communication_handbook.pdf. Additional information can be found at www.dot.ca.gov/hq/projmgmt/guidance_pchb.htm. Project Management Institute (2004), A Guide to the Proj- ect Management Body of Knowledge (PMBOK Guide). Washington State Project Management Process, Com- munication Plan Template, can be found at www.wsdot. wa.gov/Projects/ProjectMgmt/OnLine_Guide/Tools/ Communication_Plan.doc. C1.4 Definitive Management Plan A primary function of state highway agencies is project management. Cost estimation management can be consid- ered a subset of project management. Project management requires the application of skills, knowledge, tools, and tech- niques to deliver the project on time, within budget, and according to specifications. Communication is arguably one of the most important elements of project management. Suc- cessful project management involves discipline. The creation of definitive project management plans is a critical element of project management. It helps to communicate management objectives, strategies, project control requirements, project milestones, and project personnel. Project management plans will vary based upon project type, project complexity, and point in project development. This variation is a primary reason why definitive project management plans can help communicate estimates and cost management procedure effectively. The definitive management plan describes how the pro- cesses and activities of a project will be managed. A cost esti- mation management plan is a subset of this definitive project management plan. The primary objective of a definitive proj- ect management plan is to create a consistent, coherent doc- ument that can be used to guide the project execution and project control and communicate the essential functions of estimation management. Why? Each project is unique. Projects vary by the complexity of their physical, temporal (i.e., schedule), and sociopolitical characteristics. While some projects require elaborate project management plans and actions, others can be managed by planning a concise set of actions at critical times in the process. The purpose of the definitive project management plan is to clearly define management roles and responsibilities, struc- A-12

ture of work, and execution required by the executive man- agement and project teams to complete a quality project on time, within budget, and safely. What Does It Do? The communication of a definitive project management plan can help to clarify project objectives, strategies, cost con- trol requirements, project milestones, and project personnel. It can ultimately help state highway agencies to manage tax- payer resources for the highest possible return on value. It communicates that each project is unique and requires indi- vidual project management attention. When? This tool can be used during all phases of project develop- ment. In planning, it will likely be most effective on large projects with clearly defined boundaries. The tool will be most helpful from preliminary engineering through final engineer- ing and into construction. Examples There are proven industry standards for project manage- ment. Perhaps the most pervasive standard is the Project Management Body of Knowledge (PMBOK) from the Project A-13 Figure C1.3. Sample stakeholder analysis (above) and communication matrix (below) (Caltrans Project Communication Handbook).

Management Institute (PMI). According to the PMBOK, the organization and presentation of the project plan should include the following: 1. Project charter 2. A description of the project management strategy 3. Scope of work, with the project’s objectives 4. Define quality-level analysis 5. Cost estimates, schedule start and finish dates, and responsibility assignments 6. Performance measurements and baselines for technical scope, schedule, and cost 7. Major milestones and the corresponding dates 8. Required personnel and their expected cost 9. Risk management plan (including main risks) and planned strategies, solutions, and contingencies for each risk 10. Subsidiary management plan, including: • Scope management plan • Schedule management plan • Cost management plan • Quality management plan • Staffing management plan • Communications management plan • Risk response plan • Procurement management plan 11. Open issues and pending decisions A second example comes from Washington State DOT. In July of 2005, the secretary of transportation issued Executive Order E 1032 to address project management at the agency level. The executive order contained guiding principles for the agency to follow. It provides an excellent point of discussion for this tool. The introduction of the executive order states as follows: The Washington State Department of Transportation (WSDOT) has refined its project management process for deliv- ery Capital Transportation projects. This process includes “best practices,” tools, templates and examples and will enhance the communication process for both pre-construction and con- struction project management. The Process, tools and templates can be found at www.wsdot.wa.gov/Projects/ProjectMgmt. The project management website contains tools, templates, and examples that help project managers create definitive management plans. The website is extremely detailed. It cov- ers tools and training in such areas as project management, cost A-14 Table C1.3. Template for documenting communication among teams. WHAT WHO HOW WHEN Communicate project progress to senior management Communication among all teams. Distribute & maintain schedule Base Schedule Date: Create an organizational chart that identifies Team Structure Set guidelines Clarify chain of command guidelines with other agencies and contractors Set protocols Team member Communication How do project teams & resource agencies communicate? Communication between P/M Team and Production/Supervision Team Define internal (WSDOT) communication roles and responsibilities Facilitate distribution of information on other relevant agency projects to all production team members Communication between P/M Team and Consultant or Contractor At technical/field level At admin/regional level

risk assessment, cost estimate validation, value engineering, project control and reporting, and innovative project delivery. Figure C1.4 provides a concise overview of the process. Communicating a definitive project management plan will assist in project estimation management and has proven suc- cessful in assisting to deliver projects on budget. Tips Intuition and numerous research studies have shown the benefits of pre-project planning. A definitive management plan should be created early and revisited at key milestones throughout the project lifecycle. Resources Project Management Institute (2004). Project Management Body of knowledge (PMBOK Guide). www.pmibookstore.org/ PMIBookStore/productDetails.aspx?itemID=358&varID=1. C1.5 Proactive Conveyance of Information to the Public Proactive conveyance of information to the public is an important tool in cost estimation management. An informed public can become partners in cost estimation management. Additionally, state highway agencies are entrusted with re- sources from the public and have the responsibility to com- municate how they are managing the resources to maximize a state’s transportation system. Cost estimation practice and cost estimation management are vital processes to manage these resources. Transparency and proactive conveyance of estimate information can assist in cost estimation management. What Is It? This tool is a proactive approach for conveying cost estimate information to the public. It includes an action plan established for taking a proactive rather than defensive (or reactive) pos- ture in gathering and transmitting information. Why? Public input can be vital to successful project completion. The public is the customer of every state highway agency. If the public does not agree with the project or some aspects of the project, there can be major impacts to project cost, sched- ule, and scope. Open and honest communication with the public can limit problems that impact project development. What Does It Do? A communication plan and the activation of the plan can cre- ate an open and honest dialogue between the agency and public. It creates accountability in cost estimation management for both the state highway agency and the public. This open exchange A-15 Figure C1.4. WSDOT project management process.

creates a positive atmosphere in which the agency and public can express goals, questions, comments, and concerns. Not only does this allow for an exchange of information, but it also pro- duces an air of accountability. The plan needs to be developed and followed actively throughout project development. When? To be effective, the plan needs to be instituted in the earliest stages of project development. Communication plans may be standard for all projects, but large, complex, and sensitive proj- ects require more extensive information exchanges than small, simple projects. Examples Some state highway agencies have public awareness plans that include websites for larger projects. While this may be very beneficial, state highway agencies should also make information available to the public regarding smaller, less controversial projects. This does not have to be a high-cost initiative on all projects. Consider using local and regional media, local schools, fairs, malls, focus groups, sponsorship of teams in walk-a-thons or benefit races, advisory groups, town hall meetings sponsored by local organizations, bill- boards, flyers, logo design competitions, or appearances at local civic club meetings. Virginia DOT (VDOT) has created a “Dashboard” website, shown in Figure C1.5, which provides a wide variety of infor- mation to the general public regarding VDOT operations. The VDOT Dashboard site allows the public access to information on the number of projects in each phase of development, real- time information on specific projects, and milestone account- ability of project development and engineering project activities. Information is transmitted using a traffic signal framework. The website enables the public to track any proj- ect. The website allows open communication between VDOT and the public and creates accountability to the public. Resources The VDOT Dashboard website: www.virginiadot.org. Scenario Planning: www.fhwa.dot.gov/planning/scenplan/ index.htm. Public Involvement Techniques for Transportation Decision-Making: www.fhwa.dot.gov/reports/pittd/cover.htm. Bell, J. (1998). “Public Involvement, Low Budget Can Mean High Effectiveness,” Proceedings: National Conference on Transportation Planning for Small and Medium-Sized Commu- nities, http://ntl.bts.gov/card_view.cfm?docid=703. O’Dowd, Carol (1998). “A Public Involvement Road Map,” Proceedings: National Conference on Transportation Planning for Small and Medium-Sized Communities. http://ntl.bts.gov/ card_view.cfm?docid=701. A-16 Figure C1.5. Virginia DOT “Dashboard” website. (a) Homepage

A-17 (b) Traffic signal information framework (c) Project-specific information Figure C1.5. (Continued). (continued on next page)

Shoemaker, Lee, and Tom Schwetz (1998). “Sustaining Pub- lic Involvement in Long Range Planning Using Stakeholder Based Process: A Case Study from Eugene-Springfield, Ore- gon,” Proceedings: National Conference on Transportation Plan- ning for Small and Medium-Sized Communities. http://ntl.bts. gov/card_view.cfm?docid=702. C1.6 Simple Spreadsheet (Also See C2.4, D2.8) Spreadsheets and checklists are excellent and simple methods for ensuring that all components of project cost have been considered and accounted for in the estimate. Spreadsheets and checklists, which identify the elements and activities included in (and excluded from) the estimate, can effectively communicate project cost and the distribu- tion of that cost. What Is It? Spreadsheets are formatted standard lists of items that an estimator should consider when calculating the cost of a proj- ect. Because spreadsheets are usually straightforward docu- ments, they are very good tools in communicating estimate completeness and the allotment of costs to the different por- tions of work. A-18 Engineering Dashboard Project Details UPCs 4730 State Project # 0638073176 Summary Description RTE 638 - RECONSTRUCTION (DILLWYN, PRINCE EDWARD) District Lynchburg Residency DILLWYN County PRINCE EDWARD Town Road System Secondary Route 0638 Next Scheduled Activity Approve Willingness Accomplishment Contract (1) Project Status ACTIVITY DATES SET (15) Comments Map It Six-Year Program Details Construction Details Send Feedback Print Page 0 Contact Information Manager/Designer Bruce Wooldridge Phone 434-856-8253 Contact William Leatherwood Phone 434-947-2314 Schedule Baseline Ad Date 11/10/2009 Current Ad Date 11/10/2009 Actual Ad Date PROJECTED TARGET DATE HAS NOT EXCEEDED ORIGINAL TARGET DATE Cost Estimates Scoping Estimate $1,787,663 Current Estimate $1,343,100 Estimate Date 3/15/2005 Variance -25% COST ESTIMATE VARIANCE IS -24.86% (d) Engineering-specific information Figure C1.5. (Continued).

Why? A well-designed spreadsheet will clearly communicate the total estimated cost of the project, as well as what is included in the estimate and what the various categories of work are expected to cost. A secondary objective is to guide organiza- tions toward improved estimation processes and practices. What Does It Do? The objective of a spreadsheet is to provide guidelines that (1) facilitate creation of a complete estimate and (2) support the evaluation of cost and schedule credibility. Spreadsheets serve to document estimate completeness in an easy-to-read format, which facilitates project cost communication in a uniform and structured manner. When? Different spreadsheet formats (with different levels of detail) are used in the course of project development as project scope is quantified and additional information becomes available. However, spreadsheets should be designed so that major cate- gories can easily be expanded as project detail is better defined. A-19 Activities Begin Date End Date Activity Code Scheduled Actual Scheduled Actual AUTHORIZE PE 12 05/16/1987 05/16/1987 05/18/1987 05/18/1987 SERP-NOTICE TO STATE AGENCIES 18 04/01/2004 04/07/2004 07/30/2004 06/11/2004 SCOPE PROJECT 22 04/01/2004 04/01/2004 08/31/2004 06/11/2004 CONDUCT LOCATION SURVEY 31S 03/16/2001 03/16/2001 11/30/2001 03/20/2002 PLAN DESIGN/PRELIMINARY F.I. 36F 07/16/2004 07/16/2004 12/13/2004 12/13/2004 R/W&UT DATA- HEARING/PUBLIC INV 44 12/13/2004 12/13/2004 09/28/2007 APPROVE WILLINGNESS 47 10/07/2007 02/04/2008 FURNISH R/W&UT PLANS 51 02/04/2008 04/04/2008 NOTICE TO PROCEED/RW ACQUIS 60P 04/04/2008 04/19/2008 UTILITY RELOCATION BY UTILITY 67U 04/14/2009 10/13/2009 ACQUIRE RIGHT OF WAY 69 04/19/2008 04/14/2009 APPROVED CONSTRUCTION PLANS 71 07/01/2009 10/13/2009 ADVERTISE PROJECT/BEGIN CN 80 10/20/2009 11/10/2009 Figure C1.5. (Continued).

A-20 Table C1.6. Georgia DOT spreadsheets. (a) Conceptual estimate spreadsheet Examples The detail of an estimation spreadsheet will vary by project type and by the point in time when the estimate is being created. In the earliest stages of project development, there is limited project definition and design knowledge. One state highway agency’s early stage spreadsheet has only five cost categories: 1. Grading and drainage 2. Base and pavement 3. Lump items 4. Miscellaneous 5. Engineering and construction The sheet also requires calculation of a total cost and a total cost per mile to provide transparency in comparing the cost to similar projects, thereby assessing reasonableness. These basic categories can be expanded as additional information about the project is developed. Sheets from Georgia DOT spreadsheets are shown in Table C1.6. Tips The calculation of estimated costs during the early phases of project planning usually employs parametric techniques based on historical cost data. Therefore, to be truly effective, the agency must have cost databases for organizing and retaining information on completed projects. Resources Michigan DOT’s Road Cost Estimating Checklist can be found at www.michigan.gov/documents/MDOT_0268_Road_ Cost_Est_120543_7.pdf.

C1.7 Year-of-Construction Costs (Also See E3.5) Project cost estimates are created at a specific point in time. The estimated cost is typically based on prices as of the date on which the estimate is created, while construction is to occur at some future date. Economic comparisons between options are most commonly done in present values during planning and preliminary engineering. However, estimates should be com- municated to project stakeholders in year-of-construction costs because that is what the project will actually cost when it is complete and that is the number that many stakeholders will use to measure success. Therefore, for the estimate to reflect actual construction cost, there must be an adjustment for inflation between the two points in time. What Is It? Year-of-construction cost is the estimated cost adjusted for the difference in time between when the estimate is created and when the project is to be constructed. Year-of-construction cost estimates take the “time value of money” into account. Project costs should be adjusted for inflation or deflation with respect to time due to factors such as labor rates, material cost, and interest rates. Estimated cost is most commonly inflated to the expected midpoint of construction date. Why? Using year-of-construction cost will more accurately reflect the future project cost. Funds available for projects often do not increase with inflation, but actual project costs do. Infla- tion continually reduces the agency’s capacity to preserve, maintain, and modernize the transportation system. While it is common to communicate a net present value for estimates when comparing projects or design options, it is not a good idea to communicate the estimate to external parties in any- thing but year-of-construction costs. What Does It Do? State highway agencies can be prepared in advanced to eval- uate the construction cost for the project at its programmed date. This tool improves estimate accuracy by identifying the effect of inflation on project cost. Implications for deci- sion making regarding transportation infrastructure based on budget will be clear to the public, and concerns about strate- gic misrepresentation (or lying) will be dismissed. It defines an estimated cost made in current dollars in terms of cost at the time of construction. When? Year-of-construction cost recognizes the cost escalation effect of inflation across the period of development and con- struction. Estimates should be communicated in year-of- construction costs from the earliest points in the project development process. This is very important for projects hav- ing long development and/or construction periods. Examples The year-of-construction cost will vary depending on when the estimate is created and the year-of-construction A-21 Table C1.6. (Continued). ESTIMATE SUMMARY A. Right of Way $2,454,000.00 B. Reimbursable Utilities $0.00 C. Clearing and Grubbing $416,000.00 D. Earthwork $565,000.00 E. Base and Paving $3,302,000.00 F. Drainage $255,000.00 G. Concrete Work $563,000.00 H. Traffic Control $225,000.00 I. Erosion Control $113,000.00 J. Guardrail $20,000.00 K. Signs, Striping, Signals, Lighting $353,000.00 L. Grassing/Landscaping $17,000.00 M. Miscellaneous $46,000.00 Roadway Subtotal $5,875,000.00 N. Major Structures $200,000.00 Construction Total $6,075,000.00 4 years of inflation at 5% $1,309,200.47 10% Engineering and Contingency $738,420.05 Construction Estimate Subtotal $8,122,620.52 Total Construction Estimate $8,123,000.00 (b) Summary conceptual estimate spreadsheet

and economic variations caused by external factors, such as inflation. To calculate the year-of-construction cost, adjust- ments should be made from current dollar estimates by apply- ing a cumulative inflation factor for the year of construction. MnDOT applies inflation factors as developed by the Office of Investment Management and approved by the Transportation Program Investment Committee. Table C1.7, which is a MnDOT table, illustrates a consistent standard to be applied in adjusting project estimates. Short- term inflation rates are higher because they can be more vol- atile. Long-term rates are lower because the economic cycles are expected to dampen the rates over time. The table has lim- ited life and must be updated on a periodic basis. Similarly to other state highway agencies, the Washington State DOT maintains it own Construction Cost Index (CCI) that is applied to projects across the state. WSDOT also main- tains inflation rates for right-of-way costs (R/W Cost Index) because these costs can increase at substantially higher rates than general construction inflation depending upon the loca- tion of the parcels. WSDOT maintains these values internally, but the values can be obtained by contacting the WSDOT Strategic Planning and Programming—Systems Analysis and Program Development Office. The FHWA also tracks cost changes that can be used to pro- ject future inflation on federal aid projects. This informa- tion can be found at www.fhwa.dot.gov/programadmin/ pricetrends.htm. Tips Project costs estimates provided in the Statewide Trans- portation Improvement Plan (STIP) should be calculated in year-of-construction costs. Use discipline in communicating year-of-construction costs at each phase of the project devel- opment. Federally funded local projects may either be adjusted for inflation as described above or capped at a fixed level of fed- eral funds. Resources FHWA price trends for federal aid highwy construction: www.fhwa.dot.gov/programadmin/pricetrends.htm. Minnesota DOT (2002). Ten Year Highway Work Plan http:// www.leg.state.mn.us/docs/2004/other/040069.pdf. Washington State DOT Strategic Planning and Program- ming website: http://www.wsdot.wa.gov/planning. C2 Computer Software (Also See C3, D2, V1) Computer software provides state highway agencies the abil- ity to manage large data sets that support estimate develop- ment for all project types and across the range of project complexity. Estimation programs with preloaded templates for creating cost items help project teams define the project scope, cost, and schedule. Computer software eases the task of track- ing project estimates through all phases of development and can assist in estimate and schedule reviews. In the case of state highway agencies, the most widely used estimation software is Estimator by InfoTech. Project development and management are team efforts. Computers and software can be a part of the team. But the state highway agency has to set high standards for the software if it is to be an effective member of the team. C2.1 Agency Estimation Software (Also See C3.1, D2.2, P1.1) Some state highway agencies have taken the initiative to develop their own estimation software. This has been accom- plished using internal resources in many cases, but external contractors have also been employed in software development. A survey in 2002 found that 18 state highway agencies are using software programs that were developed within the agency. These are not commercially available and are used either as A-22 Table C1.7. Inflation factors for current WP/SP to be consistent with 02-04 STIP guidance. STATE FISCAL YEAR 01 02 03 04 05 06 07 08 09 10 Current WP/SP -- -- .06 .06 .0325 .0325 .0325 .03 .03 .03 FY 02-04 STIP -- .06 .06 1.06 1.1236 1.1978 1.274 1.27 1.312 1.31 1.351 CUMULATIVE 1.12 1.16 1.160 1.20 1.24 1.237 1.35 WP/SP = work plan/strategic plan

stand-alone systems or in conjunction with other software. These programs generally have limited capabilities and were designed to run on mainframe computer systems. Additionally, many state highway agencies and individual estimators have not gone as far as developing software but have created spreadsheet programs to support estimate devel- opment (see Sections C1.6 and C2.4). What Is It? The various software packages developed by state highway agencies are designed to address very explicit agency estimation approaches and satisfy discrete agency objectives. Some agency software has been created for use exclusively during specific project development phases (also see Section E3.1). Why? Due to the computer’s ability to handle large data sets and its calculation flexibility, the estimator can easily adjust unit costs or percentages to match each project’s unique conditions and can generate answers to specific agency questions. Many agency-developed estimation software programs are connected to other management software that the agency employs. What Does It Do? Computer software allows the user to readily employ several different estimation databases for parametric or line-item esti- mation and for performing “what-if” analyses. The programs typically allow the user to draw prices from historical bid data, historical cost data, reference tables, or a collection of price der- ivations. All of the data used to generate an estimate—such as historical costs, crew wages, equipment and material costs, production rates, and assumptions—can be stored to provide a sequential record of estimate development. When? To address very specific estimation requirements, custom agency software may be the only solution. Agency software can be very good in addressing distinctive requirements imposed on any individual state highway agency; however, software development is tedious and costly, and continuing support is a critical issue. Agencies should first look to com- mercially developed and supported software such as the AASHTO Trns•port, which has been developed specifically to meet the needs of state highway agency estimation. Examples North Carolina DOT approaches project estimation by building estimated cost from the bottom up currently uses a slightly modified commercial estimation program. This pro- gram is used by many contractors and was originally developed to facilitate detailed estimation by a large contracting organi- zation. This program and similar ones of this type enable state highway agencies to development estimates from the bottom up based on crew productivity, construction methods, and selected equipment. Virginia DOT (VDOT) expanded an in-house-developed software system that was initially created through the com- bined efforts of two districts. The VDOT Project Cost Estimate System (PCES) is currently being used during the middle stages of project development (see Figure C2.1). Virginia is looking to expand its use of the system to the earlier stages of project development. The initial software system specifically guided the estimator through decisions about the following: • Costs common to every project (i.e., the costs of every “usual element” averaged and factored according to geo- metric classification), such as stone, asphalt, grading, pipes, erosion control, pavement markings, and moderate shoul- der widening • Costs specific to each project that are typically overlooked, such as crossovers, turn lanes, and curb and gutter • Costs of unique or unusual items requiring a specific dollar input determined by a specialist in a particular field That original template was modified to include the following: • Data from the entire state rather than just a few districts • Interstate projects • Right-of-way • Utilities • Estimation curves and relationships based on a wider vari- ety of projects • Construction engineering and inspection at a variable rate based on project cost • A wider range of bridge estimates This software is not only an estimation tool, but also a man- agement tool in that a number of items must be checked off, dated, or entered before a project can continue to the next level of development. Tips Many times, estimators spend more time with the tools they use to create the estimate (computers and software) than studying and analyzing the project. It is important that agency- developed software be user friendly and structured so that it is easy to input the required data into the system. Resources Kyte, C. A., M. A. Perfater, S. Haynes, and H. W. Lee (2004). Developing and Validating a Highway Construction Project Cost Estimation Tool, Virginia Transportation Research Council, Charlottesville, Virginia, December 2004, VTRC 05-R1. Can A-23

be found at www.virginiadot.org/vtrc/main/online%5Freports/ pdf/05-r1.pdf. Barlist is a reinforcing steel quantity-estimating tool devel- oped at the Washington State DOT. It can be found at www. wsdot.wa.gov/eesc/bridge/software/index.cfm?fuseaction= download&software_id=45. Trns•port is AASHTO’s transportation software manage- ment program. It is an integrated construction contract management system that has been developed based on the experience and needs of AASHTO’s member agencies. The New York State DOT (NYSDOT) and the New York State Thruway Authority (NYSTA) developed a website to sup- port their transition to the Trns•port system. This website can be found at www.dot.state.ny.us/trns-port/index.html. The “About Trn•sport” page of the website describes how, in years past, the NYSDOT used the mainframe versions of Trns•port Proposal and Estimates System (PES), Letting and Awards Sys- tem (LAS), and Decision Support System (DSS), but as other agencies moved from the mainframe to the client/server ver- sions, AASHTO decided to drop support of the mainframe version: NYSDOT’s options were to run the mainframe system without vendor support (a risky proposition), replace Trns-port with a new system, or migrate to the client/server version. The decision was made to migrate to the client/server version, and to implement additional modules, to provide a more functional and integrated system which covers the full lifecycle of capital projects. Similarly, the NYSTA had been using BIDLET, a Clipper- based estimation and bid management system developed in house. As stated in the same website, As computer technology and operating systems have advanced BIDLET has required increasingly greater resources to maintain its’ A-24 Figure C2.1. Example of summary page available in VDOT’s Project Cost Estimating System.

[sic] operation. The decision was made to replace BIDLET with the client/server version of Trns-port. The NYSDOT and the Thruway Authority investigated and have subsequently been working on a joint implementation of Trns-port to take advantage of the cost savings and efficiencies that could be realized from utilizing a single common installation. C2.2 Commercial Estimation Software (Also See C3.2, P1.2) In the case of state highway agencies, the most widely used computer estimation software is Estimator by InfoTech. Estimator is a module of Trns•port. Trns•port is owned by InfoTech, Inc., and fully licensed by AASHTO under that name. Using this software, state highway agencies can prepare parametric or item-level project cost estimates. Parametric estimates are based on project work types and their major cost drivers. Item-level estimates are derived from bid histories and cost-based estimation techniques. Cost-based estimates use material, equipment, and labor costs. What Is It? Estimation software systems are the computer program tools that assist the state highway agencies in developing their project estimates. Estimation software systems have preloaded templates that help the state highway agency project teams define the project scope, cost, and schedule. The software pro- vides a means to track project development, and it can assist in project review. There are several very good commercial pro- grams available and being used by a large number of state high- way agencies. Why? By using commercial software, the state highway agency avoids responsibility for updating or modifying the estimation programs as technology advances. Responsibility for matching the software with current protocols remains with the software provider. Additionally, the software provider works with many agencies and estimators and, therefore, has a broad knowledge of software issues. What Does It Do? Computers and estimation software enhance the ability of engineers to manage large data sets that are used in developing estimates for all types of projects. Definite advantages include the following: • Ability to develop an unlimited number of estimates matched to project complexity and level of design, whether from scratch, other current estimates, or historical backups • Ability to easily change, back up, and restore estimates • Ability to draw from unlimited amounts of historical cost data and/or labor and equipment rate tables • Ability to quickly copy entire estimates, individual or multiple work (bid) items, and/or activities from previ- ous estimates • Ability to track all changes made to the estimate and who made the change When? Commercial estimation software offers the most effective means of preparing and managing estimates for medium to large projects involving multiple cost items. For very large, com- plex projects, computer software may be the only effective and efficient method for handling large amounts of information. Examples The Trns•port Estimator module is used by 22 state highway agencies (as of August 7, 2002). Historic bid price databases can be created using Decision Support System module of the con- struction contract information historical database. Another commercially available system that is used by sev- eral state highway agencies is Bid Tabs by Oman systems. This system is used as a stand-alone system or in conjunction with Trns•port by seven state highway agencies (as of August 7, 2002). Two other state highway agencies are in the process of testing this software (as of August 7, 2002). One state highway agency (as of August 7, 2002) uses Heavy Construction Systems Specialists (HCSS) Heavy Bid, which is a program used by many contractors and was originally devel- oped to facilitate detailed estimation by a large contracting organization. One state highway agency (as of August 7, 2002) uses Auto- CAD to perform quantity takeoff for project estimates by combining plan views of the project area with elevation infor- mation to get a three-dimensional view of the project. Tips The effectiveness of any computer software program is directly related to product support and training. When select- ing software, always ensure that product support will be avail- able and that training and training material will be provided. Resources For more information about Trns•port Estimator, contact the AASHTOWare contractor: Info Tech, 5700 SW 34th Street, Suite 1235, Gainesville, FL 32608. Phone 352-381-4400; Fax 352-381-4444; info@infotechfl.com; www.infotechfl.com. Oman Systems, Inc., P.O. Box 50820, Nashville, TN 37205. Phone 800-541-0803; Fax 615-385-2507; www.omanco.com. Heavy Construction Systems Specialists, Inc. (HCSS), 6200 Savoy, Suite 1100, Houston, TX 77036. Phone 800-683- 3196 or 713-270-4000; Fax 713-270-0185; www.hcss.com; info@hcss.com. A-25

C2.3 In-House Conceptual/Parametric Estimation Software Parametric estimation methods are defined as estimation techniques that rely on relationships between item character- istics and the associated item cost. Early estimates developed during planning or during the initial stages of programming and preliminary design are typically based on a limited defini- tion of project scope. The usual approach used to address these estimation difficulties is reliance on some form of conceptual estimation methodology. Parametric models can be developed internally by an organization for unique estimation needs, or they can be obtained commercially. One key reason state high- way agencies develop their own parametric models is that they have specific estimation needs that cannot be achieved by using a commercial parametric model. What Is It? A parametric cost estimate is one that uses cost estimation relationships and associated mathematical algorithms (or logic) to establish the cost estimate for a project. Parametric estima- tion using statistical techniques can produce a range of proba- ble costs rather than a single deterministic cost. The method can be applied to develop an estimate before design is complete. Why? During the early stages of project development, it is difficult to develop definitive cost numbers based on material quantities or specific work items, as these have not yet been defined. Con- ceptual estimation methodologies and parametric estimation tools can bring speed, accuracy, and flexibility to estimation processes that are often bogged down in unnecessary and really unknown project detail at this point in project development. What Does It Do? The cost of a project element is based on relevant inde- pendent variables, or cost drivers. Mathematical expressions, or formulas, are used to express the functional relationship between the cost drivers and the elements of a project being estimated. These techniques are often referred to as cost esti- mation relationships. Parametric models are more complex than cost estimation relationships. They can be used to prepare estimates for an entire project. Parametric models incorporate many equations, ground rules, assumptions, logic, and variables that describe and define the particular situation being studied and estimated. Parametric models make extensive use of cost history databases. In addition, organizations use parametric estimation tech- niques to develop estimates that serve as “sanity checks” on the primary estimation methodology. Because these estimates can be prepared based on only a lim- ited amount of definitive project information, they support the following: • Scope development tasks • Investigation of alternative design concepts • Examination of alternative proposals for enhancements and upgrades • Identification of key design elements • Recognition of key project parameters • Prioritization of needs versus wants • Disclosure of key assumptions When? Early in project development, it is usually not possible to create a bottom up estimate based on a fully developed scope of work. Conceptual estimation is an excellent estimation methodology that can provide reliable estimates based on lim- ited scope definition. Parametric estimation techniques can also use validated change order request pricing. Examples Pennsylvania DOT (PennDOT) uses parametric values in determining cost estimate at planning and early design stages. The Washington State DOT (WSDOT) Urban Planning Office has developed a tool termed “Planning Level Cost Esti- mation” (PLCE). The PLCE tool is a parametric estimation tool created to help plan and budget for large improvement projects. The output of this tool is a range of total project costs, includ- ing preliminary engineering, right-of-way (if applicable), and construction. The tool focuses on major project elements and creates costs for other minor elements using factors. This pro- gram is based on WSDOT data for large projects using recent cost data. The tool can reflect regional differences. The output needs to be reviewed carefully by planners and other disciplines. The tool uses Microsoft Access as the database. Figure C2.3 shows a flowchart of the process, a typical screen capture for the mainline add of two lanes, and a typical summary output. Tips All parametric estimation techniques, including cost esti- mation relationships (CERs) and complex models, require credible data before they can be used effectively. Data should be collected and maintained in a manner that provides a com- plete audit trail with expenditure dates so that dollar-valued costs can be adjusted for inflation. While there are many for- mats for collecting data, an example of one commonly used by state highway agencies would be the standard contract pay items. Technical noncost data that describe physical, perfor- mance, and engineering characteristics of a project must also A-26

A-27 USER INPUT ESTIMATE RANGE STRUCTURE BASE ESTIMATE UNCERTAINTY ASSESSMENT QUANTIY, AREA DENSITY TYPES TYPES, SIZE TYPES, SIZE UTILITY, CE, TAX, … … MAINLINE ROW ENVIRONMENT INTERCHANGE (a) Flowchart Figure C2.3. WSDOT’s “Planning Level Cost Estimation” tool. (continued on next page) (b) Input for added lanes

be collected. Once collected, data need to be adjusted for items such as production rate, improvement curve, and inflation. This is also referred to as the data normalization process. CERs are analytical equations that relate various cost cate- gories (in either dollars or physical units) to cost drivers, or variables. CERs can take numerous forms, ranging from infor- mal rules of thumb to formal mathematical functions derived from statistical analysis of empirical data. Developing a CER requires a concerted effort to assemble and refine data. In deriv- ing a CER, assembling a credible database is especially impor- tant and, often, the most time-consuming activity. Resources The paper “Parametric Estimating Methodology for Transit Project Planning,” by Robert H. Harbuck, PE CCE, which is part of the 2001 AACE International Transactions, provides an overview for transit project applications. A copy can be found on the Parsons Brinckerhoff website at: www.pbworld.com/ library/technical_papers/pdf/46_ParametricEstimating.pdf. The Association for the Advancement of Cost Engineering (AACE International) Professional Practice Guide #6, Construc- tion Cost Estimating, presents information on conceptual and parametric estimation. NASA has a Parametric Cost Estimating Handbook. This handbook is intended to be used as a general guide for imple- menting and evaluating parametric-based estimation systems and as the text material for a basic course in parametric esti- mation techniques. It can be found at http://cost.jsc.nasa. gov/PCEHHTML/pceh.html. Washington State DOT, Urban Planning Office, Seattle, Washington. A-28 Figure C2.3. (Continued). (c) Summary cost estimate generated

C2.4 Simple Spreadsheet (Also See C1.6, D2.8) An estimator or state highway agency typically creates sim- ple spreadsheets using Excel or some similar user-friendly computer software. They provide a rapid and easy means for organizing numbers and making calculations (also see C1.6). These are really computer worksheets, but the name from the old pencil-and-paper days—spreadsheet—is retained. What Is It? Electronic spreadsheet programs offer the computing power of the computer and text editing and formatting capabilities at high speed and low cost. The electronic spreadsheet can store both the formulas and the computed values returned by the formulas and, therefore, provide great economies when there are numerous repetitive calculations to be made. Why? Electronic spreadsheet programs speed up estimate calcu- lations and will automatically update all calculations when values are changed. In the case of repetitive calculations, there is only the need to formulate the mathematics once. The other advantage of using such spreadsheets is that everyone is already familiar with how the software works, so training time is almost nonexistent. What Does It Do? Simple electronic spreadsheets can generate documents that use text and number entries and that require performance of calculations on the inserted values. Monte Carlo simulation can also be added to spreadsheets for doing probabilistic esti- mation or risk analysis. When? Simple electronic spreadsheets can be developed to estimate small projects or they can be created to support other estima- tion programs. Spreadsheets are also excellent tools for sup- porting and documenting quantity takeoff work. Examples Virtually any estimation process can be successfully auto- mated with a well-designed Excel template. Spreadsheets are excellent tools for calculating material areas, volumes, and summing by type of material. New Jersey DOT has posted on the Internet (www.state. nj.us/transportation/eng/CCEPM/) a preliminary estimate spreadsheet. Tips Computer spreadsheets such as Excel require less initial investment than commercial estimation software and tend to be very flexible. The list of included items on spreadsheets is often not exhaustive, and space should be provided in each sec- tion of the spreadsheets to allow the entry of additional cost items that may be unique to a particular project. Resources Georgia DOT (GDOT) has posted on the Internet (www. dot.state.ga.us) the format for submitting scope and cost esti- mates for GDOT projects in the form of Excel workbooks to expedite the review and approval process. Type “GUIDELINES FOR SCOPE & COST ESTIMATE WORKBOOKS” in the search box on the home page. There are also commercial estimation programs that have seamless integration with Microsoft Excel. See Hard Dollar Construction Estimating Software at www.harddollar.com/ software/Take-Off-Analysis.asp. C3 Conceptual Estimation During the earliest stages of project development, prior to any design work, there is limited information about the proj- ect. However, there is the need to establish the approximate cost in order to evaluate options and to make choices between transportation needs and feasibility. Because there is very lit- tle project definition at this point in time, conceptual esti- mates usually rely on parametric techniques to extrapolate from past experience the economic impact cost of future projects. These techniques are applied using custom cost esti- mation relationships or commercially available tools. Such estimates are normally prepared prior to the National Environmental Policy Act (NEPA) decision document. The accuracy of these estimates is directly related to the specificity of project definition. These techniques are used to determine the approximate cost of the project. In some cases, the esti- mated dollar amount is expressed as a range; this is a very good practice. C3.1 Agency Estimation Software (Also See C2.1, D2.2, P1.1) Based on schematic information, the intent of a conceptual estimate is to provide a realistic cost assessment so that decision makers can judge the relative merits of the project. The usual approach to doing that is reliance on some form of parametric estimation approach. Parametric estimation methods are defined as estimation techniques that rely on relationships between item characteristics and the associated item cost. One key reason state highway agencies develop their own paramet- ric models is that they have specific estimation needs that can- not be achieved by using a commercial parametric model. A-29

What Is It? A parametric cost estimate is one that uses cost estimation relationships and associated mathematical algorithms (or logic) to establish the cost estimate for a project. Parametric estima- tion using statistical techniques and historical databases can produce a range of probable costs rather than a single deter- ministic cost. The method can be applied to develop an estimate before design is complete. The conceptual estimation tech- niques with 1% to 15% project definition can produce a proj- ect estimate with an accuracy range of +40/−20% to +120/−60% according to the Association for the Advancement of Cost Engi- neering International (AACE). Why? During the early stages of project development, it is difficult to develop definitive cost numbers based on material quanti- ties or specific work items, as these have not yet been defined. Computer-driven conceptual estimation tools can bring speed, accuracy, and flexibility to estimation processes. They are also applicable for projects of an emergency nature that must be completed rapidly and for which there is limited scope definition. What Does It Do? When the only definitive information about a project is general parameters such as location, length, and maybe the number of roadway lanes an estimate can be derived from a weighting of historical cost records from previous projects. The technique uses cost estimation relationships to build the cost of individual parts of the project and parametric mod- els to prepare estimates for an entire project. Parametric mod- els incorporate many equations, ground rules, assumptions, logic, and variables that describe and define the particular sit- uation being studied and estimated. Parametric models make extensive use of cost history databases. When? Early in project development, it is usually not possible to cre- ate a bottom up estimate, as a fully developed scope of work is yet to be created. Conceptual estimation is an excellent costing methodology that can provide reliable estimates based on a limited definition of project scope. Conceptual estimation techniques can also be used to price validated change order requests. Examples Penn DOT uses parametric values in determining the cost estimate at the planning and early design stage. Tips All parametric estimation techniques, including cost esti- mation relationships and complex models, require credible data before they can be used effectively. Data should be col- lected and maintained in a manner that provides a complete audit trail with expenditure dates so that dollar-valued costs can be adjusted for inflation. While there are many formats for collecting data, an example of one commonly used by state highway agencies would be the standard pay items. Technical noncost data that describe physical, performance, and engi- neering characteristics of a project must also be collected. Once collected, data need to be adjusted for items such as production rate, improvement curve, and inflation. This is also referred to as the data normalization process. Cost estimation relationships are analytical equations that relate various cost categories (either in dollars or physical units) to cost drivers, or variables. They are created in a stepped process involving development of a unit cost by a weighting of historical data to which appropriate corrective adjustments are applied. Inflation/deflation adjustment. The unit cost must be adjusted for the time difference between the historical proj- ects and the estimated project. Various indexes of economic trends are available to support a correction. See the Engineer- ing News Record quarterly construction indexes. Location adjustment. The historical cost data are only reli- able for the specific locations of the encompassed projects. Consequently, the relative difference in the cost of materials, equipment, and labor between locations of past projects and the current project requires an adjustment in unit cost. Project size adjustment. Project size can affect cost; there- fore, in developing a cost estimation relationship, size of the historical projects compared with the estimated projects must be factored in. Unit cost adjustments. The cost of certain items (e.g., spe- cific hardware) is independent of project size; as a result, it is necessary that the estimator have a clear understanding of the proposed project scope. In deriving a cost estimation relationship, assembling a credible database is especially important and, often, the most time-consuming activity. Resources The paper “Parametric Estimating Methodology for Transit Project Planning,” by Robert H. Harbuck, which is part of the 2001 AACE International Transactions, provides an overview for transit project applications. A copy can be found on the Parsons Brinckerhoff website at www.pbworld.com/library/ technical_papers/pdf/46_ParametricEstimating.pdf. A-30

The Association for the Advancement of Cost Engineering’s (AACE International’s) Professional Practice Guide #6: Con- struction Cost Estimating presents information on conceptual and parametric estimation. NASA has a Parametric Cost Estimating Handbook. This handbook is intended to be used as a general guide for imple- menting and evaluating parametric-based estimation systems and as the text material for a basic course in parametric esti- mation techniques. It can be found at http://cost.jsc.nasa. gov/PCEHHTML/pceh.html. C3.2 Commercial Estimation Software (Also See C2.2, P1.2) The intent of a conceptual estimate is to provide a realistic cost assessment so that decision makers can judge the relative merits of the project. These estimates are generally based only on schematic information. The usual approach to address such an estimation situation is reliance on some form of conceptual estimation. These are estimation techniques that rely on rela- tionships between item characteristics and the associated item cost. Writing good software is extremely time intensive and requires a qualified staff of professional programmers who are also knowledgeable about the task the software is to perform. These two reasons cause many agencies to use commercial estimation software that has been validated and documented before release. What Is It? A conceptual cost estimation software system, whether it is a commercial product or agency-developed product, uses cost estimation relationships and associated mathematical algo- rithms (or logic) to establish the cost estimate for a project. These statistical techniques, together with historical databases, can produce a range of probable project costs. The method can be applied to develop an estimate before design is com- plete. Table C3.2 is from the Association for the Advancement of Cost Engineering (AACE) International. The table provides a sense of the accuracy that can be achieved using a conceptual estimation methodology in relation to the amount of project definition. During early project development, scope definition and design will be limited. Under the AACE International matrix, early estimates would be either Class 5 or 4. Why? During the early stages of project development, it is difficult to develop definitive project cost numbers based on material quantities or specific work items, as these have not yet been defined. Computer-driven conceptual estimation tools can bring speed, accuracy, and flexibility to estimation processes. Because development and maintenance of individual or spe- cialized software packages can be expensive and requires spe- cial talents, it is often more economical to use commercially available software, which spreads the product cost over a larger user base. In the case of conceptual estimation, commercial software providers often also have extensive databases that can be pro- vided with the product. What Does It Do? When the only definitive information about a project are general parameters such as location, length, and maybe the number of roadway lanes, an estimate can be derived from a weighting of historical cost records from previous projects. A-31 Table C3.2. AACE International generic cost estimate classification matrix. Primary Characteristic Secondary Characteristic Estimate Class Level of Project Definition Expressed as % of complete definition End Usage Typical purpose of estimate Methodology Typical estimating method Expected Accuracy Range Typical +/− range Class 5 0% to 2% Screening or Feasibility Stochastic or Judgment +40/−20 to +200/−100 Class 4 1% to 15% Concept Study or Feasibility Primarily Stochastic +30/−15 to +120/−60 Class 3 10% to 40% Budget, Authorization, or Control Mixed, but Primarily Stochastic +20/−10 to +60/−30 Class 2 30% to 70% Control or Bid/ Tender Primarily Deterministic +10/-5 to +30/-15 Class 1 50% to 100% Check Estimate or Bid/Tender Deterministic +10/-5

The technique uses cost estimation relationships to build the cost of individual parts of the project and parametric models to prepare estimates for an entire project. Parametric models incorporate many equations, ground rules, assump- tions, logic, and variables that describe and define the partic- ular situation being studied and estimated. Parametric models make extensive use of cost history databases. When? Early in project development, it is usually not possible to cre- ate a bottom-up estimate, as there is no fully developed scope of work. Conceptual estimation is an excellent costing method- ology that can provide reliable estimates based on a limited def- inition of project scope. Conceptual estimation techniques can also be used to price validated change order requests. Examples Trns•port cost estimation relationships is a job and program cost estimation and planning tool that provides a highly pro- ductive environment to prepare parametric, cost-based, and bid-based job cost estimates. Tips The estimator is the key to any estimation process and must know the software being used, its capabilities, and its limita- tions. To become proficient at any task, training is required. This is especially true with estimation software. Training will greatly enhance the proficiency and efficiency of estimators using any software. One of the greatest benefits of computer estimation is the storage and retrieval of historical data. All parametric estima- tion techniques, including cost estimation relationships and complex models, require credible data before they can be used effectively. Data should be collected and maintained in a man- ner that provides a complete audit trail with expenditure dates so that dollar-valued costs can be adjusted for inflation. While there are many formats for collecting data, an example of one commonly used by state highway agencies would be the stan- dard pay items. Technical noncost data that describe physical, performance, and engineering characteristics of a project must also be collected. Once collected, data need to be adjusted for items such as production rate, improvement curve, and infla- tion. This is also referred to as the data normalization process. Cost estimation relationships are analytical equations that relate various cost categories (in either dollars or physical units) to cost drivers, or variables. Cost estimation relation- ships are created in a stepped process involving development of a unit cost by a weighting of historical data to which appro- priate corrective adjustments are applied. Inflation/deflation adjustment. The unit cost must be adjusted for the time difference between the historical proj- ects and the estimated project. Various indexes of economic trends are available to support a correction. See the Engineer- ing News Record quarterly construction indexes. Location adjustment. The historical cost data are only reli- able for the specific locations of the encompassed projects. Consequently, the relative difference in the cost of materials, equipment, and labor between locations of past projects and the current project requires an adjustment in unit cost. Project size adjustment. Project size can affect cost; there- fore, in developing a cost estimation relationship, size of the historical projects compared with the estimated projects must be factored in. Unit cost adjustments. The cost of certain items (e.g., spe- cific hardware) is independent of project size; as a result, it is necessary that the estimator have a clear understanding of the proposed project scope. In deriving a cost estimation relationship, assembling a credible database is especially important and, often, the most time-consuming activity. Resources The paper “Parametric Estimating Methodology for Transit Project Planning,” by Robert H. Harbuck, which is part of the 2001 AACE International Transactions, provides an overview for transit project applications. A copy can be found on the Parsons Brinckerhoff website at www.pbworld.com/library/ technical_papers/pdf/46_ParametricEstimating.pdf. The Association for the Advancement of Cost Engineering International’s (AACE International’s) Professional Practice Guide #6: Construction Cost Estimating presents information on conceptual and parametric estimation. NASA has a Parametric Cost Estimating Handbook. This handbook is intended to be used as a general guide for imple- menting and evaluating parametric-based estimation systems and as the text material for a basic course in parametric estima- tion techniques. It can be found at http://www1.jsc.nasa.gov/ bu2/PCEHHTML/pceh.htm. AASHTOWare is AASHTO’s transportation software solu- tions. See http://aashtoware.org/?siteid=28. C3.3 Cost/Parameter Using Similar Projects This tool is based on the concept of using the cost of proj- ects that are similar to the project being estimated as the basis for developing the estimate. The similar project has a known cost and scope. The similar project cost is converted into some reasonable cost parameter, such as dollars per centerline-mile or dollars per square foot of decking and is A-32

used in conjunction with an order-of-magnitude quantity parameter of the project being estimated, such as centerline- miles, to provide a basis for approximating the total cost of the facility. What Is It? Early in program (or project) development, there is very lim- ited scope definition as to how a transportation need should be addressed. Because there are often similarities between a current need and a recently programmed, designed, or completed proj- ect, the cost basis for estimating the future program area (a proj- ect or groups of projects) is the relationship to the similar project for which there are cost data. The cost of the similar project is often expressed in terms of a cost per mile. Why? The purpose of this tool is to rapidly assess the approximate costs for addressing a transportation need or needs. What Does It Do? This tool provides an easy way to quickly approximate the order-of-magnitude cost of a potential transportation pro- gram (project or groups of projects). The concept is based on identifying an existing project that is almost identical in scope to the project that is being estimated. The tool relies on his- torical cost data. The historical data have to be modified to fit any differences in scope, location, and other project charac- teristics that might exist between the similar project and the new project or program area. When? This tool is used for preparing conceptual estimates during the planning phase of program (or project) development. Examples Several state highway agencies use historical cost data from similar projects to generate cost-per-mile factors for long- range planning estimates. One transportation agency identi- fies similar type projects within the state that are in the programming phase and uses the current average cost-per- mile estimates from those projects to prepare the conceptual estimates for its planning phase projects. The cost-per-mile data could be obtained from a single programmed project or from a number of similar programmed projects. The key to this estimation practice is using similar projects that have a more defined scope than the project in the long-range plan- ning phase. The planning engineers in the respective districts provide the estimators with the current cost-per-mile estimate for the programmed projects, which were created using para- metric and line-item historical bid-based estimation tools. Thus, the conceptual estimates reflect all project cost ele- ments, including costs for design, utilities, construction, and right-of-way. If the project includes structures, the estimator attempts to separate and remove the structure cost in the pro- gramming phase estimates and then estimates the current project’s structures separately. Other state highway agencies develop lane-mile factors in a similar manner as the one describe here, but they use costs for projects that have already been let instead of projects still in the programming phase. Tips Applying this tool requires the user to match basic scope items to projects that are deemed similar in scope to the trans- portation program or project being estimated. The user must ensure that all scope items are covered in relation to the similar project. If there is not a perfect match, appropriate adjustments in cost should be made. For example, if the similar project has fewer structures than the transportation need being estimated, an appropriate adjustment in the cost estimate should be made to account for fewer structures. There may also be location dif- ferences that must be accounted for when using costs of similar projects. Costs should be adjusted to include future dollars— that is, the time at which the transportation need is likely to become a project with a construction target date. This tool is useful for developing quick estimates for a pro- gram or project provided that the level of scope similarity is very high. The cost of the similar project should include all ele- ments, including preliminary design costs, right-of-way, util- ity adjustments, contract administration, and construction. If one of these elements is not in the scope of the new trans- portation need, then the cost for this element must be deleted from the similar estimate. Alternatively, cost for elements could be added to adjust for differences between a similar project and a new transportation need. Contingencies should be included to cover uncertainties in the cost estimate. Simple spreadsheets can be used to summarize cost estimation ele- ments when using this tool. Resources The data for the Wisconsin DOT method of calculating con- struction costs for a roadway improvement project based on “controlling cost items” (these are the certain bid items that comprise the majority of total construction costs) can be found at www.dot.wisconsin.gov/localgov/highways/docs/ district-controlling.pdf. C3.4 Cost/Parameter Using Typical Sections This tool is based on the concept of using typical sections/ components representing common types of facilities and historical cost data to derive key cost parameters. These cost A-33

parameters, such as dollars per centerline-mile or dollars per square foot of decking, are used in conjunction with gross quantities to provide a basis for approximating the partial cost of a facility. What Is It? Early in program (or project) development, very limited scope definition is available for solving a potential transporta- tion need. The proposed facilities are often described in terms of a parameter such as a centerline-mile of roadway improve- ment, the number of lanes, and the type of construction (new or reconstruction) or number of bridges. For example, typical- pavement-type sections are used as the basis for estimating pavement construction cost for a given or standard pavement length and thickness or for a typical shoulder width. Historical cost data are provided in terms of cost factors (e.g., dollars per centerline-mile) and percentages for certain scope categories. Historical data reflect average costs and are not necessarily spe- cific to any one area within a state. Why? The purpose of this tool is to develop approximate capital costs for a transportation need or needs so that estimates of funds required for long-range programs can be determined. What Does It Do? This tool is easy to use and provides a quick approximation of the magnitude of the cost for addressing a transportation need or correcting a deficiency. The concept is based on iden- tifying those cost elements that are likely to be a substantial portion of a project’s capital cost. The tool relies on historical data for developing standardized or typical configurations that represent types of transportation facilities. When? This tool is used for preparing a transportation program (or project) conceptual estimate during the planning phase of program (or project) development. Examples One unique approach to applying cost-per-mile factors is developing typical project sections (e.g., pavement sections and type) that correspond with lane-mile cost factors. Using this approach, one state highway agency created an estimation handbook that has sketches of typical roadway sections that are used to generate conceptual estimates. At the planning stage, the pavement thickness, materials, and lane widths are typical values. Depending on the project’s standard characteristics, the estimator chooses the corresponding project from the hand- book. Then, the estimator selects the appropriate cost chart that best fits the anticipated project structure. Cost is still in dollars per lane-mile but it reflects a typical structural section that is identified early in project development. The typical sketches also aid the estimator in deciding on the additional project elements that will be required. This process provides the base construction cost; therefore, the preliminary engi- neering, civil engineering, inspection, and right-of-way costs are added to this lane-mile cost. The right-of-way is factored into the estimate as a percentage of the estimated construc- tion cost, and the engineering costs are based on historical ratios of engineering to construction cost. The engineering cost includes preliminary engineering, construction engineer- ing inspection, right-of-way support, and related overhead costs. The factors in this state highway agency handbook rep- resent present day costs that must be inflated to the project’s midpoint of construction. This planning manual has inflation factors that are applied to the planning estimates. The sum of the calculated elements determines the long-range planning estimate’s total amount. This estimation method provides the state highway agency with a consistent and transparent approach to estimating the cost of transportation needs. Consistency of approach con- tinues as the project is further developed because the state highway agency uses an estimation methodology that builds upon the lane-mile typical section at each project develop- ment phase. The difference between the estimates in each phase is the incorporated level of project detail. Furthermore, estimate development is documented by the systematic preparation of narratives. The approach also has standard project cost components that must be considered for inclu- sion in the estimate; this helps the estimators avoid the prob- lem of cost-item omission. Two state highway agencies reported using lane-mile cost factors with typical sections for their planning estimates, but their methods were not consistently used within the state high- way agency as the procedure previously described. One state highway agency uses three spreadsheet templates specifically for its central, northern, and southern regions. The templates categorize typical projects into rural or urban location and into new or widening projects. The number of roadway travel lanes and the median type is used to further define each typical sec- tion. The spreadsheet templates have columns associated with costs for grading and drainage, base aggregate and pavement, lump-sum items (e.g., pavement markings and signs), miscel- laneous items, engineering and contingency, total project cost, and total cost per mile. The length of the proposed project is entered into the template, and costs for each typical section listed are calculated. This template provides the state highway agency with different design alternatives along with an estimate for each design so that designs can be compared. Another state highway agency has a cost sheet that lists sim- ilar project types and associated cost-per-mile factors. The A-34

A-35 cost sheet separates projects into rural and urban with project types listed by the number of roadway travel lanes. From the cost sheet, the estimator chooses the thickness of the pave- ment and the median type. The cost sheet also refines cost numbers based on work type (reconstruction or new con- struction). Furthermore, the sheet provides information for estimating the cost of miscellaneous improvements, such as signaling. Percentages of the total project cost are used to esti- mate right-of-way and utility cost. This state highway agency is in the process of refining its estimation software to include the computerization of planning estimate preparation. Two illustrations of typical cost data that support this tool are shown here. The first illustration (Table C3.4-1) relates to bridge costs and shows typical structural sections. The second illustration (Table C3.4-2) shows typical costs for roadway sections, bridge types, and other relevant costs such as right- of-way and construction engineering. Tips Applying this tool requires the user to match basic scope items to typical configurations and/or sections representing different types of transportation need solutions. The user also must ensure that all scope items are covered and that the data- base provides sufficient information to estimate all pertinent scope elements for the proposed solution, such as right-of-way, preliminary engineering, and utility relocation. If necessary, costs should be adjusted to include future dollars, adjusted to time-of-construction dollars. Cost adjustments may also be necessary when the scope is different form that used to make the estimate or unique conditions exist. Simple spreadsheets can be used to make calculations and summarize cost estima- tion elements. Resources Florida DOT Office of Planning Policy (March 2003). “Pol- icy Analysis and Program Evaluation, 2002 Transportation Costs.” Caltrans Division of Engineering Services, Structure Office Engineer (2003). “Comparative Bridge Costs.” http://www.dot. ca.gov/hq/esc/estimates. The Wisconsin statewide average costs per mile for various roadway improvement projects based upon the state’s classifi- cation such as a resurfacing, pavement replacement, recondi- tioning or reconstruction project can be found at www.dot. wisconsin.gov/localgov/highways/docs/statewide-cost permile.pdf. C3.5 Trns•port (Also See D2.9, P1.5) Trns•port is the AASHTO-sponsored transportation agency management software. It is a robust transportation program management system. It uses the most current information systems technology and is based on the experience and needs of AASHTO’s member agencies. Trns•port capabilities encompass the full functionality of a construction contract management system. It is an integrated system consisting of 11 modular components, which can be used individually or in combinations as appropriate. Each module (see Figure C3.5) addresses the needs of the highway agency at a particular milestone in the construction contract- ing life cycle, representing three functional areas: precon- struction, construction, and decision support. What Is It? The Cost Estimation System (CES) is the primary Trns•port module, and, as shown in the estimation workflow schematic, it is most appropriately used in the conceptual estimation stage. It provides a highly productive environment for preparation of parametric, cost-based, and bid-based project cost estimates. The CES module, when used in a conceptual estimation con- text, estimates the cost of parameters involved in the breakdown of a project. A parameter could be general characteristics such as project type, length, and location, or more specific informa- tion such as quantities and prices of major items. Parametric estimation uses three statistical modeling techniques: (1) proj- ect breakdown estimation, which determines the major cost drivers, called “major items,” for the breakdown; (2) major item quantity estimation, which determines appropriate quantities of major items; and (3) major item price estimation. Adjust- ment of any of the calculated values to better reflect estimator knowledge of the project is possible, and CES will recalculate the estimate by using the refined data. A very popular calculating approach among state highway agencies is the lane-mile historic cost averages, which is an inbuilt feature of this module backed by the Bid Data Analysis and Decision Support System (BAMS/ DSS) historic database feature of Trns•port. Why? At the conceptual estimation stage, it is an ordinary practice for state highway agencies to use lane-mile costs to estimate a project. The lane-mile cost parameter is a built-in feature of the Trns•port CES module. The CES module, however, empha- sizes an item-level-quantity-based approach as opposed to estimating at a project level using a cost-per-lane-mile param- eter. This approach may improve early estimate accuracy. Developing quantities early may enable continuous tracking and control by initiating quantity estimates at the outset. To efficiently perform these functions, a comprehensive project breakdown schematic is necessary, along with the ability to correlate them to historical databases. The CES module of Trns•port can be used to accomplish this correlation.

