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Federal Agency Update - A Public Real Estate Symposium
Las Vegas, NevadaJanuary 26, 2010
Procedures Guide for Right of Way Cost Estimation and Cost Management
NCHRP 8- 49 (2)
Stuart Anderson Texas A&M Keith Molenaar Univ. Colorado Cliff Schexnayder Del E. Webb School of Const., Arizona State U.
Outline• Background
• Methodology
• Data Collection & Results
• Issues
• Procedure Guide
• Discussion
BackgroundState highway agencies problems with
project cost escalation.
Phase I of NCHRP Project 8-49 Focused on cost escalation relative
to general project cost estimating Product - Guidance, Report 574,
focuses on estimating strategies, methods, & tools
NCHRP Report 574Guidance for
Cost Estimation and Management for Highway Projects During Planning,
Programming, andPreconstruction
http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_rpt_574.pdf
Targeted – Right of Way Cost estimation and Cost estimation management
Phase II of NCHRP 8-49
NCHRP Report 625
Procedures Guide forRight-of-Way Cost Estimation
and Cost Management
http://onlinepubs.trb.org/onlinepubs/nchrp/
nchrp_rpt_625-2.pdf
NCHRP Report 625Procedures Guide for
Right-of-Way Cost Estimationand Cost Management
This ROW Guidebook includes content from the accompanying project Research Report 132 and the Estimating Guide 574
NCHRP Web-Only Document 132
Right of Way Methods and Tools to Control Project Cost Escalation
http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_w132.pdf
Research Objective
Develop inclusive right-of-way cost estimation and cost estimation management procedures based on literature and current practice, that integrates with the cost estimate steps documented in NCHRP Report 574
FrameworkPhase I Implications Project development phases General project cost estimation
& estimate management steps Cost estimating & cost
management flowcharts Tool appendix approach
FrameworkImpact of Phase I on Phase II Focus on creating a ROW Cost
Estimating & Cost Management Procedures Guide – a “how to”
Create more detailed processes for cost estimating & cost management for ROW to support procedure guide
FrameworkImpact of Phase I on Phase II
Use some Phase I tools but created additional tools focused on ROW using same format and structure as in the
NCHRP Report 574
Data Collection
1. Literature review
2. On-site interviews Interview Protocol
Six areas of interest that focused on different aspects of the cost estimation & estimate management process
Data Collection Interview Process Who? SHAs and other organizations that
acquire ROW Central Office and Region/District
perspectives How? Ask questions relative to project
development phase
Data CollectionDocuments collected
– ROW manuals
– Unique tools used in practice (i.e. cost estimating systems, estimate documents, spreadsheets)
Early flowchart feedback
Data Analysis
Review of Practices Critical issues to ROW cost
estimation Successful practices and
tools
Data AnalysisFlowchart techniqueData subdivided into four categories: Inputs (primary and secondary)
Process steps
Outputs
Decisions and loops(cycles within the process)
LimitationsSmall sample size
Differences between agencies: Large verses small
Organizational make-up ― centralized verses decentralized
Project development phases
Terminology and acronyms
ResultsProblem Areas• Damages • Condemnations• Appreciation & market conditions• Risk analysis & contingency• Early scope definition• Estimating tools• Estimator experience & knowledge
Right of Way Issues Current practices lack structure and
organization.
Communication between ROW personnel and project development team needs to improve.
The ROW estimation is highly dependent on scope definition.
Right of Way Issues ROW planning estimates typically
not prepared by ROW staff.
SHAs do not utilize risk analysis and the application of contingency to all estimates.
Cost estimation management and cost control are underutilized.
