Airport Capital Improvements: A Business Planning and Decision-Making Approach (2014)

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8This chapter provides general guidance on cost estimating for airport construction projects. It discusses basic terminology, best practices, and challenges. Basic Principles of Cost Estimating Cost estimating is a dynamic process, encompassing interdependencies and integration with system engineering, benefit analysis, requirements, risks, schedule, and implementation plan- ning. Lifecycle cost estimates include the total costs to acquire, implement, operate, maintain, technology refresh, and dispose of the proposed acquisition. The elements of such cost estimates include costs for both capital expenditures and recurring expenses for operations and main- tenance. However, when developing construction cost estimates for an ACIP, only the initial capital expense is usually considered. This is because one main purpose of the ACIP is to align construction needs with the availability of capital funding. Many, if not most, of the sources for airport capital funds, including the federal Passenger Facility Charge (PFC) program and AIP, only provide funds for the initial planning, design, permitting, and construction, and not for recurring maintenance costs. When a proposed investment consists of the procurement of commercial off-the-shelf (COTS) products, a cost estimate is relatively easy to obtain. This is because the cost can simply be deter- mined by using the purchase price or a quote provided by one or more potential vendors. How- ever, for anything other than a straightforward COTS procurement, cost estimating becomes much more complex. In the airport domain, construction usually requires significant plan- ning, design, and engineering activities. Frequently, airport construction projects require facility needs analysis, site surveys, geotechnical investigation, environmental analysis, and permitting. Construction is usually preceded by site preparation activities, which can be extensive. Each of these cost elements can be complex enough to require substantial engineering and analysis. These cost estimates of construction and acquisition costs developed for ACIP are typically pro- vided by the airport’s engineer (in-house or through a consultant appointment). More in-depth information and best practices are also available in existing reference material, for example, the U.S. Government Accountability Office’s Cost Estimating and Assessment Guide (GAO 2009). FAA’s guidance on BCAs for airport projects also covers cost-estimating principles (FAA 1999). Benefit-Cost Analysis The BCA is the broadest type of cost-estimating document and is used to justify specific capi- tal planning decisions. The BCA is used to evaluate the lifecycle economic value of proposed C H A P T E R 2 Best Practices for Estimating Construction Costs

Best Practices for Estimating Construction Costs 9 public investments. It works by comparing streams of economic benefits over time with streams of costs, and then expresses the difference in terms of a number of metrics. These metrics include the discounted net present value (NPV), benefit-cost (B/C) ratio, internal rate of return (IRR), and payback period. The BCA provides a straightforward and consistent way to compare, rank, and select among competing alternatives that may differ in timing and/or scale. The key issues addressed by a BCA for a proposed investment decision include the following: • Whether the economic benefits of a proposed project justify its economic costs • Which alternative should be selected • What the priorities and schedules should be for the selected projects A BCA is required for projects funded through AIP grants of at least $10 million, when paid for using discretionary funds or letters-of-intent. In practice, this means BCAs are not required for most AIP-funded projects. BCAs are also not required for projects paid through other fund- ing mechanisms, such as bonds or PFC funding. Guidance for conducting BCAs for airport proj- ects is provided by the FAA (1999) and in ACRP Synthesis of Airport Practice 13: Effective Practices for Preparing Airport Improvement Program Benefit-Cost Analysis (Landau & Weisbrod 2009). Cost-Estimating Analyses Cost-estimating analyses cover all other types of studies focused strictly on the development of cost estimates. There are four commonly used methodologies to develop cost estimates (Ameri- can Association of State Highway and Transportation Officials 2009): 1. Parametric estimates. Parametric estimates are developed by applying CERs that relate an independent non-cost variable such as runway length to a dependent cost variable such as amount of site work required. CERs are developed by quantifying hypothetical relationships between independent and dependent variables based on engineering experience, developing a database of actual historic variables, and performing statistical analyses of the relationship between the independent and dependent variables. 2. Estimating using historical bid prices. This method uses data from recently awarded con- tracts as a basis for the unit prices on the project being estimated. Data from previously awarded projects is typically stored in a database for three to five years to provide historical data to the estimator. The more data that is available and the more effectively it is organized by project types, size, and locations, the better the estimate that can be produced. Unit prices are adjusted for specific project conditions in comparison to previous projects awarded. Adjust- ments are generally made based on the project location, size of the project, project risks, quantities, general market conditions, and other factors. 