A-36 Table C3.4-1. Comparative bridge cost data. SIMPLE CONTINUOUS RC SLAB 0.06 0.045 5-13 800 - 1, 200 RC T-BEAM 0.07 0.065 12-18 850 - 1, 400 RC BOX 0.06 0.055 15-37 950 - 1, 450 CIP/PS SLAB 0.03 0.03 12-20 950 - 1, 300 CIP/PS BOX 0.045 0.04 30-76 800 - 1, 200 PC/PS SLAB 0.03 (+75 m m AC) 0.03 (+75 m m AC) 6-15 1,300 - 1, 950 PC/PS 0.06 (+75 m m AC) 0.055 (+75 m m AC) 9-37 1,100 - 1, 800 BULB T GIRDER 0.05 0.045 27-44 1,100 - 2, 100 PC/PSI 0.055 0.05 15-37 1,300 - 1, 700 PC/PS BOX 0.06 0.045 37-61 1,500 - 2, 700 STRUCT STEEL I-GIRDER 0.045 0.04 18-91 1,625 - 2, 300 NO FALSEWORK REQUIRED NO FALSEWORK REQUIRED NOTE: Removal of a box girder structure costs from $160 - $215 per square meter. COSTS INCLUDE 10% MOBILIZATION AND 25% CONTINGENCY THESE ARE THE MOST COMMON TYPES AND ACCOUNT FOR ABOUT 80% OF BRIDGES ON CALIFORNIA STATE HIGHWAYS. STRUCTURAL SECTION (STR. DEPTH/MAX SPAN) COST RANGE ($ / M2) REMARKS JANUARY 2003 Factors for Lower End of Price Range Factors for Higher End of Price Range Short Spans, Low Structure Height, No Environmental Constraints, Large Projects, No Aesthetic Issues, Dry Conditions, No Bridge Skew Long Spans, High Structure Height, Environmental Constraints, Small Project, Aesthetic Issues, Wet Conditions (cofferdams required), Skewed Bridges Urban Location Seat Abutment Spread Footing No Stage Construction Remote Location Cantilever Abutment Pile Footing 2 Stage Construction Widenings Less Than 5M Factors That Will Increase the Price Over the High End of the Price Range Structures With More Than 2 Construction Stages Unique Substructure Construction COMMON SPAN RANGE (meters) The following tabular data gives some general guidelines for structure type selection and its relative cost. These costs should be used just for preliminary estimates until more detailed information is developed. These costs reflect the ‘bridge costs’ only and do not include items such as: bridge removal, approach slabs, slope paving, soundwalls or retaining walls. The following factors must be taken into account when determining a price within the cost range:

A-37 Table C3.4-1. (Continued). SIMPLE CONTINUOUS RC SLAB RC T-BEAM RC BOX CIP/PS SLAB CIP/PS BOX 0.06 0.07 0.06 0.03 0.045 PC/PS SLAB 0.03 (+3" A C) 0.03 (+3" A C) PC/PS 0.06 (+3" A C) 0.055 (+3" A C) BULB T GIRDER PC/PS I PC/PS BOX STRUCT STEEL I-GIRDER 0.05 0.055 0.06 0.045 0.045 0.065 0.055 0.03 0.04 0.045 0.05 0.045 0.04 16-44 40-60 50-120 40-65 100-150 20-50 30-120 90-145 50-120 120-200 60-300 75-110 80-130 90-135 80-100 75-110 120-180 100-170 100-200 120-160 140-250 150-215 NO FALSEWORK REQUIRED NO FALSEWORK REQUIRED NOTE: Removal of a box girder structure costs from $15 - $20 per square foot. COSTS INCLUDE 10% MOBILIZATION AND 25% CONTINGENCY THESE ARE THE MOST COMMON TYPES AND ACCOUNT FOR ABOUT 80% OF BRIDGES ON CALIFORNIA STATE HIGHWAYS. STRUCTURAL SECTION (STR. DEPTH/MAX SPAN) COMMON SPAN RANGE (feet) COST RANGE ($ / FT2) REMARKS JANUARY 2003 Factors for Lower End of Price Range Factors for Higher End of Price Range Short Spans, Low Structure Height, No Environmental Constraints, Large Projects, No Aesthetic Issues, Dry Conditions, No Bridge Skew Long Spans, High Structure Height, Environmental Constraints, Small Project, Aesthetic Issues, Wet Conditions (cofferdams required), Skewed Bridges Urban Location Seat Abutment Spread Footing No Stage Construction Remote Location Cantilever Abutment Pile Footing 2 Stage Construction Widenings Less Than 15 ft. Factors That Will Increase the Price Over the High End of the Price Range Structures With More Than 2 Construction Stages Unique Substructure Construction The following tabular data gives some general guidelines for structure type selection and its relative cost. These costs should be used just for preliminary estimates until more detailed information is developed. These costs reflect the ‘bridge costs’ only and do not include items such as: bridge removal, approach slabs, slope paving, soundwalls or retaining walls. The following factors must be taken into account when determining a price within the cost range:

What Does It Do? The CES module of Trns•port provides a full range of cost estimation capabilities from conceptual estimation to the engi- neer’s final estimate required for final approval. Estimators can migrate their work through each stage of estimation, splitting and combining projects as required, moving smoothly from each stage of estimation. This tool allows import of data from other design software, such as computer-aided design and drafting (CADD). The parametric estimation capability of CES is, however, of particular interest for this application. The CES module creates estimates using item-based historical prices from the BAMS/ DSS module. It permits the creation of estimates from scratch or by importing older project estimates from exist- ing Trns•port modules that may have similar parameters, such as project type, length, and location, or more specific informa- tion such as quantities and prices of major items. Estimates are created and categorized on a project-by-project basis using an item-based approach. Predefined line items that are built into the program are directly linked to historical databases. The module also permits customization for unique items. It also facilitates the listing and tracking of sources of funding on each project. Item pricing can be based upon equipment and labor, previous bid and regression analysis, references to similar proj- ects, and ad hoc. As items are added, CES automatically calcu- lates and updates the estimate based on the pricing method chosen. This computer-based tool allows customization to improve accuracy and also generates an array of reports to help document and track project costs. When? This tool can be used in the planning phase of project development to create early estimates based on major project parameters and other factors. In this way, CES can be an effi- cient tool for quickly estimating project costs for purposes of long-range planning. A-38 Table C3.4-2. Highway cost per centerline-mile.

Examples In years past, the NYSDOT used the mainframe versions of Trns•port PES, LAS, and DSS, but as agencies moved from the mainframe to the client/server versions, AASHTO decided to drop support of the mainframe version. NYSDOT then migrated to the client/server version. Tips This tool can be used at all stages of estimation, bridging easily from one Trns•port module to another module that has been developed to be used at different stages of project devel- opment. These features help improve accuracy and handle more complex circumstances. Thus, the user can start with the planning estimate developed in CES and then move to estimation in the other project phases. The estimator should check the output of the CES model to ensure that the estimate is consistent with estimated costs using other agency historical data. The estimator must ensure that all project costs are covered, such as right-of-way and preliminary engineering. These costs may not be generated by CES. Additional information can be found using the following website dot.state.ny.us/trns-port/about.html. Resources The Technology Implementation Company, in Gainesville, Florida. See website addresses www.infotechfl.com and www. cloverleaf.net. AASHTOWare, the transportation software system of AASHTO. See website at www.aashtoware.org. C4 Consistency The estimate is the beginning and the foundation of the entire project cost control process. All project estimates should be developed and treated as permanent documents that func- tion as a basis for business decisions. Therefore, an estimate must be in a form that can be understood, checked, verified, and corrected. There must be consistency of presentation within an individual estimate and consistency across all esti- mates prepared by an agency. Consistency is an important fea- ture of all estimates, but its impact on performance increases with project complexity. The consistent presentation of state highway agency estimates supports avoidance of duplications, omissions, and errors within an estimate and strengthens the estimate review processes. Successful estimation improvement is not so much about “computers and data” per se, as it is about A-39 Table C3.4-2. (Continued). (continued on next page)

creating an organizational culture and climate that support state highway agency estimators and the estimation process. C4.1 Cradle-to-Grave Estimators When the same estimator or estimation team is assigned to a project from programming through plans, specifications, and estimates (PS&E), the retention of historical knowledge about cost drivers and why decisions were made is more eas- ily maintained and considered during later phases of project development. What Is It? Under the cradle-to-grave concept, the same estimator is responsible for the estimate during all phases of project devel- opment. As a project moves through its development stages, a single estimator or estimation team is responsible for develop- ing and updating the estimate. There is no “over-the-wall” (i.e., team to team) passage of scope, schedule, and estimation responsibility as the project passes from one development stage to another. Why? When project development is a stepped process with stage responsibility passing from one team to another (i.e., over-the- wall deliverables) there is always the possibility that critical knowledge will be lost during a hand-off between teams. One approach used to avoid this problem of lost project knowledge is the reliance on a dedicated team to move the project through all development phases. This approach would also place esti- mation responsibility with the same person or persons during all of the project’s development stages. What Does It Do? The use of cradle-to-grave estimators improves the knowl- edge base of the estimator or estimation team concerning all A-40 Table C3.4-2. (Continued).

A-41 Table C3.4-2. (Continued). Figure C3.5. Estimation workflow and functional areas where Trns•port models assist.

project details. With this approach, estimators gain knowledge about the reasons for revisions, the existence of constraints, the required coordinate with other schedules, and the regulatory procedures that affect the project. When estimators possess such knowledge, estimate quality is improved because there is a better understanding about external cost drivers. When? The use of cradle-to-grave estimators can be very beneficial in the case of projects that will be impacted extensively by third- party agreements, utility conflicts, coordination issues, and scheduling uncertainty. Even with simple and straightforward projects, the use of cradle-to-grave estimators will work, but the realized benefits are usually not as significant. Examples The use of cradle-to-grave estimators is found more in the private sector of the construction industry, where the estima- tor is a member of the project development team and not an auxiliary or separate support staff. It has been reported by engineering firms working for the chip and technology indus- try that, by making the estimator a member of the project development team, the firms are saving to the original budget because of early value engineering and cost input. Tips To realize the full potential of this estimation approach, the estimator must become an integral part of the project devel- opment team and be fully informed about coordination issues, external agreements (environmental, utility, and societal), and schedule constrains. Resources The Trns•port Estimator and CES modules are both cost estimation systems. CES is a client/server system that is tightly integrated with Trns•port PES, sharing databases and sup- porting direct project import/export and check-in/check-out processes. CES supports cradle-to-grave project estimation. C4.2 Estimation Checklist (Also See P2.1, V3.1) Checklists are intended to serve as guides in preparing, checking, and reviewing cost estimates for errors and omis- sions. Effective use of estimation checklists will minimize omis- sions and duplications. They are not, however, a substitute for the exercise of sound engineering judgment by the estimator or the reviewers. The estimation professionals must indepen- dently evaluate supporting data upon which the estimates are based, but the checklist helps to ensure estimate completeness. What Is It? Checklists are templates that estimators and reviewers use to ensure a complete estimate. They guide the estimator through suggested items and consideration of factors that impact proj- ect cost. Why? While estimators and project managers are generally very familiar with assembling cost data and developing an esti- mate, the estimation process requires consideration of a very large number of work items and the factors that impact the cost of individual items, as well as factors that impact the cost of the project in general. Checklists serve to delineate the large number of factors, which must be considered during estimate preparation. Therefore, they are an excellent means of avoid- ing omissions and for calling attention to the interaction between factors that can impact cost. What Does It Do? Checklists guide the estimator through suggested work items and cost factors. A checklist serves to ensure that all cost categories are accounted for in an estimate. The answers to the checklist questions will provide an overview of the estimate’s completeness and focus the estimator’s attention on critical questions. The checklists can be divided into major work areas, such as roadway and structural, to support specific parts of project estimate development. When? Checklists can support estimate creation at all stages of project development. The purpose of a checklist is to assist the estimator in planning, formatting, and developing a complete estimate. Checklists should be as inclusive as possible, with questions that specifically probe the estimate at the different stages in project development. Examples North Carolina DOT has an estimation checklist for func- tional and preliminary estimates. The list, which contains the various items included on a project, as well as the units of measurement to be used in estimating the items, is as follows: • Clearing and grubbing (acre or hectare) • Earthwork (cy or m3)—unclassified, borrow, undercut, etc. A-42

• Fine grading (sy or m2) • Drainage (per mile or kilometer) • Paving (ton or mtn, w/pavement design, or sy/m2 without) • Stabilization (sy or m2) • Shoulder drains (lf or meter) • Curb and gutter (lf or meter) • Guardrail (lf or meter) • Anchor units (each type) • Fencing (mile or kilometer) • Interchange signing (type and location) • Traffic control plan (TCP) (per mile or kilometer) • Thermo and markers (per mile or kilometer) • Utilities (lf or meters) • Erosion control (acres or hectares) • Traffic signals (each and location) • Retaining walls/noise walls (sf or m2, with avg. height) • Bridges (individual location) • Reinforced concrete (RC) box culverts (individual location) • Railroad crossing (each—with or without gates) Tips There can be many individual checklists to support different phases of estimate preparation and specific cost areas—a plan review checklist; a site checklist; a checklist for developing quantities; and a checklist to consider construction noise, dust, and other construction nuisance issues. Resources The following list is from the FHWA’s Engineer’s Estimate Checklist for Full Oversight Projects: • Check approximately 15–20% (more if possible) of the bid items against the plan quantities for accuracy. • Do the items checked correspond with the plans and plan quantities? • Do the pay items correspond to the type of work proposed? • Are the units of measure appropriate for the pay item? • Is the quantity for the pay item reasonable for the project? • Does the unit price seem reasonable for the type, size, and location of the project? The FHWA also has posted on the web a checklist docu- ment: “Checklist and Guidelines for Review of Geotechnical Reports and Preliminary Plans and Specifications.” The PS&E portion of the checklist applies to specific geotechnical features, such as pile foundations, embankments, and landslide correc- tions. This checklist can be found at www.fhwa.dot.gov/bridge/ checklist.htm. The U.S. Army Corps of Engineers estimate review check- list from ER1110-1-12 requires that the reviewer verify the following: • Estimates are based on an approved scope of work and the latest available design data. • Estimates are developed from Corps unit price book (UPB) or approved construction cost data (e.g., the Gen- eral Construction Cost Engineering Standards published annually by Richardson Engineering Services or the price data published by R. S. Means Company). • Basis for estimates is provided or explained; all assumptions, quotes, crew sizes, and other cost factors are documented. • Estimates are escalated to the expected midpoint of con- struction using the latest approved management control plan or Office of Management and Budget (OMB) (for Civil Works projects) index. • Estimates are prepared in accordance with latest Corps cost engineering regulations and technical manuals. • Estimates include risk analysis to cover unknown condi- tions or uncertainties on work schedules. • Estimates are internally reviewed prior to submittal. This checklist could serve as review guidance for any state highway agency. Defense Logistics Agency’s “In-House Cost Estimate Check- list” (available online at www.dla.mil/j-3/a-76/IRLine02.html) is not designed for projects of the type that state highway agen- cies usually handle, but it does contain some very good ques- tions that a state highway agency might want to include in its own checklist, including the following: • Is inflation calculated correctly? • If costs are based on historical data, are appropriate adjust- ments included? C4.3 Estimation Manual (Guidelines) The foundation of a good estimate is composed of the for- mats, procedures, and processes used to arrive at project cost. Consistency is measured by the ease with which an estimate can be checked and the ability of several estimators to work together to complete a single estimate. Every state highway agency should have a published estimation manual of standard formats, procedures, and processes to be used by both state highway agency estimators and design consultants retained for estimation purposes. This guidance document should be specifically written for those responsible for preparing the state highway agency’s estimates. What Is It? An estimation manual is a set of standard operating proce- dures that guide the preparation of cost estimates. By establish- ing standard operating procedures for estimate preparation, state highway agencies can enhance estimate completeness and accuracy. An estimation manual should also address wide- A-43

ranging issues of estimation practice, such as consideration of external factors that affect construction cost and how to accommodate project risk in contingency amounts. Why? The foundation of a good estimate is the formats, procedures, and processes used to arrive at project cost. A survey of state highway agencies in 2003 found that only 16 had manuals that provided formal guidance for preparing estimates, and most of these tended to describe how to use the particular state highway agency’s estimation system and failed to address broader issues of good estimation practice, such as consideration of external factors that affect project cost. Estimate consistency and accu- racy is achieved by instituting procedures that serve as guides for all parties engaged in the estimation processes. What Does It Do? An estimation manual provides guidelines for the prepa- ration of all project estimates developed by the state high- way agency. It should provide information on a range of processes and techniques matched to varying project types (straightforward to complex) and to project development stage. When? The manual should address estimate preparation during all phases of project development, not just during plans, specifi- cations, and estimates (PS&E). Examples Examples of estimation manuals can be found at www. state.nj.us/transportation/eng/CCEPM/ and www.dot.state. il.us/desenv/BDE%20Manual/BDE/pdf/chap65.pdf. The Queensland Government of Australia has its manual online at www.mainroads.qld.gov.au/MRWEB/Prod/Content. nsf/0/02c5ce00d16de3764a256e4000101970?OpenDocument. Tips The following ideas should be part of the estimation manual: • All estimates should be prepared electronically and stored in a centralized database. • Estimators should become familiar with the project site. A formal site review helps in identifying constructability issues that can be overlook during a paper plan review. • Prime estimators should obtain written estimates from supporting units, including – Traffic engineering, – Environmental compliance, and – Right-of-way. • The designer should confirm that the estimate is consistent with the project scope. • Estimates should be updated at design milestone points: preliminary design, 30%, 60%, and final design. • All support units should be required to update and submit their portion of the estimate at the milestone points. • The 60% and final design estimates should be based on actual quantity take-offs. • There should be consistent methods for estimating both the quantities and prices of minor items. • There should be a standard method for handling inflation and a defined inflation percentage that is applied to the esti- mate. The estimate for long-duration projects should be stated in year-of-construction costs. • The estimation manual itself should be updated annually in the areas of inflation factors, contingency amounts or per- centages to be used, and possibly other factors that change with time and market conditions. Resources Visit these sites for additional information and guidance on cost estimation practices: • Transportation Estimators Association (TEA): tea. cloverleaf.net/. • FHWA “Guidelines on Preparing Engineer’s Estimate, Bid Reviews, and Evaluation”: www.fhwa.dot.gov/program admin/contracts/ta508046.htm. • FHWA’s “Major Project Program Cost Estimating Guid- ance”: www.fhwa.dot.gov/programadmin/mega/cefinal.htm. C4.4 Estimator Training Human error in anticipating and properly considering proj- ect cost drivers is an important factor in the failure to produc- ing quality estimates. This often happens because of a de- emphasis on engineering/estimation experience and judg- ment in the light of increasingly sophisticated numerical techniques/software. Estimate accuracy and quality will only be achieved when the analytical, numerical, and computational tools are supplemented with improved thinking skills. What Is It? Estimators come from many different specialties within the state highway agency, including engineering, construction, contracting, and occasionally from the operations and main- tenance areas. Estimator training can be attendance at formal classes; mentoring among the estimators in the state highway A-44

agency; or support for estimators to attend off-site confer- ences, seminars, or classes pertinent to their work. These activ- ities should support estimation skill in using techniques for achieving accurate estimates and knowledge about the state highway agency’s estimation procedures. Why? Cost estimators must be able to interpret details from scop- ing documents during early phases of project development or from the plans as design progresses and then make sound and accurate judgments using poorly defined information or only minimal information. To do these things, estimators must receive formal training in (1) estimation methods appropriate to different levels of project detail and (2) methods for prop- erly using the estimation software that is available. What Does It Do? Formal training programs can provide state highway agency estimators with a solid background in methods, materials, and regulations, including methods to analyze bid documents (reading and understanding contracts, plans, and specifica- tions); methods to evaluate special conditions affecting project cost; and methods to analyze project risk for developing real- istic contingency amounts. Training programs will serve to maximize the potential of software programs for improving estimation processes by providing estimators with a broader understand of how these systems can be used. Training should also provide opportunities to obtain prac- tical construction experience because such experience is an important component of estimator training. Field experiences enhance knowledge about construction methods and provide awareness of the on-site construction difficulties that impact job cost. When? Training must be continuous because new construction techniques are always being introduced and the cost of work changes with economic conditions. Additionally, new com- puter systems are constantly being introduced and the poten- tial of these systems is dependent on knowledge of how to use them effectively. But maybe most important is the issue of accounting for new rules and regulations that impact proj- ect costs. Examples One state highway agency (New York) has developed a computer-based training CD with training modules for each phase of project development. The agency has central office training sessions for the estimating engineers and conducts an annual class to bring the estimators together to discuss issues. Tips If the agency uses the AASHTO Trns•port estimation soft- ware, the agency should support estimator participation in the Trns•port Users Group (the TUG), which seeks to provide a forum for a unified voice to direct the course of Trns•port development. The TUG additionally provides input to the Product Management Task Force on product effectiveness, deficiencies, and needed enhancements and helps to define product training and support needs. Resources To expand the knowledge base of department estimators, their participation in the Transportation Estimators’ Associa- tion (TEA) should be supported. TEA publishes guidelines used by transportation estimators (cost based, historical based, and parametric), publishes a newsletter for transportation cost estimators, sponsors an annual cost estimation workshop, and seeks to achieve the following goals: • Advance cost estimation techniques; • Develop new, innovative cost estimation techniques; and • Disseminate information about cost estimation experiences and new practices. The homepage for the TEA can be found at http:tea.clover- leaf.net/. The homepage for the TUG can be found at www.tug. cloverleaf.net/default.htm. C4.5 Major Project Estimation Guidance This guidance is provided by the FHWA for the preparation of a total program cost estimate for a major project. For the purpose of this guidance, a major project is defined by the FHWA as a project that • Receives any amount of federal financial assistance and has an estimated total program cost greater than $500 million (expressed in year-of-expenditure dollars) or • Has an estimated total cost approaching $500 million, with a high level of public or Congressional intent. The total program cost estimate includes engineering, con- struction, right-of-way, and related costs, which will be iden- tified by this guidance. Although this guidance is for major projects, it may also be applied to other projects. A-45

What Is It? The major project estimation guidance is a compilation of key principles to be followed when preparing a cost estimate for significantly large projects. The magnitude of investment on such projects is associated with greater risks, which have to be carefully monitored. These guidelines provide a complete overview of all critical elements that must be estimated and included in the cost estimate and their importance. Why? Estimates are central to establishing the basis for key proj- ect decisions, for establishing the metrics against which proj- ect success will be measured, and for communicating the cost status of a project at any given point in time. Logical and rea- sonable cost estimates are necessary in maintaining public confidence and trust throughout the life of a major project. Cost increases over and above the early planning and envi- ronmental estimates for major transportation projects have become an increasing concern to Congressional and political leaders, federal and state executive management, and auditing agencies. Major projects by nature are usually more complex and con- tain more risk elements than other projects. Careful attention must be provided when preparing cost estimates for major projects. Traditional estimation methods may not be appro- priate in all cases. This guidance is intended to assist state high- way agencies, the FHWA, and other sponsoring agencies to ensure that all program cost estimates are prepared using sound practices that result in logical and realistic initial esti- mated costs of the projects, thereby providing a more stable cost estimate throughout the project continuum. What Does It Do? Major projects are associated with greater risks and require more effort to properly estimate project cost. There are many aspects of major projects that must be considered when preparing cost estimates. These guidelines, hence, familiarize estimators with the requirements of such estimates and pro- vide a standardized framework and checklist of items to be included in the estimate. When? These guidelines indicate how to maintain consistency in estimation through all project development process phases, but the guidelines are most extensively and appropriately applied in the programming and preliminary design phase. These guidelines could be referred to as late as during plans, specification, and estimates (PS&E) phase. Examples The key principles for project cost elements are as follows. • Integrity • Contents of a cost estimate • Year-of-expenditure dollars • Basis of a cost estimate • Risk and uncertainty • Project delivery phase transitions • Team of experts • Validation of estimates • Revalidation of estimates • Release of estimates and estimation information • Program cost estimation elements • Preliminary engineering • Right-of-way • External third-party (e.g., utilities and railroad adjustments) • Transportation demand and management and transporta- tion system management • Construction estimate • Construction contingencies • Construction administration • Public outreach • Management reserve • Integration of program costs estimates throughout the proj- ect continuum • Quality assurance/quality control Tips State highway agencies should incorporate these procedures into their cost estimation process by adapting them to fit into agency approaches for estimating major projects. Developing checklists based on such guidelines and other input from within the state highway agency or from experts outside of the state highway agency, as applicable to major projects, would improve estimates in terms of consistency. Continuous improvement of such checklists through lessons learned from past major projects can help in improving accuracy. Resources More information is available from the FHWA publication, “Major Project Program Cost Estimating Guidance,” June 8, 2004: www.fhwa.dot.gov/programadmin/mega/cefinal.htm. C4.6 Standardized Estimation and Cost Management Procedures (Also See B1.3) The objective of standardizing procedures is to establish a common basis for all state highway agency project develop- A-46

ment participants to follow when preparing cost estimates and when managing costs over the project development process. The integration of both cost estimation practice and cost esti- mating management through standardized procedures is a critical feature to achieving consistent project results. What Is It? This tool establishes a set of standards and procedures within a state highway agency to guide the preparation and management of costs throughout the various phases of project development. The objective is to provide a coherent policy basis for alleviating cost escalation by consistently applying tools used for cost estimation practice and cost estimation management. These procedures typically include standard for- mats for summarizing costs estimates and for tracking changes. Why? In many state highway agencies, projects are estimated and managed in regions or districts. However, final project approval of estimated costs and changes is often made at the state highway agency headquarters. Standard procedures can provide estimate and cost management consistency across the different regions or districts within a state. Using com- mon formats will make review and approval processes more efficient. Projects are often similar, and past projects provide valuable input for future projects. However, projects must be compared on a common basis. A common basis is achieved by following similar procedures for every project. Standardized procedures facilitate this. Standardized procedures help in establishing familiar estimation and cost management processes for proj- ect participants, which, in turn, should improve proficiency over a period of time and minimize errors. What Does It Do? By following standardized procedures, project managers and estimators apply consistent approaches to estimating cost and controlling costs. These approaches will likely generate more accurate and realistic estimates with less room for errors. Standardized procedures also help in documenting previous projects in a format that permits easy extraction of necessary information in future. When? Standardized procedures must be established at an agency level for guiding project development work and specifically for cost estimation and cost management. They should be applied throughout the project development process. However, cost management can only begin after the project’s baseline scope, cost, and schedule are set. Examples Missouri DOT has developed a list of items to be considered during design that is followed for every project to prevent omissions. Similarly, they have standard lists for procedures to be followed while estimating for right-of-way, environmental, utilities, and bridge considerations. There are also guidelines on acceptable estimation approaches to adopt based on the information available during different periods when estimates are developed. Given that, for many highway projects, 80% of the cost is often attributed to 20% of the line items, which often constitute grading, drainage, and paving quantities, elaborate and updated cost databases on these items have significant impact on cost estimate accuracy. Missouri DOT has developed a list of items to be considered during design that is followed for every project to prevent omissions. Similarly, it has standard lists for procedures to be followed while estimating for right-of-way, environmental, utilities, and bridge considerations as shown below: 1-02.12 (10) (b) DESIGN CONSIDERATIONS. Below is a partial list of design items. Other items may be considered and included in the estimate, as necessary. • Grading (Class A, Class C Excavation, Borrow) • Pavement design—include curb and gutter if applicable. (See Section 6-03 for pavement design considerations) • Drainage—stream crossings, closed systems, open channel • Detention storage basins • Shoulder widening • Resurfacing • Signals, lighting, signing (include temporary signals) • Temporary by-pass • Traffic control, detours, etc. • Construction incentives • Pavement edge treatment • Guardrail items • Urban contingencies (i.e., enhancements, landscaping, etc.) • Erosion control (seed and mulch, rock ditch liner, paved ditch, rock blanket) • Temporary erosion control • Mobilization 1-02.12 (10) (c) RIGHT-OF-WAY CONSIDERATIONS. If right-of-way acquisition is involved, a written request for an esti- mate should be made to the district right-of-way manager with the following information: • Latest available plans • Tentative or actual right-of-way required • Access controls • Anticipated improvements to be taken • Proposed borrow areas • Proposed mitigation sites for parklands, wetlands, etc. A-47

Right-of-way personnel should develop the estimate accord- ing to the guidelines and policies of the right-of-way manual. 1-02.12 (10) (d) ENVIRONMENTAL CONSIDERATIONS. The Environmental Section of GHQ [General Headquarters] design should be consulted to determine if there are any environ- mental or cultural resource issues that may affect the cost of the project. They will also be able to provide assistance in determining any associated costs. The Environmental Section should be fur- nished with the following applicable items: • Request for Environmental Studies (RES) form (see Subsec- tion 2-03.2) • Latest available plans • Location layout of structures, suspected wetlands and unusual features • Photographs Environmental staff should give consideration to how the fol- lowing items will impact the project costs: • Parklands • Wetlands • Historic structures (include bridges) • Hazardous waste sites • Threatened and endangered species • Archeological sites • Noise mitigation • Socio-economic impacts 1-02.12 (10) (e) UTILITIES CONSIDERATIONS. The dis- trict utility engineer should be furnished with the following applicable items: • Latest available plans • Photographs The district utility engineer should consider the following in developing the associated utility cost estimate for the project: • Known major utilities • Railroad crossings • Determine if existing utilities are on existing highway right-of- way or private easement • Coordinate with appropriate utility companies 1-02.12 (10) (f) BRIDGE CONSIDERATIONS. GHQ Bridge will provide cost estimates for the bridge structures associated with a project. Upon receipt of the bridge survey, GHQ Bridge will review the bridge survey data and make an in-depth analysis of the proposed crossing. The analysis will include hydraulic design of the waterway opening for stream crossings, geometric layout for grade separations, economic analysis of structure types and span lengths, and investigation of any special features evident from the bridge survey data. A tentative bridge layout will be pre- pared. The following bridge-related items should be considered by the core team when developing costs for bridges and other drainage structures: • Number of major stream crossings • Flood plain proximity to crossing location • Earthquake design necessity • Nearby structures that are similar • Number of bridge rehabilitations • Clearance requirements • Enhancements (Special aesthetics—railing, lighting, girders, concrete surface texture, etc.) Missouri DOT process also addresses quality control and quality assurance as these two functions relate to ensuring esti- mate consistency across Missouri DOT’s planning and proj- ect development process. The following parts of their procedure highlight their approach to quality control and quality assurance. 1-02.12 (6) QUALITY CONTROL. The district engineer is responsible for maintaining the consistency of the estimates and their documentation within each district. The district engineer should establish a district Cost Estimate Quality Control Review Team that will implement a plan to ensure quality control of all project estimates. It is recommended this team include the dis- trict’s transportation planning coordinator, project development engineer, right-of-way manager, transportation project managers, and other personnel deemed necessary. This team is not expected to inspect each estimate in detail, but rather establish consistent procedures for the appropriate preparation and updating of the project estimates. 1-02.12 (7) QUALITY ASSURANCE. The GHQ design tech- nical support engineers will provide quality assurance to their assigned districts to ensure consistent cost estimates are produced throughout the department. This will be accomplished through periodic reviews of selected project estimate files, the district’s project estimation process, the district’s quality control plan, and the district’s plan for review and updating of the STIP [state trans- portation improvement plan] estimates. The results of all quality assurance reviews should be reported on the quality assurance form, Figure 1-02.8, and submitted to the district engineer and the Chief Engineer. Reviews may be con- ducted by the district review team, the GHQ design technical support engineer, or jointly performed by both parties. The par- ticipation of other GHQ personnel, including a bridge structural liaison engineer and structural project manager, a right-of-way field liaison, and other project core team members, should be required as appropriate. Tips Identifying tasks that are repeated for every project and adopting an efficient method to accomplish these tasks are necessary for this tool to be successful. Also, adequate training and awareness among participants is also essential for this tool to be successful. Resources Missouri DOT (2004). “Chapter 1, General Information: Needs Identification Project Scoping and STIP Commit- A-48

ments,” Section 1-02, Project Development Manual. www. modot.org/business/manuals/projectdevelopment.htm. C4.7 State Estimation Section Estimators come from many different specialties within the state highway agency, including engineering, construction, contracting, and occasionally the operations and maintenance areas. In 26 state highway agencies, estimation personnel are consolidated in a dedicated estimation section where their pri- mary responsibility is the production of estimates. In the other 24 state highway agencies, personnel prepare estimates as an ancillary duty while their primary responsibilities are likely to be either design or contract preparation. What Is It? To achieve consistency in estimation processes and tech- niques from programming through plans, specifications, and estimates (PS&E), some state highway agencies have central- ized estimation functions. Such an approach provides a cen- tral point of contact for designers and allows experience staff to mentor new, less experienced estimators. Centralized esti- mation can bring rigor and discipline to project estimation, which in turn means estimate reliability. Why? Cost estimation for large projects or for complex projects is inherently challenging. In a 2003 survey, several state highway agencies reported having estimators with minimal experience and stated that in recent years they had lost their most experi- enced personnel to retirement. A number of state highway agencies have therefore recognized the benefit of having esti- mation personnel at all stages of professional development working as a consolidated group in a single location. What Does It Do? When the state highway agency’s estimation functions are centralized in a single location with a dedicated team, less expe- rienced estimators can be mentored by those having a broader range of knowledge. The principle advantages of a centralized state estimation section are that it • Improves corporate memory, • Facilitates the use of experienced staff and their individual knowledge, • Achieves better estimated documentation, • Makes possible interaction between estimators to discuss approaches, and • Enhances the ability to support externally imposed schedule constraints by sifting the workload of collocated estimators. When? Consolidation of project estimation functions in a single location is usually the result of personnel issues, such as lack of qualified staff and limitations on the number of staff posi- tions. But consolidation can also be driven by the need for estimators to interact with multiple sections within the state highway agency. Examples The California DOT (Caltrans), which has 12 districts, has consolidated all estimation structures into a single office in the Engineering Service Center located in Sacramento. The dis- tricts take the lead in developing all project estimates, but the estimation group, which is in the Engineering Service Center, provides the bridge cost part of an estimate. This group also produces conceptual estimates for alternatives during the early stages of project development. Tips One of the problems with having a single estimation group is establishing good communication with the state highway agency’s districts that are being served. For a consolidated estimation group to be effective, there needs to be good com- munication between the project’s designer and the estimation group so that the experience of both groups can be fully used. Resources Florida Dot State Estimates Office: www.dot.state.fl.us/ estimates. The Caltrans Division of Engineering Services, Cost Esti- mates Branch, web page is located at www.dot.ca.gov/hq/esc/ estimates. This page provides access to Caltrans’s Bridge Construction Cost Index, Construction Statistics, and Com- parative Bridge Cost in both English and Metric units. The Caltrans estimation portion of the bridge design manual is found at www.dot.ca.gov/hq/esc/techpubs/manual/ bridgemanuals/bridge-designaids/page/bda_11.pdf. C5 Constructability In a broader context, the intent of constructability is to apply construction knowledge and experience during all phases of project development to help achieve the project objectives. The application of construction knowledge and experience can occur in a number of ways depending on the project phase and complexity of the project. The ultimate goal of constructabil- ity is to enable cost-effective construction by improving the efficiency of construction through better project designs. If properly implemented on projects, the design intent should be A-49

clear to the contractor through the contract plans and spec- ifications, and the design should be constructable, thereby improving the likelihood of receiving consistent bids when the project is advertised for construction. During construction, fewer claims should result in problems with the design. Constructability is formalized through a review process. This process determines when reviews will occur, who will perform the reviews, what level of review is necessary, and how recommended changes will be incorporated into project designs. The tool involves constructability reviews. With respect to cost estimation practice and cost estimation man- agement, constructability reviews will have their most signif- icant impact if performed during the programming and preliminary design phase in support of improving document quality while preventing and/or reducing the impact of scope and schedule changes. This tool can also ensure that final design documents are clear and error free. C5.1 Constructability Reviews Constructability reviews can occur during any phase of a project, although they are most likely to occur during prelim- inary engineering and final design. Constructability reviews provide an independent and detailed analysis of all project drawings and construction-related project information. These reviews can be conducted at design milestones and also just prior to release of plans and specifications for construction. This critical review evaluates the “ability to construct” the pro- posed highway project. What Is It? The production of an accurate, well-coordinated set of plans and specifications is very important to minimize change orders and optimize field contract administration. Constructability reviews are performed as a means to assess critical construction issues early in design so as to provide an opportunity to improve the efficiency of construction. Later in design, constructabil- ity reviews assess the construction documents for accuracy, completeness, and systems coordination issues. This latter review occurs as construction documents are nearing com- pletion and prior to advertising the project for bid. During this review, potential coordination issues, missed details, time delays, potential liability, and inter-contractor coordination items are identified prior to publishing bid documents. The design team then reviews and implements appropriate changes to the documents. Why? During a project, the design phase can take months or even years to complete. If construction knowledge and expertise are introduced at the end of the design phase, potential changes may be difficult to incorporate into the design in a timely manner. Delaying this vital and project-critical review can lead to inefficiencies. At worst, the lack of a timely constructability review will lead to cost overruns, time overruns, and possibly substandard quality. Using constructability reviews early will ensure high-quality project design documents and reduce the potential for change. What Does It Do? A constructability review helps in determining whether a contractor can ultimately submit a competitive bid based on what is shown in the contract plans and specifications. Con- structability reviews provide an opportunity to remove many common problems with plans and specifications. A constructability review concentrates on whether the infor- mation shown on drawings and within specifications can be constructed. Further, constructability reviews can aid in sug- gesting improvements to designs that support efficient con- struction methods, phasing and sequencing, and site access approaches. When? Constructability reviews can be applied during each phase of the project development process. Maximum benefits occur when people with construction knowledge and experience become involved from the very beginning of the project life cycle. Examples Enhanced Constructability Review is a new Caltrans pilot project whereby the highway construction industry can review preliminary design plans and submit comments to Caltrans regarding the constructability of a project. The intent is to draw on the vast experience of the industry to ensure that plans and specifications are biddable and buildable. Con- tractors can review the draft project plans and specifications provided on this Caltrans website and voluntarily provide comments. Comments submitted through the website are for- warded to Caltrans designers and may be incorporated into the final design. Comments that are submitted may be posted on the website. A sample agenda for constructability review meetings from one state highway agency is presented in Figure C5.1. Tips Conducting a constructability review incorporates contrac- tor knowledge into the total construction project develop- A-50

ment process. This review provides the state highway agency with the following advantages: • Many problems can be identified before the construction phase. This can prevent costly change orders, extra work orders, and financial bombshells. • Plans and specifications can be improved. • Contractor claims can be reduced. • Building quality can be enhanced. • Cost can be reduced. • Project schedules can be shortened. • Environmental permit violations and/or noncompliance can be reduced. • There can be cooperative team relationships between all parties involved in a project. • All parties can gain more time to concentrate their efforts on producing a high-quality, cost-effective project. Constructability reviews are not intended to replace or change a designer’s duties or the handling of a value engi- neering program; rather, they are intended to review projects during the design phase for constructability issues. The constructability review should concentrate on quanti- ties for each item of work called for in the plans and specifi- cations. What is material used for? How much? Where does it go on the project? Are the quantities correct? Reasonable? Misleading? Duplicated? Unnecessary? Contingent? Resources Anderson, S, and D. Fisher (1997). NCHRP Report 391: Constructability Review Process for Transportation Facilities, Transportation Research Board. Oregon DOT Constructability Review Process, www. oregon.gov/ODOT/CS/OPO/construction/constructability_ reviews.shtml#Constructability_Review_Process. C6 Creation of Project Baseline Cost estimation is continuous and repetitive during the project development process. Cost estimates must be created A-51 Figure C5.1. Constructability review meeting agenda. Constructability Review Meeting Agenda Project: ___________________________________________________________________ Project No.: ______________________________________ Date: ____________________ Meeting Location: _________________________________________________________ Agenda Item Speaker Time Frame Introduction I Traffic A. Design office specific items of concern B. Traffic office specific issues of concern C. Stage construction II Environmental A. Design office specific items of concern B. Environmental office specific issues of concern III Hydraulics/Utilities A. Design office specific items of concern B. Hydraulic/Utilities specific issues of concern IV Structures/Geotechnical A. Design office specific items of concern B. Structures/Geo. specific issues of concern V Right-of-Way A. Design office specific items of concern B. Right-of-way specific issues of concern VI Traffic Control A. Design office specific items of concern B. Traffic control specific issues of concern VII Construction/Maintenance A. Design office specific items of concern B. Construction/Maintenance issues of concern VIII Recap of issues A. Issues B. Responsible parties for resolution C. Deadlines dates __

to support the various alternative solutions that are being explored at the earliest stages of design. When the preferred design becomes apparent or when project-funding limits are set, a baseline cost estimate should be established. That baseline can best be defined as the estimate that is used to man- age change and make design decisions that affect project cost. The baseline estimate sets the basis for funding and for meas- uring project performance. It is important to note that the baseline refers to a project of a certain scope and dimension; any future design or scope changes that alter the actual capac- ity of the project by definition change the project and require a new baseline, and not just an adjustment to the existing cost and schedule estimates. Four tools have been identified in this research to assist in the creation of a project baseline: cost con- tainment tables, an estimation scorecard, a scope change form, and scoping documents. C6.1 Cost Containment Table (Also See I1.1, G1.2) Cost containment is an objective of cost estimation man- agement. Managing to a baseline cost estimate is one of the most common measures of estimation management success. As a project moves forward through its development stages, cost containment tables provide a benchmark against the proj- ect baseline. They create a standard tool that can be used by team members to track cost growth and provide immediate feedback for executive management. What Is It? A cost containment table is an estimate reporting system that requires project team members to document summary- level estimates at critical points in the project development process. It provides executive management with estimate totals as the project moves through critical milestones during its development. These milestones will vary from state high- way agency to state highway agency, but they can include scoping, programmed amount, preliminary engineering, final engineering, award, and closeout. They can also include esti- mate subtotals for items like engineering, right-of-way, and construction. Why? Cost containment tables provide a simple and concise tool for managers and project team members to monitor and react to cost escalation as projects transition through critical phases in their development process. What Does It Do? Cost containment tables create transparency and account- ability in the management of a baseline. The use of cost con- tainment tables permits quick identification of cost escalation as it occurs. When standardized in a state highway agency, cost containment tables allow for comparison of cost escala- tion by the variables captured in the tables. The use of the cost containment table establishes minimal milestones that are consistent throughout the state highway agency. They create accountability for the project team for changes in the esti- mates from one milestone to the next. When? The effort to manage project costs continues from the pro- gramming and advanced planning/preliminary design stage through final design until the project letting. The cost con- tainment table should only be used when a project baseline estimate is established. Examples Pennsylvania DOT developed a cost containment form that provides information on cost breakdown and milestone esti- mates. This table is shown in Figure C6.1. Pennsylvania DOT has found that this table creates accountability and trans- parency. If costs escalate from one milestone to the next, the project teams are charged with bringing the project back into budget or justifying the reason for this escalation (i.e., right- of-way cost escalation, varying material prices, other scope change, or estimate error). Tips A cost containment table requires updating at each pre- determined project milestone. At each project milestone where the table is used, the estimate must be broken down into specified items. If substantial changes are present, they can be easily identified to indicate a need for further review. Cost containment tables should be only one tool in manag- ing cost escalation. A drawback of the cost containment table is that it only provides a “rearview mirror” look at cost escala- tion. While knowing that there is a problem at critical project milestones is essential, project teams should strive to anticipate cost escalation whenever possible and mitigate their effects before they occur. Resources Pennsylvania DOT (2001). Estimating Manual. ftp://ftp. dot.state.pa.us/public/Bureaus/design/PUB352/inside_cover_ page.pdf. C6.2 Estimation Scorecard (Also See I1.2) While the use of estimation scorecards is not prevalent with state highway agencies, scorecards are good tools for evaluat- A-52

ing cost estimation management throughout the project devel- opment process. An estimation scorecard is an objective mea- sure of estimate accuracy or project scope growth. It should be created by the entire team and aligned with the project objec- tives that will ultimately drive the perceived project success. What Is It? An estimation scorecard is an evaluation tool to measure the success of cost estimation practice and cost estimation management during the project development processes. The format of the scorecards can vary depending upon individual agency objectives, but the goal is to create an objective score for performance in cost estimation practice and/or cost esti- mation management. Why? Early identification and measurement of the project success criteria helps to ensure that there is no miscommunication regarding functionality and physical structure of the com- pleted project. This helps to clearly align project scope with expectations, thereby limiting scope changes. What Does It Do? Estimation scorecards are commonly used when consultants are preparing the project design and estimate, but they can also be used internally for agency evaluations. Estimation score- cards indicate the measures that will be used at project com- pletion to evaluate success. During various points in the project development or once the project is complete, performance measures can be derived from comparison of target values des- ignated during project development and the achieved values measured after project completion. When? The evaluation criteria of the estimation scorecard are devel- oped early in the project development process and used in the latter phase to determine the success of the project. Examples Coors Brewing Company has found it beneficial to develop benefit and execution scorecards to evaluate the benefit of the project as well as execution. These scorecards are com- pleted early in project development and are used at project A-53 Figure C6.1. Cost containment table. Cost Containment Table District: Program Yr: County: Project: Short Title: Cost Containment Milestone Estimate Cost Breakdown Program Amount (PMC approved amount) $ E&E Scoping Field View $ 30% (Design Field View) $ 75% (After Final Design Field View) $ 95% (Engineer's Estimate) $ Bid Amount $ Engineering: Preliminary Engineering Final Design R/W Utilities Construction Total Cost: Scope Comments

completion to evaluate success of the project. This tool is also used for payment of services. Figure C6.2 shows the Coors Brewing Company benefit scorecard and execution score- card. The scorecard is developed for each project, one for execution and another for benefit. The benefit scorecard communicates the benefits of the project. The elements of the benefit scorecard for determining project success are defined based on the project. The weights for each benefit are determined by the project team that devel- ops the benefit items as well as how the results will be measured early in project development. After the project is completed, these benefits are assessed. The result for each benefit can either be above the target value (AT), on target (OT), or below the target value (BT). The success of the project is dependent on the evaluation of the perceived benefits. The execution scorecard is similar to the benefit scorecard in that the weights of the given evaluation items, project cost, schedule, and quality/performance are determined early in project development by the project team. The elements of the execution scorecard for determining project success are cost, schedule, and quality/performance. The measurement charac- teristics are also defined. Once the project is completed, these characteristics are assessed. The results for each can either be above target (AT), on target (OT), or below target (BT). While the example above was created by a private-sector company for a process facility, the concept can easily be trans- lated to public-sector transportation projects. State highway agencies should develop clear and concise project goals at the beginning of each project. These goals can be used to measure project success, either internally for the state highway agency or externally for consultants. An example of project goals, which relate to benefits in the scorecard, is taken from Col- orado DOT’s Colorado Springs Metro Interstate Expansion Project (COSMIX; http://www.cosmixproject.com): 1. Maximize capacity and mobility improvements in the cor- ridor within the program budget. 2. Minimize inconvenience to the public during construction. 3. Provide a quality project. 4. Complete by the end of calendar year. 5. Provide a visually pleasing final product. A benefit scorecard can be created in a fashion similar to Figure C6.2 using the project goals above. The weighted goals can be scored and used in an execution scorecard to measure cost estimation performance and overall manage- ment performance. Tips The use of the scorecards can ensure that all team members are clear about the expectations for a successful project. The tool will help to facilitate a structured discussion about what will define success on each project, and it will provide an objec- tive measurement for this success. Develop the scorecard as a team. Consider developing an overall project scorecard as well as discipline-specific scorecards. Resources U.S. Department of the Interior (2005). “The Quarterly Scorecard and Corrective Actions Reports for Constructed Asset Investments.” www.doi.gov/pam/QuarterlyReport Guidance61605.pdf. C6.3 Scope Change Form (Also See I1.4) Although managing a project to the baseline estimate is the goal of every project manager, scope changes are sometimes unavoidable. Changes in scope should be documented and jus- tified. A scope change form is an estimation tool that creates a standard procedure for reporting scope changes. It creates transparency and accountability. It also allows agencies to view trends in scope changes that may allow for better scope defini- tion on future projects and in future estimates. What Is It? This form provides a permanent record of the scope changes that occur during the project development. To create account- ability, it also records who authorized the changes. Why? Changes to project scope almost always cause cost increases. Therefore, the requirement for formal management approval of any scope change serves to limit change, because all such proposals must be carefully reviewed and controlling scope change serves to control cost growth. An additional reason for tracking changes to the project is to ensure that no changes take place without the full knowledge of the project team, including designers, managers, and estimators. What Does It Do? Scope change forms make possible easy comparison of the current project scope, schedule, and cost with the established baseline of the project. The form should require that the doc- umented change—as well as any impacts of the change to project scope, schedule, and cost—be specifically acknowl- edged. An explanation is required with each change. Appro- priate approvals should be required depending on the size and nature of changes. A-54

A-55 (a) benefit scorecard (b) execution scorecard Figure C6.2. Coors brewing company scorecards.

