Estimating Highway Preconstruction Services Costs - Volume 1: Guidebook (2016)

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N A T I O N A L C O O P E R A T I V E H I G H W A Y R E S E A R C H P R O G R A M NCHRP REPORT 826 Estimating Highway Preconstruction Services Costs Volume 1: Guidebook Douglas D. Gransberg H. David Jeong Emily K. Craigie Jorge A. Rueda-Benavides K. Joseph Shrestha Iowa State UnIverSIty–InStItUte for tranSportatIon Ames, IA Subscriber Categories Highways • Construction • Design TRANSPORTAT ION RESEARCH BOARD WASHINGTON, D.C. 2016 www.TRB.org Research sponsored by the American Association of State Highway and Transportation Officials in cooperation with the Federal Highway Administration

NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM Systematic, well-designed research is the most effective way to solve many problems facing highway administrators and engineers. Often, highway problems are of local interest and can best be studied by highway departments individually or in cooperation with their state universities and others. However, the accelerating growth of highway transportation results in increasingly complex problems of wide inter- est to highway authorities. These problems are best studied through a coordinated program of cooperative research. Recognizing this need, the leadership of the American Association of State Highway and Transportation Officials (AASHTO) in 1962 ini- tiated an objective national highway research program using modern scientific techniques—the National Cooperative Highway Research Program (NCHRP). NCHRP is supported on a continuing basis by funds from participating member states of AASHTO and receives the full cooperation and support of the Federal Highway Administration, United States Department of Transportation. The Transportation Research Board (TRB) of the National Academies of Sciences, Engineering, and Medicine was requested by AASHTO to administer the research program because of TRB’s recognized objectivity and understanding of modern research practices. TRB is uniquely suited for this purpose for many reasons: TRB maintains an extensive com- mittee structure from which authorities on any highway transportation subject may be drawn; TRB possesses avenues of communications and cooperation with federal, state, and local governmental agencies, univer- sities, and industry; TRB’s relationship to the Academies is an insurance of objectivity; and TRB maintains a full-time staff of specialists in high- way transportation matters to bring the findings of research directly to those in a position to use them. The program is developed on the basis of research needs identified by chief administrators and other staff of the highway and transporta- tion departments and by committees of AASHTO. Topics of the highest merit are selected by the AASHTO Standing Committee on Research (SCOR), and each year SCOR’s recommendations are proposed to the AASHTO Board of Directors and the Academies. Research projects to address these topics are defined by NCHRP, and qualified research agencies are selected from submitted proposals. Administration and surveillance of research contracts are the responsibilities of the Acad- emies and TRB. The needs for highway research are many, and NCHRP can make significant contributions to solving highway transportation problems of mutual concern to many responsible groups. The program, however, is intended to complement, rather than to substitute for or duplicate, other highway research programs. Published reports of the NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM are available from Transportation Research Board Business Office 500 Fifth Street, NW Washington, DC 20001 and can be ordered through the Internet by going to http://www.national-academies.org and then searching for TRB Printed in the United States of America NCHRP REPORT 826 VOLuME 1 Project 15-51 ISSN 0077-5614 ISBN 978-0-309-37553-5 Library of Congress Control Number 2016944164 © 2016 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 not-for-profit purposes. Permission is given with the understanding that none of the material will be used to imply TRB, AASHTO, FAA, FHWA, FMCSA, FRA, FTA, Office of the Assistant Secretary for Research and Technology, PHMSA, or TDC endorsement of a particular product, method, or practice. It is expected that those reproducing the material in this document for educational and not-for-profit 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 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 National Academies of Sciences, Engineering, and Medicine. 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 Academies of Sciences, Engineering, and Medicine; or the program sponsors. The Transportation Research Board; the National Academies of Sciences, Engineering, and Medicine; and the sponsors of the National Cooperative Highway 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.