3. Cost-based estimating. Cost-based estimating is a method that relies on estimating the cost of each component to complete the work and then adding a reasonable amount for the contrac- tor’s overhead and profit. A cost-based estimating approach can take into account the unique characteristics of a project, geographical influences, market factors, and the volatility of material prices. Since contractors generally utilize a cost-based estimating approach to prepare bids, this method can provide more accurate and defendable costs to support the decision for contract award. Properly prepared cost-based estimates require significantly more in terms of effort, time, and skill to prepare than historical bid based estimating. For this reason, cost-based estimates are often prepared only for those items that comprise the largest dollar value of the project. In order to successfully implement cost-based estimating, the estimators must have expertise in construction methodologies including required equipment, manpower, material, and schedul- ing. Additionally, the nature of cost-based estimating requires that a significant degree of infor- mation regarding the project scope, size, materials, and systems has been developed. Therefore this method is usually implemented only after the design of the project has begun.

10 Airport Capital Improvements: A Business Planning and Decision-Making Approach 4. Risk/contingency analysis. In addition to developing the most likely, or so-called “point,” esti- mate, this method also addresses project risks and uncertainties. Using statistical techniques such as Monte Carlo analysis, risk analysis accounts for uncertainty surrounding the point estimate. The total risk-adjusted cost estimate for the project is derived by statistically adding the risk-adjusted costs for each of the contingent subelements that make up the project. Parametric cost estimating was the approach used to develop the cost model presented in this guidebook. This methodology is described in detail in Chapter 3. Summary of Best Practices The science of cost estimating is relatively mature and there is a large body of knowledge documenting approaches and best practices. A summary of the most relevant best practices is presented below, organized by key reference works. American Association of State Highway and Transportation Officials, A Practical Guide to Estimating The American Association of State Highway and Transportation Officials (AASHTO) Techni- cal Committee on Cost Estimating documents practical guidance on preparing final estimates, including recommended procedures and guidance on reviewing bids prior to award (AASHTO 2009). The guide draws on the expertise of AASHTO members and the agencies they represent to document the best practices in use by state agencies. This guide provides practical guidance on preparing final estimates. Of particular interest to this project is the discussion on the dif- ferences between cost estimation utilizing historical bid pricing and cost-based estimating. The guide contains an analysis and discussion of the importance of proper bid tabulation methods, as well as critical factors that affect cost estimating. Government Accountability Office, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital Program Costs, GAO-09-3SP The U.S. Government Accountability Office (GAO) has released a guide designed to help fed- eral, state, and local government agencies develop more reliable cost estimates for government projects of all sizes. While the focus of the report is on federal acquisition projects, it contains extensive guidance on how to produce well-documented, comprehensive, accurate, and credible estimates. The report constitutes an exhaustive primer on the art and science of cost estimating, identifying the processes, key stakeholders, and best practices. Also included in this report is a large number of case studies. One of the case studies is from the field of aviation, but it is related to an FAA air traffic management system, not airport construction. Additionally, the report incorporates a thorough discussion of the identification and application of data sources, but does not identify any specific data sources applicable to airport construction projects. Generally, the report does not identify specific cost-estimating models or software packages. American Society of Professional Estimators, Standard Estimating Practice, 8th Edition The American Society for Professional Estimators is one of two industry organizations iden- tified by the U.S. Bureau of Labor Statistics as providing industry certification for professional cost estimating. This manual is a standard “how-to” guide for use by professional estimators