When? Changes should be tracked throughout project develop- ment. The form may change slightly and require more detail as the project progresses through development; however, the concept and purpose of the form remains constant. The use- fulness of the scope change form in regards to cost will be more beneficial after the project baseline is set. Examples Missouri DOT (MDOT) has created a form for tracking both scope and estimate changes. The form and the instruc- tions for how to complete it are shown in Figure C6.3. Tips Scope change forms should explicitly require all the infor- mation needed to track project changes, including scope, sched- ule, and cost impacts, as well as explanations and approvals. Forms should be standard; however, there should be the ability to deviate from the form for special project circumstances. Resources California State DOT Project Development Procedures Manual (PDPM) Chapter 6 addresses project cost, scope, and schedule changes: dot.ca.gov/hq/oppd/pdpm/chap_htm/ chapt06/chapt06.htm. A-56 Figure C6.3. Missouri DOT non-major project scope/ estimate change form. MEMORANDUM Missouri Department of Transportation Project Development District TO: (District Engineer) FROM: Your Name Project Manager Date: Subject: Route , County Job No. Non-Major Project Scope/Estimate Change Project Stage: Annual Review/Milestone Completion Submittal of P,S,&E Scope Change: (Describe the elements and details of the project that have changed since the project initially included funds in the STIP for right of way or constriction or since the last scope/estimate change was approved) (If a project scope/estimate memorandum has not previously been approved for the project, the details of the project that have changed since approval of the original project-scoping memorandum should be documented here.) (Projects that require submittal of this letter due solely to a change in cost may not necessarily include a change in the project’s scope.) Reason for Change: (Provide the reasons that the change in the project’s scope is necessary. The information provided should be detailed enough to allow someone unfamiliar with the project details to gain a general understanding of why the recommended change is necessary.) (Projects that require submittal of this letter due solely to a change in cost may not necessarily include a change in the project’s scope. However, the reasons for the cost change shall be fully described in adequate detail to allow someone unfamiliar with the project details to gain a general understanding why the recommended change is necessary.)

Chapters 2 and 3 in the New York State DOT’s Project Devel- opment Manual (PDM) discusses changes in project cost, scope, and schedule: www.dot.state.ny.us/cmb/consult/dpm1/ pdm_01_30_04.html. C6.4 Scoping Documents (Also See P2.2) State highway agencies throughout the country have created scoping documents to support the project definition (i.e., scoping) process. These documents are used at project initia- tion to define project scope. These scoping documents provide an excellent tool for project estimators to define the basis of an estimate. The documents are also excellent tools for under- standing the uncertainty involved in a project; thus, they are very helpful in setting an appropriate project contingency early in the project development process. What Is It? Scoping documents are standardized forms that state high- way agencies use to explicitly define and document the scope of a project. They are often developed in the form of a check- list. They represent past project experience and list key scope items and lessons learned from past projects. Why? Scoping documents are a tool to aid in project scope def- inition and documentation. They can be used before any major engineering efforts take place. They can also be used in the cost estimation process to define the estimate basis and aid in the establishment of an appropriate level of contingency. A-57 Figure C6.3. (Continued). Source of Additional Funding: (This section is only required if the project scope/estimate change results in an increase in the total project cost.) (If the change results in an increase in cost, the source of the additional funds should be identified. Any associated impacts to other STIP commitments should also be discussed in this section, if applicable.) Project Estimate Change: Approved STIP Amount: $ ($1,000’s) Revised Cost Estimate: $ ($1,000’s) Am ount of Change: (+/-) $ ($1,000’s) Percent Change: (+/-) % (The estimate amounts shown here should reflect the total amounts included in the STIP for right of way and construction as compared to the revised estimates for the same items. For example, if a project only has right of way funds included in the latest approved STIP then the cost comparison only needs to include the revised right of way costs. If right of way and construction funds are both included in the latest approved STIP then the revised total of these costs should be compared to the previous total of these costs.) (In order to ensure an accurate comparison of the project costs, the revised costs should be compared to the latest approved amounts found in District STIP database. Any amounts obtained from the database should be obtained from the Internal Report category since these amounts do not include any inflation factors.) Change in Construction Aw ard Date: Approved STIP Construction Award Date: Quarter of FY Revised Construction Award Date: Quarter of FY Approved: Date: (District Engineer)

What Does It Do? The development of a standard scoping document provides consistency in project scope definition early in the project development process. Completion of a scoping document for each project assists in documenting the estimate basis, defin- ing the baseline estimate, defining contingency, and tracking scope changes. This document will aid in identification of the true purpose of the project and serve as a reminder of project intentions throughout project development. The document aids in identification of elements to be included in estimate and schedule considerations. When? The scoping document should be completed early in proj- ect development to establish a baseline scope of the project and basis for the early project estimates. The document should be reviewed throughout the development of the project to check for changes in scope. Examples Many state highway agencies use some sort of scoping doc- ument. The documents range in complexity and specificity. Some state highway agencies use a simple memo as their scoping document, while other agencies have longer, more detailed forms. Figure C6.4-1 provides an example of a scoping document from Virginia DOT. Figure C6.4-2 provides an example of a scoping document from the Missouri DOT. Tips A scoping document is an excellent tool to define an esti- mate basis. Use the scoping document in a team environment with all of the appropriate disciplines represented whenever possible to minimize the chance of any oversights. Scoping documents should permit some flexibility for special-case projects, both the very straightforward and the more complex. A-58 Figure C6.4-1. Example scoping document from Virginia DOT.

Resources The Vermont Agency of Transportation Project Develop- ment Process is online at www.aot.state.vt.us/progdev/Sections/ PDManual/01mantabl.htm. The New York State DOT Design Quality Assurance Bureau scoping process can be found in the first three chapters of the Project Development Manual: www.dot.state.ny.us/cmb/ consult/dpm1/pdm_01_30_04.html. Project initiation documents mark the transition from plan- ning and programming to advanced planning (using the terms in NCRHP Project 8-49). These documents are described in Chapter 9 of the California DOT Project Development Proce- dures Manual (PDPM), which is on the Internet at www. dot.ca.gov/hq/oppd/pdpm/chap_htm/chapt09/chapt09.htm. D1 Delivery and Procurement Method The selected contracting method is a critical factor impact- ing the project estimate because it definitively states how proj- ect risk is distributed between the state highway agency and the contractor. The distribution of risk directly impacts the cost of the project. Additionally, it is clear today that market forces have a substantial impact on the cost of a project. How market forces impact a particular project depends on the specific dates A-59 Figure C6.4-1. (Continued).

on which a project is advertised and bid (are there many proj- ects being advertised by other agencies during the same time frame?) and on the manner in which the work is packaged into individual contracts (what is the size of a single contract, and is there coordination between adjoining contracts?). D1.1 Contract Packaging On December 13, 2001, Maryland DOT opened bids for the Woodrow Wilson Bridge superstructure contract. A sin- gle bid, 75% higher than the engineer’s estimate for the con- tract, was received. In reviewing the situation, it became clear that market forces had a substantial impact on the bid prices, a much greater impact than anticipated by the project planners and estimators. The manner in which work is packaged into individual contracts affects contract prices and must be accounted for when estimating project cost. State highway agencies should seek to package projects in such a way that there is effective management of cost, sched- ule, and risk. Heeding the recommendations of an inde- pendent review committee, Maryland DOT repackaged the contract into three contracts and rebid the project approxi- mately a year later. The first rebid contract came in 11% over the estimate, but there were five bidders and it was a workable bid, and the other two contracts both came in below the estimates, one by 28% and the other by 25%. A-60 Figure C6.4-1. (Continued).

Contract packaging is important for maintaining competi- tion and receiving competitive bids. What Is It? In packaging contracts, there must be a weighing between economy (usually measured as competition) and work effi- ciency. Based on thoughtful analysis and consideration of a program or project’s physical work elements and on the mar- ket conditions existing at the work location, contract packages are developed that minimize the total cost of construction. Contract packaging, which is based on such forethought, requires interaction between estimators, the project develop- ment team, and the state highway agency personnel responsi- ble for managing project construction as the estimator and construction management personnel will be able to call atten- tion to packaging affects on project cost. Why? Project size (contract dollar), equipment requirements, physical features, and the responsibilities (i.e., risk) imposed on the contractor are all critical factors impacting the bid price of work. There are opportunities to reduce contract cost by conscientiously considering the contract package in respect to these factors. At the same time, estimators must consider the impacts of contract packaging when developing the project estimate. A California DOT (Caltrans) study on the impact of com- petition on final bid results found a clear and undeniable relationship between the number of bids received and the contact low bid compared with the engineer’s estimate. Stra- tegies that increase competition (i.e., the number of bidders per project) will lower project cost. Contract packaging is particularly important in the case of large aggregate dollar value work and work of a specialized nature. The geograph- ical location of a contract or work sites is an additional fac- tor that should be considered. Any factor that affects the number of bidders that can be expected on a project should be evaluated. Caltrans found that the relationship between the average number of bidders and the bid price changes based on project dollar size, as shown in Table D1.1. This table makes it clear that even for small dollar jobs, it is important to consider the effects of competition. A-61 Figure C6.4-1. (Continued).

What Does It Do? Contract packaging affects project cost; therefore, knowl- edge of such impacts can result in contracting packages struc- tured to achieve the work at lower cost. By structuring contracts to facilitate maximum participation by the con- tracting community, state highway agencies can often lower bid prices. Increasing competition also leads to the continued potential for long-term savings by maintaining a viable base of competition. When? The contract packaging control procedures should be estab- lished from the initial conceptual phase through bidding. Examples A review of the Maryland DOT estimate compared with the single bid for the Woodrow Wilson Bridge superstruc- ture contract found the following: • Only a small number of contractors had the ability to under- take a project of such magnitude. • Several other major bridge projects were being bid con- currently with the Woodrow Wilson project. • The size of the project necessitated that joint-venture teams be formed, thereby further reducing the competition. The work was repackaged into three contracts. The first contract was successfully bid with five contractors competing. The second contract had six bidders and came in 28% below the engineer’s estimate. The third contract had four bidders and was 25% below the engineer’s estimate. Tips State highway agencies should consider the following when packaging contracts: • Contracting method (the history of design-build projects by state highway agencies indicates that change orders aver- age 2%, while design-bid-build contract change orders ave- rage 5%) A-62 Figure C6.4-1. (Continued).

• Potential high mobilization costs for bridge structure or earthmoving equipment • Coordination with adjacent contracts • Traffic control limitations • Utility relocation activities (Can this work be accomplished before the prime contract [advance utility relocation] or will there be extensive coordination of work?) • Accomplishment of hazardous remediation work as a sepa- rate contract in advance of the prime contract • Large-dollar contracts (Such contracts can limit competi- tion because contractors are not able to obtain bonding. In the case of mega-dollar projects, there is a limit to the risk that the bonding community is willing to assume. To pro- tect themselves, the bonding companies join together to write large bonds. This practice further limits the availabil- ity of a contractor to obtain a bond.) During the design phase of project development, there should be a strategic separation of projects within a corridor, thereby allowing for efficient use of earthwork (balancing cut and fill requirements). In respect to all these considerations, there must be a bal- ance between the cost of administration for multiple contracts and the potential benefits from having multiple contracts. Resources While the California DOT report is specific to conditions in that state, it provides a good indication of competition impacts on project cost (see “Impact of Competition on Final Bid Results for Transportation Related Construction Project,” Nov. 15, 2001, Caltrans, Division of Engineering Services). Maryland DOT (MDOT) information on the Woodrow Wilson Bridge contract packaging can be found at www.mdot. state.md.us/News/2003/May2003/Wilson%20Bridge. Former Utah DOT chief Tom Warne led the Independent Review Committee (IRC) that MDOT established to examine the Wilson Bridge situation. The IRC recommendations for A-63 Figure C6.4-2. Example scoping memorandum from Missouri DOT. MEMORANDUM Missouri Department of Transportation Project Development District TO: (Director of Project Development) FROM: Your Name Project Manager Date: Subject: Route , County Job No. Draft Project Scoping Memorandum (The information provided in the draft project scoping memorandum should be detailed enough to allow someone unfamiliar with the project details to gain a general understanding of the recommended actions that will be taken to address the need.) Need: (This should include a description of the deficient items that indicate the initial need for the project. In addition any other deficient items or safety needs that are identified through the initial stage of the project scoping process should be included.) Scope: (The description of the project’s scope should be as complete as possible at this early stage of the project development process. However, it is reasonable to assume that level of detail that is available will be limited to describing broad concepts and general details of the project.)

advancing the project included: value-engineering opportuni- ties, contract modifications, review of bonding/surety issues, and project modifications to enhance competition. The full report is available from MDOT. There is also a TRB paper, “Adventures in Building Another Washington Monument: Woodrow Wilson Bridge Project Re-Bidding Outcomes,” by Robert Douglass, Robert Healy, Thomas Mohler, and Shirlene Cleveland, which was presented in the 2004 TRB Annual Meeting. D1.2 Delivery Decision Support The selection of a project delivery system can affect both cost estimation practice and cost estimation management. The design-bid-build delivery system approach, in which unit price construction contracts are awarded to the lowest bidder, is the traditional method for delivery of U.S. highway projects and is used in the majority of cases today. However, this tra- ditional project delivery method has received criticisms stem- ming from long delivery times, excessive cost growth, and litigious relationships. Continuing to face increasing demands of the traveling public with declining staffs, federal, state and local agencies are employing alternative project delivery, pro- curement, and contracting methods to improve the efficiency and effectiveness of public-sector project delivery. What Is It? Project delivery decision support is a tool that assists state highway agencies in choosing the appropriate project delivery A-64 Figure C6.4-2. (Continued). Budget: Grading & Drainage + Base & Surface + Bridges + Misc. + Estimated Contract Total = $0 $0 $0 $0 $0 Construction Contingency (est. @ 3% of contract total) Contract Total+ Construction Contingency= $0 $0 Utilities $0 Non Contractual Items Total Construction Cost= $0 $0 R/W Incidentals + Preliminary Engineering Incidentals + Construction Engineering (est. @ 7% of contract total) + Total Incidentals $0 $0 $0 $0 Construction Incentives/ Contract Acceleration $0 Program Estimated Total = $0 Schedule: Milestone Schedule Initial Concept Approval Environmental Document Approval Preliminary Plans Approval Project Scoping Memorandum Approval Implementation Plan: (The implementation plan should include a discussion of how development of the project will proceed beyond this stage. This should include the time frame for developing the project to enough detail to allow completion of the project scoping memorandum. Any other pertinent information related to implementation of the project should also be included. Projection of the project schedule beyond the project scoping memorandum will not be possible at this point in the process since the project prioritizations process will be used to determine priority for the fully scoped project.)

A-65 Figure C6.4-2. (Continued). I have reviewed the scope of this project and offer the following comments: (Design Technical Support Engineer) I recommend proceeding with the development of this project subject to the following comments: (District Engineer) Approved Subject to the following comments: (Director of Project Development) Approved subject to the following comments: (Transportation Planning Director Table D1.1. Relationship of bid price to estimate considering project size (Caltrans study). Project Size, $ Ave. No. Bids Percent over PS&E if only one bid Expected reduction by increasing the average by one bidder Less than 1 Mil. 5.2 +17% -2.3% 1 to 5 Mil. 5.3 +5% -2.0% 5 to 10 Mil. 5.0 +5% -2.1% Greater than 10 Mil. 5.7 +3% -1.8%

method. It provides a clear understanding of the advantages and disadvantages of alternative delivery methods so that state highway agencies can make informed decisions about the most effective choice for the available alternatives to meet the spe- cific project goals. The following is a sample of alterative proj- ect delivery methods in use by state highway agencies at the time that this document was being prepared. Project delivery methods: • Construction management at risk • Design-build (and variations, such as design-operate- maintain and design-warranty) • Indefinite quantity/indefinite delivery • Job order contracting • Public-private partnerships Procurement methods: • Cost + time bidding (A+B) • Multi-parameter bidding (A+B+C) • Best-value procurement • Alternate designs • Alternate bids • Additive alternates • Negotiated or qualifications-based selection (for construction) Contracting and payment methods: • Lane rental • Incentive/disincentive payments • Warranty contracting • Lump sum payment methods When selecting alternative project delivery methods, state highway agency personnel should consider such issues as risk allocation, legal implications, statutory restrictions, and administrative issues. The decision to use an alternative deliv- ery method invariably involves a tradeoff between cost and other factors such as time, user delays, or quality. Delivery deci- sion tools can help to define and quantify the tradeoffs. Why? The choice of project delivery method often hinges on a proj- ect’s cost or time constraints, and estimators must understand how to estimate the cost tradeoffs involved in the decision to use an alternative delivery method. For example, the design- build project delivery method can be used to award a lump- sum contract for both the design and construction of a project much earlier in the project development process than the tra- ditional design-bid-build method. This early award offers a high potential for project delivery time savings and, in essence, fixes a project’s cost earlier in the project development process than the traditional process. When design-build is selected, dif- ferent approaches must be taken for cost estimation practice and cost estimation management. Cost estimation practice may require the use of more rigorous conceptual estimation tools and a more rigorous risk analysis because designs will not be complete and quantities will not be known at the time of project award. Cost estimation management will require dif- ferent change management procedures because the design- builder is responsible for the final project design (including final quantities) and changes in cost estimates due to scope additions or deletions can be more difficult to manage. What Does It Do? Project delivery decision support provides an understand- ing of why an alternative delivery method might be appropri- ate for a project given a set of unique project goals. It provides guidance for cost estimation practice and cost estimation management. When? Project delivery decisions should be made as early as pos- sible in the project development process to optimize their impact. Decisions for the overall project delivery method (i.e. design-build, public-private partnership, etc.) should prefer- ably be made during the project scoping process or shortly thereafter. Decisions regarding innovative procurement meth- ods such as best-value or qualifications-based procurements should be made as early as possible as well. Other, less sig- nificant procurement and contracting decisions (e.g., A+B bidding, additive alternates, and lane rental) can be made sometime in the preliminary engineering development. Examples There are numerous examples of project delivery decision tools. Five national examples are provided here, but numer- ous states have developed decision support tools as well. Utah State University Innovative Contracting Website. The Federal Highway Administration sponsored the devel- opment of an innovative contracting website to provide decision support for innovative contracting methods. A screen clip of the website is provided in Figure D1.2. The Utah State University’s Innovative Contracting website includes information concerning various construction con- tracting methods, such as design-build, warranties, cost- plus-time bidding, lane rental, and job order contracting. State DOT work plans and evaluation reports from FHWA’s A-66

Special Experimental Project No. 14, “Innovative Contract- ing,” are provided. The site also features a best practices guide and a decision tree for selecting the appropriate con- tracting technique. NHI Alternative Contracting Course (Course No. 134058). The Federal Highway Administration’s National Highway Institute (NHI) is offering a course on “Alternative Contracting” (Course No. 134058). A short description of the course is listed below, and more information on the course availability can be found on the NHI website at www.nhi. fhwa.dot.gov. Course Objective The estimated 2-day training course will teach participants how to select the appropriate projects for alternative project delivery strategies, choose the correct alternative contract pro- visions, and recognize the legal and programmatic implications associated with these techniques. The course design is to be flexible, allowing the requesting agency to customize the pres- entation for increased emphasis on topics of interest to the agency. The target audience includes personnel working in contract administration, project development and design, and the man- agement of highway construction, including contribution of information in contract provisions. Upon completion of the course, participants will be able to: • Identify alternative project delivery, procurement, and con- tract management methods for highway construction • Identify objectives for the use of alternative project delivery, procurement, and contract management methods • Differentiate among traditional design-bid-build and alterna- tive project delivery, procurement, and contract management methods based on relative advantages and risks AASHTO Primer on Contracting for the 21st Century. The Primer on Contracting for the 21st Century is an updated version of the Primer on Contracting 2000, which was pub- lished in 1997. The new primer describes various contracting and contract administration methods that are currently being used by contracting agencies in their transportation programs and provides contacts within these agencies for use in obtain- ing additional information. This report was prepared by the Contract Administration Task Force of the AASHTO Highway Subcommittee on Construction. The document can be found in the references section of the AASHTO Subcommittee on Construction’s website http://construction.transportation.org. NCHRP Project 10-49, “Improved Contracting Meth- ods for Highway Construction Projects.” The project reviewed relevant domestic and foreign literature; surveyed the construction industry; identified and evaluated contract- A-67 Figure D1.2. Utah State University Innovative Contracting Website (www.ic.usu.edu).

ing practices with consideration to compatibility with the low-bid system, impact on state highway agency resources, product quality, and risk allocation; and developed guide- lines for three nontraditional contracting methods: warrant, multi-parameter, and best value. The agency’s final report that contains the findings of the literature review, discus- sions of current use, and analysis of survey results has been distributed to all state highway agencies. The guidelines for nontraditional contracting methods have been published as NCHRP Report 451 (http://www.trb.org/news/blurb_detail. asp?id=5476) NCHRP Project 10-61, “Best Value Procurement Methods for Highway Construction.” NCHRP Project 10-61 pro- vides decision support for best-value procurement of U.S. highway construction. The resulting report outlines a compre- hensive process that state transportation agencies can use to create best-value methods in their individual states. The research effort investigated best-value concepts currently in use in the construction industry, evaluated their relative effective- ness, and recommended a best-value system or systems that may be used in conjunction with a traditional design-bid-build delivery system for highway construction. The research prod- ucts include: • A common definition and a conceptual framework for the use of best-value procurement methods for highway con- struction projects • A best-value procurement system that allows for flexibility in the choice of parameters and award methods • An implementation plan that includes both a project screen- ing system for selecting candidate projects and a step-by- step process for selecting appropriate parameters, criteria, and award algorithms • Recommendations regarding models to use for legislation and procurement regulations • A compendium of case studies for best-value procurement in the highway construction industry • A training tool to assist agencies with implementation The results of NCHRP Project 10-61 have been published as NCHRP Report 561: Best-Value Procurement Methods for Highway Construction Contracts. (http://www.trb.org/news/ blurb_detail.asp?id=6903). Tips Choose delivery methods that better align goals and that allocate risk properly. The U.S. highway industry must evolve from the traditional “one size fits all” project delivery method. A renewed focus should be given to alternative delivery meth- ods that promote early industry involvement and life cycle design solutions to maximize the entire project team’s input into meeting customer needs. Resources AASHTO Subcommittee on Construction’s website. See ref- erences for Primer on Contracting for the 21st Century (http:// construction.transportation.org). Anderson, S. D., and J. S. Russell (1998). NCHRP Report 451: Guidelines for Warranty, Multi-Parameter and Best-Value Contracting, Transportation Research Board. http://www.trb. org/news/blurb_detail.asp?id=5476. FHWA’s National Highway Institute, www.nhi.fhwa. dot.gov. NCHRP Project 10-49 website, http://www.trb.org/TRB Net/ProjectDisplay.asp?ProjectID=266. NCHRP Project 10-61 website, http://www.trb.org/TRB Net/ProjectDisplay.asp?ProjectID=281. Scott, S., K. R. Molenaar, D. D. Gransberg, and N. Smith (2006). NCHRP Report 561: Best-Value Procurement Methods for Highway Construction Contracts, Transportation Research Board. http://www.trb.org/news/blurb_detail.asp?id=6903. Utah State University, Technology Transfer (T2) Center, Innovative Contracting website, www.ic.usu.edu. D2 Design Estimation Design estimation commences when a project enters into the programming phase and continues throughout prelimi- nary engineering. Design estimation is critical during pro- gramming because during programming is often when a baseline scope, cost, and schedule are determined. Design estimation tools must produce consistent and accurate esti- mates. However, the use of these tools will vary depending on the level of project scope definition, the project type, and the complexity of the project. Computer software is used to facilitate the application of these types of estimation tools. A variety of tools can be used to support design estimation: • Analogous or similar project: This tool relies heavily on one project that is very similar to the project being estimated. The reference (i.e., analogous or similar) project is typically one that was previously constructed; is currently under con- struction; is bid for construction; or has a completed plans, specifications, and estimates (PS&E) level estimate. Line items, quantities, and unit costs are used as a basis for esti- mating the current project. Similar costs from the reference project are used to estimate preliminary engineering and construction engineering costs. • Cost-based, bottom up: This tool relies on the cost-based estimation approach, wherein construction costs, based on a selected productivity, are estimated for labor, material, A-68

equipment, contractor overhead, and contractor profit for each major line item. Estimates of preliminary engineering and construction engineering are estimated from the bot- tom up. This means that resources are specifically identified for each element and tied to time—productivity—when these resources will be engaged on the project. • Historical bid based: The use of historical data from recently bid contracts is the most common state highway agency estimation approach. Under this approach, bid data are summarized and adjusted for project conditions (proj- ect location, size, quantities, etc.) and the general market conditions. Line items are developed for major elements of work so that quantities and historical unit prices can be applied to these line items. Often, percentages are used to estimate items where little or no definition is available. Stan- dard percentages are used to estimate preliminary engineer- ing and construction engineering costs. • Historical percentages: This tool is used in conjunction with other tools such as historical bid-based estimation. Historical percentages are used to estimate costs for items that are not typically defined early. A percentage is devel- oped based on historical cost information from past proj- ects to cover certain items. This percentage is based on a relationship between the selected items and a total cost cat- egory such as direct construction. Contractor mobilization, construction engineering, and preliminary design (often referred to as preliminary engineering) are often estimated based on a historical percentage of construction. • Major cost items using standard sections: Typical sections are developed for different roadway or bridge types. These typical sections are tied to cost data that reflect the work to be completed for each section. As a project scope is devel- oped, typical sections that are similar to the project being estimated are used to generate a new cost estimate for a project. Standard percentages are used to estimate other costs associated with the typical sections, such as traffic con- trol items and preliminary engineering and construction engineering costs. • Parametric estimation: Parametric estimation techniques are used primarily to support development of program- ming or early preliminary engineering estimates, which are developed when very little project scope definition is avail- able. Major project parameters are identified. Statistical relationships and/or nonstatistical ratios between historical data and other parameters (e.g., tons of asphalt and square footage of bridge deck) are used to calculate the cost of var- ious items of work. D2.1 Analogous or Similar Project This tool relies heavily on matching a previous project that is very similar to the project being estimated. The reference (i.e., analogous or similar) project is typically one that was pre- viously constructed; is currently under construction; is bid for construction; or has a completed plans, specifications, and esti- mates (PS&E) level estimate. Line items, quantities, and unit costs are used as a basis for estimating the current project. Sim- ilar costs from the reference project are used to estimate pre- liminary engineering and construction engineering costs. What Is It? Analogous estimation is an estimation tool that uses the values of parameters (such as scope, cost, and time) or meas- ures of scale (such as size, quantities, and complexity) from a similar previous project as the basis for estimating the same parameters or measures for a future project. This tool is a form of expert judgment. It is most reliable when previous projects are in fact similar in terms of major parameters and not just in appearance. Future projects often have common elements associated with other completed or ongoing projects. Why? This tool provides a quick and cost-effective approach for developing a programming-type estimate or to prepare an estimate during the early phases of preliminary engineering. The availability of information based on real project experi- ence is an invaluable input for determining future project cost. Identifying similarities in a completed or current proj- ect and comparing that project to one that is being estimated can provide excellent cost history for estimation purposes. Further, using lessons learned to adjust a project estimate that is based on a similar past project can improve estimate accuracy. What Does It Do? This tool provides an approach to preparing an early esti- mate that has sufficient reliability and accuracy for use in pro- gramming a project. Further, the tool provides sufficient detail to subsequently track changes in quantities and unit costs as the project is designed. When? Analogous or similar project estimation is perhaps best used during programming and early in preliminary engineer- ing. It can also be used in planning in a slightly different form (see C3.3). Examples In late 2003, when Caltrans received a single bid for the self-anchored-suspension (SAS) span of its San Francisco- A-69

Oakland Bay Bridge Project, the upper levels of California government seriously considered going forward with a skyway- type structure instead of the costly SAS. Caltrans therefore had to prepare an early estimate for a Skyway Extension Bridge span. At the time of this estimate preparation, the design was only 5% complete. The proposed project was very similar in scope to the existing Skyway Extension Bridge work that was under construction at that time. Further, the foundation sys- tem was also very similar to cost data that were available from a bid on another type of bridge to be located at the same location. These two past projects were used to develop the cost estimate for the Skyway Extension Bridge span project estimate. The estimator used both quantities and unit costs from the two similar projects. Appropriate adjustments were made to both quantities and unit costs to fit the current bridge situation and reflect the unique site conditions for the proposed bridge as well as current market conditions. These adjustments were extremely important for this billion- dollar project. Cost estimates for preliminary engineering, environmental impacts, and construction engineering were also based on costs from the similar bridge projects. The Washington State DOT prepared an estimate for another component of a pavement project on an existing state route. The project increases the capacity of the route by adding two lanes to an existing two-lane highway. This current esti- mate was based on a previously completed estimate for an ear- lier stage of a project on the same road. The estimator used the previous estimate that was based on an approximately 1-mile section of roadway to estimate another 2 miles of roadway for the next stage of the project. The estimator used ratios to adjust quantities for the new project estimate. Unit prices were also used, but were adjusted to reflect current dollars and several slight differences in complexity of the new project in the earth- work category. Tips The user of this tool must understand that the reference project is in fact similar to the project being estimated and not just similar in appearance. Thus, the estimator must make a careful assessment of the scope and site conditions of both the project being estimated and the reference project. Adjustments may be required to the reference project scope and cost data to fit the project being estimated. Differences between the reference (or analogous/similar) project and the current project should be carefully docu- mented as part of the estimate back-up calculations. Resources Project Management Institute (2004). A Guide to the Proj- ect Management Body of Knowledge (PMBOK Guide). D2.2 Agency Estimation Software (Also See C2.1, C3.1, P1.1) Some state highway agencies have taken the initiative to develop their own estimation software. This has been accom- plished using internal resources in many cases, but external contractors have also been employed to support state highway agency software development. Most of the software programs have limited capabilities and were designed to run on main- frame computer systems. Additionally, many state highway agencies and individual estimators have not gone as far as developing software but have created spreadsheet programs to support estimate development. See Sections C1.6, C2.4, and D2.4. What Is It? Agency estimation software is specifically designed to serve the estimation practice of a specific state highway agency. This includes the capability to use the agency’s existing historical data files on project components and costs. The software may include logic to establish the cost of items that are not fully defined using parametric techniques combined with the use of historical databases to produce costs for fully scoped items. The combination of these methods can be applied to develop an estimate before design is complete. Why? During the early stages of project development, it is difficult to develop definitive cost numbers based on material quanti- ties or specific work items because they have not yet been defined. Because of the computer’s ability to handle large data sets and its calculation flexibility, the estimator can easily search historical databases to parametrically estimate those items for which there is still limited scope development and can also adjust unit costs or percentages to match each project’s unique conditions. Additionally, agency estimation software is designed to be compatible with other management software used by the agency. What Does It Do? Computer software allows the user to employ different esti- mation databases for parametric or line-item estimation and for performing “what-if” analyses. The programs typically allow the user to draw prices from historical bid data, histori- cal cost data, reference tables, or a collection of price deriva- tions. All of the data used to generate an estimate (such as historical costs, crew wages, equipment and material costs, production rates, and assumptions) can be stored to provide a sequential record of estimate development. A-70

When? To address very specific estimation requirements, custom agency software may be the only solution. Agency software can be very good in addressing distinctive requirements imposed on any individual state highway agency; however, software development is tedious and costly, and continuing support is always a critical issue. Agencies should first look to commer- cially developed and supported software such as the AASHTO Trns•port product, which has been developed specifically to meet the needs of state highway agency estimation. Examples Virginia DOT expanded an in-house-developed software system that was initially created through the combined efforts of two districts. This Project Cost Estimate System (PCES) is currently being used during the middle stages of project devel- opment. Figure C2.1 is a sample summary page from PCES. The state is looking to expand its use to the earlier stages of project development. The initial software specifically guided the estimator through decisions about the following: • Costs common to every project, such as stone, asphalt, grad- ing, pipes, erosion control, pavement markings, and moder- ate shoulder widening (i.e., the costs of every “usual element” averaged and factored according to geometric classification) • Project-specific costs that are typically overlooked, such as crossovers, turn lanes, and curb and gutter • Costs of unique or unusual items requiring a specific dol- lar input determined by a specialist in a particular field The initial software was modified to include the following: • Data from the entire state, rather than just a few districts • Interstate projects • Right-of-way • Utilities • Estimation curves and relationships based on a wider vari- ety of projects • Construction engineering and inspection at a variable rate based on project cost • A wider range of bridge estimates This software is not only an estimation tool, but also a management tool in that a number of items must be checked off, dated, or entered before a project can continue to the next level of development. Tips Many times, estimators spend more time with the tools they use to create the estimate (computers and software) than with studying and analyzing the project. It is important that agency- developed software be user friendly and structured so that it is easy to input the required data into the system. Resources Kyte, C. A., M. A. Perfater, S. Haynes, and H. W. Lee (2004). “Developing and Validating a Highway Construction Project Cost Estimation Tool,” Transportation Research Record 1885: Transportation Management and Public Policy 2004, Trans- portation Research Board. http://www.trb.org/news/blurb_ detail.asp?id=4517. Barlist is a reinforcing steel quantity-estimating tool devel- oped at the Washington State DOT. It can be found at www. wsdot.wa.gov/eesc/bridge/software/index.cfm?fuseaction= download&software_id=45. D2.3 Cost Based, Bottom Up Cost-based, bottom-up estimation is a tool similar in con- cept to the cost-based estimation tool described in Section P1.3. The application under design estimation is extended to not only cover construction costs but also other project costs, such as pre- liminary engineering (PE) and construction engineering (CE). During programming and preliminary design, this tool is often used to estimate unique items and not necessarily used to esti- mate all construction-related costs, such as the cost-based esti- mation tool in Section P1.3. Nineteen state highway agencies perform detailed bottom-up estimates for major work items, using historic databases to track costs based on crews, equip- ment, and production. Further, this tool may be used when PE and CE costs are difficult to estimate using a percentage. What Is It? Cost-based, bottom-up estimation is a tool to compute project costs by estimating the cost of each component required to complete the work. In the case of construction, costs are estimated based on crew sizes, wage rates, and pro- duction rates for labor, material and construction equipment. A reasonable amount for a contractor’s overhead and profit is added. In the case of PE and CE costs, these costs would be esti- mated based on anticipated resource levels (e.g., the number of design personnel or construction inspectors) and the deliver- ables (e.g., number of plans needed or quality assurance tests) based on the time required to perform the work. Why? This tool is especially applicable for very large and complex projects. The unique character of these projects, geographical influences, market factors, and the volatility of material prices A-71

can make historical bid pricing an unreliable method of esti- mating project costs. In addition, long design and construc- tion durations for these projects make the use of percentages for estimating PE and CE costs potentially unreliable. Hence, cost-based, bottom-up estimation can provide more accurate and defendable estimates. What Does It Do? Bottom-up estimates are, as the term suggests, developed from the bottom up. Costs are estimated based on the lowest component level of work, such as identifying crews, produc- tion rates, materials, and equipment for construction items; assigning resource requirements for detailed design elements; and estimating agency construction staff support for admin- istering the construction contract. Costs at the lowest levels are estimated and then summarized to different levels to ulti- mately generate a total project cost estimate. When? This tool can be used for large projects that are in the pro- gramming phase or early in the preliminary design phase of project development. The tool can be used to estimate compo- nents of projects that are not that large but still complex. It is a very good method for developing plans, specifications, and estimates (PS&E) when final plans and quantities are known. Examples When Caltrans was attempting to estimate the capital out- lay support (COS) cost or what could be referred to as the department’s overhead cost for the Skyway Extension Bridge, the project’s design was in its infancy (5%). A bottom-up approach was used to provide an independent validation of the initial numbers developed using a percentage estimation approach. Six functional areas were identified and solicited to provide COS workload estimates based upon their anticipated relevance on this project. The primary functional areas were project management, environmental, structure design, road- way design, construction, and materials engineering and test- ing services (METS). Within these primary functional areas, subfunctions such as surveys, hydraulics, and electrical were represented by the primary function they support. The functional groups submitted hours by the work break- down structure for the Skyway Extension Bridge through all phases of the work. The COS dollar estimate was calculated using the workload estimates provided by the functional experts and applying the present associated state personnel rates and consultant rates. The consultant rates were from existing consultant contracts. To better capture the effects of escalation as a function of resource types, an escalation of 3.5% was applied to state resources, and an escalation of 5% was applied to consultant resources. Follow-up interviews were conducted with the functional experts to clarify assumptions used in building the workload estimates. This effort resulted in the identification of specific line-item contingencies not captured in the workload estimates. Rather than apply an across-the-board contingency factor to the entire COS estimate to account for unknowns, specific percentages were used depending upon the phase of the proj- ect. A 35% contingency was applied during the design phase to provide for potential added costs associated with major design modifications and unknown special studies that may be needed. This unknown potential added cost was not cap- tured in the 6-month design delay calculation. The 6-month design delay calculation was based solely upon the concept of extended review times due to public scrutiny resulting in min- imal design changes. A 20% contingency was applied to the construction phase to account for potential added cost asso- ciated with use of additional expert consultants or independ- ent analysis for construction engineering. A lower percentage was used during the construction phase because the costs for a 1-year construction delay reflected the extended use of all support staff in the construction phase. The delay costs were calculated by preparing two separate scenarios: (a) a 6-month design delay during design and (b) a 12-month construction delay. The worst-case situation of both design and construction delay combined was evaluated. For simplicity, delays were applied at the peak workloads and for a sustained duration. The bottom-up estimate more accurately reflected the impact of delays because it took into consideration the resource type and the work being performed. A relatively lower delay cost during design was indicative of the ability to quickly mobilize and demobilize consultant design staff. Higher delay costs during the construction phase reflected the fact that mobilization and demobilization of staff are not a viable option for short-term sporadic delays in a construction environment. The bottom-up delay costs captured the higher end of delay costs by applying a sustained level at the peak staffing level. Delay costs may actually be lower if the delays occur earlier in the project, when staffing levels are much lower. The bottom-up method segregated the specific costs and clarified the relationship between the functional components of the estimate and the contingency components. Tips Detailed cost-based bottom-up estimation requires a great deal of knowledge about construction methods, supply sys- tems, labor markets, and method productivity specific to the area where the work is being performed. It also requires more time to prepare a detailed estimate than that which is needed for estimation methods that simply apply bid aver- ages to work items. This is because the estimator must con- ceptualize the construction process in order to prepare an accurate estimate. A-72

Most state highway agencies that do this kind of estimation have dedicated estimation sections whose personnel have the necessary construction experience. State highway agencies that do perform detailed estimates typically use computer software that supports estimate development, but the software is not critical to the estimation process itself. The software may be used to track cost trends or simply allow the estimator to report the estimate to other sections of the state highway agency more efficiently. The basic information that is necessary to perform a detailed estimate—such as crew sizes, equipment types, pro- duction rates, and labor and material costs—can be derived from a variety of resources. This may require contacting local contractors or using a database such as RS Means Heavy Con- struction Cost Data (see Section P1.3). The estimator will have to call suppliers of materials to obtain unit costs for materials and similar resources for determining equipment production and rental rates. It is important that the estimator be familiar with available resources, know how to find the resources, and most importantly has a competent knowledge of construction processes. All of these elements are necessary in order to develop an accurate cost-based, bottom-up estimate. Resources The AASHTO Subcommittee on Design, Technical Com- mittee on Cost Estimating is developing guidance on historical cost-based estimation. Draft papers are prepared, but not approved for release. If interested, contact the chair of this tech- nical committee. See this website for key contact persons: http:// design.transportation.org/?siteid=59&pageid=756. Church, Horace K. (1981). Excavation Handbook, McGraw- Hill Book Company. Associated General Contractors of America (1999). Con- struction Estimating & Bidding Theory Principles Process. Publication No. 3505. Means, R. S., and M. A. Kingston (2006). “Heavy Construc- tion Cost Data,” www.rsmeans.com. Oberlender, Garold D., and Steven M. Trost (2001). “Pre- dicting Accuracy of Early Cost Estimates Based on Estimate Quality,” Journal of Construction Engineering and Manage- ment, Vol. 127, No. 3. Parker, Albert D., Donald S. Barrie, and Robert M. Snyder (1984). Planning & Estimating Heavy Construction, McGraw- Hill Book Company. Rignwald, Richard C. (1993). Means Heavy Construction Handbook, R. S. Means Company, www.rsmeans.com. R. S. Means Company (published annually). RSMeans Building Construction Cost Data, www.rsmeans.com. R. S. Means Company (published annually). RSMeans Heavy Construction Cost Data, www.rsmeans.com. Smith, Francis E. (1976). “Earthwork Volumes by Contour Method,” Journal of the Construction Division, American Soci- ety of Civil Engineers, Vol. 102, CO1, March. Frank R. Walker Company (published periodically). Walker’s Building Estimator’s Reference Book, Lisle, IL. D2.4 Historical Bid Based (Also See P1.4) Historical bid-based estimation is the most common estima- tion approach used by state highway agencies. This approach relies heavily on line items with quantities and good historical bid data for determining line-item cost. The historical data normally are based on bids from recent projects. The estima- tor must adjust the historical data to fit the current project characteristics and location. What Is It? The most common method used by state highway agencies in developing estimates for transportation projects is histori- cal or bid-based estimation. This tool is more often associated with the engineer’s estimate, but can be used during pro- gramming and preliminary design. The tool requires the esti- mator to identify line items and quantities for each line item so that historical unit prices can be used to calculate line-item costs for the project. Why? Historical bid-based estimation is an efficient method for developing an estimate for line items that have adequate his- torical pricing data available. Implementing a bid-history- based estimation process enables an agency to estimate the cost of proposed work using a minimum of resources. Similar projects with similar line items, quantities, and locations can generally be estimated quickly using historical bid data and engineering judgment. Preparing estimates quickly may be important when the agency is developing a number of project estimates for programming purposes. The tool can be used at this stage in project develop for standard-type projects where the scope is relatively consistent, such as hot mix asphalt pave- ment overlay projects. What Does It Do? Creating cost estimates from historic bid prices is a rela- tively straightforward and quick process. After determining the quantities from the project plans, the estimator simply matches those quantities to the appropriate historical unit- bid prices or average historic unit-bid prices. To generate unit price data, departments systematically compile bid data from past project lettings. The data are broken down by bid line item. Average prices can also be calculated for the estimator’s use. State highway agencies reported several different methods for sorting the data collected from bid documents. A-73

When? Historical bid-based estimation can be used during pro- gramming and throughout preliminary engineering as long as the project scope can be described in terms of line items for which quantities can be developed. Examples The first decision is how many bids from each project should be included in the data. There is significant variance as to how state highway agencies approach this issue. All 50 state highway agencies responded to this question because even those state highway agencies that use a detailed estimation procedure track historical bid average costs for minor work items. Among the 50 states, • 20 state highway agencies use low bid only • 1 state highway agency uses low and second bid • 15 state highway agencies use the three lowest bids • 11 state highway agencies use all bids, but may exclude sin- gle bids that are very high or low • 2 state highway agencies use all bids except high and low • 1 state highway agency uses bid analysis to determine a rea- sonable bid amount for each line item Table D2.4 summarizes the estimation performance of the above practices. The one agency using a reasonable price and the two agencies using all bids except high and low reported the best performance. The one agency that used reasonable price to create its estimates did not have any experience using the approach for projects valued at more than $100 million, and, as with the two agencies that use all bids except high and low, this agency’s total project experience over a 5-year period was limited. Of the remaining practices, using the three low bids produced the best results. Tips After it is decided which bid prices will be used to create the average price, a timetable must be established that specifies the frequency of data updates. Databases can be refreshed and updated after each letting or on an annual or on some other recurring basis. In addition to these two factors (i.e., how many bids to use and how often to make system updates), the department must decide for what period of time data will be retained in the data- base and how far back price data should be considered to determine average prices used in estimates. Typical look-back periods are 1 year, 18 months, or 2 years for use in averages. Nine state highway agencies retain data for as long as records exist. Estimators can examine and use the data for items that are not frequently encountered or items that have seasonal price swings. An averaging of data would obscure seasonal pricing. Estimators should know exactly how the prices they are using were created, because there are multiple mathematical meth- ods to arrive at an index value or average value. Three common methods of deriving an index value are: where C = the individual costs elements and n = the numbers of cost elements. Such information should be part of the state highway agency’s estimation manual. Connecticut has several different sets of bid data information that the estimator can use as the situation dictates, as shown in Figure D2.4. A three low-bid printout is created for each project bid. At the end of each cal- endar year, average prices are computed, and every 2 years weighted unit prices are prepared. Resources The AASHTO Subcommittee on Design, Technical Com- mittee on Cost Estimating is developing guidance on historical Index value (average) C n Index value ( i i n = = ∑ 1 inverse) n C Index value (root of t ii n= ( ) = ∑ 1 1 he product) C C C1 n n = × × × ×( )2 3 1. . . C A-74 Table D2.4. Number of bids used for historic bid price estimation. Number of bids used Number of DOTs Reported projects Number reported more than 5% over estimate % Reasonable price 1 24 1 4.2 All except high and low 2 64 3 4.7 Three lowest 15 497 88 17.7 Low only 20 755 169 22.4 All 11 260 74 28.5 Low and second 1 24 13 54.2

cost-based estimation. Draft papers are prepared, but not approved for release. If interested, contact the chair of this technical committee. See this website for key contact persons: http://design.transportation.org/?siteid=59&pageid=756. The data for the Wisconsin DOT method of calculating con- struction costs for a roadway improvement project based on controlling cost items (these are the certain bid items that com- prise the majority of total construction costs) can be found at: www.dot.wisconsin.gov/localgov/highways/docs/district- controlling.pdf. D2.5 Historical Percentages Historical percentages are used to estimate costs for items that are not typically defined early. A percentage is developed based on historical cost information from past projects to cover certain items. This percentage is based on a relationship between the selected items and a total cost category, such as direct construction. Contractor mobilization, construction engineering, and preliminary design (often referred to as pre- liminary engineering) are often estimated based on a historical percentage of construction. What Is It? During the early phases of project development, not all line items can be identified sufficiently to be quantified. Estimating quantities and unit prices for these line items is difficult due to this lack of definition in the design. One tool that is often used to estimate known but not quantified line items is developing historical percentages to cover those items. Historical percent- ages can be developed using projects that are relatively similar in scope and complexity. This tool relies on an agency having standard line-item numbers to aid in preparing such percent- ages. Historical percentages are typically developed for esti- mating contractor mobilization, construction engineering, and preliminary engineering costs. Why? There are circumstances when the estimator simply does not have sufficient time and information to detail all line items and develop quantities for these line items. With a good database of historical bid prices used on past projects, com- bined with standard line items for reference, developing per- centages for a group of similar line items may take less time and be just as accurate as trying to estimate quantities for these line items. What Does It Do? Cost estimates contain many line items when fully detailed through the engineer’s estimate at the end of final design. How- ever, early in project development, identifying and quantifying A-75 Figure D2.4. Connecticut price cost data guidance.