The National Academy of Sciences was established in 1863 by an Act of Congress, signed by President Lincoln, as a private, non- governmental institution to advise the nation on issues related to science and technology. Members are elected by their peers for outstanding contributions to research. Dr. Marcia McNutt is president. The National Academy of Engineering was established in 1964 under the charter of the National Academy of Sciences to bring the practices of engineering to advising the nation. Members are elected by their peers for extraordinary contributions to engineering. Dr. C. D. Mote, Jr., is president. The National Academy of Medicine (formerly the Institute of Medicine) was established in 1970 under the charter of the National Academy of Sciences to advise the nation on medical and health issues. Members are elected by their peers for distinguished contributions to medicine and health. Dr. Victor J. Dzau is president. The three Academies work together as the National Academies of Sciences, Engineering, and Medicine to provide independent, objective analysis and advice to the nation and conduct other activities to solve complex problems and inform public policy decisions. The Academies also encourage education and research, recognize outstanding contributions to knowledge, and increase public understanding in matters of science, engineering, and medicine. Learn more about the National Academies of Sciences, Engineering, and Medicine at www.national-academies.org. The Transportation Research Board is one of seven major programs of the National Academies of Sciences, Engineering, and Medicine. The mission of the Transportation Research Board is to increase the benefits that transportation contributes to society by providing 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 committees, task forces, and panels 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 individuals interested in the development of transportation. Learn more about the Transportation Research Board at www.TRB.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 CRP STAFF FOR NCHRP REPORT 826 Christopher W. Jenks, Director, Cooperative Research Programs Christopher Hedges, Manager, National Cooperative Highway Research Program Andrew C. Lemer, Senior Program Officer Sheila A. Moore, Program Associate Eileen P. Delaney, Director of Publications Doug English, Editor NCHRP PROJECT 15-51 PANEL Field of Design—Area of General Design Lesly Tribelhorn, Montana DOT, Helena, MT (Chair) Robert H. Cary, Virginia DOT, Salem, VA Majed N. Al-Ghandour, North Carolina DOT, Raleigh, NC Fred K. Doehring, Utah DOT, Salt Lake City, UT Debora B. Farrell, Maine DOT, Augusta, ME James S. Nelson, Iowa DOT, Ames, IA Pramen Shrestha, University of Nevada Las Vegas, Henderson, NV J. Richard Young, Jr., Atkins North America, Inc., Jackson, MS D. Scott Wolf, FHWA Liaison Frederick Hejl, TRB Liaison

NCHRP Report 826: Estimating Highway Preconstruction Services Costs presents guid- ance for state departments of transportation (DOTs) and other agencies for estimating pre- construction services (PCS) costs for transportation project development. PCS refers to a varied assortment of project-specific engineering and other professional services required before construction begins on a bridge, highway, or other transportation project, whether provided by agency staff or consultants. The guidance—a guidebook and supporting research report—addresses principal sources and components of PCS costs, PCS estimating methodol- ogies, trends (such as changes in design and construction technology, design standards, pro- gram requirements, and professional workforce) likely to affect PCS costs, and advice on agency policies and practices that can help control program risk through improved PCS cost estimation. The report will be helpful particularly to DOT staff and management respon- sible for the agency’s project development and delivery activities. State DOTs and other agencies responsible for development of major capital facilities rely throughout the project development process on cost estimates to verify that adequate funds are available for project completion, to negotiate for contracted services, and to ensure that the development process is responsibly conducted. Substantial effort is required for a variety of activities that must occur before construction begins, and the ability to define the scope and estimate accurately the costs of these preconstruction activities is essential to agency planning, programming, budgeting, and management functions. Tighter budgets, funding limitations, and growing emphasis on accountability in government spending increase the importance of accurate and reliable cost estimation. Timely and accurate estimates of the costs for preconstruction services are an important basis for management decision making. In the research underlying this document, PCS refers to engineering and other professional services required before construction begins on a bridge, highway, or other transportation project. The activities for which services are required—whether provided by agency staff or consultants—are project specific and may include planning, PCS contract negotiation, preliminary engineering, environmental studies, subsurface investigations, rights-of-way surveys and acquisitions, design and bid document preparation, design modifications and associated PCS scope changes, and construction pro- curement. Similar professional services may be required during and following construction (such as construction engineering, inspection and quality assurance, and claims analysis) but were not explicitly considered in this research. PCS cost-estimating practices vary greatly among DOTs and even within a single agency for different types of services and different stages of project development. The resources allocated to cost estimation and the policies, procedures, and information systems that support cost F O R E W O R D By Andrew C. Lemer Staff Officer Transportation Research Board