Best Practices for Estimating Construction Costs 11 in the construction industry. It is updated on a regular basis to take into account new data and revised guidance. Airports Today: Existing Cost-Estimating Practices As part of the research process that resulted in this guidebook, a broad literature review and stakeholder survey were conducted. One of the objectives of this effort was to identify existing practices in the airport community for estimating costs for construction projects in both the horizontal and vertical domains. Existing practices use proven methodologies that draw on pro- cedures and guidance published by a number of entities, particularly professional organizations and state agencies. Cost estimating for vertical projects has an added layer of structure through the use of standard classification schemes, such as those provided by the Construction Specifica- tions Institute (CSI 2011). The two primary methods used today are estimation through historical bid prices and cost- based estimating. The parametric estimation methodology, which is common for large-scale programs in the FAA Air Traffic Organization, has generally not been applied to airport con- struction projects. Risk/contingency analyses are applied but often in a simplified manner. Examples include the application of contingency factors to line item quantities or the total cost estimate. Approximately half of survey respondents reported using cost-estimating con- tingency factors. However, there appear to be few, if any, standards for using such contingency factors. The survey results indicate that these range from 0% (no contingency factor) to 25%, or even 50% for certain project types (e.g., airport security projects). Since overall contingency factors can be applied on top of contingencies for line item quantities, the cumulative contin- gency can be substantial. The lack of established standards in this area results in potentially large variations. Existing methods appear limited in their ability to accurately account for unique project con- ditions. These can significantly affect the estimate and can result in wide variations from initial cost assumptions to actual costs incurred on a particular project. Environmental planning and cost of mobilization are examples of areas that have specifically been identified as difficult to quantify. The cost-estimating procedures are backed up by cost data drawn from a number of data sources. The two most common data sources are past bid tabulations and commercially avail- able products. The practice of storing past bid tabulations is common. The literature survey and industry stakeholder survey did not reveal any particular weaknesses in the application of these data sources. Moreover, a number of agencies maintain their own cost data and eight survey recipients indicated a willingness to share this type of information for this research project. Nonetheless, for the purpose of developing a comprehensive cost model, three specific chal- lenges present themselves in regards to the availability of cost data: • Many of the most commonly used data sources are proprietary and cannot readily be distributed as part of a publicly accessible model. • Data maintained by public agencies is distributed across a range of state and regional agencies. • There is no standard format for data and in many cases the data is stored in formats that are notionally electronic but essentially represent digital versions of printed documents. Use of computer models for cost estimating does not appear to be a common practice for air- port construction. It is less clear whether this is due to the cost of commercially available models, the lack of suitable models, or the challenges in airport construction cost estimating not being easily solved through computer modeling techniques. It does, however, indicate potential for

12 Airport Capital Improvements: A Business Planning and Decision-Making Approach the development of an airport-specific model, provided the challenges identified are carefully considered and appropriate solutions identified. A major finding of the survey was that at small airports, construction cost estimating is pri- marily accomplished through consultants. The most commonly estimated airport construc- tion projects include terminals, runways, taxiways, and airfield lighting. While the majority of respondents store historical construction cost estimates, they are mostly stored in hard copy format. When electronic formats are used, a range of formats exist—there is no accepted file standard. Only a minority of survey respondents reported that they use online data to develop construction cost estimates. Challenges All airports within the NPIAS maintain an ACIP including both vertical and horizontal proj- ects. At smaller, general aviation airports, the needs tend to be well known, but the amount of funds available for airport improvements is often very limited. The typical general aviation air- port often has much less AIP entitlement funds available than that which would be required to fund the multiyear list of capital projects in its ACIP. One unintended consequence is a potential pressure to keep cost estimates low. As an example, in order to keep a project viable and within funding limits, a low estimate may be used for capital planning, with the assumption that project scope can subsequently be cut in order to match available funds. This can create disconnects in the process for planning the use of limited funding and can result in the outright cancellations of projects. Since capital planning is usually conducted at a regional or state level, weaknesses in the cost- estimating process can end up shifting or distorting priorities across an entire airport system. Although more detailed cost estimating