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

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A I R P O R T C O O P E R A T I V E R E S E A R C H P R O G R A M ACRP REPORT 120 TRANSPORTAT ION RESEARCH BOARD WASHINGTON, D.C. 2014 www.TRB.org Research sponsored by the Federal Aviation Administration Subscriber Categories Aviation • Construction • Economics Airport Capital Improvements: A Business Planning and Decision-Making Approach Joakim Karlsson Scott Allard Rohit Viswanathan MCR FedeRal, llC Washington, DC Robert Furey Hoyle, TanneR & assoCiaTes, inC. Manchester, NH Jonathan McCredie FenniCk MCCRedie aRCHiTeCTuRe, lTd. Boston, MA

AIRPORT COOPERATIVE RESEARCH PROGRAM Airports are vital national resources. They serve a key role in trans­ portation of people and goods and in regional, national, and inter­ national commerce. They are where the nation’s aviation system connects with other modes of transportation and where federal respon­ sibility for managing and regulating air traffic operations intersects with the role of state and local governments that own and operate most airports. Research is necessary to solve common operating problems, to adapt appropriate new technologies from other industries, and to introduce innovations into the airport industry. The Airport Coopera­ tive Research Program (ACRP) serves as one of the principal means by which the airport industry can develop innovative near­term solutions to meet demands placed on it. The need for ACRP was identified in TRB Special Report 272: Airport Research Needs: Cooperative Solutions in 2003, based on a study spon­ sored by the Federal Aviation Administration (FAA). The ACRP carries out applied research on problems that are shared by airport operating agencies and are not being adequately addressed by existing federal research programs. It is modeled after the successful National Coopera­ tive Highway Research Program and Transit Cooperative Research Pro­ gram. The ACRP undertakes research and other technical activities in a variety of airport subject areas, including design, construction, mainte­ nance, operations, safety, security, policy, planning, human resources, and administration. The ACRP provides a forum where airport opera­ tors can cooperatively address common operational problems. The ACRP was authorized in December 2003 as part of the Vision 100­Century of Aviation Reauthorization Act. The primary participants in the ACRP are (1) an independent governing board, the ACRP Oversight Committee (AOC), appointed by the Secretary of the U.S. Department of Transportation with representation from airport operating agencies, other stakeholders, and relevant industry organizations such as the Airports Council International­North America (ACI­NA), the American Associa­ tion of Airport Executives (AAAE), the National Association of State Aviation Officials (NASAO), Airlines for America (A4A), and the Airport Consultants Council (ACC) as vital links to the airport community; (2) the TRB as program manager and secretariat for the governing board; and (3) the FAA as program sponsor. In October 2005, the FAA executed a contract with the National Academies formally initiating the program. The ACRP benefits from the cooperation and participation of airport professionals, air carriers, shippers, state and local government officials, equipment and service suppliers, other airport users, and research orga­ nizations. Each of these participants has different interests and respon­ sibilities, and each is an integral part of this cooperative research effort. Research problem statements for the ACRP are solicited periodically but may be submitted to the TRB by anyone at any time. It is the responsibility of the AOC to formulate the research program by iden­ tifying the highest priority projects and defining funding levels and expected products. Once selected, each ACRP project is assigned to an expert panel, appointed by the TRB. Panels include experienced practitioners and research specialists; heavy emphasis is placed on including airport pro­ fessionals, the intended users of the research products. The panels pre­ pare project statements (requests for proposals), select contractors, and provide technical guidance and counsel throughout the life of the project. The process for developing research problem statements and selecting research agencies has been used by TRB in managing cooper­ ative research programs since 1962. As in other TRB activities, ACRP project panels serve voluntarily without compensation. Primary emphasis is placed on disseminating ACRP results to the intended end­users of the research: airport operating agencies, service providers, and suppliers. The ACRP produces a series of research reports for use by airport operators, local agencies, the FAA, and other interested parties, and industry associations may arrange for work­ shops, training aids, field visits, and other activities to ensure that results are implemented by airport­industry practitioners. ACRP REPORT 120 Project 01­19 ISSN 1935­9802 ISBN 978­0­309­30808­3 Library of Congress Control Number 2014951769 © 2014 National Academy of Sciences. All rights reserved. COPYRIGHT INFORMATION Authors herein are responsible for the authenticity of their materials and for obtaining written permissions from publishers or persons who own the copyright to any previously published or copyrighted material used herein. Cooperative Research Programs (CRP) grants permission to reproduce material in this publication for classroom and not­for­profit purposes. Permission is given with the understanding that none of the material will be used to imply TRB or FAA endorsement of a particular product, method, or practice. It is expected that those reproducing the material in this document for educational and not­for­profit uses will give appropriate acknowledgment of the source of any reprinted or reproduced material. For other uses of the material, request permission from CRP. NOTICE The project that is the subject of this report was a part of the Airport Cooperative Research Program, conducted by the Transportation Research Board with the approval of the Governing Board of the National Research Council. The members of the technical panel selected to monitor this project and to review this report were chosen for their special competencies and with regard for appropriate balance. The report was reviewed by the technical panel and accepted for publication according to procedures established and overseen by the Transportation Research Board and approved by the Governing Board of the National Research Council. The opinions and conclusions expressed or implied in this report are those of the researchers who performed the research and are not necessarily those of the Transportation Research Board, the National Research Council, or the program sponsors. The Transportation Research Board of the National Academies, the National Research Council, and the sponsors of the Airport Cooperative Research Program do not endorse products or manufacturers. Trade or manufacturers’ names appear herein solely because they are considered essential to the object of the report. Published reports of the AIRPORT COOPERATIVE RESEARCH PROGRAM are available from: Transportation Research Board Business Office 500 Fifth Street, NW Washington, DC 20001 and can be ordered through the Internet at http://www.national­academies.org/trb/bookstore Printed in the United States of America