all line items is difficult at best. This tool provides a methodol- ogy for estimating costs for these unidentified line items. When? Historical percentages are best applied when there are many small items that cannot be quantified due to lack of design. This tool can also be used when time to prepare the estimate is a constraint. Historical percentages are commonly used for estimating contractor mobilization, construction engineering, and preliminary engineering costs. This tool is most applica- ble in the programming and early design phases of project development. Examples On a recent Washington DOT (WSDOT) project that is early in preliminary engineering, a historical percentage was used to determine the estimated costs for erosion control and planting. This category of work has a set of standard line items under Section 17 of WSDOT’s Standard Item Table. In this case, several similar projects, both completed and recently estimated, were used to develop a percentage range for the erosion control and planting component of the estimate. The percentages were based on a ratio of costs for this section to total direct construction costs without mobilization. The range varied from 2% to 9%. WSDOT provides guidance on some historical percentages. For example, mobilization, construction engineering (CE), and preliminary engineering (PE) costs are estimated typically using this approach. Mobilization is a percentage of direct construction cost. Suggested percentages based on construc- tion cost are provided in the WSDOT Plans Preparation Man- ual, Division 8. Typical percentages used on recent projects have varied from 7% to 12%. Typically, ranges for CE costs are also shown in the Plans Preparation Manual, Division 8. These ranges are based on program type (preservation and improve- ment) and construction cost. The range for PE cost is typically between 7% and 15%. Tips The project from which historical percentages are developed should be very similar in scope and complexity to the project being estimated. The following approach to developing and applying this tool may be useful: 1. Identify components or project elements that can be esti- mated using a percentage. 2. Find several different projects that are similar. 3. Identify line items and actual cost for those items. 4. Calculate the sum cost of these items and determine the ratio percentage of the sum to total costs for several proj- ects (e.g., percent of construction). 5. Select percentage that best fits the project being estimated. 6. Apply the percentage to the project, and incorporate the item into the cost estimate. The percentage selected must be consistent with the scope, complexity, and schedule for the project being estimated. As the dollar size of the project increases, historical percentages normally decrease. Construction execution can also impact mobilization and construction engineering costs. Resources Washington State DOT Plans Preparation Manual, Standard Item Table, can be found on the following website: http:// www.wsdot.wa.gov/eesc/design/projectdev. D2.6 Major Cost Items using Standardized Sections Developing accurate estimates early in programming or pre- liminary design is a requirement of all state highway agencies. In many cases, these estimates must be developed quickly based on limited scope definition, and often these early estimates become the baseline from which the project is managed. As the design develops, estimates are prepared and compared with the baseline. If these early estimates are developed on a consistent basis using the same tools, then changes can easily be identified and reported to management. Preparing estimates based on major cost items using standardized sections is a technique that can provide accurate baseline estimates and allow for tracking of cost changes as the design is developed. What Is It? Early in programming and preliminary engineering, very limited scope definition is available on a potential transporta- tion need, such as urban and rural roads, bridges, and related highway facilities. Often a transportation need is very similar to a project under design, under construction, or recently completed. One approach to bridge available information with ambiguous project conditions is to adapt standardized sections. Typical section models can be developed with major cost elements as a standard. Agencies will have a basis for developing an estimate using a limited pool of successful designs and will improve the level of proficiency over a period of time by working on similar models. Why? The purpose of this tool is to develop accurate estimates based on information from previous projects that have been completed by adapting similar sections for major cost items. The availability of previous data enhances the credibility of the estimate generated. The concept of working with a smaller A-76

number of designs but having the flexibility to customize components improves the efficiency of estimate development. What Does It Do? This tool is feature driven and template based to match the conceptualized project scope. It consists of a limited number of models conceptualized on standard roadways. The concept is to identify and group all major roadway types in terms of magnitude and allocate minimum design elements to each type. Each design element is further associated with parameters such as dimensions, pavement designs, and pay items. Similar standardized sections can be developed for structures. A model is chosen from the available list as appropriate to the project requirements and customized for any additional facility components that may be required. The tool should be able to generate multiple versions based on design refinement and be used for tracking changes. The tool also should have default values based on historical databases and predeter- mined formulas. Validation and customization of values are permitted to produce more accurate estimates. When? This tool is used in programming when a project is being scoped for inclusion in an authorized program. Design is typ- ically between 5% and 25%. The tool is used to update esti- mates periodically as design progresses (25% to 80%) until adequate information is generated from final plans and spec- ifications to develop plans, specifications, and estimates (PS&E) using line items and historical bid pricing. Examples Florida DOT (FDOT) has pioneered this concept by devel- oping long-range estimates (LRE), which have four hierarchi- cal levels: project, version, sequence, and component. The project level contains general information like the project, location, key personnel, time periods, budgeted costs, and project delivery. A number coding is further associated with each project to distinguish between official and unofficial projects. The version level allows for coding the projects in multiple ways, for alternative designs. But, a primary version has to be designated for reporting and reviews. Costing infor- mation is summarized back to the version level. The sequence level accommodates choice of alternative designs from 12 sec- tion models representing type of construction, median, and shoulder type. Each model has default values that represent average conditions. These values can be modified to reflect current conditions. Multiple sequences are possible when there are changes in the characteristics of the typical section. The component level relates to specific pay items, groups, and types of work. These pay items, groups, and types of work can either be optional or required. The latter are generated auto- matically, while the former are at the discretion of project requirements. A tab system facilitates easy navigation through the levels. The virtual private networking feature of the LRE enables remote operation. For bridges, a cost reference sheet based on most common sections, designs, and spans is developed on a unit basis and incorporated at the preliminary design phase. Also, additional costs such as mobilization and contingency can be attributed on a percentage basis. The LRE provides for customization in terms of additional or extra items with relevant input from the estimator on parameters such as unit costs, quantity, and dependencies. This can also be calculated on a percentage basis of some dependent standard element. Figures D2.6-1 through D2.6-6 show various screen captures of the FDOT LRE. Tips Applying this tool requires the standardization of roadway sections by the agency. Care must be taken to include all major elements into each standardized model and to allow for flexi- bility to adjust sections to fit unique project conditions. Gen- erating and maintaining bid history databases from previous projects are also essential elements for this tool. The user has to understand what is covered in the estimate using this approach and what must be added to cover all components of the project. Resources FDOT State Estimates Office, 605 Suwannee St., MS 34, Tallahassee, FL 32399-0450. D2.7 Parametric Estimation Parametric estimation techniques are primarily used to sup- port development of programming or early preliminary engi- neering estimates, when very little project scope definition is available. Statistical relationships and/or nonstatistical ratios between historical data and other parameters (e.g., tons of asphalt and square footage of bridge deck) are used to calculate the cost of various items of work. What Is It? Early in programming and preliminary engineering, proj- ect scope definition is usually very ambiguous. However, it is often the case that the project is similar to previous projects that are under design, are under construction, or have recently been completed. The cost history from these projects can serve as a basis for developing a uniform, repeatable estimation tool. Parametric estimation provides reasonable estimate accuracy in a timely manner. Statistical relationships and/or nonstatis- tical ratios between historical data and other parameters form the basis for parametric estimation. A-77

A-78 Figure D2.6-1. Screen capture of the FDOT LRE (showing main screen). Figure D2.6-2. Screen capture of the FDOT LRE (showing one of the standard sections). Why? The purpose of parametric estimation is to develop early project estimates when information is restricted to only gross dimensions work features. An item-level quantity approach based on predicting item quantities from preliminary quantity information is another potential parametric approach. While parametric estimation can be used in the planning phase, this tool can provide a more detailed cost breakup than the tradi- tional cost-per-lane-mile estimation. This more detailed cost breakup should improve accuracy and alleviate cost overruns. The tool is developed to provide simplified, reliable, early esti- mates that are based on current prevailing costs. The potential to separate quantity uncertainty from price uncertainty pro- vides a better platform to track and analyze the effects of changes during project development.

A-79 Figure D2.6-3. Screen capture of the FDOT LRE (showing another standard section). Figure D2.6-4. Multiple-sequence feature of the FDOT LRE. What Does It Do? A major fraction of a transportation project’s costs is often attributed to one component, and many projects may have a common critical cost component. One parametric approach takes advantage of this fact and seeks to quantify the criti- cal component in a unit volume. All pavements are three- dimensional (length, width, and depth), and these parameters are typically known fairly early in project development. The concept is to develop factors based on roadway sections for different dimensions and associate them with a historical cost database considering all major items to construct the road- way. The individual factors are extracted as applicable to the project and are then cumulated for all elements in the

A-80 Figure D2.6-5. Screen capture of the FDOT LRE (showing multiple-sequence section selection). Figure D2.6-6. Screen capture of the FDOT LRE (showing project totals).

estimate to derive a single factor, which is multiplied with a cost multiplier (i.e., ratio) representing closely a past project of similar type and scope. This tool, however, estimates cost for roadway construction only and does not include other project elements such as right-of-way or bridges. In another example, the item-level, quantity-based estima- tion approach enables continuous tracking and control by ini- tiating quantity estimates at the outset. The basic estimation parameters, as derived from the statistical analysis, are then documented for future input in quantity calculation. The con- cept behind this tool development is to match historical data with current project elements and subject them to quantity model development using statistical techniques. Such analyses will provide estimators with cost-sensitive project elements, which can be closely monitored for improving estimate accu- racy. Several parameters based on design, project locations, and other topographical and geographical conditions that may influence project costs are incorporated into such modeling to improve accuracy. Major cost elements are hence identified, and a standard can be established for future reference with con- stant validation for current markets. When? This tool is used early in project estimating, through pro- gramming and early into the preliminary engineering phases of project development. Parametric estimation may be best used on less complex projects that tend to be more standard in terms of project components such as preservation projects (i.e., overlays) or bridge rehabilitation projects. Examples Minnesota DOT has developed a cost estimation tool based on the physical dimensions of the roadway using the length, width, and depth (LWD) methodology. The DOT uses a LWD factor, which is a cumulative computation of each road- way, shoulder, or ramp’s LWD volume. A project LWD factor is multiplied by a selected multiplier/LWD cost multiplier, which constitutes all major items to construct a roadway only, such as mobilization, removals and salvage, grading, aggre- gates, paving and approach panels, by-pass and temporary construction, drainage, concrete items, traffic control, turf/ erosion, and miscellaneous. Items such as bridges, signals, noise and retaining walls, traffic management systems and other special constructions are not included in the LWD cost multiplier and have to be estimated separately. ROW cost is also not included. A scope form is completed for every project at its inception. This form is used for extracting information revolving mainly around pavements for the three dimensions. It is preferred to have a separate entry for different depths along with areas. A centralized database is maintained to generate cost multi- pliers calculated from past and current projects within a 5-year time frame. These cost multipliers are supplied on a project- by-project basis. The estimator requests these multipliers when they are required. The combination of the LWD factors and the cost multi- pliers culminate in a roadway cost, to which other costs, such as bridges and signals, are added to determine project totals. The tool inputs are through Excel spreadsheets and Word templates, while databases are queried with Access. Figures D2.7-1 and D2.7-2 show screen captures of the LWD tool. Texas DOT supported a study to develop an item-level, quantity-based estimation method. This method was devel- oped on the belief that it was possible to segregate unit prices from estimates. The method is schematically represented in the flow chart shown in Figure D2.7-3. An overview of the systematic procedures for the quantity- based approach is illustrated in Figure D2.7-4. The approach was based on identifying factors affecting an item-level quantification from literature survey combined with experience obtained from past projects. These factors were then formulated along statistical techniques to establish cor- relations and develop models based on several assumptions. Several iterative steps refined the model to an acceptable com- putational program, which was then verified with current prices to validate the model. Another key aspect of this method was effective use of work breakdown structures, which are often the framework of estimates. The item-level, quantity-based approach employs quan- tity estimation models at project inception to produce pre- liminary estimates. Items comprising 80% of project costs based on historical data were identified as major work items. For each major work item, a statistical parametric model was developed to predict the quantity during the conceptual planning phase of the project. The results of the statistical analysis show a strong relationship between the item quanti- ties and the parameters adopted in the models. The quantity prediction models are being integrated into an item-level cost estimation system to predict both major item costs and total project cost. By segregating unit prices from item quantities, the quantity-based approach provides an opportunity to doc- ument both price inflation over time and changes in project scope. Sample outputs from such statistical analysis that aid in pre- dicting costs based on quantities are shown in Figure D2.7-5. Tips The estimator needs to ensure that all project costs are cov- ered, especially costs that may not be generated using the parametric approach, such as right-of-way. A-81

A-82 Figure D2.7-1. Screen capture of the LWD tool showing post letting project history. Figure D2.7-2. Screen capture of the LWD tool showing multiplier adjustment options.

A-83 Figure D2.7-3. Influence diagram of preliminary project cost estimate. Figure D2.7-4. Overview of item-level quantity model development and application. Identification of those elements that contribute to the major fraction of a project’s total cost is critical to this tool. The tool relies on cost predictions for items of work based on statistical predictions. Hence, identification and inclusion of cost items that contribute to 80% of the cost for each estimate is crucial for the tool’s success. The standardization of such elements in relation to project types is to a large extent the basis of implementing this tool. The tool can model addi- tional items that may not be standard as long as historical information is available. Resources Minnesota DOT (2002). “Documentation of Guidelines for Statewide Uniform Cost Estimates.” Chou, Jui-Sheng, Min Peng, Khali Persad, and James T. O’Connor (2006). “Quantity Based Approach to Preliminary Cost Estimates for Highway Projects,” Transportation Research Record 1946: Construction 2006, Transportation Research Board. http://gulliver.trb.org/news/blurb_detail.asp?id=6858. Project Management Institute (2004). A Guide to the Pro- ject Management Body of Knowledge (PMBOK Guide), Third Edition. D2.8 Spreadsheet Template (Also See C1.6, C2.4) Spreadsheet templates provide a rapid and easy means for organizing estimate data and formulating repetitive calcula- tions. Templates are excellent and simple tools for ensuring

that all components of project cost have been considered and accounted for in the estimate. Because these are usually straightforward documents they are good tools for commu- nicating estimate completeness and the allotment of cost to the different portions of work. What Is It? Spreadsheet templates are standard item lists of things an estimator should consider when calculating the cost of a proj- ect. When constructed in an electronic spreadsheet program, they provide computing, text-editing, and formatting capabil- ities at high speed and low cost. Electronic spreadsheet tem- plates can store both the formulas and the computed values returned by the formulas. Why? By using a spreadsheet template to guide estimate develop- ment, state highway agencies can improve estimate accuracy by ensuring that critical cost items are included in the cost total and that the estimator considers significant impacting factors when preparing the estimate. Furthermore, a well- designed spreadsheet will clearly communicate the total esti- mated cost of the project, as well as what is included in the estimate and what various categories of work are expected to cost. This allows easy comparison to historical values for mak- ing rapid “sanity checks” of estimated costs. What Does It Do? Spreadsheet templates (1) provide estimate development guidelines that facilitate creation of a complete estimate and (2) support the evaluation of cost and schedule credibility. They serve to document the estimate and provide an easy-to- read format, which facilitates communication about the proj- ect costs in a uniform and structured manner. Monte Carlo simulation can also be added to spreadsheets for doing prob- abilistic estimation or risk analysis. When? Different spreadsheet templates can be used in the course of project development as scope is quantified and additional information becomes available. However, templates should be designed so that major categories can easily be expanded as project detail is better defined. Spreadsheet templates are also excellent tools for supporting and documenting quantity takeoff. Examples The detail of a spreadsheet template will vary by project type and by the point in time when the estimate is being created. In the earliest stages of project development, there is limited project definition and design knowledge. One state highway agency’s early-stage spreadsheet has only five cost categories: 1. Grading and drainage 2. Base and pavement 3. Lump items 4. Miscellaneous 5. Engineering and construction The sheet also formulates calculation of a total cost and a total cost per mile, which provides transparency in compar- ing the cost with similar projects. These basic categories can be expanded as additional information about the project is developed. Tips Computer spreadsheets such as Excel require less initial investment than commercial estimation software and tend to be very flexible. The list of included items on spreadsheets is A-84 Figure D2.7-5. Sample predicted values of logarithmic engineering quantity versus historical values for representative work items.

often not exhaustive, and space should be provided in each section of the spreadsheets to allow the entry of additional cost items that may be unique to a particular project. Resources Michigan DOT’s “Road Cost Estimating Checklist” can be found at www.michigan.gov/documents/MDOT_0268_Road_ Cost_Est_120543_7.pdf. New Jersey DOT has posted on the Internet (www.state. nj.us/transportation/eng/CCEPM/) a Preliminary Estimate (English or Metric) Spreadsheet (zip 85k). Georgia DOT has posted on the Internet (www.dot. state.ga.us/) the format for submitting scope and cost esti- mates for GDOT projects in the form of Excel workbooks to expedite the review and approval process. Type “Guidelines for scope & cost estimate workbooks” in the search box on the home page. D2.9 Trns•port (Also See C3.5, P1.5) Trns•port is the AASHTO-sponsored transportation agency management software. It is a robust transportation program management system. It uses the most current information sys- tems technology and is based on the experience and needs of AASHTO’s member agencies. Trns•port capabilities encompass the full functionality of a construction contract management system. Trns•port is an integrated system consisting of 11 modular components that can be used individually or in combination as appropriate. Each module addresses the needs of the highway agency at a particular milestone in the construction contracting life cycle, representing three functional areas: preconstruction, con- struction, and decision support. AASHTO recently introduced another software to the suite of estimation tools. TRAnsportation Cost EstimatoR (TRACER) software is a parametric cost estimation tool created to help plan and budget for highway and bridge construction/renovation projects at the predesign and pre- liminary design phases. TRACER was developed by Earth Tech. What Is It? Trns•port has three modules (Cost Estimation System, Esti- mator, and Proposal and Estimates System) that interact with each other or work independently, as applicable, to produce design estimates. Figure D2.9-1 shows the interaction of these modules. The Cost Estimation System (CES) and Estimator modules are the most popular modules among state highway agencies that use Trns•port for design estimation. The CES module is a network-dependent module that is fully integrated with the other database-oriented Trns•port modules. It provides a highly productive environment in which to pre- pare parametric, bid-based, or cost-based estimates. The Trns•port Estimator module is a highly interactive, PC- based, stand-alone estimation system for highway construc- tion that uses a graphic user interface to prepare detailed estimates. It is well suited for distributing the estimation func- tion both throughout the agency and to the supporting con- sulting community. The Proposal and Estimates System (PES) module is designed for use at relatively advanced design stages, when more project data are available. This module accepts data in a project, category, and item level, and grouping of multiple projects is allowed to track all related costs and sources of fund- ing. The ability of this module to interact with the Bid Data Analysis and Decision Support System (BAMS/DSS) module of Trns•port and the exchange of this function with the CES module are the key attractions in parametric estimation. TRACER is a new computer-based tool developed to sup- port parametric estimation. The database that supports this tool is the RS Means Heavy Construction Cost Data manual. A-85 Figure D2.9-1. Interaction of Trns•port modules.

Why? During programming and preliminary design, specific ele- ments are defined for a project, and cost estimates are prepared using a number of different tools. The Trns•port estimation software can facilitate the use of several design estimation tools, such as historical bid-based and cost-based, bottom-up approaches. This software allows the estimator to build up an estimate as the design progresses. When software is linked to a historical cost database, selecting unit cost information can be more efficient because the user works within the software to find the appropriate historical bid costs that fit the element being estimated. Further, changes in the cost estimate can be made easily as new information or modifications to existing information are made. The software can be used to eventually develop the engineer’s estimate and support preparation of bid documents. In programming, if quick estimates are desired using major project parameters, TRACER can be used. Minimal input is required to generate a construction cost estimate. What Does It Do? The CES module contains a standard set of cost groups for parametric estimation. It is also equipped with tools that, cou- pled with its integration with the other Trns•port components, permit the uploading of historical labor, equipment, material and crew data for more detailed estimates. Its parametric esti- mation strategy uses cost groups that are based on major proj- ect types. They are groupings of items that are usually known early in the planning process for the type of project. Trns•port’s Estimator module supports generation of cost estimates using cost-based or bid-based techniques. Hybrid estimates are easy to create, allowing cost- and bid-based methodologies to be used in the same project estimate. Esti- mator can also reference a price lookup table if data are lacking or can perform ad hoc data entry of unit prices. The reference data used to generate estimates, including wages, equipment costs, material costs, production rates and historical bid data, are stored and maintained in the com- puter. Estimator will automatically apply the weighted aver- age price to line items, providing statistically valid estimates. If the historical data set is sufficiently large, regression coeffi- cients can be calculated and applied. Estimator can also bridge between the other modules and design systems to enhance data exchange. TRACER uses statistical relationships between major sys- tems of a highway project, termed “modules,” and the details that describe that system. For example, a bridge module is available to estimate the cost of a bridge. The user then pro- vides the system definition for the bridge. In this case, three basic elements are required—bridge size (length and width), separation type (over highway and height), and definition (superstructure and substructure type). This is the only input required. TRACER then generates all direct construction costs. Contractor overhead and profit must be added. A template is provided to insert these values. TRACER costs can be adjusted for different locations. When? These modules of Trns•port can be used in both program- ming and preliminary engineering. CES can be used in pro- gramming to create a parametric estimate. It can also be used for bid-based estimation at the programming phase if suffi- cient design details are available to support line-item-type esti- mates. All three modules can be used during preliminary engineering to support on-going design estimates. TRACER is probably most applicable during programming. Examples In the past, the NYSDOT used the mainframe versions of Trns•port PES, LAS, and DSS, but as agencies moved from the mainframe to the client/server versions, AASHTO decided to drop support of the mainframe version. NYSDOT’s migrate to the client/server version. Figure D2.9-2 shows the interaction of estimation-related Trns•port modules. A CES product tour is available at https://www.nysdot.gov/ portal/page/portal/main/business-center/trns-port/ modules/ces (click on “CES Product Tour” at the bottom). An Estimator product tour is available at http://www. infotechfl.com/software_solutions/estimator.php (click on “Product Tour” on the left). When using TRACER, the estimator needs to check the results against past history to verify the estimate. Several screen captures are shown in Figures D2.9-3 through D2.9-5. Tips Estimators who have access to the Trns•port database should use CES, while estimators without a connection to the network should use Estimator. The information generated by the CES module for cost- based estimation includes the following: • Detailed job estimate snapshots • Labor • Equipment • Materials • Cost sheets • Crews • Programs A-86

The Estimator module has the following features: • Master data for producing estimates are stored and main- tained in catalog forms. • Reference data are easily shared among several project par- ticipants using the same platform. • Historical pricing information can be applied automatically when Estimator is properly configured with BAMS/DSS, another Trns•port module. • Reference prices or ad hoc data entry is permitted when historical data are not available. • Cost-based estimation techniques are flexible, yet struc- tured and simple. • In-built Estimate verification processes improve accuracy. The estimator must ensure that all project costs are covered, such as right-of-way and preliminary engineering costs. These costs may not be generated by CES. The estimator must check all input and output to ensure that the estimated costs for major line items are within expected agency tolerances for the project type being esti- mated. This check can follow the Puerto principle: 80% of the estimated cost of construction is covered in 20% of the items. Comparing the overall estimate with estimates from similar-type projects that are recently bid or completed is another method of checking an estimate. Finally, using the statistical techniques in CES and Estimator may help iden- tify line-item estimates that are outside normal cost ranges for that item. A-87 Figure D2.9-2. Interaction of estimation-related Trns•port modules.

Additional information can be found using the following website: dot.state.ny.us/trns-port/about.html. Resources The Technology Implementation Company, Gainesville, Florida, see website addresses: www.infotechfl.com or www. cloverleaf.net. AASHTOWare, Transportation Software Solutions, American Association of State Highway and Transportation Officials, www.aashtoware.org. D3 Design to Mandated Budget Budgeting is a balancing act of meeting the agencies’ objec- tives (i.e., responding to transportation needs) to the fullest extent possible within the limits of its financial capacity. Typi- cally, an agency’s program of required projects outpaces its funding year after year. Budgets for projects that move into the state highway agency’s program are sometimes fixed indepen- dently of the scope of the project. When this scenario occurs, the preliminary engineering effort is substantially influenced by the dollars available for construction and right-of-way. Project scopes must be tailored to fit the budget; thus, the focus of engi- neering becomes a constant tradeoff between costs and scope. D3.1 Design to Cost In some cases, funding for a project is fixed by an external source, such as the state legislature. The scope of work may be congruent with the allocated project funds. The design-to-cost method is often used when a project team encounters a pre- determined fixed budget, but it can also be used by the state highway agency management to control project scope growth. The design-to-cost estimate and the budget cost of the project are compared. If the estimated cost during design exceeds the budget cost of the project, then one or both need to be reeval- uated before continuing with further project development. A-88 Figure D2.9-3. TRACER system definition input for a bridge over a roadway.

The scope will be reduced if the current cost estimate is higher than the fixed budget. Scope may be added if the current esti- mate is substantially less than the fixed budget. What Is It? Design to cost is a method of controlling project cost by establishing cost goals at specified levels of a project work breakdown structure and then requiring the project to make scope tradeoffs during the engineering process. These trade- offs will ensure that the facility built will meet the cost goals. In design to cost, the cost goals are added to the existing design requirements to form additional requirements of the project. Why? This tool is used most often when external sources man- date a fixed budget for a project. The budget may have been prepared with little or no information on the project or may be based on cost information that has not been recently updated. If there is little or no possibility of obtaining addi- tional funding, then the project team must develop a design that meets the mandated budget. This often will lead to a scope that is less than that which was envisioned by the exter- nal source. What Does It Do? This tool is based on constant evaluation of different scope options available to construct a project while continuously checking cost ramifications of these scope options in order to not exceed the predefined total project cost. This tool can fos- ter innovative design solutions, which can help in alleviating cost overruns. When? This tool should be used early in programming or prelim- inary engineering, when design criteria and basis are being A-89 Figure D2.9-4. Additional TRACER information created by the bridge system definition (beams).

established. The project design team will need adequate time to explore alternative design solutions in an attempt to main- tain the project within the mandated budget. Examples The flow chart in Figure D3.1 illustrates typical steps fol- lowed to implement the design-to-cost tool. The process is iter- ative until the estimate cost of the project is aligned with the established budget. This alignment process fixes the scope of the project. Tips Several factors are important when using the design-to- cost approach: • An understanding of state highway agency affordability or competitive pricing requirements by the key participants in the development process • Establishment and allocation of target costs down to a level of the construction cost components where costs can be effectively managed • Commitment by estimators to match development bud- gets and target costs • Stability and management of requirements to balance requirements with affordability and to avoid creeping elegance • An understanding of the highway construction cost drivers and consideration of cost drivers in establishing highway specifications and in focusing attention on cost reduction • Creative exploration of concept and design alternatives as a basis for developing lower-cost design approaches A-90 Figure D2.9-5. TRACER direct construction cost output for this bridge (without markups).

• Access to cost data to support this process and empower project team members • Meaningful cost accounting systems using cost techniques to provide improved cost data • Continuous improvement through value engineering to improve product value over the long term Resources Crow, Kenneth (2000). “Achieving Target Cost/Design-to- Cost Objectives,” SAS Institute. http://www.bettermanage ment.com/library/library.aspx?l=12369. D4 Document Estimate Basis and Assumptions Project complexity and the size of many projects today means that more issues must be considered in preparing the estimate. Additionally, estimates are commonly prepared in collaboration among many individuals and departments within the state highway agency. The decisions and assump- tions behind the decisions that drive the estimate must be clearly stated and communicated to management and to those reviewing the estimate. D4.1 Project Estimation File Estimates are usually created by the collaborative effort of many individuals. To be able to follow the assumptions upon which the estimate is based and to preserve the information for future efforts, there should be a structured system for accu- mulating all estimates and their supporting documentation. Construction contractors use their project estimates both to create the budgets for successful bids and as reference sources for developing future estimates. State highway agencies need information systems that allow easy retrieval of historical esti- mate information and that allow multiple individuals to work productively on a single estimate. What Is It? The development team and the estimators prepare and maintain a master reference file that contains the critical scope, policy, and supporting information (assumptions, methods, and procedures) that are used to prepare the project estimate. This master file is maintained as a permanent reference file. The estimator, when costing an item, must reference specific cost-impacting information documented in the file. Why? Good documentation supports the cost estimate’s credibil- ity, aids in the analysis of changes in project cost, enables reviewers to effectively assess the estimate, and contributes to the population of state highway agency databases for estimat- ing the cost of future projects. Each project should have an individual project estimation file that is separate from the general project file or the cor- respondence file. The primary purpose of this requirement is to ensure that each project has a well-documented and easily retrievable history of the assumptions, methods, and proce- dures used to estimate the costs associated with the project’s specific scope of work. Having this information contained in one location and separated from other project documentation will help ensure that the estimate information is readily acces- sible and uncluttered with other project information. What Does It Do? A project estimation file provides a corporate memory and historical database for cataloging the basic reasons behind the original estimated cost, as well as reasons for subsequent cost revisions. Additionally, it usually provides other project descriptive information, such as trends that affect the item cost, cost from similar past projects, and external factors that limit construction operations. This historical file allows easy A-91 Figure D3.1. Flow chart of a typical design-to-cost process.

comparison of the current estimate with previous estimates and resolution of discrepancies When? The project estimation information should be retained in the central filing system from the time the initial project esti- mate is prepared until project close-out. The project estima- tion file should include all cost estimates prepared for the project up to and including the completed contract plans, specifications, and estimates (PS&E). Archiving the cost esti- mation files is a good practice because these files can be use- ful in reconciling completed project cost and responding to inquiries. Examples For each bid item element, there should be a description of the derivation of its estimated cost in sufficient detail to allow an independent reviewer to determine whether the estimate is complete, accurate, and realistic. The following information should be provided: • Item number and title. • Item description and any tailoring used for this estimate. • Methodology. Describe how the item’s costs were esti- mated. Depending on the choice of methodology, the esti- mator could include one or more of the following practices: − The use of unit prices from the department’s historical bid tab database. This is the most common approach. Under this approach, bid data are summarized and adjusted for project conditions (project location, size, quantities, etc.) and the general market conditions. − The actual cost approach (i.e., a bottom-up estimate). This approach takes into consideration factors related to actual performance of the work (i.e., cost of labor, equipment, and materials; sequence of operations; and production rates). This approach requires the estimator to have a good working knowledge of construction meth- ods and equipment. • How lump-sum items are handled. • Base year of the cost calculation. For long-duration proj- ects it is a good practice to present the item’s estimated cost in constant year dollars, both total dollars and distributed across fiscal years. • Detailed, clear environmental items (requirements). • How indirect costs are determined. • Each contingency allowance assigned to the various parts of the estimate. If extraordinary conditions exist that call for higher contingencies, the rationale will be documented. • All uncertainties and risks associated with the estimate. • Level of knowledge about scope. • Level of risk. • Level of estimate detail. • Techniques used to compete the estimate. • Experience of those who developed the estimate. • Cost tractability. When a prior cost estimate exists, a cost track should be prepared. The cost track should provide a concise explanation for any cost change to an item from the prior estimate. • Who participated in the development of the estimate. A description of an approach used by the Missouri DOT regarding estimate documentation is shown below: 1-02.12 (5) DOCUMENTATION OF PROJECT ESTIMATES. Each project will have an individual project estimate file that is separate from the general project file or the correspondence file. The purpose of this requirement is to ensure that each project has a well documented and easily retrievable history of the assumptions, methods and procedures used to estimate the right of way and construction costs associated with the specific scope of work identified for the project. Having this information con- tained in one location and separated from other project docu- mentation will help ensure that the estimate information is readily accessible from a known location and uncluttered with other project information. At a minimum the project estimate file should include any assumptions that have been made, the current project scope, maps, photos, as-built plans, functional classification, design cri- teria and a copy of or reference to the cost data used to support the estimate. This basic information should be included in each project estimate file regardless of the stage of project develop- ment. A sheet should be placed in the front of each estimate file so the project manger can record the date and current project milestone or project development stage each time the project esti- mate is changed, updated or reviewed. A signature line should also be included to document the project manager’s review of the estimate file. Depending on the level of project development that has occurred on the project, the amount and type of documentation contained in the project estimate file will vary. For projects that do not have clearly defined scopes and in the absence of other esti- mating methods, the cost-per-mile type of estimates described in Section 1-02.5 are suitable and acceptable to develop the initial project estimate. Cost-per-mile factors may be developed from a previously con- structed project of similar type and conditions or the generic cost per mile factors included in Figure 1-02.1 may be applied to the estimated project length to develop an initial project cost. Infor- mation used to develop the project specific cost per mile factors or the generic factors from Figure 1-02.1 that are used should be well documented and included in the project estimate file. This information may consist of items such as estimate soft- ware, bid tabulation data from similar projects, unit bid price books, or some other reputable resource. Additionally any devia- tions from the generic cost per mile factors, that are determined to be warranted by the estimator, shall have well documented rea- sons included in the project estimate file. A-92

The district may prepare a master reference file that contains the cost-per-mile, unit costs, accepted PE [preliminary engineer- ing] and CE [construction engineering] cost as a percentage and other critical policy and procedures that are used to prepare proj- ect estimates on an annual basis in order to avoid duplication of the information in multiple project estimate files. However, this master file must be kept as a permanent reference file that can be cited and reference to. It must be included in each individual proj- ect estimate file. Variations of the Miscellaneous and Utility Costs percentage (see Figure 1-02.1) should also be documented in the project estimate file. As discussed in Subsection 1-02.6(4) some projects that are not complex and have a small scope of work may war- rant the inclusion of a cost adjustment factor to compensate for the short project development time and project uncertainties. These cost adjustment factors shall be well documented in the project estimate file and have a reproducible basis. These factors should only be applied to projects that fall into the small non- complex category. They shall not be applied to all project esti- mates as a matter of district practice. A cost adjustment factor will never be considered as an acceptable substitute for prepar- ing a well documented and accurate estimate if adequate project information is available. Once the project scoping phase of the project is completed and estimates are being produced for inclusion in the STIP [statewide transportation improvement program], cost-per-mile type esti- mates will no longer be acceptable. All estimates made beyond this stage of project development shall be based upon estimated pay item quantities and unit costs. Copies of all pertinent infor- mation related to the project estimate, including all documenta- tion of the quantities and unit costs used, shall be included in the project estimate file. All estimate data sheets should include the date of preparation and the estimator’s name. Each time a final Project Amendment Tracking System (PATS) form is prepared for the project a copy should be placed and retained in the project estimate file. Another copy of the PATS form will be provided to the district transportation planning coordinator, who will be responsible for ensuring a copy is also immediately submitted to GHQ [General Headquarters] Trans- portation Planning. This procedure should be followed for all projects, whether designed internally or by a consultant. The documentation included in the estimate file must substantiate the latest final PATS form that has been submitted to GHQ Transportation Planning. In addition, any project scope change approval letters required by Sections 1-02.11 and 1-02.12(9) shall also be retained in the project estimate file. The project estimate files for all projects under development in the district should be located in one central location. District management is responsible for establishing estimating proce- dures, within their district, that will indicate the person respon- sible for maintenance of the project estimate files and the central location for the files. The district estimating procedures should also establish general guidelines for the contents that should be maintained in the file. The project estimate information should be retained in the central filing system from the time the initial project estimate is prepared until after the project has been included in the Account- ability Report to the Legislature. The project estimate file should include all cost estimates prepared for the project up to and including the completed Contract Plans (PS&E) Estimate. Cost data following submission of Contract Plans to GHQ is not required in the project estimate file. Once the project data has been included in the accountability report, there is no require- ment to archive the cost estimate files. However, the district may wish to retain cost data longer for purposes such as reconciling completed project cost with GHQ Transportation Planning, responding to additional inquiries related to the Account- ability Report, or until there is a final payout on the project by FHWA, etc. Tips The project estimation file should, at a minimum, include any assumptions that have been made, the current project scope, maps, photos, as-built plans, functional classification, design criteria, and a copy of or reference to the cost data that were used to develop the estimate. This basic information should be included in each project estimation file regardless of project development stage—the creation of the file begins with the very first estimate. A sheet should be placed in the front of each estimation file so the project manger can record the date and current project milestone or project development stage each time the project estimate is changed, updated, or reviewed. A signature line should also be included to document the proj- ect manager’s review of the estimation file. When items are estimated by percentages of other costs, as is often done for miscellaneous and utility costs, the percent- age should also be documented in the project estimation file. Some projects that are not complex and have a small scope of work may warrant the inclusion of a cost adjustment factor to compensate for the short project development time and project uncertainties. These cost adjustment factors shall be well documented in the project estimation file and have a reproducible basis. These factors should only be applied to projects that fall into the small noncomplex category. They should not be applied to all project estimates as a matter of common practice. A cost adjustment factor will never be considered an acceptable substitute for preparing a well- documented, accurate estimate if adequate project infor- mation is available. Depending on the level of project development that has taken place, the amount and type of documentation contained in the project estimation file will vary. Information used to develop the initial estimate, such as cost-per-mile factors or the generic factors, should be well documented and included in the project estimation file. This information may consist of refer- ences to software databases, bid tabulation data, unit bid price book data, or some other reputable resources. Additionally, any deviations that are determined to be warranted by the estimator from the generic cost factors shall be well docu- mented in the project estimation file. A-93

The estimation procedures manual should also establish general guidelines for the contents of the file. The documents that serve as the basis of the estimates should do the following: • Provide a description of site conditions (railroad through or adjacent, utilities, need for stage construction, etc.) • Describe assumed construction methods and alternatives considered • Explain the decision criteria used for evaluating alternatives • List and explain all general assumptions that apply to all alternatives • List and explain all specific assumptions (e.g., excavation costs assume 30% rock) • Include a full listing of the item take-offs (quantities) Resources Missouri DOT (2004). “Chapter 1, General Information: Needs Identification Project Scoping and STIP Commit- ments,” Section 1-02, Project Development Manual. www. modot.org/business/manuals/projectdevelopment.htm. Many state highway agencies use the commercial estima- tion software Trns•port Estimator by InfoTech. This soft- ware requires the estimator to input much of the data that should be in a project estimation file. See the NYSDOT Trns•Port Estimator Guidelines, Draft May 6, 2004 version, which can be found at www.dot.state.ny.us/trns-port/files/ nysdotestguide.pdf. E1 Estimate/Document Review In the construction world, designers provide contractors and subcontractors with graphical and written representa- tions (i.e., the project plans and contract documents) that describe what is to be constructed, the required quality, and sometimes how it must be constructed. The constructors must transform these concepts into physical reality. The qual- ity of this transformation from abstraction to reality not only determines the quality of design work provided by the design- ers, but also impacts how the work is priced. Baffling draw- ings or any ambiguous wording as to what quality or limitations to construction activities are expected affects project cost. E1.1 Estimate/Document Review—External The design and contract documents for all projects should be subjected to an internal review and compared with the esti- mate assumptions; however, in the case of very large and com- plex projects, the design drawing and contract documents should additionally be subjected to an external review and comparison with the estimate. What Is It? This tool consists of an external estimate/document review process structured to minimize or eliminate contractor- perceived project risk by ensuring that the construction doc- uments are fully coordinated, complete, and buildable. It should be employed after the agency’s own internal estimate/ document review. Specifically, it adds an important dimen- sion to estimate/document reviews because the reviewers have not been privy to how the plans and project docu- ments were developed. Therefore, the reviewers shape their opinion of the work strictly by what is presented in the documents. Why? Many times, the agency personnel who regularly review project documents are so familiar with the project or how the state highway agency describes project elements that their historical knowledge prevents them from completing a valid review of the project’s documents compared with the estimate. This can be a serious problem in the case of very large or complex projects where a critical review of the doc- uments is most important for ensuring clarity of plans and specifications. The primary method used by contractors to cover document ambiguity is adding dollars to the bid prices, and that creates a disparity with the state highway agency’s estimate. What Does It Do? External estimate/document reviews support the develop- ment of accurate cost estimates for large and complex projects by bringing an independent perspective to the quality of the project documents, particularly in terms of their relationship to the assumptions upon which the estimate is based. It is a process that ensures that construction requirements are com- plete and not in conflict. When? The FHWA believes that an external review is appropri- ate prior to the first release of an estimate to the public for large and complex projects. External estimate/document reviews should also be conducted for large and complex projects during the latter stages of design development. It is important to conduct such a review prior to advertising a project, and such a review must use the final project docu- ments. Therefore, the review must be scheduled with suffi- A-94

cient time after the review for making any necessary correc- tions to the documents. Examples While no external estimate/document review examples exist that strictly match the tool outlined here, research has repeatedly indicated the need for such a process. Many agencies do have review formats in place for the doc- uments in general that could be used as the starting point for developing this tool. The Central Federal Lands Highway Divi- sion, in the Design Resources section of its website, has a “Doc- ument Review Comment and Response” form (www.cflhd. gov/design/_documents/misc_forms/design/PSE_CMT.doc). Tips The most important factor in the success of this tool is engag- ing independent external experts, who could be retired con- struction professionals or construction professors who have had actual field experience. These reviews should evaluate all project documents because many times geotechnical, hazardous material, and environ- mental reports, which are included only by reference in the bid package, contain information or directions that affect how the work must be conducted and therefore influence bid prices, particularly if there is a conflict between these reports and the project plans and specifications. The design engineers should provide a written response to all project estimate/document review comments. Responses to review comments must be available to the project team prior to production of the bid documents so as to allow sufficient time for the estimators to properly prepare the PS&E. For projects that will be constructed using multiple con- tracts, a phasing or staging plan should be provided to delin- eate the boundaries of each phase. The same would be true of multiple projects in a corridor. Additional tips can be found in Tool E1.2, Estimate/Docu- ment Review—Internal. Resources Alaska Division of Legislative Audit (1994). “Department of Transportation and Public Facilities Highway Design Cost and Quality Comparison.” http://www.legaudit.state.ak.us/ pages/audits/1995/pdf/4472.pdf. Tilley, P. A., A. Wyatt, and S. Mohamed, S. (1997). “Indi- cators of Design and Documentation Deficiency,” Proceedings of the Fifth Annual Conference of the International Group for Lean Construction, 16–17 July, Australia, 137–148. The Massachusetts Highway Department and the Ameri- can Consulting Engineers Council of Massachusetts (1998). “Measuring Design Quality.” E1.2 Estimate/Document Review—Internal Design quality for highway construction has been defined by the Massachusetts Highway Department as a totality of characteristics and features of all preconstruction engineering processes, tasks, and deliverables that bear on satisfying stake- holders’ needs. A critical stakeholder is the future project con- structor who will be submitting a price to perform the work. What Is It? This tool consists of a structured agency estimate/document review process to minimize or eliminate contractor-perceived project risk by ensuring that the construction documents are fully coordinated, complete, and buildable. It can be imple- mented either as part of the agency’s normal document reviews or as a separate review. Specifically, it adds an impor- tant dimension to estimate/document reviews by purposely checking the project plans and contract documents for com- pleteness, ambiguous language, and conflicts between con- tract clauses and the plans, because such problems cause contractors to perceive increased project risk and add dollars to their bids and it is very difficult for state highway agency estimators to quantify such perceived risk when they prepare their estimates. Why? Contractors are quite often supplied with project docu- mentation that is incomplete, conflicting, or erroneous, which causes pricing tribulations. Contract document quality is important to controlling project cost and accurate estimation because document conflicts and/or ambiguous language increase the builder’s perception of project risk, and such issues lead to higher bid prices as the contractor attempts to cover risk with dollars. Deficiencies in the project documents also have the potential to cause change orders and delay claims, which can have serious detrimental effects on the project budget. What Does It Do? Estimate/document reviews seek to ensure that there is con- tinuity and conformance in expressing the scope of the proj- ect and between individual clauses in the documents. It is also an ordered process that ensures that construction require- ments are definitively stated and that the plans and specifica- tions are complete and not in conflict. In practical terms, it seeks to eliminate subjective and arbitrary requirements, such as the following: • “The engineer assumes no responsibility for the completeness of the plans.” • “Provide item X as required. Provide item Y if necessary.” A-95