would mitigate this risk, time and budget limitations typically prevent high-fidelity cost estimates in this phase of the cost-estimating process. One risk is that airports default to working with cost estimates that are based on little to no technical research and choose to direct their time and money toward needs that are perceived as more imminent and pressing. A parametric cost-estimating model, once established, can be utilized at low cost, taking relatively little time and effort to use. A benefit of this approach is that it has the potential for reducing some of the existing flaws in the cost-estimating process for capital planning. The stakeholder outreach effort conducted as part of this project confirmed a general lack of formal cost-estimating procedures. For example, only 17.4% of respondents reported accessing online cost data for generating construction cost estimates and only 26.5% reported storing historical construction cost estimations. This suggests that many airports use educated guesses to establish initial cost estimates, with varying levels of credibility. Moreover, once an initial cost estimate is prepared, it can be hard to adjust the resulting number if it has been shared with funding agencies or provided as public information. The results of these challenges are not always predictable and can lead to either overestimation or underestimation. The former can be just as problematic as the latter. In the case of over- estimation, potential bidders can be influenced by publicly available budget levels that are not supported by sound cost-estimating practices. This can ultimately influence project costs, regardless of the level of refinement after the completion of the initial cost estimate. To understand how to improve this process through the use of the cost model prepared for this study, a discussion of issues related to current cost-estimating practices is provided below. The discussion is categorized by horizontal and vertical project types, but it should be noted that many projects integrate both domains. Moreover, in many cases the basic procedures and lessons learned are similar and apply to both types of construction project.

Best Practices for Estimating Construction Costs 13 Cost Estimating for Horizontal Projects Current practices for the cost estimating of horizontal airport construction projects are pri- marily taken from two of the categories identified previously: historical bid pricing and cost- based estimating. For a typical horizontal airport construction project, there are basic items that define the scope of work (SOW). The FAA provides a series of Advisory Circulars that define these items in their most basic form, utilizing an alphanumeric coding system. Some typical items and their codes are shown in Table 1. With these basic items established, an engineer can begin to identify planning-level components that will compose an estimate by extracting design data from preliminary planning or preliminary engineering design documents. In some cases the only data available is an aerial-view planning document, which will provide proposed limits of improvements. In this case, there is a high probability of developing an inac- curate cost estimate. Conversely, in some cases, there is an abundant amount of data available such as aerial topographic survey, planning-level project layout data (taxiway alignment, aircraft apron size and geometry, width and length of runway extension, etc.), environmental data, and basic soils investigation data. In this case, a higher level of accuracy is likely. The process of extracting design data from planning or engineering documents is referred to as “quantity takeoff” (QTO). The engineer is figuratively taking off key pieces of data from the design plans to create a list of pay items and a SOW. This process is typically conducted utiliz- ing computer-aided design software and the three-dimensional models that are created during engineering design. The quantity data is then input into a spreadsheet, which begins the next step, assigning unit prices to the various item quantities. At this point, a cost estimate can be developed using one of the two methods referenced earlier, historical bid pricing or cost-based estimating. The most common method in use for developing estimates for transportation projects is to use historical bid costs (AASHTO 2009, p. 31). As described previously, this is a process by which estimators collect cost data from previ- ous, similar projects and apply unit prices based on averaging the results. Adjustments are made where necessary for factors such as the following: • Topographic survey • Soil investigations • Wetland delineation • Wildlife assessment • Historic preservation • Archaeological findings It is incumbent on the designer to make allowances for various contingencies for each of these types of data collection until such a time that this data becomes available. This early cost-estimating process is sometimes problematic for owners as it often yields total project costs that appear to be unaffordable. However, if the engineer and owner can properly communicate the design and planning assumptions to funding agencies, there is a much better chance of the cost-estimating Code Designation/General Item Description P Pavements D Drainage F Fencing L Lighting T Topsoil/Seeding M Miscellaneous Table 1. FAA codes for horizontal airport construction.