PROGRAMMING
ROW Project Development:· Define Project Scope:
Identify ROW area and/or rough parcels needed (impacted)
· Document ROW Required on rough conceptual plan or aerial photo (schematic)
Determine Baseline ROW Estimate Basis· Review ROW required as documented per
project type and scope· Request clarification of uncertain ROW
requirements· Document requirements in project estimate
file
Approve & Communicate Baseline ROW Cost Estimate· Obtain management approval· Authorize communication internally and
externally
Determine Baseline ROW Risk & Set Contingency· Identify risks· Assess and analyze risks· Assign contingency· Document risk analysis and basis for
contingency· Compile baseline ROW cost estimate (base
plus contingency)
Review Baseline ROW Cost Estimate· Determine level of review· Review estimate basis & assumptions· Verify completeness and Cost Data· Review Contingency amount based on
identified risks
Baseline ROW Cost Estimate
To PreliminaryDesign
ScopeDevelopment
ROW Requirements
Input from Environmental,
Utilities, Railroad
Prepare Baseline ROW Base Estimate· Review estimate basis· Document observations from field visit · Calculate potential area of land by land type· Develop cost basis for each ROW element· Convert cost basis to estimate for each
element· Document estimate assumptions including
uncertain items· Summarize all estimate elements for total
ROW base cost
Real Estate Appreciation
Rate
Land Market Values
Field Visit by Estimator (Improvements,
Damages, Existing Conditions, etc.)
Condemnation RateHistorical
Data
- Removal of Improvements- Relocation Assistance- Support Costs
Future Development (Community
Planning)
Represents the dynamic nature of the milestone dependant on the practices
of the State highway agency.
*
Priority Program≤ 10 years
*
FromPlanning
Modifications
Update Estimate Basis(Scope/
Location)
Prepare Base Estimate
Perform Risk Analysis
(Set Contingency)
Review Total Cost Estimate
Historical Data Input from 3rd Parties
Input from Disciplines
Market Conditions
Baseline Estimate
TrafficRoadwayStructures
ROWEnvironmentalConstruction
Utilities
Project Scoping5-25% Design
Project Complexity
Obtain Appropriate Approvals
Communicate Approval
Macro Environment
Project Estimate
P
RE
LIM
IN
AR
Y D
ES
IG
N
Authorize Project
*
PR
OG
RA
MM
IN
G
Database
Document
Step
Input
Milestone
Pha
se
Legend
Decision
COST ESTIMATING AND COST ESTIMATING MANAGEMENT
To Final Design
ROWResearchResults
ProceduresGuide
Organization of GuideChp 1 IntroductionChp 2 Integrated Estimating ProcessChp 3 Agency Process OverviewChp 4 Conceptual ROW EstimatingChp 5 Baseline ROW EstimatingChp 6 Update ROW EstimatingChp 7 ROW Cost ManagementChp 8 ConclusionsAppendix - Tools
Organization of GuideTools Appendix – provides detailed information on each of the tools discussed in the Procedures Guide.
Tool description is consistent with that used in NCHRP Report 574.
Agency Level
ProcessFlowchart
Transportation Need
Conceptual ROWestimate
Update ROWestimate
Baseline ROWestimate
ROW CostManagement
ROW Estimating Elements
• Land only
• Land and structures
• Other property improvements
• Damages
• Utility relocations
ROW Estimating Elements
• Relocation assistance program• Administrative settlements• Settlements or trials• Support Costs• Appreciation (market forces)
depreciation is possible but as much of a problem
Key ROW Estimating Inputs
Requirements Values for land and structures Historical data Inflation/appreciation rates Condemnation rates Future highest and best use
Baseline ROW Cost Estimate
Baseline ROW Estimate Basis
PrepareBaseline ROW Base Estimate
Baseline ROW Risk/Contingency
Review Baseline ROW Estimate
Approval Baseline ROW Estimate
PRELIMINARY DESIGN
ROW Project Development:· Refine ROW Scope per
preliminary plans and refined overall Project Scope
· Develop preliminary ROW plan
Approve & Communicate Updated ROW Cost Estimate· Review Impacts of changes· Obtain management approval· Authorize communication internally and
externally
Review Updated ROW Cost Estimate· Review estimate changes (basis and
assumptions)· Verify completeness and cost data for
changes· Review effect of changes on contingency
amount
Updated ROW Cost Estimate
To FinalDesign
ROW Requirements (Preliminary ROW
Plans)
Revised ROW Required
(Revised Plans)
Estimate on Budget?