The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. C. D. Mote, Jr., is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Victor J. Dzau is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. C. D. Mote, Jr., are chair and vice chair, respectively, of the National Research Council. The Transportation Research Board is one of six major divisions of the National Research Council. The mission of the Transporta- tion Research Board is to provide leadership in transportation innovation and progress through research and information exchange, conducted within a setting that is objective, interdisciplinary, and multimodal. The Board’s varied activities annually engage about 7,000 engineers, scientists, and other transportation researchers and practitioners from the public and private sectors and academia, all of whom contribute their expertise in the public interest. The program is supported by state transportation departments, federal agencies including the component administrations of the U.S. Department of Transportation, and other organizations and individu- als interested in the development of transportation. www.TRB.org www.national-academies.org

C O O P E R A T I V E R E S E A R C H P R O G R A M S AUTHOR ACKNOWLEDGMENTS The research reported herein was performed under ACRP Project 01-19 by MCR Federal, LLC and its subcontractors Hoyle, Tanner & Associates, Inc. and Fennick McCredie Architecture, Ltd. The principal investigator was Joakim Karlsson of MCR Federal, LLC. The other authors of this report are Scott Allard and Rohit Viswanathan, PMP, of MCR Federal, LLC; Robert Furey, PE, of Hoyle, Tanner & Associates, Inc.; and Jonathan McCredie, AIA, of Fennick McCredie Architecture, Ltd. The research team would like to express its gratitude to the members of the ACRP Project 01-19 panel for their valuable input and support throughout this project and the many individuals, agencies, and organizations who contributed to the airport construction cost database. CRP STAFF FOR ACRP REPORT 120 Christopher W. Jenks, Director, Cooperative Research Programs Michael R. Salamone, ACRP Manager Lawrence D. Goldstein, Senior Program Officer Anthony P. Avery, Senior Program Assistant Eileen P. Delaney, Director of Publications Natalie Barnes, Senior Editor ACRP PROJECT 01-19 PANEL Field of Administration Carol L. Niewola, New Hampshire DOT, Concord, NH (Chair) Kalyan Balasubramaniam, Mitra Aviation Consulting, LLC, Washington, DC Geoffrey S. Baskir, Runway Safety CSA Team, Fort Worth, TX Marc Gambrill, Broward County Aviation Department, Domip, FL Holly L. Hawkins, Federal Aviation Administration, Phoenix, AZ Steve Hubbell, Southwest Airlines, Dallas, TX Joshua E. Polston, Oakland International Airport, Port of Oakland, Oakland, CA Jeffrey Breeden, FAA Liaison Robert Samis, FAA Liaison Christopher J. Oswald, Airports Council International—North America Liaison Christine Gerencher, TRB Liaison