• “Contractor to provide item Z as needed.” • “If phased construction is required by the agency, the agency will allow a 30-day time extension for the contract.” Most state highway agencies have policies and procedures in place for the review of project plans and contract docu- ments. However, most of these processes have as their purpose to ensure that the project has been properly designed and that all necessary contract language is included in the document package. These existing reviews are for the purpose of check- ing completeness to general agency standards, whereas the reviews developed under this tool seek to establish clarity and eliminate presentation-related conflicts. When? Estimate/document reviews should be conducted at each design development phase (30%, 60%, 90% design). A cost estimate should be provided along with the intermediate design phase documents. At 100% design and prior to adver- tising a project, there should be a comprehensive in-house review of the project plans and all contract documents. All projects receive the same type of reviews; however, larger proj- ects usually warrant a more in-depth review. Examples While no estimate/document review examples exist that match the strict purpose of this tool, many agencies have review formats in place for the documents in general. The Central Federal Lands Highway Division, in the Design Resources section of its website, has a “Document Review Comment and Response” form: www.cflhd.gov/design/_ documents/misc_forms/design/PSE_CMT.doc. Georgia DOT has the material for “Field Plan Review Inspections” posted in the Transportation Online Policies and Procedures System (TOPPS) section of its website: www. dot.state.ga.us/topps/ss/engserv/2440-1.htm. Tips The methodology for conducting an estimate/document review should be to focus on project buildability from a con- tractor’s perspective of risk. The project manager should immediately arrange a meet- ing with the designers to resolve issues if any review comments indicate a conflict between the design documents and the proj- ect’s scope and/or standards of practice or conflicts within the documents. The design engineers should provide a written response to all project estimate/document review comments. Responses to all project estimate/document review comments must be sub- mitted prior to production of the bid documents so as to allow sufficient time for the estimators to properly prepare the PS&E. The project manager should immediately arrange a meet- ing with the designers to resolve issues when review comments indicate a conflict between the design documents and the pro- ject’s scope and/or standards of practice. Each contract requirement should be stated only one time and in the most logical location in the contract documents. Information in one document should not be repeated in any of the other documents. Each document has a specific purpose and should be used precisely for that purpose. This simplifies the retrieval of information and substantially reduces the pos- sibility of conflicts and discrepancies. Everyone involved with a project benefits from this standardized approach to the place- ment of information within the construction documents. Resources Alaska Division of Legislative Audit (1994). “Department of Transportation and Public Facilities Highway Design Cost and Quality Comparison.” http://www.legaudit.state.ak.us/pages/ audits/1995/pdf/4472.pdf. Tilley, P. A., A. Wyatt, and S. Mohamed (1997). “Indica- tors of Design and Documentation Deficiency,” Proceedings of the Fifth Annual Conference of the International Group for Lean Construction, 16–17 July, Australia, 137–148. The Massachusetts Highway Department and the Ameri- can Consulting Engineers Council of Massachusetts (1998). “Measuring Design Quality.” E2 Estimate Review—External The most effective means of improving estimate quality is to refine the methods of identifying errors and omissions, not to refine estimation methods or computer software. No esti- mate should be released without review. Estimate reviews should be conducted at strategic times during estimate prepa- ration to improve accuracy and completeness. The formality of a project estimate review and the depth of the review at each stage in project development will vary depending on the type of project and project complexity. The first review of the estimate should be conducted by the team that prepared the estimate. This is essentially a screen- ing review that ensures that the math is correct, the process is documented, and agency guidelines were followed. When very complex projects or projects involving new con- struction methods are being estimated, management should require that there be an external review of the estimate by qualified professionals. E2.1 Expert Team Very complex and high-profile projects should have an external review of the estimate by qualified professionals. The most indispensable tool for estimate review is judgment. Judg- A-96

ment is what identifies mistakes, detects flawed assumptions, and identifies where the process has missed critical cost driv- ers. The surest way of conducting a successful external review is by selecting a panel of independent reviewers that have as broad a range of engineering experience as the project demands. What Is It? External reviews concentrate on the estimation process and methodology. They are applied based on project scope and design development at the point in time when the review is conducted. An external review should include a risk analysis that identifies the critical elements of the estimate and possi- ble impacting risks. Why? Large projects with multiple interacting activities, urban projects with numerous stakeholders, and projects using new technology all test the estimator’s ability to properly account for all cost drivers when developing a project esti- mate. Therefore, a review that brings a viewpoint completely external to that of the state highway agency should be part of an inclusive review process. This includes a requirement for internal reviews of the estimate calculations and the applied unit costs. What Does It Do? The reviewers seek to assess the reasonableness of the assumptions supporting the cost and schedule estimates and assess the rationale for the methodology used. Reviewers receive a briefing from the project team and the estimators and are given access to all available project documentation. By applying parametric techniques or ratios to analyze costs and schedule reasonableness, they check the completeness of the estimate. However, they usually do not perform quantity take- offs or estimate individual items. The result is a report that details findings and recommendations. In the case of a very complex project with critical cost driv- ers, it is sometimes necessary for the reviewers to develop an independent, bottom-up estimate of their own to ensure esti- mate reasonableness. This may or may not involve quantity takeoffs, but usually does necessitate vendor quotations and productivity analysis of the critical cost items. When? Independent external reviews are more typically employed on PS&E of large complex projects. However, having such reviews conducted much earlier in the design process can pro- vide real benefits because they often discern cost drivers that can be addressed by design changes, thereby reducing project cost. Examples Several state highway agencies have used retired heavy con- struction personnel to conduct estimate reviews and in some cases have even staged mock bids. As an after-the-fact example, on December 13, 2001, Maryland DOT opened bids for the Woodrow Wilson Bridge superstructure contract. A single $860 million bid was received. That amount was more than 75% higher than the engineer’s estimate for the contract. Maryland formally rejected the bid because it far exceeded the project’s budget. An independent review committee (IRC) was organized to identify and evaluate the reasons for the large discrepancy between the engineer’s estimate and the bid submitted. The IRC determined that the owner-produced estimate was technically solid, based on the tangible factors like the cost of steel, concrete, and other materials. But certain significant fac- tors, particularly for large construction projects, are difficult to quantify in an estimate. The IRC went on to state that the esti- mate did not sufficiently take into account the intangibles of market factors, specifically the following: • Contractors capable of bidding a project of that size were seeking larger margins to protect themselves due to recent experiences on other mega-projects and to associated proj- ect risks. • There were several other large bridge projects bidding in the same period, a completely external factor that caused a lack of competition. • Equipment demands on projects of this size are substantial. Maryland DOT took the advice of the IRC and repack- aged the contract and rebid the project approximately a year later as three independent contracts. The first contract rebid came in 11% over the estimate, but there were five bidders and it was a workable bid. The other two contracts both came in below the estimates, one by 28% and the other by 25%. Tips The reviewers need to be experienced professionals who have an understanding of engineering and construction com- plexities. Market conditions or changes in the macroenviron- ment can affect the costs of a project, particularly large projects. Often, only large contractors or groups of contractors can han- dle the construction tasks or even obtain bonding for a large project. The size of the project affects competition for a project and the number of bids that a state highway agency receives for A-97

the work. External independent reviews are usually more attuned to the impacts of such factors on project cost. Resources Maryland DOT (March 1, 2002). “Summary of Indepen- dent Review Committee Findings Regarding the Woodrow Wilson Bridge Superstructure Contract.” The full report is available from the MDOT. Woodrow Wilson Bridge Project Bridge Superstructure Contract (BR-3): Review of the Engineer’s Estimate vs. the Single Bid, February 28, 2002. This report is available from Maryland DOT. Douglass, Robert, Robert Healy, Thomas Mohler, and Shir- lene Cleveland (2004). “Adventures in Building Another Washington Monument, Woodrow Wilson Bridge Project Re-bidding Outcomes,” presented at the 2004 TRB Annual Meeting. E3 Estimate Review—Internal Estimate reviews should be conducted at strategic times during estimate preparation to improve accuracy and com- pleteness. The formality of a project estimate review and the depth of the review at each stage in project development will vary depending on the type of project and project complexity. No estimate should be released without internal reviews. The team that prepared the estimate should conduct the first review of the project estimate. This is essentially a screening review that ensures that the math is correct, the process is doc- umented, and department guidelines were followed. In the case of a straightforward overlay project, a formal review may not be necessary. However, as project complexity and scope increase, it is necessary to conduct formal reviews with either an in-house/peer review or a formal committee review. When very complex projects or projects involving new con- struction methods are being estimated, management should require that there be an external review of the estimate. There can be several different approaches to estimate reviews: (1) a review of calculations and applied unit costs, (2) a review of the process and methodology, or (3) a very complete review that encompasses evaluation of both calculations and mythol- ogy. All reviews must closely examine the assumptions that form the basis of the estimate, internal logic, completeness of scope, and estimation methodology. E3.1 Formal Committee Certain state highway agencies use an “estimate review com- mittee” approach to enhance estimate accuracy. The formal committees review each estimate at different stages in project development and prior to the bid letting. The committee struc- ture used by the Georgia DOT consists of six people, including the state construction engineer, an FHWA representative, a contract administration engineer, a state maintenance engi- neer, and two project/field engineers. What Is It? A formal committee estimate review is a cost estimate val- idation tool. This cost validation tool entails an objective review of the estimate by a group of experienced third-party state highway agency individuals who did not participate in development of the estimate. Why? The most effective means of improving estimate quality is, not to refine estimation methods or computer software, but to refine the methods of identifying errors and omissions. This is a tool to ensure that estimation criteria and requirements have been met and that a well-documented, defensible estimate has been developed. What Does It Do? The review committee seeks to subjectively determine estimate accuracy, based on the totality of the information available. In particular, the committee: • Determines whether the estimate satisfies the project criteria: The committee seeks to ensure that the estimate conforms to the project scope and design documents. • Appraises the estimate methodology: The committee must be able to follow and check the estimate methodology. Steps to do this would include verifying estimation tech- niques and sources of estimate data. The committee should be able to clearly understand the origin of all numerical data in the estimate. • Identifies uncertainties: The committee should confirm all uncertainties documented in the estimate and identify other uncertainties in the estimate that were missed or glossed over. It is good to note these uncertainties at this time so that an accurate estimate can be developed. • Documents the finding: The findings of the estimate review must be documented. The committee may use an estimate review checklist or prepare a concise written report that doc- uments the findings. A sample estimate review checklist is present here in the example part of this section. When? Reviews are typically employed on plans, specifications, and estimates (PS&E). However, as the project design is developed and the revised estimates are generated, it is good practice to conduct a review of the revised estimate, particularly at the major design development stages, 30% and 60%. These earlier reviews can provide real benefit because they often discern A-98

cost drivers that can be addressed by design changes and, in so doing, reduce project cost. Example Here is an example of a checklist used by a formal com- mittee when conducting a review. REVIEW CHECKLIST Review Date: Review Location: Project Name: Reviewers’ Names and Organizations: Background Data and Conditions: Is there complete technical scope documentation, including the following elements? ____ Description of the work to be performed; ____ Performance criteria and requirements; ____ Discrete tasks and deliverables; ____ Resource requirements; ____ Sequence of events and discrete milestones; ____ Work not included in the scope. Have milestone descriptions been developed for each mile- stone associated with the project? Does the technical scope documentation for the estimate include descriptions of support associated with the work to be performed? Is the technical scope for the estimate consistent with the site, regulatory requirements and constraints (e.g., permit conditions, regulations) identified during the planning process? Cost Estimate Are appropriate historical cost data used in the estimate? Are direct costs that are associated with individual activities included in the cost estimate clearly and individually identified? Are indirect, overhead, or other costs clearly and individually identified? Has the cost estimate been updated in a timely manner in response to relevant changes in its basis, background data, or assumptions? Are an appropriate change control document and an estimate development history attached to the cost estimate? Does the estimate development history include an itemized and chronological list of the changes made to the cost estimate since initiation of its preparation, and the rationale for each change? Are activities, quantities, and unit costs associated with the work to be performed clearly identified and defined in the cost estimate? Are the assumptions and exclusions upon which the cost esti- mate is based clearly identified and defined in the estimate? Are time and cost assumptions and cost elements associated with each activity clearly identified, defined, and documented in the estimate? Cost elements for program activities include: Quantities Unit of measure Material cost Overhead rate Total overhead allocated Are significant estimator findings identified during prepara- tion of the estimate documented? Have factors been used to adjust the costs? If so, have they been adequately documented and appropriately applied? Have escalation factors been used to escalate the estimate? Are the escalation factors adequately documented and appro- priately applied? Are indirect rates used in the estimate adequately documented and appropriately applied? Are estimate summary and detailed reports included, and do they provide cost totals for each cost element in the estimate? Is a schedule included with the estimate? Are activities included in the schedule consistent with those included in the technical scope? Are milestones and deliverables included in the schedule con- sistent with those included in the technical scope documentation and the estimate? Tips The reviewer must try very hard to eliminate confusion in the contract documents and specifications. Check the esti- mated cost of any items that represent unfamiliar work or items for which there is only a limited database of historical information. Investigate whether the percentages used to estimate overhead and other costs besides the direct cost are realistic. It is good practice to include younger state highway agency staff as members of the committee so that they can learn from the discussion, but many times they will also contribute a com- pletely new perspective. Resources FHWA (2004). Major Project Program Cost Estimating Guidance. While aimed at estimation for major projects, this document does contain many ideas that can be incorporated into a review process and stresses the need for review teams to have diverse membership composition. E3.2 Off-Prism Evaluation (Also See I3.2) In the case of most conventional projects, engineers focus on technical solutions with little attention to community interest or the macroeconomic environment. Market forces and third-party interventions can have a major impact on project cost and must be accounted for in the estimation process. What Is It? This is an estimate review that seeks to provide management with assurance that cost impacts driven by macroeconomic and market conditions have been considered in developing the project’s estimated cost. A-99

Why? Every project is executed in the context of a particular polit- ical, economic, and cultural environment. The legal system, labor practices, and even the global demand for construction materials are manifestations of a project’s macroeconomics. The macroeconomy can affect cost growth in two ways: (1) by being unknown to some degree to estimators and managers and (2) by changes in the environment. Unlike understanding other aspects of project planning and estimation, understand- ing the macroenvironment has never been standardized as a part of project estimation. What Does It Do? In the case of very large projects, the amount of risk that even the largest contracting organizations can tolerate is exceeded. Therefore, contracting firms must develop strategies to mini- mize their risks. Some of these strategies involve increased cost to the project owner. In the case of risks that cannot be quan- tified, that cost increase can be significant. Additionally, if the contractor perceives that an owner is seeking through the con- tract language to shift risk to the builder, sufficient additional cost will be included in the bid to cover that added financial exposure. An off-prism review is conducted from the per- spective of how contractors perceive risk and specifically con- siders the construction marketplace and macroeconomic factors impacting contractor risk. When? Because reviews are the best means for ensuring estimate accuracy and for minimizing the potential for unanticipated surprises concerning the financial condition of the project, it is good practice to perform a review each time an estimate is revised. However, in the case of off-prism evaluations, an esti- mate review should also occur any time there is a change in macroeconomic conditions or the construction marketplace. When the underlying economic assumptions for the estimate change, the estimate will need to be revisited. Examples The FHWA document Major Project Program Cost Estimat- ing Guidance, June 4, 2004, specifically calls attention to the fol- lowing factors that affect project cost: • Contracting method: Innovative contracting techniques such as design-build, cost-plus-time bidding, and lane rental should be taken into consideration when preparing the estimate. Design-build contracts and contracts with performance-based specifications or warranties impose a higher risk on the contractor and may increase a contractor’s bid. Any stipend costs should be included in the estimate. • Acquisition strategy analysis: A separate value analysis on the project should be considered to determine the most eco- nomical and advantageous way of packaging the contracts for advertisement. A value analysis is a systematic approach by a multidisciplined team to identify functions of a project, establish a worth for each function, and generate alternatives that satisfy each function at the lowest life cycle cost. • Surety issues: Obtaining bid and performance bonds for major projects is difficult, especially for smaller contrac- tors. If bonding requirements are not reduced, then an increased amount for obtaining bonds should be included in the cost estimate. • Bidding climate impact: Estimators should consider the economic impact of the project on the local economy. For example, material manufacturers that would normally compete with one another may need to combine resources in order to meet the demand of the major project. Extremely large construction packages also have the poten- tial to reduce the number of contractors that have the capacity to do the work, and the project may need to be split into smaller contracts to attract additional competi- tion. In addition, the timing of the bid solicitations can also have an affect on the cost because contractors may be more competitive during the winter months when trying to build some inventory. Cost estimates should also consider controls on the use of labor. • Industry capacity: The number of potential qualified con- tractors that are able to bid on major projects are limited to those that have the capacity to construct the project. Contractors that bid on major projects often bid on projects throughout the country. If other major projects are being advertised concurrently, this may have a limiting effect of competition and would result in higher bids. • Highly specialized designs and technology: Cost estimates should consider the impact of any requirement to use first- of-a-kind technology, new materials, or innovative con- struction methods. • Construction time: The impacts of construction activities (e.g., sequencing, traffic control, haul routes, accessibility, and geographic locations) should be considered when devel- oping cost estimates. Also, costs associated with work time restrictions and night work must be considered. • Construction incentives: The cost for the contractor to meet material and performance incentives must be included in the cost estimate. Tips Bid options (i.e., simultaneous procurements of similar scopes with options to award) should also be considered for potential cost savings resulting from economies of scale and reduced mobilization. A value analysis should be performed A-100

on the project to determine the most economical and advan- tageous way of packaging the contracts for advertisement. Some questions that are often decided by contractors but not normally part of a state highway agency’s estimation methodology include the following: • Is this a labor-intensive project? • Does the project depend heavily on certain pieces of equipment? • Is there a danger of material price increases? • What is the cash flow of the project? Resources Arizona DOT (1989). Estimating Guidelines. Schexnayder, Cliff (2001). “Construction Forum,” Practice Periodical on Structural Design and Construction, ASCE, Vol. 6, No. 1. E3.3 In-House/Peer An objective estimate review can be accomplished by a group of experienced third-party state highway agency indi- viduals who did not participate in development of the estimate. For large or complex projects, the review is usually conducted with the project team and estimator so that the reviewers can better understand the execution plan, estimate basis, and proj- ect challenges in regards to scope and pricing. What Is It? A peer review typically involves an estimate validation by state highway agency estimator who has not worked on the estimate being reviewed. The state highway agency reviewer must have the experience and knowledge to carefully appraise the materials presented. In the case of larger projects, this peer validation may involve a peer team. Why? The foundation of a good estimate is the formats, proce- dures, and processes used to arrive at the cost. Poor estimation includes general errors and omissions from plans and quanti- ties and general estimation procedure and technique inade- quacies. It is easy for members of the state highway agency to conduct an estimate review because they are familiar with the formats, procedures, and processes that the agency has in place and therefore can easily spot deficiencies. What Does It Do? A peer review checks the estimate for completeness and correctness, including, but not limited to, the following: • Check mathematical extensions and correctness. • Check takeoff for omissions or oversights. • Check for conformity between amounts of work (item quantities) with the schedule durations to determine correctness. • Check the calculations of the indirect costs. • Examine the estimate for buried contingency. Compare the estimate with any similar project for an order- of-magnitude check. When? Each time a revised estimated is generated, there should be a review. An estimate review is the best means for ensur- ing accuracy and minimizing the potential for unantici- pated surprises concerning the financial condition of the project. Examples North Carolina DOT uses a formal internal estimate review process. The process coincides with the project development process milestones. Following is the approach used by Missouri DOT regarding timing of estimate reviews: 1-02.12 (4) REVIEW OF ESTIMATES. Project cost estimates should be reviewed and updated periodically. At a minimum, project cost estimates should be reviewed on an annual basis. A new or revised project estimate should be prepared at the follow- ing major milestones or stages of project development: project initialization, conceptual plan/environmental document com- pletion, preliminary plan completion, right of way plan comple- tion, and contract plans completion (PS&E). The estimated project costs should be submitted to GHQ [General Headquar- ters] Transportation Planning at least annually, at the above noted project development milestones/stages, or when significant project scope changes are identified using a PATS [Project Amendment Tracking System] form (see Figure 1-02.7). If an annual review of the previous estimate is conducted and it is determined that no change is necessary, the project estimate file should include documentation to indicate that the previous esti- mate has been reviewed and remains valid. Revised cost estimates submitted for projects that are scheduled for expenditure of funds within the current fiscal year of the STIP [statewide transportation improvement plan] will not be reflected in the STIP or the approved PATS database. For example, if the project is to be awarded during the current fiscal year, the con- struction cost reflected in the STIP will not be revised to account for project estimates prepared after the beginning of the fiscal year. Similarly, if a project has right of way funds included in the cur- rent fiscal year of the STIP, the right of way amount will not be revised based on a revised estimate submitted in the same fiscal year. Even though these costs will not be reflected in the STIP, the revised project estimates should still be prepared in accordance with the recommended schedule. However, the submission of a A-101

PATS form to GHQ Transportation Planning will not be required in this situation. This is the only exception that exists for not sub- mitting a PATS form to GHQ Transportation Planning each time a revised estimate is prepared. All estimated costs should be submitted in current dollars. GHQ Transportation Planning will make any necessary inflation adjustments. Estimate revisions will impact a district’s funding balance and be used to calculate the current cost of the program, but not be used to determine any changes in the district funding distribution. Tips The peer review should consider the following: • What is the basis for the assumptions made in developing the estimate? • Are the assumptions made in the estimate consistent with the technical scope and schedule of the project? • Are the activity durations in the schedule consistent with the estimated cost? • Are indirect rates, escalation factors, and other factors used appropriately? • Have the findings and recommendations of the peer review been documented in a peer review document? • Is the peer review document included with the cost esti- mate documentation? • Have the findings and recommendations of the peer review been addressed in revisions to the cost estimate? • Are activities included in the schedule consistent with those included in the technical scope documentation and estimate? Resources Opfer, Neil D. (Fall 1997). “Construction Peer Review: A Technique for Improving Construction Practice,” Journal of Construction Education, Vol. 2, No. 3, pp. 211–221. While this article discusses a peer review of contractor organizations, it includes several important peer review fundamentals. One of these is the point that the technique’s success depends on sig- nificant resource commitments, including time. Missouri DOT (2004). “Chapter 1, General Information: Needs Identification Project Scoping and STIP Commit- ments,” Section 1-02, Project Development Manual. www. modot.org/business/manuals/projectdevelopment.htm. E3.4 Round Table Reviews can have a round-table structure, in which the estimators sit down with the reviews. As with other estimate reviews, the round-table review involves examining the esti- mate and the basis, but unlike other estimate reviews, the round-table review has the advantage of bringing a greater body of knowledge and experience to the review to engage in a dialogue. What Is It? A round-table estimate review is like the process used by contractors to validate their cost estimates before a bid letting. The project team assembles and has a detailed discussion of the schedule, conditions, and expected construction methods for the major cost items, as well as all known site conditions. Only after that discussion does the actual review of total cost and item cost begin. The cost review is top down by broad classes: direct cost total and major items, state highway agency field support cost, state highway agency administrative sup- port cost, and included contingency. Why? All project estimates are very complex in terms of the fac- tors that can determine work item costs, and estimators must make numerous judgments based on perceptions of work conditions and the physical conditions at the project site as the estimate is developed. Therefore, it is good practice to capture a different perspective from agency experts in order to validate the estimator’s assessment. What Does It Do? Using a committee to review an estimate brings knowledge from agency experts with a broad base of experience. The re- viewers who compose the committee should represent diverse sections of the agency having specific knowledge of cost- impacting factors—for example, personnel from the agency’s right-of-way section for reviews during planning and design development and personnel from the construction office for a review of PS&E. When? Periodic reviews of estimates are important because condi- tions and underlying assumptions for the original and sub- sequent estimates often change; thus, estimates need to be revised to account for these changes. When estimates are revised, there should be a review because reviews are the best means for ensuring accuracy and minimizing the potential for unanticipated surprises concerning the financial condition of the project. Examples North Carolina DOT uses a formal internal estimate review process. The process coincides with the project development process milestones. A-102

Round-table reviews often consider the following: • Project schedule: Are there project duration constraints with associated cost impacts because of late delivery or because there was no compensating incentive to deliver the project on time or ahead of schedule? • Constructability: Is a unique design creating some unknown factors that could impact the cost of the project? Are special- ized or large machines needed to construct the project? • Government oversight: Do the various government enti- ties involved and the political sensitivity raise concerns as to who is ultimately accountable and empowered to make quick decisions? (Delays in decision making by an owner causes a contractor to incur uncompensated additional costs.) • Other major projects: Are there other projects that may interfere with the contractor’s ability to estimate this proj- ect? (Even major contractors have limited estimation capa- bility; to estimate more than one large project during the same time frame is often impossible.) Tips An estimate review does not dig into every detail of the esti- mate, but it should always test the vital few items and assump- tions. The Italian economist Vilfredo Pareto observed that 20% of something is always responsible for 80% of the results. That observation is recognized today as a universal principle called the 80/20 rule, or Pareto principle. The Pareto princi- ple should guide the estimate review. Applying the rule allows the reviewers to set priorities. After a general overview analy- sis of the estimate, the reviewers should concentrate on the items that are the project’s primary cost drivers. The reviewers should carefully examine the selected items based on a list of important issues: • Correctness of quantities • Appropriateness of unit cost • Validity of assumed construction method, considering site conditions and project phasing • Consideration of external market factors that could affect cost (this is critically important in the cast of large, com- plex projects) • Unforeseen engineering complexities • Changes in economic and market conditions • Changes in regulatory requirements • Pressures by local government or other stakeholders • Transformation of community expectations • Market availability of materials and/or equipment • Concise explanation of how contingency amounts were developed • Construction schedule There should be comparisons of costs to benchmark ratios and factors for similar projects. Resources U.S. Department of Energy (1997), “Check Estimates and Independent Cost Estimates.” www.directives.doe.gov/pdfs/ doe/doetext/neword/430/g4301-1chp13.pdf. FHWA (2004). Major Project Program Cost Estimating Guidance. While this document is aimed at the estimation for major projects, this document contains many ideas that can be incorporated into a review process and stresses the need for review teams to have diverse membership composition. E3.5 Year-of-Construction Costs (Also See C1.7) A final step in the internal estimate review process is a check to ensure that the estimate is accurately communi- cated in the year-of-construction costs. Communication of these costs is discussed in Section C1.7. Estimators typically construct the estimate based on current dollars. It typically is more accurate for estimators to make judgments in current market prices during the estimate development. Addition- ally, net present value is more appropriate when comparing design alternatives or performing value engineering. How- ever, estimates should be communicated to project stake- holders in year-of-construction costs because that is what the project will actually cost when it is complete and that is the number that many stakeholders will use to measure suc- cess. Therefore, an estimate review should be performed to ensure that the estimate is properly communicated in year- of-construction costs. What Is It? Year-of-construction cost is the estimated cost adjusted for the difference in time between when the estimate is created and when the project is to be constructed. Year-of-construction cost estimates take the “time value of money” into account. Project costs should be adjusted for inflation or deflation with respect to time due to factors such as labor rates, material cost, and interest rates. Estimated cost is most commonly inflated to the expected midpoint of construction date. This tool involves a step in the internal estimate review process to ensure that the estimate is accurately converted to year-of-construction costs for communication purposes. Why? Using year-of-construction cost will more accurately reflect future project costs. Funds available for projects often do not increase with inflation, but actual project costs always do. Infla- tion continually reduces the agency’s capacity to preserve, maintain, and modernize the transportation system. While it is common to communicate a net present value for estimates when comparing projects or design alternatives, it is not a good A-103

idea to communicate the estimate to external parties in any- thing except year-of-construction costs. What Does It Do? This tool provides an internal estimate review milestone for the estimation team. It is one of the final steps before the esti- mate is communicated to the project team members and to external stakeholders. This tool improves estimate accuracy by identifying the effect of inflation on project cost. It defines an estimated project cost, which is developed in current dollars, in terms of the expected cost at the time of construction. When? Year-of-construction cost recognizes the cost escalation affect of inflation across the time period between when the esti- mate is made and when the project is constructed. Estimates should be communicated in year-of-construction costs from the earliest points in the project development process. This is very important for projects having long development and/or construction periods. Examples Florida, Minnesota, and Washington State DOTs have developed tools for calculating year-of-construction costs. Refer to Section C1.7 for specific examples. Most other state highway agencies have developed tools similar to those used in Florida, Minnesota, and Washington State. Tips Include a formal step in the estimate review process to ensure that the estimate is being communicated in year-of- construction costs. Use discipline in communicating year-of- construction costs at each phase of the project development. Resources Florida DOT’s “Long Term Construction Cost Inflation Forecast” can be found at www.dot.state.fl.us/planning/policy/ costs/inflation.pdf. Minnesota DOT’s “Ten Year Highway Work Plan: 2004– 2013” can be fount at www.oim.dot.state.mn.us/pdpa/2004- 13_10-YrHwyWorkPl.pdf. Washington State DOT’s Strategic Planning and Program- ming website is http://www.wsdot.wa.gov/planning. G1 Gated Process A gated process creates a formal mechanism to stop the proj- ect development process if a project’s cost escalates beyond an acceptable limit during the project development process. Checklists and cost containment tables are two tools that can be used in support of the gated process method of cost estima- tion management. G1.1 Checklist A checklist is a tool commonly used by estimators to begin an estimate or ensure that an estimate adequately addresses project scope. Checklists are valuable tools when creating con- ceptual project estimates when little or no engineering infor- mation is available. Checklists are also valuable quality control tools when completing estimates at any phase of project devel- opment. Checklists can be used in conjunction with gated processes to ensure that all relevant items of scope are esti- mated before a project moves onto the next phase of project development. What Is It? A checklist is a form that indicates the completion or incompletion of specified project milestones. Checklists are typically developed through experience with many estimates. Checklists often address items that are commonly overlooked or have high cost value. Checklists can be used in a gated process to ensure that a project will not move to the next stage of project development without the completion of critical esti- mation milestones. Why? In order for a project to progress smoothly, critical cost estimation items must be completed or accounted for before another phase may begin. The checklist is a simple tool for identifying the level of progress that has or has not been made on the project. Checklists help to ensure that major scope items are not forgotten as a project moves through the development process. What Does It Do? A checklist can assist estimators in ensuring that an estimate is complete. A checklist can serve as a simple “Go” or “No-Go” signal for moving a project to the next phase of development. After each phase or activity is completed, the item will be “checked off” of the checklist, and the next set of responsibil- ities will be addressed. Checklists can also be used to help set reasonable contingencies because they can give some indica- tion about the unknowns in a project. When? Checklists can be used on every project. The checklist can be developed during the programming and planning phases. The checklist can be used from the planning phase through A-104

the completion of the project. It is often valuable to develop checklists that correspond to major milestones in project development (see Cost Containment Table tools). Examples Mississippi DOT uses a comprehensive checklist to aid with project development. Although this example does not contain specific estimation milestones, it serves as a good basic exam- ple of a checklist. A few select portions of this checklist are seen in Figure G1.1, and a full version can be found in the resources section. Tips Checklists are simple tools for managing a current project, as well as reviewing completed projects. Add extra notes and lessons learned to the checklist as the project progresses to be used for referencing in the future. Checklists are generally set up to allow a logical progression of activities. However, it is often possible to overlap phases and activities for increased budgeting and scheduling efficiency. Resources FHWA’s “Construction Program Management and Inspec- tion Guide, Checklist for review of estimate” is available at www.fhwa.dot.gov/construction/cpmi04ge.htm. FHWA’s “Plan, Specifications, and Estimates Checklist” is available at www.fhwa.dot.gov/construction/cpmi04gi.htm. Illinois DOT’s “Checklist for Engineer’s Final Payment Esti- mate” is available at www.dot.state.il.us/Forms/bc111.dot. Michigan DOT’s “Memo for Final Estimates” is available at www.michigan.gov/documents/IM00-20_40872_7.pdf. Mississippi DOT’s “Project Development Checklist” is available at www.mdot.state.ms.us/localgov/planning/pdm/ checklist.pdf. G1.2 Cost Containment Table (Also See C6.1, I1.1) Cost containment tables were previously described as com- munication tools in Section C6.1. In addition to being used for estimate communication, cost containment tables can be used to create gated processes. A project can be stopped if it escalates past an acceptable limit as it transitions from one project devel- opment phase to the next, thereby creating a gated process. What Is It? A cost containment table is an estimate reporting system that requires project team members to document summary- level estimates at critical points in the project development process. It assists in creating gated processes by documenting project costs and alerting team members when corrective action must be taken because of changes impacting project scope, cost, and schedule. Why? Under a gated process method, a cost containment table can be used as a checkpoint at the completion of each milestone to ensure that sufficient budget, schedule, or project goals have been met. The project can proceed toward the next milestone given a satisfactory completion of the prerequisite activities per the cost containment table. What Does It Do? The cost containment table is a tool for cost estimation management that is used to ensure that the project is within budget. It can also be used to verify that the scope of work is in alignment with what was defined during programming and planning. When? Develop a cost containment table, along with feasibility studies, early in the project development process. Use the cost containment table throughout all phases of the project. Examples Please refer to the example of a cost containment table from Pennsylvania DOT in Section C6.1 and Figure C6.1. This table can be used as a tracking and communication mechanism in a gated process. Because management must approve the cost containment table before the project moves to the next phase of project development in the Pennsylvania DOT example, the DOT has essentially created a gated process. The strength of the gated process will depend on the policies, procedures, and management discipline involved. Tips Begin to use the cost containment table early in the project development process. Update the table at all project mile- stones. Be proactive in the use of cost containment tables for establishing gated processes. Resources Pennsylvania DOT’s Estimating Manual is available at ftp:// ftp.dot.state.pa.us/public/Bureaus/design/PUB352/inside_ cover_page.pdf. The FHWA uses lessons learned from past projects to com- ment on the importance of cost containment. The following link references the Boston Central Artery/Tunnel: www.fhwa. dot.gov/programadmin/mega/lessons.htm. A-105

A-106 Figure G1.1. Mississippi DOT checklist.

I1 Identification of Changes The identification method is normally positioned in the final stages of engineering to intercept inputs impacting scope and cost. The four tools used in this method—I1.1, “Cost Con- tainment Table”; I1.2, “Estimation Scorecard”; I1.3, “Project Baseline”; and I1.4, “Scope Change”—will have been estab- lished much earlier in the project development process, but will be used late in the engineering process to identify any devia- tions from the project baseline estimate. The scope and cost baseline of every project should be the reference to which all changes are compared. Throughout project development and construction, the baselines are used to evaluate performance. Most agencies that practice baselining of their projects report doing so usually at the point when an identified need becomes a “real” project and is budgeted. I1.1 Cost Containment Table (Also See C6.1, G1.2) The development of the cost containment table early in the project development process was described in Section C6.1. A-107 Figure G1.1. (Continued).

The cost containment tool is used in the identification method to quickly call attention to any deviations in budget. Manag- ing to a baseline cost estimate is one of the most common measures of estimation management success. As a project moves forward through its development stages, cost contain- ment tables provide a benchmark against the project baseline. They create a standard tool that can be used by team members to track cost growth and provide immediate feedback for exec- utive management. What Is It? A cost containment table is an estimate reporting system that requires project team members to document summary- level estimates at critical points in the project development process. It provides executive management with estimate totals as the project moves through critical milestones during its development. These milestones will vary from state high- way agency to state highway agency, but they can include scoping, programmed amount, preliminary engineering, final engineering, award, and closeout. They can also include esti- mate subtotals for items like engineering, right-of-way, and construction. Why? Cost containment tables provide a simple and concise tool for managers and project team members to monitor and react to cost escalation as projects transition through critical phases during their development. In the context of the identification method, cost containment tools identify changes to the budget and provide information for helping the designers and esti- mator get the project back on budget. What Does It Do? Cost containment tables create transparency and account- ability in the management of a cost baseline. The use of cost containment tables permits quick identification of cost esca- lation as it occurs. When standardized in a state highway agency, cost containment tables allow for comparison of cost escalation by the variables captured in the tables. The use of the cost containment table establishes minimal milestones that are consistent throughout the state highway agency and creates accountability for the project team for changes in the estimates from one milestone to the next. When? The effort to manage project costs continues from the pro- gramming and preliminary design stage through final design, and until construction closeout. In the identification method, the tool will be used during the final design and letting to ensure that cost escalation has been captured. For instance, if the price of a commodity such as steel or cement escalates rap- idly during final design, the engineer’s estimate will reflect the escalation and the cost containment table tool will alert the project team to the fact that the project scope may need to be adjusted to fit within a constrained budget. The table acts as a gated process to stop the project from progressing until it is estimated to be on budget. The cost containment table should only be used when a project baseline estimate is established. Example An excellent example of a cost containment table from the Pennsylvania DOT is described in Section C6.1 and shown in Figure C6.1. Tips A cost containment table requires updating at each pre- determined project milestone. At each project milestone when the table is used, the estimate must be broken down into specified items. If substantial changes are present, they can then be easily identified, thereby indicating a need for further review. Cost containment tables should be only one tool in manag- ing cost escalation. A drawback of the cost containment table is that it only provides a “rearview mirror” look at cost escala- tion. While knowing that there is a problem at critical project milestones is essential, project teams should strive to anticipate cost escalation whenever possible and mitigate their effects before they occur. Resources Pennsylvania DOT’s Estimating Manual is available at ftp:// ftp.dot.state.pa.us/public/Bureaus/design/PUB352/inside_ cover_page.pdf. I1.2 Estimation Scorecard (Also See C6.2) In the final stages of project engineering and letting, an esti- mation scorecard can be used to measure the performance of the estimation process. As described in Section C6.2, the tool should be created by the entire team early in the project devel- opment process and aligned with the project objectives that will ultimately drive the perceived project success. While the use of estimation scorecards is not prevalent with state high- way agencies, scorecards are good tools for evaluating cost estimation management throughout the project development process. An estimation scorecard is an objective measure of estimate accuracy or project scope growth. A-108

What Is It? An estimation scorecard is an evaluation tool to measure the success of cost estimation practice and cost estimation management during the project development processes. The format of the scorecards can vary depending upon individual agency objectives, but the goal is to create an objective score for performance in cost estimation practice and/or cost esti- mation management. Why? Measurement of estimate performance is critical to improve future estimation practices. Early identification and measure- ment of the project success criteria helps to ensure that there is no miscommunication regarding functionality and physical structure of the completed project. What Does It Do? Estimation scorecards provide objective measures of esti- mate success. Estimation scorecards are commonly used when consultants are preparing the project design and estimate, but they can also be used internally for agency evaluations. Esti- mation scorecards indicate the measures that will be used at project completion to evaluate success. Once the project is complete, performance measure can be derived from compar- ison of target values designated during project development and the achieved values measured after project completion. When? The evaluation criteria of estimate success and the physical scorecard itself should be developed early in the project devel- opment process. It is then used in the identification method in the later stages of project development to determine esti- mate success and to help collect lessons learned for future estimates. Examples Section C6.2 provides examples from a scorecard developed by the Coors brewing company for construction of their capi- tal facilities. Tips The use of the scorecards can ensure that all team members are clear about the expectations for a successful project. The tool will help to facilitate a structured discussion about what will define success on each project, and it will provide an objec- tive measurement for this success. Develop the scorecard as a team. Consider developing an overall project scorecard as well as discipline-specific scorecards. Resources U.S. Department of the Interior’s “The Quarterly Scorecard and Corrective Actions Reports for Constructed Asset Invest- ments” is available at www.doi.gov/pam/QuarterlyReport Guidance61605.pdf. I1.3 Project Baseline A project baseline is essential if a state highway agency wants to effectively manage scope, cost, and time as the project design is developed. The timing of when a baseline is set depends on state highway agency programming requirements. The level of project definition required to set the baseline depends on the complexity of the project, as well as the time allowed to prepare the scope, cost, and time baseline. What Is It? A project baseline refers to the cost estimate that sets the basis for controlling costs during project development. This cost is the budget included in the authorized program. When project requirements have been analyzed and documented and the project baseline has been established for scope, cost, and schedule, preliminary design and project control activities can begin. This involves the application of conventional system control techniques to the project effort. Why? The cost estimation management process cannot be per- formed effectively without a baseline cost. The project baseline cost provides the standard from which the impact of change is evaluated in terms of cost. The impact of change could result in increases or decreases in cost. For a project to be under con- trol, it needs to be organized as a closed system. This is accom- plished by establishing baselines for scope, cost, and schedule and then placing them under a change management process. Once the project has been contained in these three dimensions, it can be measured, monitored, and controlled. What Does It Do? The project baseline provides project management with a tool for making decisions regarding the impact resulting from changes in scope, design development, site conditions, and market conditions so that the budgeted cost for a project can be controlled. Establishing the baseline is the formal end of A-109

programming and the beginning of preliminary engineering. Controlling the project baseline is absolutely essential for proj- ect success. Other than misunderstood requirements, poor cost and schedule estimates, and technical difficulties, the issues that will most likely imperil a project are unexpected changes. When? The project baseline tool is used when the project is authorized for inclusion into the state highway agency pro- gram for design and construction letting. This occurs at the end of programming. However, the extent of the design effort to support the creation of a project baseline may vary depending on project size and complexity. Some preservation projects, such as an overlay, can be defined with only as much as 10% design completion. This may be adequate to set the baseline cost. Other larger and more complex projects may require as much as 25% design completion before setting the baseline cost. Examples The Washington State DOT (WSDOT) has a scoping phase that starts its project development process. The scoping phase is described as follows in WSDOT’s 2006 Design Manual: Scoping phase The first phase of project development for a specific project. It follows identification of the need for a project and precedes detailed project design. It is the process of identifying the work to be done and developing a cost estimate for completing the design and construction. The Project Summary, engineering and con- struction estimates, and several technical reports (geotechnical, surfacing, bridge condition, etc.) are developed during this phase. This scoping phase provides sufficient project design to pre- pare a baseline scope, cost, and schedule. This baseline sup- ports the biennial programming of projects. The scoping phase has specific documentation that is required to support the project. This documentation, referred to as a Project Sum- mary, contains three main components, as described in WSDOT’s Design Manual: Design Decisions Summary An electronic document that records major design decisions regarding roadway geometrics, roadway and roadside features, and other issues that influence the project scope and budget. Environmental Review Summary An electronic document that records the environmental require- ments and considerations for a specific project. Project Definition An electronic document that records the purpose and need of the project, along with program level and design constraints. The Project Definition component includes the cost esti- mate for preliminary engineering, right-of-way (if part of the project scope) and construction. The Project Summary document is reviewed and approved by WSDOT region management and headquarters prior to including the proj- ect in the biennial program. Tips The project baseline cost estimate has to be at a certain level of detail to be meaningful for controlling costs. That is, cost elements must be defined sufficiently, with the estimate basis, assumptions, and calculations clearly documented (see the “Project Estimation File” tool). The project baseline should be established as early as possible in the project development process, but not before sufficient level of detail is available to allow for tracking changes to project scope and cost. Resources Washington State DOT (2005). “Design Manual,” Section 330, Design Documentation, Approval, and Process Review. Chapman, James (2005). “Principle Based Project Man- agement,” Rule Number 6, Establish Baseline Controls. www. hyperthot.com/project.htm. I1.4 Scope Change Form (Also See C6.3) While managing a project to the baseline estimate is the goal of every project manager, scope changes are sometimes unavoidable. Changes in scope should be documented and justified. A scope change form is critical in the identification method because it creates a standard procedure for reporting scope changes. It creates transparency and accountability. It also allows agencies to view trends in scope changes that may allow for better scope definition on future projects and in future estimates. What Is It? A scope change form is a document that provides a perma- nent record of the scope changes that occur during the project development. To create accountability, it also records who authorized the changes. Why? Changes to project scope almost always cause cost increases. Therefore, the requirement for formal management approval A-110

of any scope change serves to limit change, as all such propos- als must be carefully reviewed. Controlling scope change serves to control cost growth. An additional reason for tracking changes to the project is to ensure that no changes take place without the full knowledge of the project team, including designers, managers, and estimators. What Does It Do? Scope change forms make possible easy comparison of the current project scope, schedule, and cost with the established baseline of the project. The form should require that the doc- umented change, as well as any impacts of the change to proj- ect scope, schedule, and cost, be specifically acknowledged. An explanation is required with each change. Appropriate approvals should be required depending on the size and nature of changes. When? The scope change form should be used for all changes after the project baseline is established and may even be used before the baseline is established. It should continue to be used in the identification method during the latter stages of project devel- opment. As projects progress toward final design, manage- ment approval of scope changes is more critical and the scope change form provides an excellent tool to ensure that the approval is obtained and tracked. Examples An excellent example of a scope change form is discussed in Section C6.3 and shown in Figure C6.3. A form used by Missouri DOT is provided with instructions on how to com- plete it. Additional examples from the California DOT and the New York State DOT can be found through the web links in the resources part of this tool description. Tips Scope change forms should explicitly require all the infor- mation needed to track project changes, including scope, schedule, and cost impacts, as well as explanations and approvals. Forms should be standard; however, there should be the ability to deviate from the form for special project circumstances. Resources California DOT’s Project Development Procedures Manual (PDPM) Chapter 6 addresses project cost, scope, and sched- ule changes: dot.ca.gov/hq/oppd/pdpm/chap_htm/chapt06/ chapt06.htm. Chapters 2 and 3 in the New York State DOT’s Project Devel- opment Manual (PDM) discusses changes in project cost, scope, and schedule: www.dot.state.ny.us/cmb/consult/dpm1/ pdm_01_30_04.html. I2 Identification of Risk (Also See R3) Risk identification involves the discovery of potential proj- ect risks and the documentation of their characteristics. In the context of cost estimation, an understanding of project risk will assist estimators in setting appropriate project contingencies. It will also assist managers in estimation management as the project progresses through the project development process. In the broader context of project risk management, risk identifi- cation is the first step in the following detailed process: • Risk identification • Risk analysis (qualitative and/or quantitative) • Risk mitigation planning • Risk monitoring and control Red flag items and risk charters are two tools that assist esti- mators in both identifying and monitoring risks throughout the project development process. These tools support risk identification early in the project development process to assist in setting appropriate project contingencies. The tools also support the risk monitoring and control process to assist in contingency resolution as the project scope, design, and proj- ect delivery methods become fully defined. I2.1 Red Flag Items A red flag item list is created at the earliest stages of project development and maintained as a checklist during project development. It is perhaps the simplest form of risk identifica- tion and risk management. The list helps estimators to better understand the required contingency and helps managers to more effectively control scope growth throughout the project development process. Not all projects will require a compre- hensive and quantitative risk management process. A red flag item list can be used in a streamlined qualitative risk manage- ment process. What Is It? A red flag item list is a technique to identify risks and focus attention on critical items with respect to critical cost and schedule impacts to the estimate. Issues and items that can potentially impact project cost or schedule in a significant way are identified in a list—or “red flagged”—and the list is kept current as the project progresses through development. A-111

Why? By listing items that can potentially impact a project’s cost or schedule, and by keeping the list current, the project team has a better perspective for setting proper contingencies and controlling cost escalation. Occasionally, items that are con- sidered a risk are mentioned in planning but soon forgotten. The red flag item list facilitates communication between esti- mators and designers concerning these impacting items. By maintaining a running list, these items will not disappear from consideration and then later cause problems. What Does It Do? At the earliest stages of project development, an agency develops a list of impacting items, based primarily on engi- neering judgment or historical records of problems. The red flagging of these items may not involve any formal qualitative or quantitative risk analysis of the factors, but it keeps the team mindful of their existence. The list also helps the team to remove contingency from the project cost estimate as the design progresses and risk issues are resolved. When? The composition of a red flag item list is done in the earli- est stages of project development. The list should then be updated at each major milestone or as new items are identi- fied. The list will be most useful if it is maintained and updated throughout the project development process. Examples California DOT has developed a sample list of risk in its Project Risk Management Handbook. The list is provided in Tables I2.1-1 through I2.1-4. This sample list of risks can be used as the basis for creating a list of red flag items for an indi- vidual project. The Caltrans list is quite comprehensive, and any single project’s list of red flag items should not include all of these elements. Washington State DOT also uses a “Sample Risk Elements” checklist for its cost risk assessment process. Sections I2.2 and R3.5 provide tools to help filter (qualitatively or quantita- tively) the risks for each project to ensure that only the most critical risks in terms of cost impacts are being considered. Tips The list of red flag items should be developed in an inter- disciplinary team environment. This activity works well during the scoping process. Consider brainstorming sessions with rep- resentatives from multiple discipline areas for creation of a list of red flag items. In addition to scoping documents or lists of standard items like that in Tables I2.1-1 through I2.1-4, indi- viduals should use their own knowledge of the project and con- sult with others who have significant knowledge of the project or its environment. Resources Caltrans Office of Project Management Process Improve- ment (2003). Project Risk Management Handbook. Curran, Michael W. (1998). Professional Practice Guide #2: Risk. Association for the Advancement of Cost Engineering International. FHWA (2004). Major Project Program Cost Estimating Guidance. Grey, S. (1995). Practical Risk Assessment for Project Man- agers. John Wiley and Sons, Chichester, England. Molenaar, K. R. (2005). “Programmatic Cost Risk Analysis for Highway Mega-Projects,” Journal of Construction Engineer- ing and Management, Vol. 131, No. 3. NCHRP (2005). NCHRP Project 20-7/172 Final Report, Recommended AASHTO Design-Build Procurement Guide, Washington, D.C. A-112 Table I2.1-1. Caltrans sample technical risks list. Risk Category Individual Risks Technical Risks Design incomplete Right of Way analysis in error Environmental analysis incomplete or in error Unexpected geotechnical issues Change requests because of errors Inaccurate assumptions on technical issues in planning stage Surveys late and/or surveys in error Materials/geotechnical/foundation in error Structural designs incomplete or in error Hazardous waste site analysis incomplete or in error Need for design exceptions Consultant design not up to Department standards Context sensitive solutions Fact sheet requirements (exceptions to standards)

Project Management Institute (2004). A Guide to Project Management Body of Knowledge (PMBOK Guide). Washington State DOT (2006). Cost Estimating Valida- tion Process (CEVP) website: www.wsdot.wa.gov/Projects/ ProjectMgmt/RiskAssessment. I2.2 Risk Charter The creation of a risk charter is a more formal identifica- tion of risks than the listing of red flag items described in Sec- tion I2.1. This tool is typically completed as part of a formal and rigorous risk management plan. The risk charter helps to set estimate contingencies and monitor potential cost escala- tion. It provides estimators with a list of significant risks and includes information about the cost impacts and schedule impacts that these risks might have. It also supports the con- tingency resolution process by tracking changes to the magni- tude of potential cost and schedule risk impacts as the project progresses through the development process and the risks are resolved. What Is It? A risk charter is a document containing the results of a qualitative or quantitative risk analysis. It is similar to a list of red flag items (see Section I2.1), but typically contains more detailed information concerning the potential impact of the risks and the mitigation planning. The risk charter contains a list of identified risks, including description, category, and cause. It may contain measurements of magnitude such as the probability and impact of occurrence. It may also contain pro- posed mitigation responses, “owners” of the risk, and current status. This method may be more effective than simply listing the potential problem areas, as with the red flagging, since it is A-113 Table I2.1-2. Caltrans sample external and environmental risk list. Risk Category Individual Risks External Risks Landowners unwilling to sell Priorities change on existing program Inconsistent cost, time, scope, and quality objectives Local communities pose objections Funding changes for fiscal year Political factors change Stakeholders request late changes New stakeholders emerge and demand new work Influential stakeholders request additional needs to serve their own commercial purposes Threat of lawsuits Stakeholders choose time and/or cost over quality Environmental Risks Permits or agency actions delayed or take longer than expected New information required for permits Environmental regulations change Water quality regulation changes Reviewing agency requires higher-level review than assumed Lack of specialized staff (biology, anthropology, archeology, etc.) Historic site, endangered species, wetlands present EIS required Controversy on environmental grounds expected Environmental analysis on new alignments is required Formal NEPA/404 consultation is required Formal Section 7 consultation is required Section 106 issues expected Project in an area of high sensitivity for paleontology Section 4(f) resources affected Project in the Coastal Zone Project on a Scenic Highway Project near a Wild and Scenic River Project in a floodplain or a regulatory floodway Project does not conform to the state implementation plan for air quality at the program and plan level Water quality issues Negative community impacts expected Hazardous waste preliminary site investigation required Growth inducement issues Cumulative impact issues Pressure to compress the environmental schedule

A-114 Table I2.1-4. Caltrans sample right of way, construction, and regulatory risk list. Table I2.1-3. Caltrans sample organizational and project management risk list. Risk Category Individual Risks Organizational Risks Inexperienced staff assigned Losing critical staff at crucial point of the project Insufficient time to plan Unanticipated project manger workload Internal “red tape” causes delay getting approvals, decisions Functional units not available, overloaded Lack of understanding of complex internal funding procedures Not enough time to plan Priorities change on existing program New priority project inserted into program Inconsistent cost, time, scope and quality objectives Project Management Risks Project purpose and need is poorly defined Project scope definition is poor or incomplete Project scope, schedule, objectives, cost, and deliverables are not clearly defined or understood No control over staff priorities Too many projects Consultant or contractor delays Estimating and/or scheduling errors Unplanned work that must be accommodated Communication breakdown with project team Pressure to deliver project on an accelerated schedule Lack of coordination/communication Lack of upper management support Change in key staffing throughout the project Inexperienced workforce/inadequate staff/resource availability Local agency issues Public awareness/support Agreements Risk Category Individual Risks Right of Way Risks Utility relocation may not happen in time Freeway agreements Railroad involvement Objections to Right of Way appraisal take more time and/or money Construction Risks Inaccurate contract time estimates Permit work windows Utility Surveys Buried man-made objects/unidentified hazardous waste Regulatory Risks Water quality regulations change New permits or new information required Reviewing agency requires higher-level review than assumed

integrated into the risk monitoring and control processes. The terms “risk charter” and “risk register” are synonymous in the industry. Why? A risk charter is used to identify, communicate, monitor, and control risks. It provides assistance in setting appropriate contingencies and managing the cost estimation process. As part of a comprehensive risk management plan, the risk char- ter can help to control cost escalation. It is appropriate for large or complex projects that have significant uncertainty. What Does It Do? The charter organizes risks that can impact project cost and project delivery. A risk charter is typically based on either a qualitative or quantitative assessment of risk, rather than sim- ple engineering judgment. The identified risks are listed with relevant information for quantifying, controlling, and moni- toring. The risk charter may include relevant information, such as the following: • Risk description • Status • Date identified • Project phase • Functional assignment • Risk trigger • Probability of occurrence (%) • Impact ($ or days) • Response actions • Responsibility (task manager) When? This technique can be used throughout project develop- ment. At the earliest stages of project development, the risk charter will be helpful in a risk identification capacity. As the project progresses, more rigorous and quantitative risk man- agement can be done and the charter will become an even more valuable tool for cost estimation management and risk moni- toring and control. Examples Washington State DOT has built a Cost Estimating Valida- tion Process (CEVP). The CEVP uses a risk charter (or risk register) as a fundamental tool in its comprehensive validation process. The CEVP is explained in more detail in Sections C1.2 and R3.5. Figures I2.2-1 and I2.2-2 show two aspects of the CEVP that are relevant to describing a risk charter. Figure I2.2-1 provides a summary example from a risk identification exercise that is part of the CEVP. Figure I2.2-2 provides a sum- mary of risk descriptions in the risk charter for the CEVP analyses. For more information on these first nine projects, see K. R. Molenaar’s 2005 article, “Programmatic Cost Risk Analysis for Highway Mega-Projects,” in ASCE Journal of Construction Engineering and Management, Vol. 131, No. 3, pp. 343–353. For more information on the current CEVP, see the Wash- ington State DOT’s 2006 CEVP website at www.wsdot.wa.gov/ Projects/ProjectMgmt/RiskAssessment. Tips The risk charter should be developed in conjunction with a comprehensive risk management plan. It should be developed in an interdisciplinary team environment and may require external facilitation. Resources Caltrans Office of Project Management Process Improve- ment (2003). Project Risk Management Handbook. A-115 Figure I2.2-1. Summary example of risk event identification exercise that is part of WSDOT’s CEVP. Risk Issue: Commercial Property Value Issue: Project ROW costs were developed by applying a percentage increase to the assessed valuations for each parcel. During the CEVP review the estimated cost of commercial properties carried in the ROW estimate for the project have been updated, and the multiplier increased to 75% of the assessed value, to better reflect current market conditions. There is a low level of confidence in the updated values and it is estimated that actual market conditions may be as high as 100% of the assessed valuations. Impacts: The actual market conditions will increase the cost of acquiring commercial properties by an average of $25M. There are no significant schedule impacts. Probability: 85%. Mitigation: Monitor the commercial real estate market and track the actual cost of recent transactions. Keep the project ROW estimate up to date and reflective of the current commercial property real estate market. Buy early if appropriate.