14 Airport Capital Improvements: A Business Planning and Decision-Making Approach process being successful at later stages. If this communication is not well executed, the project is often cancelled prematurely. Beyond planning-level cost estimating, other stages of cost estimating typically occur at various milestones, based on overall project progress. Table 2 lists typical engineering design milestones and the levels of design associated with each one. Note that these milestones should be viewed as examples. The definitions of these milestones can vary from project to project or state to state. The challenge for owners and funding agencies is that budgetary decisions for ACIPs are made at the planning-level stage. This is the stage when the least amount of data is available. This puts pressure on owners and engineers to make worst-case scenario assumptions, which are designed to provide a high level of contingency within the estimate. It is at this point in the process where a project requires justified costs with adequate proof, as well as an explanation of the assumptions, in order to support reasonable outcomes as the project continues through the design process. Cost Estimating for Vertical Projects Existing construction cost-estimating practices for vertical airport construction projects can be understood by considering the following aspects: • Types of project costs • Method of organizing and allocating hard costs • Method of assigning hard costs in relation to the stage of the project’s completion • Sources of hard cost and soft cost data • Special conditions relevant to airport projects These aspects are described in further detail in the following paragraphs. The total costs to the sponsor of a vertical construction project are typically separated into two types: hard costs and soft costs. Hard costs represent those expenses related to the actual Estimating Milestones Level of Design Involved Planning Level Basic geometry and project scope. Typically, no engineering alignments have been assigned. Right-of-way and data collection are not included. 30% Design Basic horizontal geometry. Right-of-way and property acquisition process is being started. 60% Design Refined horizontal geometry and initial vertical geometry. Initial site grading being started. Initial drainage and other major utility designs are being started. Right-of-way and property acquisition process is ongoing. 90% Design Final draft of horizontal and vertical geometry. Final grading is ongoing. Remaining utility designs are started. Electrical lighting, signage, and marking design are ongoing. Initial quantity takeoff estimate is started. 100% Design Geometry and grading is completed. Utility design is completed. Grading cross sections are generated. Right-of-way and property acquisition process is complete. Electrical lighting, signage, and marking design complete. Final quantity takeoff estimate is complete. Typical design details are finalized. Bid Documents Incorporate final owner and agency comments. Engineer assigns pay items and cross references all items of work on plans with specifications and proposal documents. Table 2. Typical engineering design milestones for horizontal construction.

Best Practices for Estimating Construction Costs 15 construction of the building that are paid by the sponsor directly to a contractor or construction manager: material, labor, and fees (including overhead and profit). These hard costs typically represent 70% to 90% of the total cost of a vertical construction project. Soft costs include all other expenses necessary for the completion of the project that are not paid to the contractor or construction manager. These costs vary significantly depending on the unique characteristics for each project but generally include design fees for the architecture/engineering firm; costs of furniture and special equipment; fees incurred through local permitting agencies, utilities, and inspections; land acquisition costs; expenses incurred as part of a public procurement process; and administration costs incurred by the sponsor to oversee and administer the project in accor- dance with public requirements. Both types of costs must be considered when establishing a total budget for the project. A key factor in accurate cost estimating is a standardized method of organizing and allocating costs. The construction industry has adopted a generally accepted format for cost estimating of vertical construction projects that is common across applications and used for both publicly and privately funded projects. CSI develops and maintains an organizational system that allocates all construction work into one of multiple categories (CSI 2011). Although some minor variations exist, the majority of architects utilize the CSI system of categorization when developing plans and specifications. Under this standardized format, every major item of work is allocated to a particular category (termed “division of work”), which corresponds to a particular trade contractor. For exam- ple, all carpentry work on a project is categorized and defined under Division 6, electrical work under Division 16, etc. For larger projects, each division is further broken down into subcategories (termed “sections of work”). Using the example of carpentry (Division 6), rough carpentry is further categorized under Section 6100, finish carpentry as Section 6200, etc. By defining individual items of work using a standardized and detailed organizational format, a clear