ACRP Report 120: Airport Capital Improvements: A Business Planning and Decision-Making Approach provides a guidebook to cost estimating for airport capital planning, supported by a spreadsheet­based cost­estimating model. The guidebook and the accompanying model are designed to help airport operators, aviation/transportation agencies, and other industry stakeholders understand cost­estimating practices, including risks and sources of uncertainty. Annual airport capital investment needs have recently diminished somewhat but are still expected to average approximately $14 billion annually over the next several years (ACI North America: Airport Capital Development Needs 2013–2017). Working to meet this need, individual airports, state and local agencies, and the Federal Aviation Administration are all dependent on individual case­by­case engineering cost studies and the bid process when estimating, planning, and budgeting for airport capital improvement projects. The engi­ neering, planning, and finance staffs at airports do not always have access to necessary and sufficient information to prepare accurate capital cost estimates. In particular, many smaller airports often do not have staff to perform these functions and must, as a result, rely on external consulting expertise. An additional problem in preparing cost estimates is a lack of consistency, standardiza­ tion, and accuracy across the airport industry. This often precludes comparisons of project cost estimates that, by necessity, must take into account variations in regional costs, state and local conditions, or varying levels of technical expertise. The result is a high risk of inac­ curate cost estimates, which can cause project cancellations and inefficient distribution of capital funds at the state level. Further, unique conditions at any given airport make simple comparison with similar projects at other airports often difficult if not problematic. Experi­ ence indicates that increased availability of relevant data can facilitate the capital budgeting process and improve overall project cost estimating, project planning, and implementation, while resulting in a more efficient and effective approach to developing an airport capital improvement program. ACRP Report 120 provides a model and database for estimating the cost of construc­ tion projects regularly proposed in an airport’s capital improvement plan. The particular approach presented as an outcome of this effort applies parametric cost estimating, using historical cost data to determine cost­estimating relationships (CERs). The CERs are math­ ematical functions that link construction cost to independent variables that represent key cost drivers. The CERs were developed using multivariable regression analysis conducted on a database of historical cost data collected for this study. The model supports construction projects representing both the horizontal domain (i.e., projects that are not buildings and are primarily related to the airfield) and the vertical F O R E W O R D By Lawrence D. Goldstein Staff Officer Transportation Research Board

domain (i.e., buildings). The resulting analytical approach incorporates a spreadsheet­based cost model, with application to a total of eight project types. The model allows the user to enter airport information, project definitions, and cost drivers to generate a cost estimate. Cost estimates are also adjusted for inflation and geographical variations in construction cost at the state level. The cost model was assessed using statistical metrics of quality of fit, and validated using a case­study approach. Limited availability of historical cost data in a usable form presents the greatest challenge to implementing parametric cost estimating for airport construction projects and puts constraints on the robustness of the model. Build­ ing on the research, this guidebook includes recommendations for data collection practices intended to help overcome these constraints to support a more comprehensive and robust model in the future.

Note: Photographs, figures, and tables in this report may have been converted from color to grayscale for printing. The electronic version of the report (posted on the web at www.trb.org) retains the color versions. 1 Summary 3 Chapter 1 Introduction 3 Objective 5 How to Use this Guidebook 6 Who Can Use this Guidebook? 6 Related ACRP Projects 8 Chapter 2 Best Practices for Estimating Construction Costs 8 Basic Principles of Cost Estimating 10 Summary of Best Practices 11 Airports Today: Existing Cost­Estimating Practices 19 Chapter 3 Parametric Cost Estimating 19 Identifying Candidate Input Variables 21 Developing Cost­Estimating Relationships 22 Testing and Validation 25 Chapter 4 Developing an Airport Cost Database 25 Candidate Project Types 27 Selection of Candidate Independent Variables 27 Historical Construction Costs 28 Database Structure 30 Data Collection 34 Chapter 5 ACCE—Airport Capital Cost Estimation Tool 34 Before Getting Started with ACCE 34 ACCE Work Flow 36 Interpreting the Results 44 Chapter 6 Lessons Learned 45 Challenges to Developing an Airport Cost­Estimating Model 46 Future Work 46 Recommendations for Data Collection Practices 50 Conclusions 52 References A-1 Appendix A Cost-Estimating Relationships B-1 Appendix B ACCE Quick Reference Guide C O N T E N T S