Curran, Michael W. (1998). Professional Practice Guide #2: Risk. Association for the Advancement of Cost Engineering International. FHWA (2004). Major Project Program Cost Estimating Guidance. Grey, S. (1995). Practical Risk Assessment for Project Man- agers. John Wiley and Sons, Chichester, England. Molenaar, K. R. (2005). “Programmatic Cost Risk Analysis for Highway Mega-Projects,” Journal of Construction Engineer- ing and Management, Vol. 131, No. 3. NCHRP (2005). NCHRP Project 20-7/172 Final Report: Recommended AASHTO Design-Build Procurement Guide. Project Management Institute (2004). A Guide to Project Management Body of Knowledge (PMBOK Guide). Washington State DOT (2006). Cost Estimating Valida- tion Process (CEVP) website: www.wsdot.wa.gov/Projects/ ProjectMgmt/RiskAssessment. I3 Identifying Off-Prism Issues The macroenvironment can affect project cost in two ways: (1) by being unknown or unrecognized by project managers and estimators and (2) by changes in the environment that are completely external to the project. Unlike other aspects of project planning and estimation, understanding the macroenvironment—that is, the off-prism issues—has never been standardized as part of project estimation. It is there- fore important to develop planning processes that focus on community concerns, externally imposed requirements, and external market conditions. I3.1 Environmental Assessment Environmental assessments are an integral component of the project delivery process. Mitigation of environmental issues is a cost to the project. Environmental assessments iden- A-116 Market Conditions Implementing several mega-projects at the same time may create a shortage in management, contractors, financing/funding, labor, and material. Labor Disruptions Labor shutdowns are likely. Storm Water Treatment and/or Quantities Stricter requirements in the future would require additional cost to provide additional detention ponds, the collecting and treatment of all runoff, which may have a base amount in the estimate but there may be higher amounts of treatment required or higher then expected volumes. Changes in Permitting Permit requirements may change over the long duration of some projects. Off and On Site Wetlands There is a chance that conditions actually encountered in the field may be different than assumed when the base estimate was compiled and the measures used my also change requiring additional mitigation. Environmental Impact Statement Disagreement between WSDOT and resource agencies and/or among agencies and the public on project impacts and associated disagreement on mitigation approaches may prompt impacts. NEPA/404 Merger Process Failure to reach concurrence on the range of alternatives and a preferred alternative could delay the environmental process. Utility Issues Routine investigations and coordination with utility companies can identify and relocate conflicting utilities throughout the project. However, unforeseen discovery of previously unknown utilities, and the need to relocate these utilities after the job is awarded and construction has started can be a significant cost and schedule liability to the project. Utilities, adjacent landowners, and other affected parties may demand “betterment” or excessive mitigation. Rail Lines (Regular and Light) Regional and national offices may need to approve new railroad alignments and ROW or the encroachment of new highway alignment on existing rail ROW. Figure I2.2-2. Summary risk charter risk descriptions from the WSDOT CEVP analyses.

A-117 Right of Way Acquisition Problems Changing property values, revolving funds, etc. may cause problems along with property owners who may hold out and cause economic problems and/or delays. Right of Way Value and Impact Several risks may be encountered such as property owner relocation, sudden growth, and area development, which may cause monetary and time impacts. Program Management The organizational make-up of WSDOT is being revised to accommodate mega-projects. This management structure will need constant care and feeding to ensure that decisions and information are growing in a responsible way. Geotechnical Conditions Inadequate geotechnical investigations during the conceptual and alignment selection phases can cause unforeseen conditions during excavation and construction of tunnels, bridges, walls, etc. This could be compounded by inadequate characterization of groundwater conditions. Design Change in Seismic Criteria The American Association of State Highway Transportation Officials (AASHTO) is developing new seismic design criteria for bridges. The timing of the release of this criteria and WSDOT’s adoption of the criteria is uncertain. Bridge Foundations The foundation type for bridges in the project may need to be adapted to new information that becomes available as the project progresses. Local Arterial Improvements and Access Local agencies may demand additional improvements to local arterials as a condition for support of the project. Inadequate Design/Design Uncertainty for Interchanges Interchanges may be planned but there may be some uncertainty from the design (i.e. unit cost, inadequate design, deviation approval, municipality involvement, etc.) Traffic Demand Traffic demands may not be accurate in some areas (i.e. inconsistent growth patterns, age of traffic projections). Contaminated Soil It is possible that even after thorough due diligence and the identification of contaminated sources during design of the project, new contaminated soils or groundwater may result in discovery of new or unknown conditions that need to be taken care of during construction. Natural Hazards Storms, floods, earthquakes, etc. can cause damage to work under construction and may result in shut down during construction. Such conditions damage the temporary water pollution controls, temporary structures, and earthwork, which must then be repaired. Work Win dow There may be restrictions in conducting some activities (i.e. earthwork) during some parts of the year (i.e. winter). Auxiliary Lanes There may be uncertainty regarding if auxiliary lanes are going to be used/constructed temporarily during construction and/or permanently. Staging Areas Due to limitations in ROW and traffic flow staging areas may be inadequate for construction. Figure I2.2-2. (Continued).

tify potential project scope issues related to ensuring that an appropriate cost is included in the project estimate to cover environmental mitigation. What Is It? An environmental assessment is a concise public docu- ment that a state agency prepares under the National Envi- ronmental Policy Act (NEPA) to provide sufficient evidence and analysis to determine whether a proposed agency action would require preparation of an environmental impact state- ment (EIS) or a finding of no significant impact (FONSI). NEPA was signed into law on January 1, 1970. The act establishes national environmental policy and goals for the protection, maintenance, and enhancement of the environ- ment, and it provides a process for implementing these goals within the federal and state agencies. Many times, environ- mental issues driven by parties external to a project can cause additions to project scope that significantly affect project cost. This tool seeks to direct state highway agency attention to exploring these possibilities during project development in a proactive instead of reactive manner. Why? A study made by the U.S. General Accounting Office iden- tified expedition of the authorizations from environmental and resource agencies as one of the most promising approaches for reducing the time it takes to plan, design, gain approval for, and build a federally funded highway project. For works in which the environmental impact is considerable, mitigation measures may pose a significant cost. Failing to consider these regulations may jeopardize not only the original budget, but also the whole project. What Does It Do? An environmental impact assessment (EIA) is a sound pre- caution and a proactive measure. Increasingly, successful proj- ect development is viewed in terms of its final result—its operational environmental performance, its acceptance by stakeholders, its contribution to sustainable development, and, critically, the scale or magnitude of environmental impact over all life cycle phases. For astute proponents, the evidence suggests that EIA followup has a valuable role to play in good project development practice. When? Environmental considerations are evaluated from the incep- tion of a project and are constantly reviewed during all phases of project development. However, the impact of environmen- tal regulations on a project is most critical during the pro- gramming and early in the preliminary engineering. The NEPA process must be completed, and all potential impacts consid- ered, prior to full design of the project. This may require that several alternatives be investigated and related costs compared in terms of potential mitigation solutions to address environ- mental issues. Examples The FHWA document, Major Project Program Cost Esti- mating Guidance, June 4, 2004, specifically calls attention to environmental work that affects project cost: Environmental Work: Although the intent of a project may be to avoid environmentally sensitive resources, some degree of environmental consideration and analysis is required for all major projects. If work associated with the alternative in the NEPA document is not included as part of the cost estimate, the NEPA document should note where the cost for the outstand- ing cost element could be found. For example, this could be short-term improvements that are already included in the Statewide Transportation Improvement Program (STIP). Any additional environmental avoidance, minimization, mitigation, remediation, and enhancement costs must also be included in the cost estimate. Costs to mitigate impacts to natural resources, cultural resources, neighborhoods, and so on, must either be individually estimated or included in a contingency amount. Although large contingencies may be appropriate if no resource surveys have been conducted, resource surveys conducted as part of the NEPA process provide valuable information for refining cost estimates. Additionally, some major projects may have enhancement work that is not directly related to the proj- ect. This may include other transportation modes and non- transportation related work. These costs must be captured and included in the cost estimate. A major project that has a poten- tially significant effect or impacts on environmental resources or has opposition from environmental or community groups or regulatory agencies, tends to include more environmental mit- igation which results in higher costs than those projects with rel- atively little impact or oppositions. Moreover, contingencies should be included for projects that include Intelligent Trans- portation System attributes, as well as in those States that are implementing Context Sensitive Strategies/Context Sensitive Design since very little historical data exists or is included in pre- vious cost figures. Tips Federal, state, tribal, or local agencies having special exper- tise with respect to an environmental issue or jurisdiction by law may be a cooperating agency in the NEPA process. A coop- erating agency has the responsibility to assist the lead agency by participating in the NEPA process at the earliest possible time; by participating in the scoping process; by developing infor- mation and preparing environmental analyses that include portions of the environmental impact statement wherein the cooperating agency has special expertise; and by making avail- A-118

able staff support at the lead agency’s request to enhance the lead agency’s interdisciplinary capabilities. Basic information about the NEPA process is available on- line: www.epa.gov/compliance/basics/nepa.html#requirement. Resources U.S. General Accounting Office (2003). Perceptions of Stake- holders on Approaches to Reduce Highway Project Completion Time, report GAO-03-398. http://www.gao.gov/new.items/ d03398.pdf. Marshall, Ross (September 2005). “Environmental Impact Assessment Follow-Up and Its Benefits for Industry,” Impact Assessment and Project Appraisal, Vol. 23, No. 3. NEPA website: www.epa.gov/compliance/basics/nepa.html. I3.2 Percentage of Total Project Cost (Also See E3.2) In the case of most conventional projects, engineers focus on technical solutions and pay little attention to community interest or the macroeconomic environment. However, mar- ket forces and third-party interventions can have a major impact on project cost and must be accounted for in the esti- mation process. What Is It? Frequently, in early estimation, the scope of a particular item or items cannot be quantitatively determined. However, the estimator knows from history that there will be a need to include costs for scope that is not adequately defined. Off- prism issues are issues that are often difficult to define in pro- gramming and early in preliminary engineering. These issues are often project specific and based on factors such as geo- graphical locations, political climate, interests of the commu- nity, and economic environment, among others. One tool to account for the cost related to potential off-prism issues is to include a percentage allowance for scope that the estimator knows is required but cannot adequately define at the time of the estimate. The percentage used should be based on history and judgment of the estimator in consultation with the project team and based on the specific project location and conditions. Thus, a case-by-case evaluation of the cost impact of off-prism issues is necessary to properly implement this tool. Why? Every project is executed in the context of a particular political, economic, and cultural environment. The potential impact on cost of off-prism issues must be considered. Costs to mitigate impacts to natural resources, cultural resources, neighborhoods, and so on must be either individually esti- mated or included in the estimate as an allowance amount. It is advisable to account for any such occurrences, and an acceptable quantification of these impacts is often recognized in the form of a percentage of total project costs. What Does It Do? This tool acts as a safeguard to reduce the chance of any cost overruns due to known but unquantified circumstances related to off-prism issues. When? It is beneficial to include an allowance for off-prism issues early in programming and preliminary design and assess if the assumed percentage is reasonable based on project scope development and the location of the project. Inclusion of the allowance is especially critical when setting a project baseline cost that is programmed. Examples Using historical cost data, Caltrans has sometimes estimated capital outlay support cost in the environmental process as a percentage of the estimated project construction cost. In the case of one particular project, this was a straight 1% of the esti- mated construction cost estimate. Caltrans also spreads this total amount across the project schedule and applies an annual escalation rate (i.e., inflation rate) to the outlay timed amounts. Tips An alternative to handling the potential cost of off-prism issues is to identify these items as risks to the project and cover them in contingency. Resources More information is available from the FHWA’s publica- tion, “Major Project Program Cost Estimating Guidance,” June 8, 2004, http://www.fhwa.dot.gov/programadmin/mega/ cefinal.htm. I3.3 Market Conditions The price for a commodity or service is dependent upon the market conditions and the situations of the contractor and agency, as well as the cost to actually secure the necessary mate- rials and perform the work. Existing and projected market forces have a substantial impact on the cost of a project. The actual impact of such forces can vary significantly depending A-119

on the specific date on which a contract is advertised and bid and depending on the type of materials that are required to construct the work. Many market condition circumstances are beyond the control of a state highway agency and will affect all purchasers of construction services, but not always in the same way because of the different risk-shifting contract clauses. What Is It? This is a tool that establishes a formal process to analyze market capability to respond to the project as designed and packaged for bid. The process seeks to provide management with assurance that cost impacts driven by market conditions, both global pressures on material prices and the local con- struction situation, have been considered in developing the project’s design, contract packaging, and estimated cost. Why? In developing a cost estimate, it is necessary to consider changes in the contracting situation and in general economic conditions. This is particularly true whenever historical prices are being used. Contractors usually enter into contracts with state highway agencies, which fix the price over the term of a project, but for some materials the contractor cannot secure fixed prices from the suppliers; therefore, project bidders must account for the risk of fluctuating material prices in their bids. What Does It Do? Contracting firms must develop strategies to minimize their risks. A primary strategy involves increased cost to the project owner. In the case of risks that cannot be quantified, such as volatility of material prices or even the availability of materials, that cost increase can be significant. Additionally, if the con- tractor perceives that an owner is seeking through the contract language to shift risk to the builder, sufficient additional cost will be included in the bid to cover that added financial expo- sure. This tool is the establishment of a structured process to continually analyze market forces—cost of materials and avail- ability of competition—and the impact of market changes on project cost. When? Market conditions are volatile and will most likely change after a project is initiated but before issuance of bid documents; therefore, the process of evaluating market conditions and their affect on the estimate must be continuous through all phases of project development. When a change in market con- ditions is identified, the estimate must be adjusted to reflect the new conditions. Examples The FHWA document Major Project Program Cost Estimat- ing Guidance, June 4, 2004, specifically calls attention to the following market condition factors that affect project cost: • Acquisition strategy analysis: A separate analysis should consider the most economical and advantageous way of packaging the contracts for advertisement. • Bidding climate impact: Estimators should consider the economic impact of the project on the local economy. For example, material manufacturers that would normally com- pete with one another may need to combine resources in order to meet the demand of a major project. Extremely large construction packages also have the potential to reduce the number of contractors that have the capacity to do the work, and the project may need to be split into smaller con- tracts to attract additional competition. In addition, the timing of the bid solicitations can affect the cost. Cost esti- mates should consider availability of labor. • Industry capacity: The number of potential qualified con- tractors that are able to bid on a project is limited as project size increases. Contractors that bid on major projects often bid on projects throughout the country. If other major projects are being advertised concurrently, this may have a limiting effect of competition and can result in higher bids. • Highly specialized designs and technology: Cost estimates should consider the impact of any requirement to use first- of-a-kind technology, new materials, or innovative con- struction methods. Tips A market survey should be carried out on sizable projects to determine where the bidders will come from—is the local market sufficiently large to accommodate the project, or will the major subcontractors be at capacity and therefore likely to bid high, if at all? Also, a reading of the market prior to finalizing the PS&E is useful for validating the estimate and can be included in a risk assessment to determine a range of expected bids. Three circumstances are worthy of special consideration: • Changes in the level of competition • Limited competition • Differing economic conditions Continuously update the estimate to reflect current market conditions. Resources FHWA (2004). Major Project Program Cost Estimating Guid- ance. www.fhwa.dot.gov/programadmin/mega/cefinal.htm. A-120

Caltrans Division of Engineering Services (November 15, 2001). “Impact of Competition on Final Bid Results for Trans- portation Related Construction Project (Draft).” Merrow, Edward W., Kenneth E. Phillips, and Christopher W. Myers (1981). Understanding Cost Growth and Performance Shortfalls in Pioneer Process Plants, Rand Corporation. http:// www.rand.org/pubs/reports/R2569. Merrow, Edward W. (1988). Understanding the Outcomes of Megaprojects: A Quantitative Analysis of Very Large Civil- ian Projects, Rand Corporation. http://www.rand.org/pubs/ reports/R3560. Sawyer, John E. (1951–1952). “Entrepreneurial Error and Economic Growth,” Explorations in Entrepreneurial History, Vol. 4, No. 4, pp. 199–204, 1951–52. Merrow, Edward W. (1986). A Quantitative Assessment of R&D Requirements for Solids Processing Technology Process Plants, Rand Corporation. http://www.rand.org/pubs/reports/ R3216. Maryland DOT (March 1, 2002). “Summary of Independent Review Committee Findings Regarding the Woodrow Wilson Bridge Superstructure Contract.” The full report is available from the MDOT. Woodrow Wilson Bridge Project Bridge Superstructure Contract (BR-3): Review of the Engineer’s Estimate vs. the Single Bid, February 28, 2002. This report is available from Maryland DOT. P1 Plans, Specifications, and Estimates (PS&E) The PS&E is based upon very definitive contract documents that reflect the project’s final design. It is used to finalize proj- ect funding prior to bid solicitation and as a baseline for eval- uating the bids. There are three basic approaches used by state highway agencies for PS&E: 1. Historical data: The use of historical data from recently awarded contracts is the most common state highway agency estimation approach. Under this approach, bid data are summarized and adjusted for project conditions (proj- ect location, size, quantities, etc.) and the general market conditions. This approach requires the least amount of time and personnel to develop the estimate and produces a good estimate, as long as noncompetitive bid prices are excluded from the database and appropriately adjusted data are used to build the estimate. 2. Bottom up: The detailed bottom-up estimate approach based on specific crews, equipment, production rates, and material costs is similar to the way a construction con- tractor would estimate a project. This approach requires the estimator to have a good working knowledge of con- struction methods and equipment. While adjustments for current market conditions may be required, this approach typically produces an accurate estimate and is useful in estimating unique items of work where there is insuffi- cient bid history. 3. Combined: Most projects contain a small number of items that together account for a significant portion of the pro- ject’s total cost. These significant contract items may include Portland cement concrete pavement, structural concrete, structural steel, asphalt concrete pavement, embankment, or other specialty items. Prices for these items are estimated using the bottom-up approach. The remaining items are estimated based on historical prices and adjusted as appro- priate for the specific project. P1.1 Agency Estimation Software (Also See C2.1, C3.1, D2.2) Estimation software provides the ability to manage large data sets that support estimate development for all project types and across the range of project complexity. Estimation software can support all three costing approaches—historical data, bottom up, and combined. The use of estimation software eases the task of tracking project estimates through all phases of development and can assist in estimate and schedule reviews. Some state highway agencies have taken the initiative to develop their own estimation software. A survey in 2002 found that 18 state highway agencies are using software programs that were developed within the agency. These agency-developed estimation programs are usually subprograms of project man- agement software that serves multiple needs beyond cost esti- mation and therefore are often not tailored to the specific needs of cost estimators. This is true of the Basic Engineering Esti- mating System discussed in the example section. What Is It? Agency estimation software is specifically designed to serve the estimation practice of a specific state highway agency. This usually means that the program has been designed around the agency’s existing historical data files on project compo- nents, items, and costs. The software is designed to address very explicit agency approaches and satisfy discrete agency objectives. Why? Because of the computer’s ability to handle large data sets and the flexibility it provides in specifying calculation pro- cesses, estimation software provides the estimator with a tool that rapidly handles the repetitive calculations needed to pro- duce an estimate. The software usually has search routines that allow the user to speedily search for specific information in the supporting historical databases. The information search abil- A-121

ity of a computer is an important asset in developing estimates for projects having a large number of cost (i.e., work) items. What Does It Do? Agency software, besides providing a calculation frame- work, allows the estimator to effectively employ the agency’s historical databases in a selective yet rapid manner. The soft- ware should also be capable of performing “what-if” analyses. Typically, the software, be it agency or commercial, provides a sequential record of the data used to generate the estimate and all assumptions. When? To address very specific PS&E requirements, custom agency software may be the only solution. Agency software can be very good in addressing distinctive requirements imposed on any individual state highway agency; however, software develop- ment is tedious and costly, and continuing support is a critical issue. Agencies must therefore recognize the size and com- plexity of the software development undertaking and must balance such a commitment against the performance of commercially developed and supported software, such as AASHTO’s Trns•port, which has been developed specifically to meet the needs of state highway agency estimation. Examples One state highway agency that approaches project estima- tion by building estimated cost from the bottom up currently uses a slightly modified commercial estimation program. The commercial program is used by many contractors and was originally developed to facilitate detailed estimation by a large contracting organization. This program and similar ones of this type enable state highway agencies to develop estimates from the bottom up based on crew productivity, construction methods, and selected equipment. California DOT (Caltrans) has its Basic Engineering Esti- mating System (BEES). General information about BEES can be found in the Caltrans Plans, Specifications and Estimates Guide. BEES has the capability of segregating estimates by structure, alternative designs, and so forth. The BEES software is a subsystem of the Caltrans Project Information System and Analysis (PISA) and uses the information contained in the Caltrans Project Management Control System (PMCS) and their Standard Item List. The estimate data are available for bid opening purposes and for contract progress payments. Tips It is important that agency-developed software be user friendly and structured so that it is easy to input the required data. To be usable and reliable, estimation software must: • Provide a precise, unambiguous definition of every element or group of elements used in the design of the software • Perform diagnostics to the extent that the completion status of every bid item is known at any given time during estimate preparation • Be mathematically consistent and automatically make ad- justments everywhere when a revision is made • Be devoid of instructions using program file names or other programming language • Have databases designed so they are accessible within an extremely short time without scrolling through a myriad of items • Allow the use of arbitrary unit prices not drawn from the database • Allow the estimator to have cost templates for standard items • Identify the source (database or plug) of all prices • Be able to sort and print the data generated by the estimate in several different formats • Automatically identify prices that are outside of specified ranges Resources Washington State DOT, Barlist bridge software down- load site, www.wsdot.wa.gov/eesc/bridge/software/index.cfm? fuseaction=download&software_id=45. Caltrans, “Chapter 20: Project Development Cost Esti- mates,” Project Development Procedures Manual (PDPM). www.dot.ca.gov/hq/oppd/pdpm/chap_htm/chapt20/ chapt20.htm. A list of Basic Engineering Estimating System (BEES) stan- dard contract items and the weighted averages of the low bid- der’s prices for those items can be found at www.dot.ca.gov/ hq/esc/oe/awards. P1.2 Commercial Estimation Software (Also See C2.2, C3.2) Because writing good software is extremely time intensive and requires a qualified staff of professional programmers who are knowledgeable about the task the software is to perform, many agencies use commercial estimation software that has already been validated and documented before release. In the case of state highway agencies, the most widely used commer- cial estimation software is Estimator by InfoTech. Estimator is a module of Trns•port. Trns•port is owned by InfoTech, Inc., and fully licensed by AASHTO under that name. Using this software, state highway agencies can prepare item-level esti- mates derived from bid histories or from cost-based esti- mation. A Construction Financial Management Association survey in 2004 identified HeavyBid, Hard Dollar, Bid2Win, and Timberline as the major estimation software used by the A-122

heavy construction industry. It is also interesting to note that the same survey found that about 26% of the market uses Microsoft Excel. What Is It? Estimation software is any computer program that assists the state highway agency in developing project cost estimates. Estimation software has preloaded templates that help the esti- mator and project team define the project scope, cost, and schedule. The software provides a means to track project devel- opment and can assist in project reviews. Several very good commercial programs are available and being used by a large number of state highway agencies. Why? Because development and maintenance of specialized agency software can be expensive and requires special talents, it is often more economical to use commercially available soft- ware, which spreads the program’s development and mainte- nance cost over a larger user base. Software providers can also help state highway agencies structure their databases to better support the estimation process. Additionally, because the soft- ware provider works with many agencies and estimators, it has a broad knowledge of estimation and software issues. What Does It Do? Computers and estimation software enhance the ability of engineers to manage large data sets that are needed in devel- oping estimates for all types of projects. Computers and esti- mation software can: • Develop an unlimited number of estimates matched to proj- ect complexity and level of design, whether from scratch, other current estimates, or historical backups • Easily change, back up, and store estimates • Draw from unlimited amounts of historical cost informa- tion and/or labor and equipment rate tables • Quickly copy entire estimates, individual or multiple work (i.e., bid) items, and/or activities from previous estimates • Provide a record of what changes were made to the esti- mate and who made the changes When? Commercial estimation software offers the most effective way to prepare and manage estimates for medium to large projects involving multiple cost items. For very large, com- plex projects, software may be the only effective and efficient method. Most software can be used in the earliest stages of project development to create an estimate that can then be expanded at the PS&E stage when design is complete and quantities fully quantified. Examples The Cost Estimation System (CES) is the primary AASHTO Trns•port module for construction cost estimation. It provides a variety of estimation methods and full integration with the other Trns•port components. Available on the client/server platform and fully integrated with PES and BAMS/DSS (other Trns•port modules), CES provides an environment in which parametric, cost-based, and bid-based job cost estimates can be prepared. Historic bid price databases can be created using the BAMS/DDS module of Trns•port. BAMS/DDS is the Decision Support System module of the construction contract informa- tion historical database. Another commercially available system that is used by sev- eral state highway agencies is Bid Tabs by OMAN systems. As of August 7, 2002: • Trns•port is used by 22 state highway agencies. • Bid Tabs is used either as a stand-alone or in conjunction with Trns•port by seven state highway agencies. • Two other state highway agencies are in the process of test- ing Bid Tabs. • One state highway agency uses HCSS HeavyBid, which is used by many contractors and was originally developed to facilitate detailed estimation by a large contracting organi- zation. (See www.hcss.com/HBstdFeatures.asp.) • One state highway agency uses AutoCAD to perform quan- tity takeoff for project estimates by combining plan views of the project area with elevation information to get a three- dimensional view of the project. Tips The estimator is the key to any estimation process and must know the capabilities and limitations of the software being used. Therefore, the effectiveness of any software is directly related to product support and training. When selecting soft- ware, always ensure that product support will be available and that training and training material will be provided. Resources For more information about Trns•port Estimator, contact the AASHTOWare contractor: Info Tech, 5700 SW 34th Street, Suite 1235, Gainesville, FL 32608. Phone (352) 381-4400; Fax (352) 381-4444; E-mail info@infotechfl.com; Internet www. infotechfl.com. A-123

Oman Systems, Inc., P.O. Box 50820, Nashville, TN 37205. Phone (800) 541-0803; Fax 615-385-2507; Internet www. omanco.com. Heavy Construction Systems Specialists, Inc. (HCSS), 6200 Savoy, Suite 1100, Houston, TX 77036. Phone (800) 683-3196 or (713) 270-4000; Fax (713) 270-0185; Internet www.hcss. com; E-mail info@hcss.com. Hard Dollar BID*BUILD estimation and job control soft- ware built on a Microsoft’s platform. http://www.harddollar. com/Solutions/project_driven/scheduling.asp. BID2WIN software is a Windows-based cost estimation and bidding program built on Microsoft.NET and SQL Server technology, www.bid2win.com. Timberline estimation software operates several different Microsoft platforms: www.sagetimberlineoffice.com/software/ estimating/default.aspx. P1.3 Cost Based At the PS&E phase of project development, there exists ade- quate scope definition to generate detailed estimates from final plans and specifications. These estimates are based on a sched- ule of line items and calculated quantities for each line item. Cost-based estimation is one tool used to develop costs for detailed estimates. Cost-based estimation is similar to what contractors use to prepare estimates to support their bids. Nineteen state highway agencies perform detailed bottom-up estimates for major work items using historic databases to track costs based on crews, equipment, and production. Although state highway agencies do not use this tool as frequently as his- torical bid-based estimation (see Section P1.4), this tool is applied when the history related to the scope of the line item or items is not available. The difficulty in using cost-based esti- mation is obtaining accurate crew sizes and mixes and associ- ated production rates. What Is It? Cost-based estimation is a tool to compute the unit cost for items of work by estimating the cost of each component to complete the work and then adding a reasonable amount for a contractor’s overhead and profit. The concept requires the esti- mator to identify distinct work items in a project, which have complete definition so that quantities can be determined for these work items. These quantities can then be used to estimate costs for such construction components as labor, materials, and equipment to arrive at a realistic unit cost for an item. Why? The unique character of projects, geographical influences, market factors, and the volatility of material prices often makes historical pricing an unreliable method of estimating project costs. Cost-based estimation may provide more accurate and defendable costs to support the decision for contract award/ rejection and any future price negotiations with the contractor. At the PS&E phase, work items are well defined so that the con- struction operations involved with a work item can be visual- ized to support the development of cost-based estimates. What Does It Do? Cost-based estimates contain six basic elements: time, equipment, labor, material, overhead, and profit. Generally, a work statement and set of drawings or specifications are used to “take off” material quantities required for each distinct task performed in accomplishing a given construction operation. From these quantities, direct labor, materials, and equipment are derived. Contractor overhead and profit are then added. The total cost divided by the quantity gives the unit price for the work item. This unit cost can then be input into the engi- neer’s estimate to provide for a unit cost for the work item. This is necessary for the state highway agency to compare the engineer’s estimate with the contractor’s unit price bid for the same item. When? This tool is used most often when detailed plans and spec- ifications are complete but there is a lack of historical bid data to estimate costs for a specific item of work. Typically, this work item is unusual in nature and not commonly encoun- tered by the estimator. The estimator must still convert the cost-based estimate for an item to an equivalent unit price for incorporation into the engineer’s estimate. Examples The AASHTO Subcommittee on Design Technical Com- mittee on Cost Estimating is developing a guidance paper on cost-based estimation. The type of content covered in this paper is outlined below: Introduction Definitions Elements of a Cost-Based Estimate Building a Task Material Quantity Breakdowns Obtaining Prices Quote Maintenance Equipment Needs Identification Ownership Rates Operation Costs Resources Labor Needs Identification Required Wage Rates Time Production Rates A-124

Effect on the Estimate Resources Overhead & Profit Administration Labor Lump Sum Items Software Applications Examples References While still in draft form, this guidance provides quantitative examples of cost-based estimation for such items as material, equipment, labor, and time, as well as the application of these components in preparing the PS&E using this tool. Tips The estimator should have construction experience in order to be able to visualize a line item in terms of the operations needed to construct the work. The estimator also needs to locate sources of information related to production rates and crews, which includes calling suppliers of materials to obtain unit costs for materials and similar resources for determining equipment production and rental rates. This may require using a resource such as the RSMeans Heavy Construction Cost Data. Resources AASHTO Subcommittee on Design, Technical Committee on Cost Estimating, is developing guidance on historical bid- based estimation and cost-based estimation. Draft papers are prepared but not approved for release. To learn more, con- tact the Chair of this technical committee. See this website for key contact persons: http://design.transportation.org/?siteid= 59&pageid=756. Church, Horace K. (1981). Excavation Handbook, McGraw- Hill Book Company. Associated General Contractors of America (1999). Con- struction Estimating & Bidding Theory Principles Process. Publication No. 3505. R. S. Means (2006). “Heavy Construction Cost Data,” www. rsmeans.com. Oberlender, Garold D., and Steven M. Trost (2001). “Pre- dicting Accuracy of Early Cost Estimates Based on Estimate Quality,” Journal of Construction Engineering and Management, American Society of Civil Engineers, Vol. 127, No. 3, May/June. Parker, Albert D., Donald S. Barrie, and Robert M. Snyder (1984). Planning & Estimating Heavy Construction, McGraw- Hill. Rignwald, Richard C. (1993). Means Heavy Construction Handbook, R. S. Means Company. R. S. Means Company (published annually). RSMeans Building Construction Cost Data. www.rsmeans.com. R. S. Means Company (published annually). RSMeans Heavy Construction Cost Data. www.rsmeans.com. Smith, Francis E. (1976). “Earthwork Volumes by Contour Method,” Journal of the Construction Division, American Soci- ety of Civil Engineers, Vol. 102, No. 1. Frank R. Walker Company (published periodically). Walker’s Building Estimator’s Reference Book. P1.4 Historical Bid Based (Also See D2.4) Historical bid-based estimation is the most common approach used by state highway agencies. This approach relies heavily on line items with both quantities and good historical data for line-item cost. The historical data normally are based on bids from recent projects. The estimator adjusts the histor- ical data to fit the current project characteristics and location. What Is It? Three basic approaches for developing an engineer’s esti- mates are typically used in practice. They are the historic bid- based and cost-based approaches and a combination of these two approaches. The most common approach used by state highway agencies in developing estimates for transportation projects is historical, or bid-based, estimation. There are many factors that need to be considered to develop an accurate engi- neer’s estimate using historical bid prices. These factors pose a certain level of risk in preparing estimates using this method. However, this method is the most common because it is very efficient and provides reasonable estimates on typical projects when using final plans and specifications. Why? Historical bid-based estimation is typically the most effi- cient method for developing an estimate for line items when adequate historical pricing data are available. Implementing a bid-history-based estimation process enables an agency to estimate the cost of proposed work using a minimum of resources. Similar projects with similar line items, quantities, and locations can be compared to quickly develop an estimate for the new project. A bid history is essential for analysis of contract bids. Main- taining a strong bid history can discourage undesirable bidding practices. A bid history is also valuable for use in evaluating contractor-proposed changes, such as value engineering and analysis proposals. The information necessary for bid-based estimates can be useful when preparing preliminary estimates or comparing design alternatives. What Does It Do? This method uses data from recently bid contracts as a basis for the unit prices on the project being estimated. Data from previous projects is typically stored in a database for 3 to 5 years A-125

to provide the historical data to the estimator. The more data that are available and organized by project type, size, and loca- tion, the better resource the estimator has to produce an esti- mate that reflects the known scope and site conditions of the new project. Unit prices are adjusted for the specific project conditions in comparison to the previous projects. Adjust- ments are generally made based on the project location, size of the project, project risks, quantities, general market conditions, and other factors. The estimator has to rely on engineering judgment and experience to make these adjustments. When? This technique can be used as early as the programming phase but is validated to a greater extent in the PS&E stage, when project quantities are better known. Examples Collection, sorting, and retrieval of data are the key to suc- cess with this method. The usage of computer software pro- vides an efficient way to handle the data. To organize the data, it is helpful to collect data by category, such as general project information, bid data, and project- specific information. Using a data entry form, such as the one in Figure P1.4-1, to input general project information and project-specific information is an effective way to collect proj- ect information. Using a spreadsheet is another effective way to import bid data. Figure P1.4-2 shows an example of bid data placed into a spreadsheet to be exported to a database. Further, provisions are often made in the software to include project-specific or unique items, such as new line items, force account work, bidding climate, time of year, expected competi- tion, other contracts, and specialty work. These types of provi- sions can aid in the estimation and improve estimate accuracy. Tips Several historical databases are available that provide cur- rent values for estimating costs of the various units of work for a project. The databases are compiled from records of actual project costs and ongoing price quotations from suppliers. The databases are published annually in the form of books, CDs, and computer-based extranets. There is, however, a danger of applying any historical database pricing without first adjusting the data for the particular aspects of the project under consid- eration. In construction, every project is unique, with a distinct set of local factors (such as size of project, desirability, level of competition, flexibility of specifications, work site, and hour restrictions) that come into play in bidding. When an estima- tion system that is attached to a price database is used, the esti- mator should still review each line item price to determine if it is applicable to the project being estimated. Blindly applying database prices can lead to inaccurate estimates. Location factors should also be applied only after first con- sidering the project size and particular nature to determine where the bidders will come from. If a large project is in a small town, the location factor for that town likely will not apply, as the bidders will be coming from elsewhere. The bids may, as a result, be much higher than the factor would indi- cate because the wages will be based on another location and the bidders may have to pay accommodation and travel costs for some of their workers. Resources The AASHTO Subcommittee on Design, Technical Com- mittee on Cost Estimating, is developing guidance on his- torical bid-based estimation and cost-based estimation. Draft papers are prepared but not approved for release. To learn more, contact the chair of this technical committee. See this website for key contact persons: http://design.transportation. org/?siteid=59&pageid=756. A-126 Figure P1.4-1. Data entry form example.

P1.5 Trns•port (Also See C3.5, D2.9) Trns•port is the AASHTO-sponsored transportation agency management software. It is a robust transportation program management system. It uses the most current information sys- tems technology and is based on the experience and needs of AASHTO’s member agencies. Trns•port capabilities encompass the full functionality of a construction contract management system. Trns•port is an integrated system consisting of 14 modular components, and AASHTOWare is continually updating the software with new modules. Figure P1.5 shows a generic estimation work- flow and functional areas where Trns•port models can assist. Each module addresses the needs of the highway agency at a particular milestone in the construction contracting life cycle, representing three functional areas: preconstruction, construction, and decision support. What Is It? The Trns•port Proposal and Estimates System (PES) addresses the needs of the highway agency during the pre- A-127 Figure P1.4-2. Example of bid data placed into a spreadsheet. Figure P1.5. Estimation workflow and functional areas where Trns•port models assist.

letting phase of project development. PES supports prepara- tion of the PS&E for state and federal aid highway construction projects. PES provides design, project construction adminis- tration, and estimation sections with tools to assist in project definition, funding specification, project cost estimation, con- tract proposal creation, and bid letting packaging. Why? The Trns•port PES module is designed for flexibility in project definition and in associated funding requirements (such as proposal creation using multiple funding units, dif- fering construction engineering and contingency percentages, identification of special provisions and supplemental specifi- cations, addendum processing, and alternative specifications at both category and line-item levels) to track and manage project scope and cost information. What Does It Do? The Trns•port PES module is an interactive, online system that enables management of project information during the pre-letting phase of a highway construction project develop- ment. PES permits the flexible definition of a project and its associated funding requirements to track and manage proj- ect cost information and set up a bidding proposal prior to the bid letting activity. It allows for data to be entered at the project, category, and item level. Grouping of multiple proj- ects to track all related costs and funding sources is also pos- sible. PES has import capabilities for receiving item and quantity data from design systems and can exchange data with the CES and estimating modules of Trns•port (see Sec- tions D3.5 and D2.9). When? The PES module of Trns•port is most frequently used to support the PS&E phase and the development of an engineer’s estimate. Examples In years past, the New York State DOT (NYSDOT) used the mainframe versions of Trns•port PES, LAS, and DSS, but as agencies moved from the mainframe to the client/server ver- sions, AASHTO decided to drop support of the mainframe version. NYSDOT then migrated to the client/server version. Tips The estimator can use different reports generated by the PES module: • Detailed cost estimate and funding summary • Proposal schedule • Special provisions listing • Proposal schedule with estimated prices The estimator must check all input and output to ensure that the estimated costs for major line items are within ex- pected agency tolerances for the project type being estimated. This check can follow the Puerto principle, in that 80% of the estimated cost of construction is covered in 20% of the items. Comparing the overall estimate with estimates from recently bid or completed similar-type projects is another method of checking an estimate. Additional information can be found on the following website: dot.state.ny.us/trns-port/about.html. Resources The Technology Implementation Company, Gainesville, Florida: www.infotechfl.com or www.cloverleaf.net. AASHTOWare, Transportation Software Solutions, Amer- ican Association of State Highway and Transportation Offi- cials, www.aashtoware.org. P2 Project Scoping Scoping ensures that the development team is concentrat- ing on the best opportunity for improvement. Projects have a greater success rate if the scoping sets clear parameters and determines what is in scope or out of scope for a particular project, what resources and skills will be required, and a time frame for completion. To ensure that the project is based on valid analysis rather than assumption, it is important to invest sufficient time up front to define the primary objectives. Without this process, a project may be too nebulous or unwieldy for the team to man- age and, therefore, will not produce the desired results—it will continually experience scope changes and scope creep, and a valid estimate cannot be developed. P2.1 Estimation Checklist (Also See C4.2, V3.1) Thoroughness in examining drawings and specifications usually eliminates estimate errors of omission. Checklists can be used to confirm that all cost items have been included in the estimate. Checklists are not, however, a substitute for the exercise of sound engineering judgment by the estimator or the reviewers. The estimation professionals must inde- pendently evaluate the significant data upon which the esti- mates are based, but the checklists help to ensure estimate completeness. A-128

What Is It? Checklists serve as guides in preparing, checking, and reviewing cost estimates. These templates ensure that estima- tors and reviewers develop a complete estimate. They guide the estimator through suggested items and consideration of factors that impact project cost. Why? While estimators and project managers are generally very familiar with assembling cost data and developing an estimate, the estimation process requires consideration of many work items and the factors that impact the cost of individual items, as well as factors that impact the cost of the project in general. Checklists serve to delineate the many factors that must be considered during estimate preparation. Therefore, checklists are an excellent means of (1) ensuring that the estimate com- pletely addresses the stated scope of the project, (2) avoiding omissions, and (3) calling attention to the interaction between factors that can impact cost. What Does It Do? Checklists guide the estimator through suggested items and serve to ensure that all cost categories are accounted for in an estimate. The answers to the checklist questions will provide an overview of the estimate’s completeness and focus the estima- tor’s attention on critical questions. The checklists can be divided into major work areas, such as roadway and structural, to support specific parts of project estimate development. There can also be checklists that help the estimator identify background concerns that impact project cost. When? Checklists can support estimate creation at all stages of project development. The purpose of a checklist is to assist the estimator in planning, formatting, and developing a complete estimate. Checklists should be as inclusive as possible, with questions that specifically probe the estimate at the different stages in project development. Example The North Carolina DOT has an estimate checklist for func- tional and preliminary estimates. It includes the various items included in a project estimate, as well as the units of measure- ment to be used in estimating the items: • Clearing and grubbing (acre or hectare) • Earthwork (cy or m3)—unclassified, borrow, undercut, etc. • Fine grading (sy or m2) • Drainage (per mile or kilometer) • Paving (ton or mtn, w/pavement design, or sy/m2 without) • Stabilization (sy or m2) • Shoulder drains (lf or meter) • Curb and gutter (lf or meter) • Guardrail (lf or meter) • Anchor units (each type) • Fencing (mile or kilometer) • Interchange signing (type and location) • Traffic control plan (TCP) (per mile or kilometer) • Thermo and markers (per mile or kilometer) • Utilities (lf or meters) • Erosion control (acres or hectares) • Traffic signals (each and location) • Retaining walls or noise walls (sf or m2, with avg. height) • Bridges (individual location) • Reinforced concrete (RC) box culverts (individual location) • Railroad crossing (each—with or without gates) Tips There can be many individual checklists to support differ- ent phases of estimate preparation and specific cost areas—for example, a plan review checklist; a site checklist; a checklist for developing quantities; and a checklist to consider construction noise, dust, and other construction nuisance issues. Resources Checklists for reviewing a prepared estimate are used by the FHWA and state highway agencies. The following is FHWA’s “Engineer’s Estimate Checklist for Full Oversight Projects”: • Check approximately 15–20% (more if possible) of the bid items against the plan quantities for accuracy. • Do the items checked correspond with the plans and plan quantities? • Do the pay items correspond to the type of work proposed? • Are the units of measure appropriate for the pay item? • Is the quantity for the pay item reasonable for the project? • Does the unit price seem reasonable for the type, size, and location of the project? The FHWA also has a checklist document, “Checklist and Guidelines for Review of Geotechnical Reports and Prelimi- nary Plans and Specifications,” which is posted on the FHWA website. In the PS&E portion of this document is a checklist that applies to specific geotechnical features, such as pile foun- dations, embankments, and landslide corrections. This check- list can be found at: www.fhwa.dot.gov/bridge/checklist.htm. The U.S. Army Corps of Engineers estimate review checklist from ER1110-1-12 requires that the reviewer verify that: A-129

• Estimates are based on approved scope of work and latest available design data. • Estimates are developed from Corps unit price book (UPB) or approved construction cost data (e.g., the Gen- eral Construction Cost Engineering Standards published annually by Richardson Engineering Services or the price data published by R. S. Means Company). • The basis for the estimates is provided or explained; all assumptions, quotes, crew sizes, and other cost factors are documented. • Estimates are escalated to the expected midpoint of con- struction using the latest approved management control plan or OMB [Office of Management and Budget] (for Civil Works projects) index. • Estimates are prepared in accordance with latest Corps cost engineering regulations and technical manuals. • Estimates include risk analysis to cover unknown condi- tions or uncertainties on work schedules. • Estimates are internally reviewed prior to submittal. This checklist could serve as review guidance for any state highway agency. Defense Logistics Agency’s “In-House Cost Estimate Check- list,” at www.dla.mil/j-3/a-76/IRLine02.html, is not designed for projects of the type that state highway agencies handle, but it does contain some very good questions that a state highway agency might want to include in its own checklist, including: • Is inflation calculated correctly? • If costs are based on historical data, are appropriate adjust- ments included? Wisconsin DOT’s (WisDOT’s) early project scoping tools can be found at www.dot.wisconsin.gov/localgov/highways/ tools.htm. WisDOT’s “Local Agency Guidelines: Appendix 14.52— Project Development Checklist” can be found at http://www. mrsc.org/Subjects/PubWorks/construct/c3-checklst.pdf. The Port Angeles Public Works Department’s “Project Development Checklist” can be found at http://www.mrsc. org/govdocs/p54pwprojdevchklst.aspx. P2.2 Scoping Documents (Also See C6.4) State highway agencies throughout the country have created scoping documents to support the scoping process. These doc- uments are used at project initiation to define project scope. They provide an excellent tool for project estimators to define the basis of an estimate. While scoping documents are fre- quently used by state highway agency planning personnel to begin the project development process, state highway agency engineers and estimators often overlook this tool in the esti- mation process during the latter stages of project development. The scoping documents can be used as a guide to ensure that all critical scope items are included in an estimate or to assist in communicating the estimate basis. What Is It? Scoping documents are standardized forms that state high- way agencies use to explicitly define and document the scope of a project. They are often developed in the form of a check- list. They represent past project experience and list key scope items and lessons learned from past projects. Why? A scoping document is a tool to aid in project scope defini- tion and documentation. It is a key tool in the scoping method of estimation. Scoping documents can be used before any major engineering efforts take place. They can also be used later in the cost estimation process to define the estimate basis and to aid in establishing an appropriate level of contingency. What Does It Do? The development of a standard scoping document provides consistency in project scope definition early in the project development process. Completion of the scoping document for each project clearly identifies the original project scope, which can be used in the documentation of the estimate basis or in the establishment of the estimate baseline. The scoping document can help document subsequent changes. This doc- ument will aid in identification of the purpose of the project and serve as a reminder of project intentions throughout proj- ect development. The document aids in identifying elements to be included in estimate and schedule considerations. When? The scoping document should be completed early in proj- ect development to establish a baseline scope of the project and a basis for the early project estimates. It can be reviewed at each project milestone to ensure that all critical scope items are included in the estimate and that the extraneous items of scope are not included. The document should be reviewed throughout the development of the project to check for changes in scope. Examples Numerous examples of scoping documents are provided in Section C6.4. Many state highway agencies use some sort of scoping document. Scoping documents vary in complexity and A-130

specificity. Some state highway agencies use a simple memo as their scoping document, while other agencies have longer, more detailed forms. Figure C6.4-1 provides an example of a scop- ing document from Virginia DOT, and Figures C6.4-2 pro- vides an example of a draft project scoping memoranda from Missouri DOT. Tips A scoping document is an excellent tool to define an esti- mate basis. Use the project scoping document in a team envi- ronment with all of the appropriate disciplines represented whenever possible to minimize the chance of any oversights. Scoping documents should permit some flexibility for spe- cial-case projects, both the very straightforward projects and the more complex projects. Revisit the project scoping docu- ment at critical cost estimation practice and cost estimation management milestones throughout the project develop- ment process. Resources The Vermont Agency of Transportation Project Develop- ment Process Manual is online at http://www.aot.state.vt.us/ progdev/Sections/PDManual/01mantabl.htm. The New York State DOT Design Quality Assurance Bureau scoping process can be found in the first three chapters of the Project Development Manual, http://www.dot.state.ny.us/ cmb/consult/dpm1/pdm_01_30_04.html. The Missouri State DOT’s report, “Implementation of Recommendations for Project Scoping,” is online at www. modot.org/design/scopingreport_0403.pdf. A series of scoping resources is available from the Virginia DOT online at www.virginiadot.org. A particularly helpful Vir- ginia DOT guidance document for a scoping meeting is listed at www.virginiadot.org/projects/Resources/CE-1-Scoping.pdf. Project initiation documents mark the transition from plan- ning and programming to advanced planning. Such docu- ments are described in Chapter 9 of the California DOT Project Development Procedures Manual (PDPM), on the Internet at http://www.dot.ca.gov/hq/oppd/pdpm/pdpmn.htm. P2.3 Work Breakdown Structure Several state highway agencies use work breakdown struc- tures (WBSs). These are lists of all the known elements of the project scope. They are in greater detail than the list of key scope items (described in Section B1.4). They are generally assembled into groups of like or related items to form a hier- archical structure, where each descending level of the hierar- chy represents an increasingly detailed definition of the project scope. A WBS is a deliverable-oriented grouping of project components that organizes and defines the total scope of the project. Work not in the WBS is outside the scope of the project. As with the scope statement, the WBS is often used to develop or confirm a common understanding of proj- ect scope. Each descending level represents an increasingly detailed description of the project. What Is It? A basic WBS is illustrated in Figure P2.3-1. Why? The WBS is an excellent tool for documenting the project scope, scope changes, and scope creep. Each change to the WBS is a change in the project team’s understanding of the project scope. Small incremental changes (i.e., scope creep) can be documented by comparing the current WBS with earlier versions. A WBS can be a basis for developing a WBS for future projects that have similar project characteristics. What Does It Do? A good WBS fully documents the team’s current under- standing of the project scope. It can be amended in three ways: • Deleting WBS elements, indicating a decrease in expected scope. • Adding WBS elements horizontally, indicating an increase in expected scope. • Adding WBS elements below an existing element, indicat- ing an increased understanding of the existing scope. When? The initial WBS should be developed immediately after the scoping document is completed (see Section P2.2). It may be part of, or an attachment to, the scoping document. Examples Washington State DOT has initiated a project manage- ment process as an executive order. A major component of the project management process is to “plan the work.” One activity under “plan the work” is the preparation of a work breakdown structure. A description of this activity is shown in Figure P2.3-2. Tips Build the WBS to the level at which you plan to manage the work. Specialty groups are a part of the project team, but they A-131

should identify their deliverables and be responsible for man- aging their tasks and reporting progress. Remember, a good WBS is not a detailed “to do” list. Resources A Guide to the Project Management Body of Knowledge (3rd ed., 2004) and Practice Standard for Work Breakdown Struc- tures (2002), both published by the Project Management Institute. Washington State DOT (undated), Project Management On- Line Guide, see website http://www.wsdot.wa.gov/Projects/ ProjectMgmt/Process.htm. Project Management Institute (2004). A Guide to Project Management Body of Knowledge (PMBOK Guide). P3 Public Involvement People want to have a voice in transportation project deci- sion making. State highway agencies must solicit public involve- ment to accommodate the public’s voice in order to create a successful project. However, the public often finds both met- ropolitan and statewide transportation programs incompre- hensible. Extra effort may be needed to obtain involvement by people unaccustomed to participating in the project develop- ment process and who, if left out of this process, could prove to be obstructive. P3.1 Meetings Getting started in public involvement need not be difficult. Clearly define the goals and objectives of the public involvement program, and then make them specific to the project. Offer peo- ple ways to participate that match their level of interest and commitment. Invite those who are highly involved to address specific tasks or issues on a regular basis. Scope issues may be raised through the people most closely impacted by the project. What Is It? Public meetings and other outreach efforts provide an opportunity for the public to participate in a general review of a specific project. These meetings also give the state highway agency a forum for providing details about the project, includ- ing the purpose of, and need for, the project. The purpose and need information informs the public that the project will cor- rect a problem or deficiency, such as relieving congestion and improving safety. Further, the state highway agency can inform the public how the project will correct the deficiency (i.e., the scope of the project), such as adding lanes to improve traffic A-132 State Highway Improvement Environmental Document Plans, Specifications and Estimate Right of Way Construction Construction Engineering Construction Contract Earthwork Drainage Pavement Structures Bridge 1 Bridge 2 Soundwall Substructure Superstructure Figure P2.3-1. Graphic representation of a work breakdown structure.