and standardized method of communication between the architect and the contractor is utilized in order to construct the project in accordance with the sponsor’s expectations. Originally developed to organize and standardize the definition of the work within the archi- tect’s construction documents, this same format has proven to be effective in organizing and standardizing the cost-estimating process. By utilizing the same categorization system, a more direct correlation between item of work and cost of work is achieved in a format easily under- stood by all parties. Other benefits of the system include the following: • CSI categorization can be performed at any stage of the project design—from the earliest concept drawings through detailed design to construction—and as a post-construction audit. • The system is easily expandable for more complex projects, or conversely can be collapsed to address smaller or simpler projects. • Direct correlation of cost item to work item reduces misunderstandings and oversights of portions of the project by the estimator. • Standardization allows for comparison to other past and current projects, and facilitates the creation and maintenance of a project cost information database. However, there are limitations to the CSI allocation system that must be addressed. The CSI system does not provide a method to estimate soft costs. Also, the CSI system does not account for special circumstances that could affect the overall hard cost for the project, includ- ing escalation, phasing of the project, temporary work, special local conditions (i.e., a remote island location that would place a premium on transportation of materials and labor), and reasonable contingencies to account for the level of completion of the project documents.

16 Airport Capital Improvements: A Business Planning and Decision-Making Approach These additional cost factors are applied according to the experience and knowledge of the estimator. Current industry practices include performing cost estimates of vertical construction projects at various stages of development during design. As for horizontal projects, estimates are typically performed during initial planning and at the 30% design, 60% design, and 100% design levels. The later estimates benefit from the greater level of detailed design and thus are usually more accurate. However, as described previously, project budgets are usually established during the very early stages of design and, sometimes, prior to any design work being completed. In these instances, arriving at a reasonable project budget is challenging. It is typically advisable not to establish a project budget prior to any design or feasibility plan- ning work being performed. However, this practice is not uncommon and is usually done with limited involvement from a design or construction estimating professional. Oftentimes the cost of a similar project constructed some years in the past and at a different location is used for budgeting. Because every project has varying conditions which affect cost and because of volatil- ity in material and labor prices over time, this method is unreliable in establishing a reasonable project budget. Where some initial design work or feasibility planning has been performed, a “square foot cost” method is often utilized to establish the project budget. At this stage, usually between the initial project planning and the 30% design stage, the project location, overall size of the build- ing in square feet, and functions that the building will accommodate have been established. With this information, an overall cost per square foot is selected based on a database of projects that are in the same geographic region, accommodate the same functions, and incurred project conditions similar to those expected. Cost databases are maintained by a number of organizations within the construction indus- try, the most well known and possibly most often utilized is RSMeans Square Foot Costs Book, which is updated annually (Reed Construction Cost, Inc. 2011). The accuracy of this method is dependent on the relevance of the precedent projects, the accuracy of the cost database, and the judgment of the estimator, especially in regards to the unique conditions of the project being estimated that differentiate it from the precedent projects. For projects that have developed the design to the 60% level, most of the major risk factors to project cost, such as existing site conditions and local permitting hurdles, have been vetted through research and field investigations. There is also enough information contained in the documents to utilize the CSI method for allocating cost items, and material and labor unit costs can be established. As the documents are not complete, estimators apply a contingency factor to their estimate to account for the level of detail still under development. The proper contingency factor is established based upon the judgment of the estimator. For estimates developed at the 90% or 100% levels, industry practice is to perform QTOs for each type of material used on the project, as defined in the construction documents. Unit costs for labor and material are then applied to each work item. The amount of detail provided at the 90% and 100% level, combined with the considerably short time frame between this estimate and the start of construction, usually result in a relatively low variance between the estimated cost and the actual construction bids received. Hard cost databases are maintained by individual cost-estimating firms and through com- mercial providers of construction cost data. These databases are constantly updated and are used to create plausible estimates for each type of material and labor that may be used for a particular project. They are also adjusted according to geographic region. The databases do not provide guidance or methods as to cost adjustments necessary for unique project characteristics,