YES
NO
Update ROW Estimate Basis· Review current ROW plans and
compare to previous requirements· Identify changes· Update ROW Estimate file
Update ROW Risks & Contingency· Review risks· Update risks as necessary· Update contingency value· Document update to risk and contingency
Input from Environmental,
Utilities, Railroad
Update ROW Base Estimate· Review updated estimate basis to understand
changes· Document observations of field visit to
confirm modifications· Review changes to existing estimate
assumptions/limitations· Calculate total area of land for each parcel· Revise cost basis to update estimate for each
element· Convert cost basis to update estimate for
each element· Update estimate documentations include
uncertain items· Summarize all estimate elements for updated
total ROW cost
Real Estate Appreciation
Rate
Land Market Values
Field Visit by Estimator (Improvements,
Damages, Existing Conditions, etc.)
Condemnation Rate
Historical Data
- Removal of Improvements- Relocation Assistance- Support Costs
Future Development (Community
Planning)
*
STIP≤ 4 years
Represents the dynamic nature of the milestone dependant on the practices
of the State highway agency.
*
FromProgramming
Potential Design/ROW Trade offs
CostEstimation
ManagementLoop
Modifications
Update ROW Cost Estimate
Update ROW Estimate Basis
Update ROW Base Estimate
Update ROW Risks/contingency
Review Updated ROW Estimate
Approve Updated ROW Estimate
Estimate in Budget NOYes
ROW Cost
Final Design Phase
Management
“How to” ChapterEstimation/Cost ManagementIntroductionFlowchart
Project complexity Phase inputs Process step description Tools (tied to tool appendix) Tips for success Outputs
ToolsGeneric methods include:• B1 Budget Control• C1 Communication• E2 Estimate Review - External• E3 Estimate Review - Internal• I2 Identification of Risk• R3 Risk Analysis
Risk AnalysisAnalysis of Risk and UncertaintyAnalysis of uncertainty involves
quantifying identified risks. Risk analysis is used to prioritize identified risks for mitigation, monitoring, and control purposes. Risk analysis can be extremely helpful for understanding project uncertainty and setting appropriate contingencies.
Risk Analysis
What Is It?
In the context of cost estimation, this tool quantifies project risk and uncertainty to provide a better understanding of contingency and the ultimate project cost.
Risk AnalysisWhy?
Highway project delivery, particularly the estimation of right-of-way cost, is a complex task heavy with uncertainty.
What Does It Do?
This tool quantifies the effect of potential risks in terms of their consequences to cost and schedule.
Risk AnalysisWhen?
Risk analysis can be used throughout the project development process.
Examples
Caltrans has documented a qualitative risk analysis procedure: Project Risk Management Handbook: Threats and Opportunities, May 2007
Risk AnalysisTips
Conduct the risk analysis early in the project development process.
Resources
Project Risk Management Handbook: Threats and Opportunities, Caltrans,
www.dot.ca.gov/hq/projmgmt/guidance_prmhb.htm
Structured Approach
Collaborative Atmosphere
Key Principles
– Create an environment for success
– Create procedures for establishing a Baseline ROW Cost Estimate
Guide Conclusions
Key Principles–Create processes to identify risk
and for setting contingency–Require ROW reviews–Create ROW cost control
mechanisms–Support good communication
practices
Guide Conclusions
Stick to the process ―a process that:
Considers risk – identify and mitigate
Requires reviews and approvals Involves updating the estimate
when new or more detailed information is available.
Magic Bullets
Communicate estimate consistency and accuracy to the project team and management
Questions - Discussion!