flow. In addition to presenting the scope, the project cost and schedule can be presented to the public. Why? Public meetings initiate active public involvement in the project. Obtaining public response to a project is critical to the state highway agency to avoid opposition to the project, which may delay project development. Further, the public may request changes to the project that would impact the project’s scope. Delays and/or changes in scope have cost and schedule ramifications. What Does It Do? Meetings create public awareness of the project and hope- fully public buy-in with respect to the approach for addressing the need that is driving the project scope. Through meetings, the public becomes part of the project. Meetings provide an opportunity for the state highway agency to gain public trust that the project is using their tax dollars wisely. When? Public involvement should occur early in project develop- ment, beginning at systems planning, continuing in program- A-133 Figure P2.3-2. Work breakdown structure activity description. Pre-Construction On-Line Guide Plan the Work Process Activity: Develop the Work Breakdown Structure using the Master Deliverables List (MDL) Revision July 1, 2005 Description: Tailoring and completing the project-specific Work Breakdown Structure based on the Master Deliverables List. Inputs: • Completed Initiate and Align Worksheet Tools: • “What you need to know about the Master Deliverables List (MDL)” • Master Deliverables List (MDL) 1. Refer to “What you need to know about the Master Deliverables List (MDL)” for a general briefing on the MDL and its role in the Project Delivery Information System (PDIS). 2. Review the MDL and delete the elements that are not applicable for this project and phase. 3. Identify your Project Phase and Sub-Phase (Levels 1 & 2), and eliminate the rest. The majority of the time in project development (design), we are in the Preliminary Engineering (PE) Phase (Level 1). Within PE, we are either in the Scoping or Design/PS&E Sub- Phase (Level 2). 4. Identify the categories of work or processes (Level 3) that will be a part of your project, and eliminate the rest. The processes in the MDL include subjects such as: Hydraulics, Right of Way, Traffic, Utilities, and Environmental Documentation. Consult with specialty groups to identify the specific processes required for the project. Steps: 5. Identify the deliverables to be produced (Level 4) for each category of work or process, and eliminate the rest. The deliverables in the MDL includes subjects such as: Type A Project, Right of Entry, Preliminary Traffic Analysis Report, and NEPA/SEPA Compliance. 6. Consult with specialty groups to identify project-specific deliverables, logical constraints, durations, and costs. Products: • Completed Work Breakdown Structure Guidelines: Build the WBS to the level at which you plan to manage the work. Specialty groups are a part of the project team, but they should identify their deliverables and be responsible for managing their tasks and reporting progress.

ming, then continuing through preliminary design and beyond. The timing of meetings to engage the public in the project should coincide with the availability of preliminary design information. The project team must have sufficient knowl- edge and understanding of the project to convey the project’s purpose, need, and scope to the public in an effective manner. Examples An open house for a project informs the public about the details of the project and allows the public to ask questions. An illustration of this approach is shown in Figures P3.1-1 and P3.1-2. Tips The state highway agency should use public meetings and open house events to encourage public comments on the proj- ect. The information provided to the public should be simple and easy to understand. Graphics should be used to the fullest extent because “a picture is worth a thousand words.” State highway agency staff should actively engage the public dur- ing the meeting, so techniques should be used to encourage the public to ask questions. Costs and schedule information should be provided in a manner that helps the public under- stand the project costs and why it takes so long to design and construct the project. The state highway agency should have key project team personnel participate in these meetings so that the public gains confidence that the project will be successful. Finally, the state highway agency should respond to any public comments and try to accommodate requests. Resources Howard/Stein-Hudson Associates, Inc., and Parsons Brinckerhoff Quade and Douglas (1996), Public Involvement Techniques for Transportation Decision-Making, Publication No. FHWA-PD-96-031 for the FHWA and the FTA. www. fhwa.dot.gov/reports/pittd/cover.htm. A-134 Figure P3.1-2. Members of the public reviewed project plans and asked Washington State DOT engineers questions about the plans at an open house. Figure P3.1-1. Website clip of announcement for a Washington State DOT open house. January 2006 Project Status − We hosted an open house to explain our plans and get public input on October 5, 2005. − We recently received approval from state legislators to build a new flyover ramp from westbound SR 202 to westbound SR 520 three years ahead of schedule. The new ramp could be open to traffic by the end of 2007. − We recently mailed a newsletter (pdf 759kb) to 40,000 Eastside households to keep them up-to-date on our progress. FHWA (1997), Public Involvement at Oregon Department of Transportation, Publication No. FHWA-PD-94-021. This report describes how Oregon DOT uses a variety of public involvement techniques in both project development and statewide planning. Washington State DOT, Project SR520, Information can be found at: www.wsdot.wa.gov/Projects/SR520/WLakeSamPk_ SR202 and at www.wsdot.wa.gov/Projects/SR520/WLake SamPk_SR202/ProjectPhotos.htm. R1 Recognition of Project Complexity Providing a standard definition of project complexity ensures that projects of similar complexity are subject to similar reviews and attention. This creates a common com- munication language among state highway agency employ- ees regarding projects. R1.1 Complexity Definitions The influence of project complexity on cost estimation prac- tice and cost estimation management is discussed throughout this guidebook. Project complexity can be a driver of cost esca- lation. Project complexity will significantly influence the meth-

ods and tools that an estimator uses to prepare and manage project cost estimates. Some agencies have found it useful to create a formal and standard definition for project complexity in order to communicate the issue to project team members and stakeholders. What Is It? A complexity definition is a formal classification of project complexity that can be applied to all projects. The complexity definition can also include a definition of project type (such as new or reconstruction, size, project setting, and rural or urban), project location, available level of design detail, and other extraordinary factors. The goal is to explicitly define project complexity through the use of this classification system. Why? Providing a standard definition of project complexity promotes transparent communication of a project’s charac- teristics. It can be used to assist in selecting an appropriate esti- mation method and tools or to invoke specific cost estimation management procedures. It helps to ensure that projects of varying complexity levels are subject to the appropriate reviews and attention. This allows for a common language between state highway agency employees for communication regarding project complexity. What Does It Do? This tool defines a project classification based on a specific set of complexity criteria. The classification in turn helps to identify the appropriate strategies, methods, and tools for approaching cost estimation practice and cost estimation man- agement on the project. When? In terms of estimation, this tool is used to define the approach for preparing estimates during all phases of project development. It should be employed early in the project devel- opment process and revisited as design develops or if any major changes in scope are realized. Examples Several state highway agencies have created classifications to define the level of project complexity. Tables were created with the use of information from similar projects that have been fully evaluated to generate complexity factors for long-range planning estimates. Pennsylvania DOT (PennDOT) has developed several tables that provide information regarding the PennDOT classifica- tion system of non-complex (i.e., minor), moderately com- plex, and the most complex (i.e., major) projects. These tables are shown in Figure R1.1. Tips Use the complexity definitions early in the project devel- opment process to select or invoke appropriate strategies, methods, and tools for project cost estimation practice and cost estimation management. Use the complexity definitions when developing estima- tion policies, guidelines, and training materials. In order to keep the tables accurately related to complexity, reassess project complexity at critical cost estimation manage- ment milestones. If the project becomes more or less complex as the design develops and more information becomes avail- able, the definitions can be used to ensure that appropriate methods and tools are being applied. Resources PennDOT has established a system to define the level of complexity. See PennDOT’s Design Manual: Part 1A: Trans- portation Engineering Procedures, Publication 10A, available from PennDOT. Christine Fiori and Molly Kovaka identified five key project characteristics common to construction megaprojects: cost, complexity, risk, ideals, and visibility. Fiori and Kovaka developed a descriptive and comparative tool for megapro- ject evaluation for future researchers. The tool consists of a 132-element questionnaire. Each element is numerically rated (0 to 4), and a five-element composite project score is gener- ated in the form “CCRIV.” For more information, see Fiori and Kovaka’s 2005 publication, “Defining Megaprojects: Learning from Construction at the Edge of Experience,” pre- sented at the Construction Research Congress 2005: www. pubs.asce.org/WWWdisplay.cgi?0520069. R2 Right-of-Way Right-of-way administrators have reported a number of challenges routinely encountered in right-of-way cost estima- tion: (1) early estimates are typically based on planning-level maps, so the extent of takings must be anticipated based on limited information; (2) often there is limited time to prepare early estimates, thereby restricting the amount of research that can be undertaken for complex parcels; and (3) right-of- way estimates are usually prepared years in advance of actual right-of-way acquisition, and significant inflation in between estimation and acquisition results in property and damage appreciation. A-135

A-136 Figure R1.1. Complexity definition tables from PennDOT Publication 10A. NON-COMPLEX (MINOR) PROJECTS Roadway Maintenance betterment projects. Overlay projects, simple widening without right-of-way (or very minimum right-of-way take), little or no utility coordination. Non-complex enhancement projects without new bridges (e.g., bike trails). Traffic Control Single traffic control/management projects. Non-ITS but minor safety improvements. Structures Bridge resurfacing or repairs which do not require re-analysis of bridge capacity. Pipes, box culverts or minor culvert replacements where design can be picked directly from design manual or standards or using simple software where detailed interpretation is not necessary. Sign structures for which the design can be picked up directly either from the standards or using design computer software. Noise walls or retaining walls for which the design can be picked up directly either from the standards or using design computer software. Right-of-Way Involve minor right-of-way acquisitions with no displacements, maintain existing access control. Utilities Minimal, if any. Environmental Categorical Exclusion (level 1A or 1B) Minimum interaction with environmental and permitting agencies. Minor environmental impacts as appropriate have a Statewide Wetland Finding. Do not involve cultural resources, hazardous waste, Section 4(f) evaluations or substantial flood plain encroachments. Stakeholders No public controversy. MODERATELY COMPLEX PROJECTS Roadway 3R and 4R projects which do not add capacity. Minor roadway relocations. Certain complex (non-trail enhancements) projects. Slides, subsidence. Traffic Control Non-ITS but major safety improvements. Interconnected traffic control/management projects. Structures Non-complex (straight geometry with minimal skew; designs using AASHTO description factors; minimal seismic analysis; footings on rock or conventional piles and abutments) bridge replacements with minor (< 610 m [2,000 ft]) roadway approach work. Bridge rehabilitation which requires re-analysis of bridge capacity. Bridge mounted signs. Tie back walls. Noise walls. Proprietary/non-proprietary walls. Right-of-Way Right-of-way plans needed with less than 20 moderate to significant claims and very few relocations or displacements. Utilities Some utility relocations, most of it prior to construction, but no major utility relocations. Environmental Categorical Exclusion level 2 or mitigated Environmental Assessment projects. Cultural resources (historical, archeological, etc.). Coordination with Museum Commission, FHWA, and/or Advisory Council. Wetland mitigation. Parkland involvement. Water and air pollution mitigation. Major coordination with Game or Fish and Boat commissions. Endangered species. Stakeholders Involvement of public and public officials is moderate due to non- controversial project type. General communication about project progress is required.

A-137 MOST COMPLEX (MAJOR) PROJECTS Roadway New highways; major relocations. New interchanges Capacity adding/major widening. Major reconstruction (4R; 3R with multi-phase traffic control). Congestion Management Studies are required. Traffic Control Multi-phased traffic control for highway or bridge construction that would mandate CPM during construction. Major ITS (Electronic surveillance, linkages) corridor project. Structures Replacement, new or rehabilitation of: Unusual (non-conventional like segmental, cable stayed, major arches or trusses, steel box girders, movable bridges, etc.) Complex (sharp skewed [less than 70 degree] superstructure, non- conventional piers or abutments, horizontally curved girders, three dimensional structural analysis, non-conventional piles or caisson foundations, complex seismic analysis, etc.) Major (bridge cost of $5 million or more—Federal definition). Unusual formations (caissons, uncommon piles, mines, Karst situation). Right-of-Way Right-of-way plans are needed and numerous relocations of residences or displacement of commercial and/or industrial properties are required. A few to over 20 property owners are involved. Major involvement of environmental clean-up. Before and after analysis. Utilities Major utility (transmission lines, substations) relocations or heavy multi- utility coordination is involved. Environmental Environmental Impact Studies are required or complex Environmental Assessment without mitigated finding of no significant impact. Studies of multiple alternatives. Continued public and elected officials involvement in analyzing and selecting alternates. Other agencies (such as FHWA, COE, PHMC, Game Commission, Fish & Boat Commission, DEP, DCNR, EPA, Agricultural Board, etc.) are heavily involved to protect air; water; games; fish, threatened and endangered species; cultural resources (historical, archaeological, parks, wetlands, etc), etc. Stakeholders Controversial (lack of consensus) and high-profile projects. (Fast track design/construction, high public impact, high interaction of elected officials, etc.) Major coordination among numerous stakeholders is required. Figure R1.1. (Continued). R2.1 Acres for Interchange A chronic problem in estimating the right-of-way cost, for either new interchanges or reconstructed interchanges, is estab- lishing the land requirements, including the requirements needed for construction operations. This problem is most acute during the preparation of planning phase estimates. What Is It? This tool encourages early consultation between the agency’s design, construction, and right-of-way sections in order to better define interchange land requirements and the cost of acquiring that land. During the planning phase of proj- ect development, the estimators and designers must under- stand that average interchange acreage requirements are frequently not an appropriate methodology for estimating the cost of the necessary takings. When estimating an interchange acreage requirement, consideration must be given to effects on utilities (water, sewer, gas lines, electric, cable, and fiber- optic lines), the need for space to accommodate utility reloca- tions, and, often times, space for noise walls. The concepts developed for each interchange should be evaluated to identify engineering issues, environmental con- cerns, construction requirements, and maintenance require- ments. The concepts developed should be evaluated for: • Acquisition of developed properties • Reconstruction of other facilities • Traffic operation issues on or into private property

A-138 • Significant acquisition of right-of-way from the protected areas (i.e., environmentally sensitive areas) • Impacts (economic, traffic, and environmental) to existing facilities Why? Many state highway agencies have design guidelines that describe the elements of a typical highway interchange and required land area. Right-of-way estimates (including those for interchanges) that are prepared based on both typical acreage requirements and an average per-acre price are often inaccurate because they fail to consider impacting cost drivers and the fact that interchanges, while following standard designs, must almost always be fitted into the unique physical setting of their locations. What Does It Do? This is a tool to help project managers and estimators appre- ciate the fact that as projects become more complex, there is a greater need for coordination and communication between the disciplines participating in the development of the project’s design and estimate. This is particularly important in the case of initial right-of-way estimates for interchanges. In such a case, many more supporting groups—multiple utility compa- nies, agencies that grant environmental permits, construction, and maintenance—must be consulted before the area required for the interchange can be determined and the right-of-way cost estimated. When? This tool supports the estimate process for projects (new alignment or reconstruction) involving interchanges, either interchange-only projects or projects where interchanges are part of a large total scope. This tool should even be applied to projects where, during early planning, it is believed that no additional right-of-way will be required, because consultation with supporting sections (utilities relocation, environmental, and construction) may lead to a different conclusion. Examples The Mid-Ohio Regional Planning Commission issued a report, Historical and Projected Transportation Funding in Central Ohio, in 2004 (available online at http://transportation. morpc.org/tplan/finalTPlan04Funding.pdf). Section 5 of the report, “Right-of-Way Costs,” provides the following guid- ance for that region of the country. While the cost data are most likely not appropriate to state highway agencies, the for- mat could be used to establish interchange reality check figures for both acreage and land cost. If an ROW [right-of-way] acreage estimate is provided, that number is used. Otherwise, estimate ROW [is] needed accord- ing to type of project. For the regional Transportation Plan, two methods have been used in the past to estimate the ROW costs. The simplified method generally assumes a project is in a high (A), medium (B) or low (C-default) cost per acre area. A more complex method based on actual county auditor valuations for the adjacent parcels has also been used. For this study the simplified approach will be used. The three cost-per-acre categories are $620,000/ac, $235,000/ac and $75,000/ac. Other costs like utility relocation vary depending upon the individual project and are not included. The following ROW acreage assumptions are made based on the improvement type. . . . Intersection Improvement: a) Turn lane 2 approaches • Major Intersection: 0.5 acre • Minor Intersection: 0.25 acre b) Turn lane 4 approaches • Major Intersection: 1 acre • Minor Intersection: 0.5 acre Interchange Upgrade: a) Basic Diamond/Partial Clover 5 acre b) Complex with directional Ramp 10 acre New Interchange: a) Basic Diamond or Partial Clover 30 acre b) Complex with directional Ramp 70 acre For the right-of-way cost, project specific estimates are made. First, for each project the parcel(s) are identified through which ROW is needed. Second, using the county auditor’s data set, the cost per acre for each parcel is determined. The total ROW cost is calculated by multiplying the estimated ROW acreage and the cost per acre of the parcel. The minimum cost per acre is fixed at $75,000. Tips Based on a project description detailing the limits of all alter- natives, a primary impact area should be established. This pri- mary impact area identification should include work done during concept development, scoping, public involvement, and interagency coordination. Secondary impact areas, where applicable, should also be identified and discussed. A graphic detailing the primary and secondary impact corridor and proposed ROW limits should be developed. Another graphic should be developed mapping the existing land use and zoning within the primary impact area of each alternative. The graph-

ics should delineate industrial, commercial, single-family residential, multifamily residential, public and quasi-public uses, and vacant land. Pursuant to the Farmland Protection Policy Act of 1984 (FPPA) (Public Law 97–98—Subtitle I of Title XV, Section 1539–1549), all agricultural lands, defined as agricultural soils considered prime farmland soils, soils of statewide or local importance and unique soils, affected by the proposed action must be identified and quantified. The acreage of agricultural soils acquired by the proposed right-of-way must be deter- mined. Additionally, it should be noted if this total exceeds 3 acres per mile of roadway improvements or 10 acres per interchange or intersection. The results of these calculations will be forwarded to the State Soil Conservation Service. Do not show proposed right-of-way during early project development. Look at the typical section width under the worst-case scenario with maximum right-of-way needed. In the conceptual plans, look at the existing constraints so that alternatives that limit right-of-way requirements (e.g., retain- ing walls or steeper side slopes) can be explored. Resources Florida DOT right-of-way estimation guidance can be found at www.dot.state.fl.us/rightofway/documents/ROWmanual/ Acrobat%20files/ch06s03.pdf. Computer-aided design and drafting (CADD) systems use computer graphic technologies to design and map projects and to quickly consolidate many different design aspects, such as right-of-way maps, into a common database or base map. A 1999 U.S. General Accounting Office study found that 43 state highway agencies use CADD systems on more than half their projects. CADD-generated project right-of-way maps present an opportunity to enhance knowledge concern- ing required right-of-way requirements and to improve right- of-way estimation. Global positing systems (GPS) are used for mapping pur- poses. A 1999 U.S. General Accounting Office study found that 15 state highway agencies use these systems on more than half their projects. GPS-generated project right-of-way maps present an opportunity to enhance knowledge concerning required right-of-way requirements and to improve right-of- way estimation. The FHWA’s Office of Real Estate Services has a Project Development Guide that contains a practical approach to proj- ect right-of-way. This document presents best practices of state and local agencies and others in the right-of-way field. The guide can be found on the Internet at www.fhwa.dot.gov/ realestate/pdg.htm. Wisconsin DOT’s document “Design, Real Estate and Construction Delivery Estimates” identifies the portion of dollars that should be set aside for design, real estate, and con- struction delivery. The document can be found at www. dot.wisconsin.gov/localgov/highways/docs/delivery.pdf. Estimates are derived by taking a certain percentage of actual real estate acquisition costs for real estate delivery or an actual percentage of total construction costs for design and con- struction delivery. R2.2 Advanced Purchase (Right-of-Way Preservation) In order to facilitate the construction of a public improve- ment, it is imperative that the necessary real property interests be acquired expeditiously and in compliance with governing rules and regulations. Proactive access management and cor- ridor preservation strategies may reduce right-of-way cost. However, transportation agencies must be very careful to avoid preemptive takings (i.e., takings in which land use rights are prematurely restricted) in long-term anticipation of proj- ects involving right-of-way acquisition. What Is It? This tool educates project managers and estimators about advance purchasing of real estate and the impact of such actions on project cost estimates. For years, corridor preserva- tion for highway projects has been a goal of the FHWA and other governmental agencies. Various activities have been undertaken in support of this goal, and legislative support was provided in ISTEA. Protective buying may be approved only after (a) the acquir- ing agency has given official notice to the public that it has selected a particular location for the project alignment or (b) a public hearing has been held or an opportunity for such hear- ing has been afforded. Why? The goal of the tool is to eliminate one of the major uncer- tainties from the project cost estimate by purchasing right-of- way in a future corridor to protect the corridor from further development that could substantially increase the cost of real estate. What Does It Do? In the case of estimates prepared during early project development, it may be necessary to predict real estate values as much as a decade in advance, which is a very difficult task. Advance purchase of right-of-way can eliminate or at least moderate this volatile component of early project cost esti- mates and therefore improves the accuracy of the estimate. A-139

When? This tool should be used in the earliest stages of project development in order to avoid inflation and escalating prop- erty values caused by development within the alignment of a corridor or project. It is a good tool for a limited number of parcels. However, in the case of a long corridor, its application is limited. Examples The Texas legislature has given the Texas DOT (TxDOT) the authority to acquire right-of-way to preserve a corridor. Both TxDOT and the FHWA understand that such an acquisition would not negate the requirement to complete NEPA. The I-69/Trans-Texas Corridor Project in Texas will be evaluated using a tiered approach. At Tier 1, corridor-level decisions will be made. After the Tier 1 right-of-way acquisition, TxDOT can acquire right-of-way at its own risk, knowing that when the Tier 2 NEPA evaluations are initiated, the ownership of the previously acquired right-of-way cannot and will not influence the Tier 2 alternative location decision. Since the I-69/TTC corridor will be approximately 1,000 miles long, common sense would lead one to believe that only the parcels in eminent danger of being developed would be acquired. See the FHWA’s March 2004 Environmental Streamlining Newsletter for more information on the I-69 project. Minnesota DOT (Mn/DOT) policy requires environmental documentation prior to purchase. Additional information can be found in Appendix J of Mn/DOT’s Interregional Corridors: A Guide for Plan Development and Corridor Management (avail- able online at http://www.oim.dot.state.mn.us/IRC-Guide. html). Also included is information on the environmental review and documentation process as it relates to right-of-way preservation. Mn/DOT also conducted a research project to identify cir- cumstances under which it is optional to purchase right-of- way in advance and those in which it is not. The final report of this research project, titled The Final Benefits of Early Acquisition of Transportation Right of Way, is available at http://www.research.dot.state.mn.us/detail.cfm?productID =1998. Improvements to Florida’s Strategic Intermodal System (SIS), a statewide network of high-priority transportation facil- ities, envisions: • Acquisition of right-of-way for the future widening of I-595 • Acquisition of right-of-way for the widening of I-4 • Acquisition of right-of-way for future improvements to SR 79 • Acquisition of right-of-way for future US 331 reconstruc- tion to a four-lane facility Florida DOT’s Right of Way Manual (effective April 15, 1999; acquisition revised December 11, 2000), “Section 8.1 Advance Acquisition,” can be found at www.dot.state.fl. us/rightofway/documents/ROWmanual/Acrobat%20files/ ch08s01.pdf. Tips Brief summary of the process. To use the protective pur- chase option (advance purchase), there must be at least a draft environmental document (which means that the initial pub- lic hearings must have been held). An individual categorical exclusion (CE) document will be required for the protective purchase. The state highway agency will ask the FHWA divi- sion office to review and approve a protective purchase pack- age. The package will include (but may not be limited to) a CE document, copies of property valuation appraisals, prelimi- nary design maps, and written justification for the protective purchase. If the FHWA division office concurs with the protective purchase, the approval will indicate that the state highway agency may incur costs that will be eligible for reimbursement at such time as a final environmental document is approved. The state highway agency may use its own funds to make the purchase and request reimbursement from the FHWA after the final environmental document is approved. There is the potential for a decrease in the value of abutting parcels (e.g., who would want to purchase a home in an area knowing that there is a major highway project planned?). Adjacent property owners could also demand compensation at this time, and there really is no appropriate way to com- pensate properties not within the corridor for a property value stigma associated with a nearby project. However, limited studies at Illinois DOT (IDOT) looking at the effect of highway improvements on adjacent property did not show evidence of property value decreases. IDOT often got comments from property owners who were not directly affected by right-of-way acquisition that the highway would damage them even though no right-of-way was taken from them. When sales prices of properties next to and away from a major highway were examined, it did not appear that the high- way was a negative impact on property values. When using this tool, the agency may want to look at some examples in its area to see if properties next to major roadways sell for less than comparable properties a block or two away. A study conducted by a national realtors organization that surveyed 2000 homebuyers nationwide on what issues were most important in choosing a home location found that access to transportation infrastructure was cited most often (43%). Transfer of development rights. Some agencies have negotiated with property owners to transfer right-of-way dedi- A-140

cation for future roadways for increased development densities on remaining portions of the parcel. This enables the developer to get the same number of lots or units and also enables the agency to obtain the needed right-of-way. Resources The FHWA’s Office of Real Estate Services has a Project Development Guide that contains a practical approach to proj- ect right of way. This document presents best practices of state and local agencies and others in the right-of-way field. The guide can be found on the Internet at www.fhwa.dot.gov/ realestate/pdg.htm. The chapter covering advance purchases, “14 Specialized Acquisition Functions,” is located at www. fhwa.dot.gov/realestate/specacq.pdf. Computer-aided design and drafting (CADD) systems use computer graphic technologies to design and map projects. They provide an expedient way to consolidate many different design aspects, such as right-of-way maps, into a common database or base map. A 1999 U.S. General Accounting Office study found that 43 state highway agencies use CADD systems on more than half their projects. CADD-generated project right-of-way maps present an opportunity to enhance knowl- edge concerning right-of-way requirements and to improve right-of-way estimation. Global positing systems (GPS) are used for mapping pur- poses. A 1999 U.S. General Accounting Office study found that 15 state highway agencies use these systems on more than half their projects. GPS-generated project right-of-way maps present another opportunity to enhance knowledge concern- ing right-of-way requirements and to improve right-of-way estimation. Also see the hardship/protective purchasing sections of the 23 Code of Federal Regulations. Specifically, refer to Sections 23 CFR 630.106(c)(3), 23 CFR 710.503, and 23 CFR 771. 117(d)(12). See Texas DOT’s Project Development Process Manual, “4410: Perform Advance Acquisition for Qualified Parcels,” at http://manuals.dot.state.tx.us/dynaweb/coldesig/pdp/ @Generic_ BookTextView/18357;cs=default;ts=default. R2.3 Condemnation Typically, right-of-way acquisition, especially in urbanized areas, includes other costs besides land purchase, such as costs related to takings, condemnations, relocations, damages, and courts. As a result, it is necessary to estimate these additional costs associated with actual acquisition of land needed for projects. From FY 91/92 to FY 94/95, Florida DOT had to ini- tiate condemnation proceedings in 42.9% of its right-of-way parcel acquisition actions. What Is It? This is a tool to educate project managers and estimators as to the schedule impacts, which can affect the overall project estimate, and the direct right-of-way cost impacts of using condemnation to acquire right-of-way. When right-of-way must be secured by condemnation through eminent domain procedures, it typically involves the transition of control of the settlement from the agency’s right-of-way department to its legal department. At that point, issues of time, cost, and jury process are relevant to establishing the estimated cost of the right-of-way parcel. Why? Because of the high costs and the potential for project delays, most right-of-way offices make it a high priority to resolve and settle right-of-way parcel disputes before resort- ing to litigation, and a majority of the cases where condemna- tion proceedings have been initiated are settled before actually going to court. However, estimators must have an under- standing of the potential necessity of resorting to condemna- tion proceeding to acquire right-of-way and of the cost consequences of such procedures. What Does It Do? This tool educates estimators about the direct and indirect cost of right-of-way acquisition, particularly the cost associated with condemnation proceedings, and the effect that condem- nation proceedings can have on a project’s time line. If a state highway agency is unable to agree with the owner on a price for a parcel of property, the agency files a condemnation suit and the court determines the property’s value. Other costs in many cases can include the landowner’s attorney fees, appraiser fees, technical expert fees, and relocation expenses if necessary. If the state takes a portion of a business property, it may also have to pay business damages for permanently lost profits and the reduced profit-making capacity of the business. Estimators need to understand these ramifications of right-of-way cost in order to prepare accurate project estimates. When? This tool should be a continuous estimator education process for all estimators who are involved in estimating the cost of right-of-way. The tool particularly supports early esti- mates developed when the exact project alignment is impre- cise and right-of-way issues lack focus. Examples Oregon DOT (ODOT) holds statewide right-of-way meet- ings every 18 months, where all right-of-way staff meet for A-141

training sessions and to share best practices with each other. In addition to formal training programs, individual training plans are prepared at the regional level and approved by cen- tral office as part of its business plan. Portions of the right-of- way manual are available online on a shared directory, and policy memos, clarifications, and relocation meeting minutes called “Andy-grams” are frequently circulated and stored elec- tronically. Something like this could be expanded to include training for right-of-way estimators. The AASHTO Right-of-Way and Utilities Subcommittee sponsors conferences addressing many of the subjects that right-of-way estimators need knowledge about. Tips Most areas of dispute involve severance damages to the remainder of the property, and business damages. Therefore, these issues must be fully understood when estimating right- of-way cost. Consider the effect that relocation has on a business. Does the business have specific requirements that may hinder relocation? When the right-of-way land requirement does not require all of an owner’s business property, other facts should be considered: • Will the proximity of the proposed facility affect the oper- ations of any businesses, in terms of access disruption, or parking loss, which could result in loss of business? • Will the proposed action disrupt current accessibility to businesses, thereby having a potential for loss of clientele? Resources The FHWA report, “Evaluation of State Condemnation Process,” summarizes the legal and procedural framework for acquiring real property for right-of-way, focusing on five spe- cific states. It provides information on the statutory authority and case law that is relevant to the acquisition of real property in each of those five states. It reviews each state’s approach to negotiations and valuation, the use of alternative dispute res- olution or other administrative procedures used to establish value, and the payment of the property owner’s attorney fees and related expenses. This FHWA report can be found at www.fhwa.dot.gov/realestate/cndmst.htm. Computer-aided design and drafting (CADD) systems use computer graphic technologies to design and map projects and provide an expedient way to consolidate many different design aspects, such as right-of-way maps, into a common database or base map. A 1999 U.S. General Accounting Office study found that 43 state highway agencies use CADD systems on more than half their projects. CADD-generated project right-of-way maps present an opportunity to enhance knowl- edge concerning right-of-way requirements and to improve right-of-way estimation. Global positing systems (GPS) are used for mapping pur- poses. A 1999 U.S. General Accounting Office study found that 15 state highway agencies use these systems on more than half their projects. GPS-generated project right-of-way maps also present an opportunity to enhance knowledge concern- ing right-of-way requirements and to improve right-of-way estimation. The FHWA’s Office of Real Estate Services has a Project Development Guide that contains a practical approach to proj- ect right-of-way. This document presents best practices of state and local agencies and others in the right-of-way field. The guide can be found on the Internet at www.fhwa.dot.gov/ realestate/pdg.htm. Also read “Costs of Right-of-Way Acquisition: Methods and Models for Estimation,” by Jared D. Heiner and Kara M. Kockelman, Journal Transportation Engineering, American Society of Civil Engineers, Vol. 131, No. 3, pp. 193–204 (March 2005). Also see the American Association of Sate Highway and Transportation Officials, Standing Committee on Highways, Strategic Plan 4-4, Right-of-Way and Utilities Guidelines and Best Practices, Jan. 2004, http://cms.transportation.org/sites/ rightofway/docs/aabp%20report%20final.pdf. R2.4 Relocation Costs In 1999, $100 million in federal and state funds were paid to displaced business and property owners for reestablishment and relocation assistance. The Uniform Relocation Act (Uni- form Act) and FHWA regulations address the benefits and pro- tections for persons displaced by highway projects that are funded, at least in part, with federal money. In 1987, as part of the Surface Transportation and Uniform Relocation Assistance Act (STURAA), Congress amended the Uniform Act to increase payment levels, to add benefits for small businesses, and to designate the U.S. DOT as the lead agency for the Uniform Act for all federal and federally funded programs and projects. The FHWA has the responsi- bility to act for the U.S. DOT. The Uniform Act was once again amended on November 21, 1997, to incorporate Pub- lic Law 105-117 by prohibiting an alien who is not lawfully present in the United States from receiving assistance under the Uniform Act. What Is It? This tool ensures that those estimating the cost of project right-of-way fully understand the legal requirements of parcel A-142

acquisition to include relocation costs. The Uniform Act pro- vides relocation payments for residential occupants and for businesses, farms, and nonprofit organizations. These pay- ments include moving expense payments and certain supple- mentary payments for replacement housing for residential occupants. In addition, the Uniform Act requires the avail- ability of replacement housing for displaced persons, sets min- imum standards for such housing, and requires notices and information to be provided to all property occupants. The law also requires that advisory services be provided to occupants so as to help them relocate successfully. Why? It is important to understand that the project schedule can be impacted by relocation actions and that there are indirect costs associated with securing right-of-way. Without the relocation of those occupying the project site, the project cannot proceed to actual construction and the schedule will be extended, thereby adding cost to the project. Estimators must understand the timing effects of relocation actions, particularly in relation to construction timing (midpoint of construction for estimation purposes), and the cost of reloca- tion actions must be included in a project right-of-way cost estimate. What Does It Do? This tool seeks to educate estimators and project managers about the legal requirements that impact the right-of-way cost and the impact that relocation actions have on project sched- ule so that estimators and project managers can estimate project cost based on realistic schedules and can include all subsidiary (i.e., indirect) right-of-way costs in the estimate. When? This tool should be used when projects involve the reloca- tion of individuals in residential properties or nonresidential relocations, businesses, farms, and nonprofit organizations. One of the main purposes of the Uniform Act is to prevent affected persons from bearing an unfair share of the burden of public projects. The act provides relocation assistance pay- ments in addition to relocation assistance advisory services. Relocation assistance payments are designed to compensate displaced persons for costs that result from acquisition of the property on which they reside. Examples Residential relocation payments are intended for persons who move (or move personal property) from a dwelling as a result of a highway project receiving federal financial assis- tance. These payments may be subdivided into three types: • Moving expense payments are designed to compensate for the moving and related costs that a person incurs as a result of having to move from his or her dwelling or to move per- sonal property for a project. • Replacement housing payments are designed to help eli- gible displaced persons occupy housing that is decent, safe, sanitary, adequate for their needs, and comparable to what they had before the project required their move. There are three categories of replacement housing payments: pur- chase supplements, rental assistance, and down payment assistance. • Housing-of-last-resort payments are payments in excess of statutory maximums or payments involving other, unusual methods of providing comparable housing. See the Caltrans brochure, “Your Rights and Benefits as a Displaced Business, Farm or Nonprofit Organization Under the Uniform Relocation Assistance Program,” on the Internet at www.dot.ca.gov/hq/row/pubs/business_farm.pdf. Tips Consider the effect that relocation has on a business and answer the question, Does the business have specific require- ments that may hinder relocation? Resources See the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (Public Law 91-646), as amended (42 U.S.C. 4601 et seq.). Also see the Uniform Relocation Assistance and Real Prop- erty Acquisition for Federal and Federally Assisted Programs (49 CFR 24). Computer-aided design and drafting (CADD) systems use computer graphic technologies to design and map projects. They provide an expedient way to consolidate many different design aspects, such as right-of-way maps, into a common database or base map. A 1999 U.S. General Accounting Office study found that 43 state highway agencies use CADD systems on more than half their projects. CADD-generated project right-of-way maps present an opportunity to enhance knowl- edge concerning right-of-way requirements and to improve right-of-way estimation. Global positing systems (GPS) are used for mapping pur- poses. A 1999 U.S. General Accounting Office study found that 15 state highway agencies use these systems on more than half their projects. GPS-generated project right-of-way maps A-143

also present an opportunity to enhance knowledge concern- ing right-of-way requirements and to improve right-of-way estimation. The FHWA’s Office of Real Estate Services has a Project Development Guide that contains a practical approach to proj- ect right-of-way. This document presents best practices of state and local agencies and others in the right-of-way field. The guide can be found on the Internet at www.fhwa.dot. gov/realestate/pdg.htm. The section on relocation is found at www.fhwa.dot.gov/realestate/relasst.pdf. R2.5 Right-of-Way Estimator Training A “Highway Construction Cost Comparison Survey” con- ducted by the Washington State DOT in 2002 found that right- of-way costs typically vary. State highway agencies reported that variability rates for right-of-way ranged from 10% or less to over 30% of project cost. Such variability makes the use of historical cost averages for estimating right-of-way cost very unreliable. Estimators need to be trained to recognize the fac- tors that impact right-of-way cost. Why? It is important that right-of-way acquisition be handled expeditiously and that project managers and estimators have a solid understanding of right-of-way acquisition processes and costs, both direct and indirect. What Does It Do? This tool seeks to specifically train estimators concerning the factors that influence right-of-way cost and to provide the esti- mators with the skills necessary to handle the challenges asso- ciated with developing right-of-way estimates. Right-of-way estimators must be trained to: • Develop early estimates based on planning-level maps with limited information on the extent of takings. • Adjust right-of-way estimates for the significant inflation and speculation that can occur between the time when the estimate is initially prepared (typically several years in advance of actual right-of-way acquisition) and when the parcels are purchased. Right-of-way estimates are pre- pared based on year of parcel purchase, not midpoint of construction. • Account for the uncertainties associated with damages and court costs that result from condemnation proceedings. When? Because all state highway agencies are continually involved with projects requiring right-of-way, the right-of-way estima- tor training tool should be standard practice to every state highway agency. However, it has been found that court costs are highly variable and are particularly high for projects in highly developed commercial corridors, where condemnation proceedings are common. Thus, the tool may be of greater benefit to state highway agencies that regularly engage in urban commercial corridor projects. Examples An example of right-of-way estimation guidance can be found at www.dot.state.fl.us/rightofway/documents/ ROWmanual/Acrobat%20files/ch06s03.pdf. The FHWA’s Office of Real Estate Services has a Right-of- Way Outreach and Program Research website (www.fhwa. dot.gov/realestate/research.htm), which lists available profes- sional training and technical assistance. Tips Train estimators to red flag areas in proposed corridors (major streams, Federal Emergency Management Agency (FEMA) flood zones, residential and commercial structures, cemeteries, wetlands, historic properties, hazardous waste sites, parks, etc.) that can impact right-of-way cost. Also train estimators to recognize removal items that will impact right-of-way cost (trees, buildings, abandoned slabs, etc.). Revisit the right-of-way estimate as design proceeds and the construction limits are refined. Each time, identify total takes, relocations, and noise wall locations, and then check the cost estimate. Understand whether the acquisition process for compen- sating renters differs from the process for compensating property owners. Real estate sales prices along a corridor of several individual projects are affected by the order in which projects are accom- plished. A study of residential property prices from 1979 to 1997 along an urban corridor in Texas revealed significant price effects of the corridor improvement phases. During the pre-planning phase, housing prices in the immediate vicinity of the freeway were negatively affected, while those farther away were positively affected. During the planning phase, houses in the corridor appreciated at twice the rate of other Dallas properties. Prices declined more rapidly in the corridor than elsewhere in Dallas during the early construction phases. However, prices again improved during the final construction phase, as sections of the freeway began to reopen and access improved. During the early phase of a project development, the right- of-way needs may not be defined clearly enough to differenti- ate between what will be a whole take and what will be a partial A-144

take. If it is helpful, cost estimates may be limited to whole par- cel acquisition. Costs of partial acquisitions, including dam- ages to the remaining properties and project overhead, can be factored into an estimate. Resources The Florida DOT right-of-way estimation guidance can be found at www.dot.state.fl.us/rightofway/documents/ ROWmanual/Acrobat%20files/ch06s03.pdf. Computer-aided design and drafting (CADD) systems use computer graphic technologies to design and map projects and provide an expedient way to consolidate many different design aspects, such as right-of-way maps, into a common database or base map. A 1999 U.S. General Accounting Office study found that 43 state highway agencies use CADD systems on more than half their projects. CADD-generated project right-of-way maps present an opportunity to enhance knowl- edge concerning right-of-way requirements and to improve right-of-way estimation. Global positing systems (GPS) are used for mapping pur- poses. A 1999 U.S. General Accounting Office study found that 15 state highway agencies use these systems on more than half their projects. GPS-generated project right-of-way maps also present an opportunity to enhance knowledge concern- ing right-of-way requirements and to improve right-of-way estimation. Executive Order (EO) No. 12898 (1994), “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations,” requires that federal agencies be responsible for reviewing their programs and other activ- ities to determine and prohibit any disproportionately high adverse effects on the human environments in low-income or minority communities. In the case of transportation projects, EO 12898 is implemented through the U.S. DOT and the FHWA. The U.S. DOT strategy ensures that the provisions of EO 12898 are integrated into the relevant existing guide- lines used in the project planning and public participation processes. The FHWA’s order requires that specific research and related data collection be conducted to provide informa- tion on environmental justice concerns. The FHWA’s Office of Real Estate Services has a Project Development Guide that contains a practical approach to proj- ect right-of-way. This document presents best practices of state and local agencies and others in the right-of-way field. The guide can be found on the Internet at www.fhwa.dot.gov/ realestate/pdg.htm. “The Costs of Right of Way Acquisition: Methods and Mod- els for Estimation” is a paper presented at the 83rd Annual Meeting of the Transportation Research Board, January 2004. The paper reviews the literature related to right-of-way acqui- sition and property valuation. It describes the appraisal process and the influence of federal law on acquisition practices. It pro- vides price models for estimation of costs associated with taking property using recent acquisition data from several Texas corridors and full-parcel commercial sales transactions in Texas’s largest regions. Results indicate that damages depend heavily on parking, access, and location. The size of the taking is not as important as the value of improvements, and utility costs are highly variable. This paper can be found at www.ce.utexas.edu/prof/kockelman/public_html/ TRB04ROW.pdf. See the following federal laws governing acquisition: • The Uniform Relocation and Real Property Acquisition Policies Act of 1970 (42 U.S.C. 4801 et seq.) • Section I of the Civil Rights Act of 1866 (42 U.S.C. 1982, et seq.) • Title VI of the Civil Rights Act of 1966 (42 U.S.C. 2000d et seq.) • Title VIII of the Civil Rights Act of 1968 (42 U.S.C. 3601 et seq.) as amended • The National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) • The Comprehensive Environmental Response, Compen- sation and Liability Act of 1980 (CERCLA or Superfund) as amended by the Superfund Amendments and Reautho- rization • The Superfund Amendments and Reauthorization Act of 1986 (SARA) (42 U.S.C. Section 9601 et seq.) • Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 790 et seq.) • The Flood Disaster Protection Act of 1973 (Public Law. 93-234) • The Age Discrimination Act of 1975 (42 U.S.C. 6101 et seq.) • Executive Order 11063: Equal Opportunity and Housing, as amended by Executive Order 12259 • Executive Order 11246: Equal Employment Opportunity • Executive Order 11625: Minority Business Enterprise • Executive Order 11988: Floodplain Management • Executive Order 11990: Protection of Wetlands • Executive Order 12250: Leadership and Coordination of Non-Discrimination Laws • Executive Order 12259: Leadership and Coordination of Fair Housing in Federal Programs • Executive Order 12630: Governmental Actions and Inter- ference with Constitutionally Protected Property Rights R2.6 Separate Right-of-Way Estimators State highway agency right-of-way sections have a mission to deliver real estate services essential for public transportation projects that support the economic, environmental, and social vitality of the state. Understanding all of the costs associated A-145

with obtaining parcels and the details of acquisition law has led some agencies to establish a separate group of right-of-way estimators. What Is It? This tool is a group of individuals within the state highway agency who are specifically trained in techniques for estimat- ing right-of-way cost, who construct and maintain right- of-way cost models, and who have sole responsibility for estimating the right-of-way cost portion of a project estimate. This group of right-of-way estimators could be located in the agency’s right-of-way, design, or estimation sections. Location in the agency structure is not as important as developing a group having the unique skills needed to accurately estimate right-of-way costs and who can mentor and support one another in this important task. Why? It is extremely important that individuals attempting to esti- mate the cost of right-of-way acquisition be intimately familiar with the applicable state laws and implementation regulations. Over the years, states have enacted eminent domain laws gov- erning public acquisitions under their jurisdiction. Since the enactment of the Federal Uniform Relocation Assistance and Real Property Policies Act of 1970 (Uniform Act) and passage of the various state consent laws, basic public acquisition policy has become more uniform. However, a number of states have enacted laws and regulations that go beyond federal law and provide property owners with entitlements not considered generally compensatable under federal law. Therefore, those responsible for estimating the cost of right-of-way must pos- sess knowledge concerning a unique set of rules and regulations and understand the lead time requirements that accompany the rules and regulations. Aside from property acquisition costs, estimators must also estimate the cost of utility relocations. These costs can run very high and may even exceed property acquisition costs. The current cost estimates for utility relocations required in the expansion of Interstate 10 in Houston, Texas, exceed $200 million. This represents a unit cost of $10 million per mile for this 20-mile project, or 30% of the right-of-way budget. What Does It Do? This tool ensures that the agency has individuals who are knowledgeable and specifically trained to prepare right-of- way cost estimates. Additionally, the tool provides the agency with the staff personnel having the competencies to evaluate right-of-way cost estimates prepared by outside consultants. When? The establishment of separate right-of-way estimators could be of great benefit to state highway agencies that regularly engage in urban commercial corridor projects. It has been found that court costs associated with acquiring right-of-way vary greatly and are particularly high for projects in highly developed commercial corridors. Examples Virginia DOT is currently doing right-of-way estimates through the right-of-way department, but is looking into mak- ing this task part of the in-house computer program. However, there has been some resistance because the right-of-way peo- ple feel that the computer cannot match the expert judgment that is required. Caltrans has realized that right-of-way funds to acquire parcels needed to construct the project are typically expended during the design phase. For this reason, it is the agency’s pol- icy to have close coordination with the right-of-way branch during the design phase of project development. Florida DOT has recommended the use of right-of-way cost estimation teams for certain projects. “Guidance Document 2: Right of Way Cost Estimates” (revised April 2004) states: “It is suggested that the district consider appointment of a team to participate in the preparation of the estimate on large or complex projects.” The document is available online at www. dot.state.fl.us/rightofway/documents/ROWmanual/ Acrobat%20files/guide2.pdf. Tips Real estate sales prices along a corridor of several individual projects are affected by the order in which projects are accom- plished. A study of residential property prices from 1979 to 1997 along an urban corridor in Texas revealed significant price effects of the corridor improvement phases. During the pre-planning phase, housing prices in the immediate vicinity of the freeway were negatively affected, while those farther away were positively affected. During the planning phase, houses in the corridor appreciated at twice the rate of other Dallas properties. Prices declined in the corridor more rapidly than elsewhere in Dallas during the early construction phases. However, prices again improved during the final construction phase, as sections of the freeway began to reopen and access A-146

improved. Right-of-way estimators need to be engaged in con- struction data based on such information to use as aids in preparing estimates. Resources Computer-aided design and drafting (CADD) systems use computer graphic technologies to design and map projects. They provide an expedient way to consolidate many different design aspects, such as right-of-way maps, into a common database or base map. A 1999 U.S. General Accounting Office study found that 43 state highway agencies use CADD systems on more than half their projects. CADD-generated project right-of-way maps present an opportunity to enhance knowl- edge concerning right-of-way requirements and to improve right-of-way estimation. Global positing systems (GPS) are used for mapping pur- poses. A 1999 U.S. General Accounting Office study found that 15 state highway agencies use these systems on more than half their projects. GPS-generated project right-of-way maps also present an opportunity to enhance knowledge concern- ing right-of-way requirements and to improve right-of-way estimation. Executive Order (EO) No. 12898 of 1994, “Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations,” requires that federal agencies be responsible for reviewing their programs and other activ- ities to determine and prohibit any disproportionately high adverse effects on the human environments in low-income or minority communities. In the case of transportation projects, EO 12898 is implemented through the U.S. DOT and the FHWA. The U.S. DOT strategy ensures that the provisions of EO 12898 are integrated into the relevant existing guide- lines used in the project planning and public participation processes. The FHWA’s order requires that specific research and related data collection be conducted to provide informa- tion on environmental justice concerns. The FHWA’s Office of Real Estate Services has a Project Development Guide that contains a practical approach to proj- ect right-of-way. This document presents best practices of state and local agencies and others in the right-of-way field. The guide can be found on the Internet at www.fhwa.dot.gov/ realestate/pdg.htm. “The Costs of Right of Way Acquisition: Methods and Models for Estimation” is a paper presented at the 83rd Annual Meeting of the Transportation Research Board, Janu- ary 2004. The paper reviews the literature related to right- of-way acquisition and property valuation. It describes the appraisal process and the influence of federal law on acquisi- tion practices. It provides price models for estimation of costs associated with taking property using recent acquisition data from several Texas corridors and full-parcel commercial sales transactions in Texas’ largest regions. Results indicate that damages depend heavily on parking, access, and location. The size of the taking is not as important as the value of improve- ments, and utility costs are highly variable. See also the following research: • Buffington, J. L., M. K. Chui, J. L. Memmott, and F. Saad (1995). “Characteristics of Remainders of Partial Takings Significantly Affecting Right-of-Way Costs.” TXDOT Research Report. FHWA/TX-95/1390-2F. • Carey, J. (2001). “Impact of Highways on Property Values: Case Study of the Superstition Freeway Corridor.” FHWA Report No. FHWA-AZ-01-516. • Gallego, A. V. (1996). “Interrelation of Land Use and Traf- fic Demand in the Estimation of the Value of Property Access Rights.” Thesis for Masters of Science in Civil Engi- neering, the University of Texas at Austin. See also the following federal laws governing acquisition: • The Uniform Relocation and Real Property Acquisition Policies Act of 1970 (42 U.S.C. 4801 et seq.) • Section I of the Civil Rights Act of 1866 (42 U.S.C. 1982, et seq.) • Title VI of the Civil Rights Act of 1966 (42 U.S.C. 2000d et seq.) • Title VIII of the Civil Rights Act of 1968 (42 U.S.C. 3601 et seq.) as amended • The National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.) • The Comprehensive Environmental Response, Compen- sation and Liability Act of 1980 (CERCLA or Superfund) as amended by the Superfund Amendments and Re- authorization • The Superfunds Amendment and Reauthorization Act of 1986 (SARA) (42 U.S.C. Section 9601 et seq.) • Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 790 et seq.) • The Flood Disaster Protection Act of 1973 (Public Law. 93-234) • The Age Discrimination Act of 1975 (42 U.S.C. 6101 et seq.) • Executive Order 11063: Equal Opportunity and Housing, as amended by Executive Order 12259 • Executive Order 11246: Equal Employment Opportunity • Executive Order 11625: Minority Business Enterprise • Executive Order 11988: Floodplain Management • Executive Order 11990: Protection of Wetlands • Executive Order 12250: Leadership and Coordination of Non-Discrimination Laws A-147