estimating vary as well. Uncertainties at the outset of the project development process, such as regarding the range of design alternatives to be considered; the extent of environmental, safety, and traffic mitigation activities likely to be required; and the need for phasing strategies to accommodate budgetary limitations, make PCS cost estimating particularly challenging. The objective of NCHRP Project 15-51 “Preconstruction Services Cost Estimating Guide- book,” was to develop a guidebook, for use by DOTs and other agencies, on estimating PCS costs for transportation project development. The guidebook addresses topics ranging from the principal sources or components of PCS costs (for example, direct labor, other direct costs, indirect costs, and profit, in terms of dollars and labor hours), as estimated at vari- ous stages of project development; estimating methodologies; and external trends likely to influence PCS costs (such as changes in design and construction technology, design stan- dards, program requirements, and professional workforce). The guidebook is suitable for adoption by responsible groups within the American Association of State Highway and Transportation Officials. The research was conducted by a team led by Iowa State University. The research team reviewed current PCS estimating practices in DOTs and other transportation agencies and private-sector firms that work with these agencies, collected and analyzed data on actual PCS cost experience, and extracted lessons about accuracy and reliability. Useful back- ground information from the research team’s work is presented in the research report that accompanies the guidebook.

1 Summary 3 Chapter 1 Introduction 3 1.1 Overview 4 1.2 The Business Case for Implementing PCS Cost Models and Management 5 1.3 Defining Preconstruction Services and Associated Costs 7 1.4 Current State of Practice 8 1.5 PCS Cost-Estimating Methodologies 8 1.6 Data-Driven PCS Cost Estimating – Implementation Efforts 10 1.7 How to Use This Guidebook 12 Chapter 2 PCS Cost-Estimating Process 12 2.1 Introduction 14 2.2 PCS Cost-Estimating Process 15 2.3 Top-Down and Bottom-Up Estimating 17 2.4 Overview of PCS Cost-Estimating Model Development Process 20 Chapter 3 PCS Database Development and Management 20 3.1 Introduction 20 3.2 Collection of Historical Data 21 3.3 Identify Factors Affecting PCS Costs 24 3.3.1 Project Classification 24 3.3.2 Data Cleaning and Transforming 26 3.4 Optimization of Data Management Efforts 27 3.5 Development and Optimization of PCS Database 29 3.5.1 Evaluation of Factors Affecting PCS Cost 31 Chapter 4 Top-Down PCS Cost Estimating 31 4.1 Introduction 31 4.1.1 Percentage of Construction Costs 32 4.1.2 Dollar Values 32 4.1.3 PCS Work-Effort Hours 32 4.2 Top-Down Estimating – Model Development 33 4.2.1 Multiple Regression 37 4.2.2 Decision Tree 39 4.2.3 Artificial Neural Networks 40 4.3 Validation of Models and Selection 43 Chapter 5 Functional-Level PCS Cost Estimating 43 5.1 Introduction 44 5.2 Process for Functional-Level PCS Cost Estimating 45 5.3 Identifying Work Tasks with a Work Breakdown Structure 46 5.4 Assigning Level of Expertise Required C O N T E N T S

46 5.5 Assigning Hours to Work Tasks 47 5.5.1 Uncertainty 50 5.6 Use of Functional-Level PCS Cost Estimating 50 5.6.1 In-House Design 50 5.6.2 External Consultant 51 5.6.3 Current Practice and Limitations 51 5.7 Continuous Improvements 53 Chapter 6 Implementing PCS Cost-Estimating Models 53 6.1 Output Interpretation and Limitations 53 6.2 Continuous Improvement 54 6.3 Use of Output as a Decision-Making Tool 54 6.4 Tracking PCS Cost Estimate Performance 54 6.5 Capturing Lessons Learned 54 6.6 Implementing Database Maintenance and Model Development Within an Agency 57 Chapter 7 Project-Specific PCS Estimating Issues and Contract Administration Guidance 57 7.1 Understanding Project-Specific PCS Cost-Estimating Considerations 58 7.2 Contract Administration Guidance for Capturing PCS Cost Data 58 7.3 PCS Cost of Scope Changes 59 7.4 In-House Versus External PCS Cost Estimating 60 7.5 Project Monitoring 62 Appendix A Glossary of Preconstruction Services Cost-Estimating Terms 64 Appendix B Project Monitoring – Preconstruction Services Progress 69 Appendix C Effective Practices and Tools for Estimating Preconstruction Services Costs 90 Appendix D Top-Down Model Development Process and Example 106 Appendix E Ohio DOT Consultant Fee Estimating Guide – Example of a WBS 109 Appendix F Case Study Question Used to Determine Influential Factors Affecting PCS Cost 110 References