Best Practices for Estimating Construction Costs 17 including those characteristics that are unique to airport projects. Soft cost databases are not prevalent in the industry. Instead, estimates of soft costs are usually developed by the sponsor, with the assistance of an architect or engineer. Certain airport projects have unique characteristics that over time have resulted in variations on standard cost-estimating methods. In some cases, these alternative methods have proven to be effective. Examples include the following: • Parking garages: At the planning through 30% design level, the industry has developed a met- ric of unit cost per space as an effective method for preliminary estimating for these structures. Databases are informally maintained by consulting firms specializing in this form of structure. The relative simplicity of the building type allows this metric to be reasonably accurate even at the early stages of planning and design. Key factors include the type of structural system, architectural treatment, and lobby amenities. • Terminal buildings: At the planning through 30% design level, the standard unit cost per square foot method is applied. However, the unit cost varies for individual areas of the ter- minal, since some areas represent significantly higher cost per square foot than others. For example, public lobby space is significantly more expensive than office and support space. Also, baggage handling and security space costs must take into account the high costs of specialized equipment. Airport projects also pose a number of special project conditions for which a standard and reliable method of establishing cost impacts is currently not prevalent in the industry. These conditions include: • Permitting: Local permit requirements and processes vary considerably. Additionally, con- struction at public-use airports oftentimes utilizes federal funding sources. In these cases, federal requirements, which are in addition to state and local requirements, must be followed in relation to environmental permitting. As construction cannot proceed until all permits are completed, an extended federal permitting process can result in extended project schedules. These procedures also require public hearings and notification that can result in additional time spent and soft costs incurred responding to public input. • Operational continuity: Many airport projects are renovations or expansions or involve some impact to ongoing airport operations. As airports must remain fully operational during construction, additional costs are often incurred related to phasing, temporary construction, and protection of passengers and employees during construction. • Security: All airport property is designated as being either “airside” or “landside.” Airside refers to areas of the airport for which special security access is required. These areas gener- ally correspond to the Security Identification Display Area (SIDA). All personnel working in these areas must be pre-screened by the airport, obtain special training, and receive a SIDA identification badge before being allowed access. This process is both costly and time consuming, and results in increased costs to the contractor. In addition to the screening and badging of the labor force, many airports require any material deliveries to be searched prior to accessing the airside work area. Some projects, especially terminal building renovations, involve construction on both sides of the SIDA access barrier as part of the same project. Here, costs are incurred to relocate and maintain temporary SIDA barrier locations in order to allow for the work to proceed without affecting the flow of passengers and ongoing airport operations. The high level of technology used in establishing these barriers makes relocation quite expensive. • Federal safety requirements: In addition to the security measures outlined previously, an airside project triggers additional safety requirements in accordance with FAA and Transpor- tation Security Administration (TSA) regulations.

18 Airport Capital Improvements: A Business Planning and Decision-Making Approach • Soft costs: Many airport projects are renovations or expansions or involve some impact to ongoing airport operations. As airports must remain fully operational during construction, significant additional soft costs will be incurred related to phasing, temporary construction, and protection of passengers and employees during construction. Vertical projects pose a significant challenge to early stage cost estimates. These are esti- mates developed prior to a design being initiated as part of a capital program. The complexity of these projects can result in significant variations of unit costs within particular areas of the project. Such elements are typically not fully understood until later in the design process. Therefore, early stage estimates for complex vertical projects are better supported by his- torical total-project-cost data for projects of similar size, scope, complexity, and cost-driver characteristics.