• Executive Order 12259: Leadership and Coordination of Fair Housing in Federal Programs • Executive Order 12630: Governmental Actions and Inter- ference with Constitutionally Protected Property Rights R3 Risk Analysis (Also See I2) Risk management is concerned with future events, whose outcome is unknown, and how to deal with uncertainties by identifying and examining a range of possible outcomes. The objective is to (a) understand risks and (b) mitigate or control risks. Understanding the risks inherent with each potential project alternative is important to controlling cost and devel- oping estimates that reflect the cost of accepted risks and risks transferred to the contractor. Risk management and an understanding of project uncer- tainty will assist estimators in setting appropriate contingen- cies for each individual project. This understanding is also important to managers of estimation processes. Cost estima- tion is one tool in a comprehensive risk management process. In the broader context of project risk management, risk analy- sis is the second step in a comprehensive risk management process that includes: • Risk identification • Risk analysis (qualitative and/or quantitative) • Risk mitigation planning • Risk monitoring and control Risk identification and risk mitigation planning are dis- cussed in the Tools I2.1 and I2.2. Risk analysis and risk moni- toring and control are discussed in Tools R3.1, R3.2, R3.3, R3.4, and R3.5. Additionally, communication of risk analysis results is discussed in Tool C1.2. When used together, these eight tools support a comprehensive risk management process. The tools presented in this section provide a better under- standing of project uncertainty and application of contingency. The process can also assist in the contingency resolution process as the project scope, design, and delivery methods become fully defined. R3.1 Analysis of Risk and Uncertainty (Also See C1.2 and I2) Analysis of risk and uncertainty involves the quantification of identified risks. In a comprehensive risk management process, risk analysis is used to prioritize the identified risks for mitigation, monitoring, and control purposes. In the con- text of cost estimation, risk analysis can be extremely helpful for understanding project uncertainty and setting appropriate contingencies. Risk analysis can be done through qualitative or quantitative methods. What Is It? In the context of cost estimation, this tool quantifies proj- ect risk and uncertainty to provide a better understanding of contingency and the ultimate project cost. It involves evalua- tion of risks in terms of their likelihood of occurrence and their probable consequences. Likelihood of occurrence and the associated consequences can be expressed qualitatively or quantitatively. If risks can be quantified, they can provide for a better understanding of project uncertainty and assist in the cost estimation management process. Risk analysis can be done through qualitative or quantita- tive procedures. In a qualitative analysis process, the project team assesses each identified risk (see also Tools I2.1 and I2.2) for its probability of occurrence and its relative magnitude of impact on project objectives. Quite often, experts or func- tional unit staff assess the risks in their respective fields and share these assessments with the project team. The risks are then sorted into high, moderate, and low risk categories (in terms of time, cost, and scope). The objective is to rank each risk by degree of probability and impact. The rationale for the decision should be documented for future updates, monitor- ing, and control. Quantitative risk analysis procedures employ numeric esti- mates of the probability that a project will meet its cost and time objectives. It is common to simplify a risk analysis by cal- culating the expected value or average of a risk. The expected value provides a single quantity for each risk that is easier to use for comparisons. While this is helpful for comparisons and ranking of risks, estimators must take care when using the expected value to calculate project costs or contingencies. For example, if there is a 20% chance that a project will need a $1 million storm water upgrade, the estimator will include $200,000 in contingency using the expected value. If the storm water upgrade is required, this value will not be enough. Unfortunately, a great deal of information is lost in this over- simplified contingency analysis. More comprehensive quanti- tative analysis is based on a simultaneous evaluation of the impact of all identified and quantified risks. The result is a probability distribution of the project’s cost and completion date based on the risks in the project. Quantitative risk analy- sis involves statistical simulations and other techniques from the decision sciences. Tools commonly employed for these analyses include first-order second-moment (FOSM) meth- ods, decision trees, and/or Monte Carlo simulations. Why? Highway project delivery is a complex task that is fraught with uncertainty. Traditional methods of cost estimation often overlook risks or deal with them in a deterministic manner. Using the analysis of uncertainty and other risk tools in the cost A-148

estimation process has many advantages. Federal Transit Administration’s 2004 Risk Assessment Methodologies and Pro- cedures mentioned several advantages: • Better understanding of the project delivery process, includ- ing timelines and phasing, procedural requirements, and potential obstacles. • More realistic estimates of individual component costs and durations, thereby allowing more reasonable expecta- tions of total project cost and duration. • Better understanding of what the project contingency is, whether it is sufficient, and for what it may need to be used. • Information support to other project or agency activities, such as value engineering and strategic planning. • Potential to improve the project budget and scheduling processes, possibly for the immediate project in develop- ment but certainly for future projects. What Does It Do? This tool quantifies the impact of potential risks in terms of their consequences to cost and schedule estimates. It provides a systematic evaluation of project uncertainty. It assists esti- mators in setting appropriate contingencies and assists project managers in controlling project cost, schedule, and scope issues that can arise from uncertain or risky events. When? Risk analysis can be used throughout the project develop- ment process. At the earliest stages of project development, risk analysis will be helpful in developing an understanding of proj- ect uncertainty and in developing an appropriate project con- tingency. As the project progresses through the development process, risk analysis can be used in a comprehensive risk man- agement monitoring and control process to assist in managing cost escalation resulting from either scope growth or the real- ization of risk events. Examples California DOT (Caltrans) has documented a qualitative risk analysis procedure in its 2003 Project Risk Management Hand- book. The Caltrans process is largely based on the Project Man- agement Institute’s 2004 A Guide to Project Management Body of Knowledge (PMBOK Guide). The Caltrans handbook calls for a quantitative assessment of project risk items representing the highest degree of exposure. This quantification is important for updating the contingency amount to be included in the project estimate. Figure R3.1 shows the Caltrans process, pub- lished as Appendix C of the handbook, as an example of a qual- itative risk analysis method. The Caltrans example demonstrates a sound process for qualitative risk analysis. The outcome of the qualitative analy- sis is typically a ranked list of risks that can be used as red flag items or in a risk charter. Quantitative analysis typically begins with a process that is similar to the quantitative analysis shown above, but then applies a direct and more accurate assessment of probability and impact and incorporates these assessments into a probabilistic cost-risk model. The goal of the quantitative risk analysis is to create a prob- abilistic cost-risk model to represent the uncertainties affect- ing project cost and schedule. It ultimately identifies a likely range of costs or durations that bracket potential risk cost or schedule impacts. Examples of range estimates are provided in Tools R3.4 and R3.5. Tips Conduct the risk analysis early in the project development process. Involve a multidisciplinary team to conduct the risk analysis. The team may benefit from outside experts to gener- ate the list of risks and assist in the analysis. If a project requires a quantitative risk analysis, consult expert modelers. Most state highway agencies do not have in-house capabilities for per- forming quantitative risk analyses. Resources Caltrans Office of Project Management Process Improve- ment (2003). Project Risk Management Handbook. www.dot. ca.gov/hq/projmgmt/documents/prmhb/project_risk_ management_handbook.pdf. Federal Transit Authority (2004). Risk Assessment Method- ologies and Procedures. Project Management Oversight under Contract No. DTFT60-98-D-41013. Federal Highway Administration (2004). Major Project Pro- gram Cost Estimating Guidance. http://www.fhwa.dot.gov/ programadmin/mega/cefinal.htm. Grey, S. (1995). Practical Risk Assessment for Project Man- agers. John Wiley and Sons, Chichester, England. Molenaar, K. R. (2005). “Programmatic Cost Risk Analy- sis for Highway Mega-Projects,” Journal of Construction Engi- neering and Management, Vol. 131, No. 3. Project Management Institute (2004). A Guide to Project Management Body of Knowledge (PMBOK Guide). Washington State DOT’s Cost Estimating Validation Process (CEVP) website: www.wsdot.wa.gov/Projects/ ProjectMgmt/RiskAssessment. R3.2 Contingency—Identified The standard state highway agency method for assigning contingency has been to either follow standard percentages for A-149

A-150 Figure R3.1. Caltrans process of risk probability ranking.

A-151 Figure R3.1. (Continued).

will be composed of three components for which there are dif- ferent amounts of information: “Known/Knowns” (known and quantifiable costs), “Known/Unknowns” (known but not quantified costs), and “Unknown/Unknowns” (as yet unrecog- nized costs); these concepts are illustrated in Figure R3.2-1. Note that in this figure the contingency cost component extends into the known/known cost percentage. Also note that in this figure, at the “Advertise & Bid” point, there still will be the potential for unrecognized costs (a very small gap) and known but not quantified costs (a small gap). Only when con- struction is completed are all costs known. All too often, if the cost of an item is not known, it is not included in early project cost estimates. There is also opportunity for other items (e.g., environmental or construction inspection costs) to be entirely left out of early estimates. The costs associated with the three components—known/knowns, known/unknowns, and unknown/unknowns—require different methods and tools to define and quantify their possible contribution to the estimate at any particular time in the project development process. Figure R3.2-2 illustrates how identifying, quantifying, and managing cost and schedule uncertainty relates to refining the cost estimate (i.e., managing the final project cost). This fig- ure illustrates two crucial points that apply to situations where the scope is unchanged and where an estimate, at some early stage in the design process, has included uncertainty. The first point is that the range of cost or schedule uncertainty should the varying stages of project development or to rely solely on the project estimator’s experience. The enumeration and qual- itative assessment of a project’s contributor risks offers a more effective method for determining project contingency than does the standard state highway agency practice of broad-based percent add-on contingency amounts. Attention to technical complexities, construction execution, and the macroenviron- ment focuses estimator attention on project risks. What Is It? This tool creates a process whereby the contingency amount included in an estimate is set on the basis of identified risks and the probability of their occurrence. This tool should ideally be used in conjunction with a comprehensive risk management process. When this tool is used in conjunction with a qualitative risk assessment, the contingency is set using the cost estimator’s judgment and the information generated from the risk identification and analysis process, and the con- tingency is in compliance with state highway agency policy. When this tool is used in conjunction with a quantitative risk analysis, the contingency is set using an acceptable confidence interval for the project (i.e., the difference between the 50% and 80% confidence intervals of a range estimate). Cost estimation methods and tools must be understood in terms of the design definition (i.e., detail) available during the various phases of project development. More generally, at any stage in the development of a highway project, cost estimates A-152 Figure R3.2-1. Components of a cost estimate.

chastic estimates, which are not commonly employed by state highway agencies, but are being described in this section on risk analysis. Why? The identification of project risks gives the estimator a much firmer basis for developing a reliable contingency amount than the typical top-down assignment of a percentage based on the estimated direct cost of the project. What Does It Do? Because risks are specifically delineated as a project is devel- oped, specific strategies can be implemented to mitigate, transfer, or avoid significant risks. In addition, with the risks identified and quantified, control and tracking procedures can be implemented to monitor risk items on an ongoing basis. These concepts are more fully explained in Section R3.5. When? The tool should be employed early, and risks should be tracked throughout the project development process. Projects of an unusual or complex nature require a more in-depth evaluation of potential risks and their effect on estimated cost. decrease as a project proceeds from concept to final design. Estimate accuracy improves as design develops, cost variables are better defined, and uncertainty is eliminated. The second point is that if the uncertainties included in the estimate, as a contingency amount, in the early stages of project design materialize, then the estimated total will still be as expected. However, as risk management and other cost control pro- cesses are applied to the identified uncertainties, it is often possible to mitigate risks (i.e., contingency costs) and deliver the project at a lower cost. The Association for the Advancement of Cost Engineering International (AACEI) has developed a cost estimate classifi- cation system that defines five estimate classifications. This system, shown in Table R3.2, provides an expected range of accuracy for each project development phase. A Class 5 esti- mate is prepared at the earliest stage of project definition, and a Class 1 estimate is prepared closest to complete project def- inition and final design. Table R3.2 also describes the method- ological approach to the estimate as either stochastic or deterministic, depending upon the level of design and infor- mation available. A deterministic estimate contains no ran- dom variables, while a stochastic estimate contains one or more random variables. The result of a deterministic estimate is a single point of total cost, while the result of a stochastic estimate is a range of total cost. The AACEI recommends that Class 1 through 3 estimates be developed primarily as sto- A-153 Figure R3.2-2. Refinement of a cost estimate.

The opportunities to expand the identification and quantifi- cation of risks should be pursued as design progresses and as more is known about potential exogenous risk factors. Examples The Cost Estimating Validation Procedure (CEVP) devel- oped by the Washington State DOT (WSDOT) is a peer-level review on the scope, schedule, and cost estimate for trans- portation projects throughout the state of Washington. The objective of the CEVP is to evaluate the quality and complete- ness, including anticipated uncertainty and variability, of the projected cost and schedule. The outcomes of the CEVP include: • An estimate validation statement in the form of a CEVP project summary sheet that represents the project cost ranges and the uncertainty involved (see Section C1.2). • Findings and recommendations that allow WSDOT project teams and senior management to better understand the basis, content, and variability of cost estimates. • Identification and characterization of the high-risk project elements (this outcome will allow project teams to address appropriate mitigation strategies). The CEVP is also discussed in Sections C1.2, I2.2, R3.4, and R3.5. The Caltrans Risk Management Handbook calls for a quanti- tative assessment of project risk items representing the highest degree of exposure. This quantification is important for updat- ing the contingency amount to be included in the project esti- mate. The handbook is available online at www.dot.ca.gov/ hq/projmgmt/documents/prmhb/project_risk_management_ handbook.pdf. The Federal Transit Administration commissioned a report on risk assessment technologies and procedures that discusses the application of risk-based contingency. The report is titled Risk Assessment Methodologies and Procedures. The Regional Transportation District (RTD) in Denver, Colorado, is also employing a risk-based contingency process to its Fastracks transit program. See Denver RTD’s 2006 “Risk Assessment Quantification,” available online at www.rtd-denver.com/ fastracks/documents/SB_208_Submittal/Risk_Analysis.doc. Tips To successfully attack the effects of project risk, risk analy- sis must take a broad view of risk; concentrating on only the technical risks can lead to oversights in other project dimen- sions. The analysis should consider local authority/agency impacts, industry and market risks, elements of political un- certainty, and public and/or permit approval processes that might impact timing. Scope changes must also be considered from a broad per- spective. Identification of risk goes beyond the internal proj- ect risks (such as pile driving depth) and includes exogenous factors (such as market conditions, business environment, global construction activities/demand, the macroeconomic environment, and weather). Namely, any major uncertainties that might influence the primary project outcomes of cost, schedule, or quality should be included. Resources Association for the Advancement of Cost Engineering International (2004). “AACE International Recommended Practice No. 10S-90: Cost Engineering Terminology.” http:// www.aacei.org/resources/rp.shtml. A-154 Table R3.2. AACEI generic cost estimate classification matrix. Primary Characteristic Secondary Characteristic Estimate Class Level of Project Definition Expressed as % of complete definition End Usage Typical purpose of estimate Methodology Typical estimation method Expected Accuracy Range Typical +/− range Class 5 Class 4 Class 3 Class 2 Class 1 0% to 2% 1% to 15% 10% to 40% 30% to 70% 50% to 100% Screening or Feasibility Concept Study or Feasibility Budget, Authorization, or Control Control or Bid/ Check Estimate or Bid/Tender Tender Stochastic or Judgment Primarily Stochastic Mixed, but Primarily Stochastic Primarily Deterministic Deterministic +40/−20 to +200/−100 +30/−15 to +120/−60 +20/−10 to +60/−30 +10/−5 +10/−5 to +30/−15 Adapted from the Association for the Advancement of Cost Engineering International’s AACE International Recommended Practice No. 17R-97: Cost Estimate Classification System, 1997.

Caltrans Office of Project Management Process Improve- ment (2003). Project Risk Management Handbook. www.dot. ca.gov/hq/projmgmt/documents/prmhb/project_risk_ management_handbook.pdf. Denver Regional Transportation District (2006). “Risk Assessment Quantification.” www.rtd-denver.com/fastracks/ documents/SB_208_Submittal/Risk_Analysis.doc. Federal Transit Administration (2004). Risk Assessment Methodologies and Procedures, Report for Contract No. DTFT60-98-D-41013. Federal Highway Administration (2006). “Price Trends for Federal-Aid Highway Construction.” www.fhwa.dot.gov/ programadmin/pricetrends.htm. Federal Highway Administration (2004). “Major Project Program Cost Estimating Guidance.” http://www.fhwa.dot. gov/programadmin/mega/cefinal.htm. Owen, P. A., and J. K. Nabors (1983). “Quantifying Risks in Capital Estimates,” AACE Transactions, B.5.1-B.5.7. Stevenson, J. J. (1984). “Determining Meaningful Estimate Contingency,” Cost Engineering, AACE International, Vol. 26, No. 1. Washington State DOT (2006). Cost Estimating Valida- tion Process (CEVP) website, www.wsdot.wa.gov/Projects/ ProjectMgmt/RiskAssessment. R3.3 Contingency—Percentage As depicted in Figures R3.2-1 and R3.2-2 and Table R3.2, contingency percentages should decrease from the early stages of project development through final design. This theoretical idea of contingency has led some state highway agencies to apply fixed contingencies that decrease with project development milestones. However, it is poor policy to use fixed allowances for contingencies without good rea- sons. So even if the contingency amounts included in an estimate are justified based on published tables of practice, they still should be documented in writing. This require- ment for documentation becomes even more important when fixed allowances or guide ranges for contingency are not followed. If extraordinary conditions exist that call for higher contingencies, the rationale and basis must be docu- mented in the estimate. What Is It? Recognizing that cost estimation is inherently difficult because estimators are trying to predict the future, it is prudent to provide contingency allowances in the estimate. These contingency allowances represent the typical cost escalation experienced on similar projects as design progresses. The con- tingency amount can be set as a percentage of the project’s direct cost with the percentage being established by analysis of historical cost experience from past projects. Why? At any stage in the development of a project, cost estimates will be composed of three components for which there are dif- fering amounts of information: “Known/Knowns” (known and quantifiable costs), “Known/Unknowns” (known but not quantified costs), and “Unknown/Unknowns” (as yet unrec- ognized costs). These components are illustrated in Figure R3.2-1. What the contingency amount is supposed to account for is the total of the “Known/Unknowns” and “Unknown/ Unknowns” of the estimate. What Does It Do? A contingency allowance included in an estimate is meant to provide funds for cost growth resulting from necessary but unforeseeable project scope changes, underestimation of real project costs, or errors in projecting the rate of inflation. Increases in the prices for construction services—inflation— are not to be considered covered by the contingency amount. Inflation should be handled by applying an appropriate infla- tion rate to the calculated project cost (see Section E3.5). When? Contingency amounts, added to an estimate, are a valid means of reflecting the uncertainties that remain to be defined as design progresses. A contingency amount should be included in every project estimate from the earliest plan- ning stage of project development to the final PS&E; how- ever, as shown in Figure R3.2-1, the magnitude of the contingency amount decreases as the scope is defined and the design progresses. Examples Many state highway agencies use standard percentages, such as the percentages in Table R3.3-1, to develop estimate contin- A-155 Table R3.3-1. One state highway agency’s graduated conceptual estimate contingency scale. Project Value Conceptual Contingency $0 - $1,000,000 11.0% $1,000,000 - $5,000,000 9.5% $5,000,000 - $25,000,000 7.0% $25,000,000 + 6.0%

gency amounts. Historical experience shows that state highway agencies can establish contingency percentages to be applied to an estimate’s direct cost, but research shows that, in many cases, the applied percentages do not reflect actual conditions. State highway agencies should only use the percentage con- tingency approach for projects that are similar in character to a large number of past projects for which good cost data are available. Table R3.3-2 is a summary of guidance on contingency in Chapter 20 of the Caltrans Project Development Procedures Manual (available online at http://www.dot.ca.gov/hq/oppd/ pdpm/pdpmn.htm). The table is offered as guidance for a graduated contingency. However, it should be noted that Cal- trans also offers guidance on applying risk-based contingency when appropriate, as described in Sections R3.1 and R3.2. Tips When a state highway agency chooses to establish an esti- mate contingency by means of the relationship between con- tingency amount and project direct cost, two steps are needed to make the process work effectively: 1. The purpose of the contingency amount needs to be care- fully defined. Estimators and management must understand that the contingency is intended to account for very specific unforeseen, unexpected, unidentified, or undefined costs. The project risks that cause the occurrence of these costs must be delineated in the state highway agency’s estimation manual with the percentages. Examples of risk factors early in design are provided in Sections I2.1 and I2.2. Examples of possible risk factors near the final design period include: • Number of bidders: The availability of contractors will- ing to bid the work will affect the bid prices. Caltrans has found that, for projects in the $1 million to $10 mil- lion range, if there is only one bidder, the price will on average be 5% above the engineer’s estimate, and the effect of each additional bidder is a 2% reduction in bid price compared with the state highway agency estimate. • Contractor perception of project risk: The perceptions of risk by contractors vary widely, but underground work will normally increase a contractor’s bid because of geot- echnical unknowns. For one-of-a-kind projects, con- tractors will apply more risk to their bid. • Construction unknowns: This risk factor might be addressed with a reserve to cover construction change orders due to differing site conditions and other con- struction issues. • Quality of construction documents (plans and speci- fications): Incomplete or inadequate construction doc- uments add to project management difficulties and usually result in an increased number of change orders. • Contracting method: A range of risk management strategies affect project cost, risk transfer, risk reduction, and even financial treatments. Using lump sum or even unit price contracts to transfer risk to a contractor when project complexities exist that cannot be completely addressed until construction commences will add cost to the project. The constructor will add higher overhead and profit markup to the bid, and there will still be diffi- cult-to-resolve change orders. • Material price escalation: Sometimes material price escalation is carried in the individual items of the esti- mate, and sometimes it is supposed to be part of the esti- mate contingency. The proper accounting should be defined in the state highway agency’s estimation manual. 2. The established contingency percentages should be based on actual experience (i.e., historical data). It is important for both the state highway agency estimators and state highway agency management to know the level of accuracy achieved with the prescribed contingency percentages. Statistical analysis of past projects provides a means for measuring that accuracy and adjusting the employed percentages. Resources FHWA (2004). “Contingency Fund Management for Major Projects.” www.fhwa.dot.gov/programadmin/mega/ contingency.htm. FHWA (2004). “Major Project Program Cost Estimat- ing Guidance.” www.fhwa.dot.gov/programadmin/mega/ cefinal.htm. Chapter 20 of the Caltrans Project Development Procedures Manual, http://www.dot.ca.gov/hq/oppd/pdpm/pdpmn.htm. Caltrans Office of Project Management Process Improve- ment (2003). Project Risk Management Handbook. www.dot. ca.gov/hq/projmgmt/documents/prmhb/project_risk_ management_handbook.pdf. Caltrans (1998). State Administrative Manual, Chapter 6000, Section 6854: CONSTRUCTION. http://sam.dgs.ca.gov/TOC/ 6000/6854.htm. A-156 Table R3.3-2. Caltrans graduated conceptual estimate contingency scale. Design/Estimation Milestone Percent Contingency Project Feasibility Cost Estimate 30% to 50% Project Study Report Cost Estimate 25% Draft Project Report Cost Estimate 20% Project Report Cost Estimate 15% Preliminary Engineer’s Cost Estimate 10% Final Engineer’s Cost Estimate 5% or less Adapted from Chapter 20 of the Caltrans Project Development Procedures Manual (available online at http://www.dot.ca.gov/hq/oppd/pdpm/pdpmn.htm).

U.S. Army Corps of Engineers. “Military Program-Specific Information—REF8011G,” http://bp.usace.army.mil/robo/ projects/pmbp_manual/PMBP_Manual/REF8011G.htm. Uppal, Kul B. (Ed.) (2005). Professional Practice Guide #8: Contingency (CD), Association for the Advancement of Cost Engineering (AACE) International. http://www.aacei.org/ technical/ppg.shtml. R3.4 Estimate Ranges The outcome of a quantitative risk analysis is a probabilistic model of cost and schedule. The probabilistic model is most commonly expressed thorough an estimate range. Estimate ranges communicate the uncertainty associated with an esti- mate. The generation of a range can be as simple as applying an historic plus-minus factor to estimated cost (e.g., −10% to +20%). Alternatively, an estimate range may be generated through sophisticated probabilistic models and expressed in a probability density function, as shown in Figure R3.4-1, with the X-axis representing the range of cost and the Y-axis repre- senting the probability of occurrence for a cost in that range. What Is It? A project cost estimate is a prediction of the quantities, cost, and/or price of resources required by the scope of an activity or project. As a prediction, an estimate must address risks and uncertainties. Consequently, engineers realize that any esti- mate has a potential range of final costs. When appropriate, the estimate can be expressed as a cost range. Communication of the estimate as a range is simply a statement of project cost variability. Why? Properly communicating the uncertainty involved in an esti- mate will help to ensure that decisions based upon the estimate are appropriate given the estimate’s precision. A range esti- mate can help to convey the uncertainty of an estimate. Esti- mates derived from probabilistic methods (i.e., range cost estimates) better convey the uncertain nature of project costs at the conceptual phase of project development and even during later project development phases. What Does It Do? The communication of a range of values representing the possible array of ultimate project costs creates a better under- standing of estimate precision. The range does not necessarily represent the very least or the very most that the project will cost, but typically the most probable range of project costs. The size of the range will be determined by the identified un- certainties and the modeling method. The interpretation of the range depends on how aggressive the agency is with the results. For example, the agency can set the budget conservatively at a 90% confidence interval, meaning that the final project cost should be less than the budget nine out of ten times. Currently, many agencies communicate project costs in a single-point value that includes a contingency. The use of a point estimate early in the project development process can lead to a false sense of precision and accuracy because even the best engineers cannot predict all future events that can and will impact a project’s cost. The inability to provide a 100% accurate estimate can, in turn, be negatively viewed by oppo- nents to the agency or project. Through use of an estimate range, the agency can convey the uncertainty that is inherent in the project and educate other parties about cost variability. This is also helpful within the agency to demonstrate the uncertainty about the project to other personnel who may not be intimately familiar with the project. When? Ranges may be considered throughout project develop- ment, but they should be used on projects in earlier stages of development to communicate the level of project knowns and unknowns about the project. Examples The Washington State DOT (WSDOT) has developed a risk-based approach to cost estimation in its Cost Estimating Validation Process (CEVP). The CEVP is used to convey proj- ect cost through estimate ranges. Figure R3.4-2 provides an example of how CEVP is used to convey an estimate range in the form of probability densities. The project represented has a 10% chance of being completed for $651 million or less, while there is a 90% chance that the project will cost $693 million or less. However, there is a chance that the project will cost as lit- tle as $640 million and as much as $720 million. A-157 Figure R3.4-1. Probability density function for project cost. P(x) x, Project Cost

A-158 Figure R3.4-2. Estimate range (presented as a probability density function) generated through WSDOT’s Cost Estimating Validation Process (CEVP). Figure R3.4-3. Estimate range (presented as a table) generated through WSDOT’s Cost Estimating Validation Process (CEVP). WSDOT also uses the CEVP to present cost estimate ranges in a tabular fashion rather than a probability density function. Figure R3.4-3 is an example of how WSDOT is communicat- ing the ranges of possible project costs for the Alaskan Way Viaduct and Seawall Replacement Project. The tabular pres- entation is used to present multiple ranges for multiple design options. Figure R3.4-3 also conveys how the estimates have changed during 2 years of project development. California DOT (Caltrans) uses three-point estimates for some elements of project costs and is planning to make wider use of this technique. Figure R3.4-4 shows the type of estimate generated by this technique. Although the math may appear

complex at first glance, it is easy to implement with a simple spreadsheet. The three-point estimation process uses the fol- lowing steps: 1. Have subject matter experts develop three estimates for each item of work: a) An optimistic estimate (o): The lowest credible cost assuming that everything goes right. b) A most-likely estimate (m): The expert’s best guess of the cost. c) A pessimistic estimate (p): The highest credible cost, assuming that virtually everything goes wrong. 2. The average cost of the item is (o + 4m + p)/6. The average is always greater than the most likely estimate. This is because there is a finite lowest-possible cost. Even in the most optimistic situation, the work package will have a cost that is greater than zero. At the other end of the scale, there is no highest possible cost. It is always possible to spend more money. 3. The standard deviation for the item, derived from the prin- ciple that 95% of events occur within two standard devia- tions of the mean, is: 4. The standard deviation for the combination of all items in the project is: 5. The cost estimate for the project is the sum of the average costs for the items. Caltrans gives the highest credible cost as the cost estimate plus three standard deviations (3 σproject). Using three standard deviations rather than two allows for the skewed nature of the probability density function. σ σ σ σ σproject i1 i2 i3 in= + + +( )2 2 2 2 0 5. . . . σ i p o= −( ) 4 Tips While estimate ranges transparently convey the uncertainty involved in a project, they can be misunderstood. The range theoretically shows the highest possible cost for a project. If people focus on the high end of the range, the project can be slowed or stopped. The range should be used as part of a com- prehensive risk management plan. If the risks and uncertain- ties that are driving the range can be understood, they can likely be mitigated and the project can be completed at a cost that is substantially less than the lower end of the range. Resources Federal Transit Administration (2004). Risk Assessment Methodologies and Procedures, Report for Contract No. DTFT60-98-D-41013. FHWA (2004). “Major Project Program Cost Estimating Guidance.” http://www.fhwa.dot.gov/programadmin/mega/ cefinal.htm. Molenaar, K. R. (2005). “Programmatic Cost Risk Analy- sis for Highway Mega-Projects,” Journal of Construction Engi- neering and Management, Vol. 131, No. 3, American Society of Civil Engineers. Project Management Institute (2004). A Guide to Project Management Body of Knowledge (PMBOK Guide). Washington State DOT (2006). “Cost Estimating Valida- tion Process” (CEVP) website, www.wsdot.wa.gov/Projects/ ProjectMgmt/RiskAssessment. R3.5 Programmatic Cost Risk Analysis State highway and transit agencies are beginning to realize the value of integrating cost estimation practice and cost esti- mation management with comprehensive risk management processes. Programmatic cost risk analysis involves all four steps of the classic risk management process—risk identifica- tion, risk analysis, risk mitigation and planning, and risk mon- itoring and control. The risk analysis component focuses on the quantitative risk analysis process and uses probabilistic cost models to drive the risk management process. The term “programmatic” refers to applying this process across multiple projects within the state highway agency. This form of risk man- agement is the most comprehensive and resource-intensive manner in which to deal with project uncertainty of all the tools described in this guide. What Is It? A programmatic cost risk analysis is a systematic project review and risk assessment method, including probabilistic estimation, to evaluate the quality of the information at hand and to identify and describe cost and schedule uncertainties. A-159 Figure R3.4-4. Caltrans three-point estimate to generate estimate range. Pr o ba bi lit y Cost Most Probable Cost (m) Lowest Possible Cost (o) Highest Credible Cost (p) Average Cost (always >m)

It involves risk identification, risk analysis, risk mitigation and planning, and risk monitoring and control. It systematically combines all of the risk identification, analysis, and commu- nication tools described in this guide (see Sections C1.2, I2.1, I2.2, R3.1, R3.2, R3.3, and R3.4). A successful cost risk analysis program has the following characteristics: • Feasible, stable, and well-understood user requirements • A close relationship with user, industry, and other appro- priate participants • A planned and structured risk management process, integral to the acquisition process • Continual reassessment of project and associated risks • A defined set of success criteria for all cost, schedule, and performance elements • Metrics to monitor effectiveness of risk-handling strategies • Formal documentation Why? Programmatic cost risk analysis can be used to change an agency’s culture and to combat systemic cost escalation. It allows cost estimates to be transparently conveyed to man- agement. It reveals risk and uncertainty involved with the project at each stage of the process. It provides a tool to model both the technical and nontechnical nature of the challenges in quantifying capital costs early in the project life cycle. What Does It Do? Programmatic cost risk analysis can help to create a culture of risk management that is forward looking, structured, informative, and continuous. Through the generation of risk- based probabilistic cost and schedule estimates, the process can assist agencies in anticipating and mitigating potential cost escalation. The process can produce prioritized lists of cost and schedule risks. It can provide estimates of these individual risk costs and their potential effects on project component sched- ules. Ultimately, the process can produce prioritized risk miti- gation strategies, including their estimated implementation costs and cost/schedule savings, which can be incorporated into a comprehensive risk management plan. When? A programmatic cost risk analysis should be applied in all phases of the project development process. In the earliest phases of project development, the tool focuses on risk iden- tification and risk analysis to produce meaning contingencies and prioritized rankings of risks. As project development pro- gresses, the process supports risk mitigation and is managed though an active risk charter. In the final stages of project development, the tool supports the contingency resolution process though active monitoring and control. Examples California DOT (Caltrans) has developed a comprehensive risk management process and documented it in Caltrans’s 2003 Project Management Risk Management Handbook. The Caltrans process is largely based on the Project Management Institute’s Guide to Project Management Body of Knowledge (PMBOK Guide). In the Caltrans process, the project team completes the risk management plan before the project initia- tion document (PID) component ends. The team updates the plan in each subsequent lifecycle component and continues to monitor and control risks throughout the life of the proj- ect. Figure R3.5 shows the process flowchart. Table R3.5-1 shows the two main process tasks, the four subtasks, and all of the deliverables associated with project risk management. Table R3.5-2 shows all of the process tasks and the roles asso- ciated with each task. Caltrans has summarized its process into a risk management plan worksheet. The worksheet is available in Microsoft Excel format. It is intended to act as a risk charter for the process (see Section I2.2). The worksheet provides a tool to organize risks from the risk identification process. It provides a color-coded function for conducting qualitative risk assessments. It also provides space for inputting the results of a quantitative risk assessment. Additionally, the risk management planning worksheet provides tracking mechanisms for risk mitigation strategies as well as risk monitoring and control. An elec- tronic version of this sample spreadsheet is available on the project management guidance website at www.dot.ca.gov/hq/ projmgmt/guidance_prmhb.htm. Washington State DOT (WSDOT) developed the Cost Esti- mating Validation Process (CEVP) to assist in evaluating the quality and completeness of project estimates, including the anticipated uncertainty and variability of the projected cost and schedule. The CEVP uses systematic project review and risk assessment methods, including statistics and proba- bility theory, to evaluate the quality of the information at hand and to identify and describe cost and schedule uncertainties. The CEVP recognizes that every project cost estimate will be a mix of the very likely, the probable, and the possible. Impor- tantly, the process examines, from the very beginning, how risks can be communicated and lowered and cost vulnerabil- ities managed or reduced. In other words, a dividend of the CEVP is to promote the activities that will improve end-of- project cost and schedule results. The CEVP process integrates into the entire project development process in a way similar to that of the Caltrans method previously described. The CEVP process begins with a workshop to facilitate the risk identification and quantitative risk analysis phases of the process. A rigorous peer review and uncertainty analysis is A-160

A-161 Figure R3.5. Caltrans risk management flowchart. Source: Project Risk Management Handbook, Caltrans Office of Project Management Process Improvement, 2003. PT = Project development team EIS = Environmental impact statement ND = Negative declaration FONSI = Finding of no significant impact EIR = Environmental impact report

A-162 Table R3.5-2. Caltrans risk management responsibility matrix. Legend: R = responsible, S = support, A = approve Source: Project Risk Management Handbook, Caltrans Office of Project Management Process Improvement, 2003. Table R3.5-1. Caltrans risk management tasks and deliverables. Source: Project Risk Management Handbook, Caltrans Office of Project Management Process Improvement, 2003. the foundation of the CEVP process. A multidisciplinary team of professionals from both the public and private sec- tors examines the project. Table R3.5-3 presents the seven phases in the WSDOT CEVP process. While the workshop is a key component of the CEVP process, the CEVP process involves many other components that are integrated into the cost estimation, risk management, and project management processes at WSDOT. Other ele- ments of the CEVP process are described in Sections C1.2, I2.2, R3.1, and R3.4 in this guide. More information can be found on the WSDOT CEVP and Cost Risk Analysis website at www.wsdot.wa.gov/Projects/ProjectMgmt/RiskAssessment.

Tips Implementation of a programmatic cost risk analysis tool will involve significant changes to most state highway agencies’ cost estimation and project management procedures. In fact, the process will likely require a cultural change within the organization. To be successful, this tool will require manage- ment’s full support and commitment of resources. Resources Caltrans Office of Project Management Process Improve- ment (2003). Project Risk Management Handbook. www.dot.ca. gov/hq/projmgmt/documents/prmhb/project_risk_manage ment_handbook.pdf. Federal Transit Authority (2004). Risk Assessment Method- ologies and Procedures, report under Contract No. DTFT60- 98-D-41013. Federal Highway Administration (2004). Major Project Program Cost Estimating Guidance. Molenaar, K. R. (2005). “Programmatic Cost Risk Analy- sis for Highway Mega-Projects,” Journal of Construction Engi- neering and Management, Vol. 131, No. 3, American Society of Civil Engineers. Project Management Institute (2004). A Guide to Project Management Body of Knowledge (PMBOK Guide). Washington State DOT (2006). Cost Estimating Valida- tion Process (CEVP) website: www.wsdot.wa.gov/Projects/ ProjectMgmt/RiskAssessment. V1 Validate Costs Constant project cost evaluation is a means to better manage projects and respond to public skepticism and concern about project estimates and actual costs. Validation processes appraise the reasonableness and completeness of the assumptions, pro- cedures, and calculations used in developing an estimate. V1.1 Estimation Software (Also See C2, C3, D2, P1) Computer software provides state highway agencies with the ability to manage large data sets that support estimate devel- opment for all project types and levels of complexity. Estima- tion programs with preloaded templates for creating cost items help project teams define the project scope, cost, and schedule. It is easy to include checks in estimation software to flag cost items that do not fall within historical price ranges. A-163 Table R3.5-3. CEVP workshop format. CEVP Process Phase Summary Description Phase I – Project Identification and Preparation Project data compilation CEVP training and education Phase II – Workshop Initiation Establishment of the workshop goals, workshop scope, and project alternatives being explored Project team presentation of: 1) scope and assumptions for each decision alternative; 2) cost and schedule estimate; and 3) major issues and concerns Development of project flow chart or schedule (the basis for the cost and schedule risk and uncertainty model) Phase III – Cost Validation and Risk Identification Cost validation team breakout activities Risk team breakout activities Environmental costing team breakout activities Modeling team breakout activities Phase IV – Integration and Model Construction Breakout team reports Reconciliation of breakout assumptions Construction of cost and schedule risk and uncertainty model Phase V – Presentation of Results Oral presentation of workshop results Written presentation of workshop results Phase VI – Validation of Results and Generation of Alternatives Project and CEVP teams validate workshop results Alternative project scenarios are explored and evaluated Phase VII – Implementation and Auditing Development of risk mitigation planning and integration into project management Reviewing and updating of workshop results and predictions as compared with actual project results • • • • • • • • • • • • • • • • • •

What Is It? Estimation software is the computer program that assists the state highway agencies in developing cost estimates. Most estimation software, be it agency developed or a commercial product, has preloaded templates that help the state highway agency project teams define the project scope, cost, and sched- ule. The software provides a means to track project develop- ment, and it can assist in project review, particularly if it includes features that flag costs that do not fall within preset historical cost ranges. Why? One of the advantages of using estimation software to cal- culate project cost is that it can provide rapid search features that detect errors or anomalies in an estimate. Estimates on large projects and even on many small urban projects are very complex, and computer software is the only efficient method of checking the many small details that support the cost calculations. What Does It Do? The estimation software will direct the estimator’s attention to input data or costs that the software detects as not being appropriate. The software does not tell the estimator what is wrong, but it focuses attention on those areas of the estimate that should be carefully reviewed. When? Cost validation is an ongoing process that should be occur- ring during all project development stages. By using estima- tion software with built-in anomaly detection features, the validation checks take place as the estimate is created. This means that problem identification is continuous. Examples The Heavy Construction Systems Specialists, Inc. (HCSS), software, HeavyBid, has a feature that checks the estimate and takes the estimator to each questionable location so that cor- rections can easily be made as necessary. The AASHTO CES and Estimator software have a feature that allows the estimator to spot unit costs that are outside the range of unit cost data included in the database. There is a statistical regression option that provides a best-fit curve with confidence intervals. This feature can be used to deter- mine if a unit price that was input by the estimator is within the range of expected unit prices as deleted through the regression analysis. Tips The effectiveness of any estimation software is directly related to product support and training. When selecting soft- ware, always ensure that product support will be available and that training and training material will be provided. Resources For more information about Trns•port Estimator, contact the AASHTOWare contractor: Info Tech, 5700 SW 34th Street, Suite 1235, Gainesville, FL 32608. Phone (352) 381-4400; Fax (352) 381-4444; E-mail info@infotechfl.com; Internet www.infotechfl.com. Heavy Construction Systems Specialists, Inc. (HCSS), 6200 Savoy, Suite 1100, Houston, TX 77036. Phone (800) 683-3196 or (713) 270-4000; Fax (713) 270-0185; E-mail info@hcss.com; Internet www.hcss.com. V2 Value Engineering Value engineering can be defined as a systematic method to improve the value of goods and services by examining func- tion. Value is the ratio of function to cost. Value can therefore be increased by either improving the function or reducing the cost. It is a primary tenet of value engineering that quality not be reduced as a consequence of pursuing value improvements. In the United States, value engineering is specifically addressed in Public Law 104-106, which states, “Each execu- tive agency shall establish and maintain cost-effective Value Engineering procedures and processes.” Value engineering is sometimes taught within the industrial engineering body of knowledge as a technique in which the value of a system’s outputs is optimized by crafting a mix of performance (i.e., function) and costs. In most cases, this practice identifies and removes unnecessary expenditures, thereby increasing the value for the manufacturer and/or their customers. In late 1995, Congress passed the National Highway System (NHS) Designation Act, which included a provision requiring the U.S. Secretary of Transportation to establish a program that would require states to carry out a value engineering analysis for all federal-aid highway projects on the NHS with an estimated total cost of $25 million or more. On February 14, 1997, the FHWA published its value engineering regulation establishing such a program. V2.1 Value Engineering Value engineering is a requirement of federal-aid projects. The value engineering process is a systematic approach to improving cost-effectiveness of designs for highway projects. Value engineering can provide a mechanism for enhancing cost estimates of projects by clarifying scope and the quality of design documents. A-164

What Is It? Value engineering is the systematic review of a project, product, or process to improve performance, quality, and/or life cycle cost by an independent multidisciplinary team of specialists. The value engineering process, referred to as the job plan, defines a sequence of activities that are undertaken during a value engineering study before, during, and follow- ing a workshop. During the value engineering workshop, the value engineering team learns about the background issues; defines and classifies the project (or product or process) func- tions; identifies creative approaches to providing the func- tions; and then evaluates, develops, and presents the value engineering proposals to key decision makers. The focus on the functions that the project, product, or process must per- form sets value engineering apart from other quality improve- ment or cost reduction approaches. Why? When value engineers talk about reducing costs, they are usually referring to either total life cycle costs or the direct costs of production. Total life cycle costs are the total expenditures over the whole life span of the highway. This measure of cost is most applicable to expensive capital equipment and includes engineering, procurement, construction, maintenance, and decommissioning costs. Individual expenditures must be dis- counted to reflect the time value of money, which translates to a more accurate estimate. The main objectives that the value engineering process seeks include improving project quality, reducing project costs, fos- tering innovation, eliminating unnecessary and costly design elements, ensuring efficient investment in projects, and devel- oping implementation procedures. What Does It Do? Value engineering uses intuitive logic (a unique “how”/ “why” questioning technique) and analysis to identify rela- tionships that increase value. Value engineering is a quantita- tive method similar to the scientific method (which focuses on hypothesis and conclusion to test relationships) and opera- tions research (which uses model building to identify predic- tive relationships). The value engineering process follows a general framework commonly referred to as an eight-phase job plan, with the fol- lowing phases: 1. Selection Phase: Select the right projects, timing, team, and project processes and elements. 2. Investigation Phase: Investigate the background informa- tion, technical input reports, field data, function analysis, and team focus and objectives. 3. Speculation Phase: Be creative and brainstorm alternative proposals and solutions. 4. Evaluation Phase: Analyze design alternatives, technical pro- cesses, life cycle costs, documentation of logic, and rationale. 5. Development Phase: Develop technical and economic supporting data to prove the feasibility of the desirable concepts. Develop team recommendations. Recommend long-term as well as interim solutions. 6. Presentation Phase: Present the recommendations of the value engineering team in an oral presentation and in a written report and workbook. 7. Implementation Phase: Evaluate the recommendations. Prepare an implementation plan, including response of the managers and a schedule for accomplishing the deci- sions based on the recommendations. 8. Audit Phase: Maintain a records system to track the results and accomplishments of the value engineering program on a statewide basis. Compile appropriate statistical analy- ses as requested. The duration and assessment for these phases depend on the complexity of the project. By performing the steps in these phases, the value engineering team will evaluate several components of a project, such as designs, topographical implications, and environmental impacts, and make recom- mendations for several feasible options along with the cost differences and their impact on total project cost and sched- ule. These details are compiled into a value engineering deci- sion document for appraisal from concerned authorities. When? Value engineering is most successful when it is performed early in project development. A value engineering study should be performed within the first 25–30% of the design effort prior to selecting the final design alternative. Value engineering is compulsorily performed on federal aid projects greater than $25 million and should be performed on high- cost projects. The process can provide a justified logic for alle- viating cost escalations while not compromising quality. Examples Figure V2.1, the value analysis flowchart for Nevada DOT, shows how the value engineering process is incorporated into practice. Tips Often, value engineering reduces costs by eliminating wasteful practices. This can be done in several areas: • Material substitutions: Unnecessarily expensive inputs can sometimes be replaced by less expensive ones that function A-165

A-166 Figure V2.1. Value analysis flow chart (Nevada). just as well. If a product has a life span of 10 years, then using a material that lasts 30 years is wasteful. In a perfectly value-engineered product, every component of a highway will function perfectly until the product is no longer useful, at which time all components will deteriorate. • Process efficiency and producibility: More efficient pro- cesses can be used, and the highway can be redesigned so that it is easier to construct. Reducing unnecessary design elements, unnecessary precision, and unnecessary con- struction operations can lower costs and increase the speed of construction and reliability. • Modularity: Many highway project design elements are identical and can be mass produced to reduce costs. Such designs are developed once and reused in many slightly dif-

ferent products, thereby reducing a project’s engineering and design costs. For example, precast concrete slabs have proven to be a quick and efficient solution to time-constrained construction operations. These slabs can be factory cast for different sizes and transported and assembled at the sites by modern construction practices, such as posttensioned con- crete structures. Also, these slabs can be produced to a desired quality as they are manufactured under controlled conditions. • Energy efficiency: In an environmentally conscious soci- ety, value can be created by making a product or process more energy efficient for the user. For example, develop- ment and usage of customized equipment, such as slip form pavers, ensure that a single piece of equipment performs several operations that would require several resources traditionally. Additionally, agencies must • Ensure they have adequate training facilities or trained staff • Identify and train value engineering team member in-house • Share knowledge gained or results derived during value engineering studies to continuously improve the process Resources Wilson, David C. (2005), NCHRP Synthesis of Highway Practice 352: Value Engineering Applications in Transportation, Transportation Research Board. http://www.trb.org/news/ blurb_detail.asp?id=5705. Washington State DOT (1998), “Design Manual,” Section 315. http://www.wsdot.wa.gov/EESC/Design/DesignManual/ desEnglish/315-E.pdf. V3 Verify Scope Completeness Scope completeness is key to producing an accurate cost estimate. Therefore, reviewing a project’s scope documents for completeness is an important task in the overall estimation process. The project that is estimated early in the development process is often not the project actually built because of scope changes that could have been avoided if more attention were given to both project requirements and community desires earlier in project development. V3.1 Estimation Checklist (Also See C4.2, P2.1) Many changes in scope result from an improved under- standing of project need and outcome requirements. Check- lists are intended to serve as guides in checking and reviewing whether there are scope omissions. The use of checklists, which cause the estimator to review the scope for complete- ness, will yield comprehensive and improved cost estimates. What Is It? This tool is the employment of checklists or templates that estimators and managers use to ensure that the project scope is complete. These checklists guide the estimator through an inventory of items and questions that address both the design elements of the project and other things that drive project cost, such as environmental permits, purchase of right-of-way, and utility interference. Why? Estimators are generally very familiar and proficient with assembling cost data and developing item costs, but for the esti- mate to be of value, it must match what will actually be built and the build environment conditions. Thus, one of the first steps to achieving estimate accuracy is verifying that the project scope is complete, in terms of both the physical structures to be built and the environment where the construction will take place. What Does It Do? Checklists serve to delineate the large number of factors that must be considered during scope development. There- fore, they are an excellent means of avoiding omissions and calling attention to the interaction between factors that can impact scope and cost. The answers to the checklist questions will provide an overview of scope completeness and focus the estimator and project management team’s attention on criti- cal issues that need to be considered. When? Scope checklists can support estimate creation at all stages of project development. The purpose of a checklist is to assist the project team in developing a complete description of proj- ect scope. Checklists should be as inclusive as possible, with questions that specifically probe the scope at the different stages in project development. Examples A scope checklist for bridge construction might review the following topics: 1. Maintenance of traffic 2. Removals 3. Foundation 4. Wetland mitigation A-167

5. Garbage dump removal 6. Toxic waste removal 7. Utilities (relocation companies/owners) 8. Unusual conditions, such as power stations, sewerage plants, high-tension lines, and pumping stations 9. Railroad engineering 10. Right-of-way summary 11. Mitigation for wetland sites 12. Sidewalks on bridge 13. Maintenance operations, such as cleaning existing pipes, drainage structures, and ditches 14. Noise barriers Tips The project scope should clearly define each deliverable, including exactly what will be produced and what will not be produced. Get approval from all stakeholders. There can be many individual checklists to support the different phases of project development, but they should all include questions about third-party requirements. The project scope must be monitored as the project pro- ceeds through the development phases to ensure that any and all changes are properly managed. Resources Sturgis, Robert P. (1967). “For Big Savings—Control Costs while Defining Scope.” AACE 11th National Meeting, AACE International, Vol. 67-C.3, pp. 49–52. Though it is not strictly for transportation work, a scope development checklist can be found on the Construction Industry Cooperative Alliance (CICA) web page at www.ces. clemson.edu/cica/Toolbox/files/SD1_Scope%20Develop ment%20Checklist.doc. CICA is a cooperative alliance be- tween member firms from the construction industry in the eastern United States and Clemson University’s Department of Civil Engineering. A-168