1 Canyonero Parkway Cost Estimate Review Close out presentation October 5, 2007

2 Canyonero Parkway Cost Estimate Review Objective Verify the accuracy and reasonableness of the current total cost estimate to complete the Canyonero Parkway and to develop a probability range for the cost estimate that represents the project’s current stage of design. Results of the review will be used by FHWA during the review of the Initial Financial Plan.

3 Canyonero Parkway Cost Estimate Review Financial Plans (SAFETEA-LU) Threshold (All costs, PE, CN, R/W, UT, CE, etc.) $500 Million – Major Project $100 to $500 Million – Division discretion “Cost to complete estimates based on reasonable assumptions as determined by the Secretary.” Secretary = FHWA Reasonable assumptions = Risk based analysis

4 Canyonero Parkway TIFIA Requirements Website: TIFIA Values Private Participation Environmental Impact National or Regional Significance Project Acceleration Credit Worthiness Use of New Technologies TIFIA Costs Application $30,000 Credit Processing $100,000 to $300,000 Annual Servicing Fee $11,000

5 Canyonero Parkway Review Participants FHWA Resource Center FHWA Headquarters (Major Projects Team) TEA

6 Canyonero Parkway Review Agenda Tuesday, September 25 Introductions Familiarize review team with project scope and overall estimate Review 1.0 Roadway costs Review 2.0 Structure costs Wednesday, September 26 Review 3.0 Drainage costs Review 4.0 Miscellaneous costs Review 5.0 and 6.0 (Cash) Toll Plazas and ITS costs Review Construction Contingencies and D/B Risk

7 Canyonero Parkway Review Agenda Thursday, September 27 Review of 7.0 Right-of-Way and Utilities Costs Review of 8.0 Agency Costs Year of expenditure and inflation rate discussion Develop team recommendations Friday, September 28 Develop presentation Executive presentation Questions and close out

8 Canyonero Parkway Documentation Provided Project plans, typical sections, earthwork summaries and maps Canyonero estimates (Section A, Section B, Section C, and Total), dated Utility Relocation Cost Summary Preliminary Right of Way Assessment Cash Flow Analysis 2005 and 2006 Statewide Bid Averages State DOT Standard Specifications Value Engineering Workshop Study Report State DOT, FHWA and ENR Construction Cost Indices

9 Canyonero Parkway Review Methodology Review Team input –FHWA, DOT Estimate Review –Understanding of estimate development process –Reasonableness of unit costs and quantities –Risks and Opportunities for various items –Contingencies and Projected Inflation Rates

10 Canyonero Parkway – Review Methodology (continued) Risks and Opportunities Analysis –Reviewed all cost items –Evaluated project risks –Identified project opportunities –Applied probability curves Performed Monte Carlo simulation to estimate risk and opportunities

11 Canyonero Parkway - Basis of Review Review based on estimates provided in advance Review to determine the reasonableness of assumptions used in the estimate –Not an independent estimate –Did not verify quantities Did not review Circle Parkway

12 Canyonero Parkway Review Findings Good estimating practices –Sections A, B, and C have detailed estimates –Contingencies used are based on level of design –Use of State DOT resources 2005 and 2006 Statewide Bid Averages State DOT Chief Estimator Composite index inflation factors –All costs are included –Cash flow analysis used to determine year of expenditure estimate

13 Estimate Adjustments 2.0 Structures –Increased Curved Structures Flyovers unit cost – Longer spans will require a steel superstructure –Increased Railroad Bridge unit cost RR Uncertainty 3.0 Drainage –Reduced unit costs 4.0 Miscellaneous –Reduced traffic marking costs –Added traffic signal quantities –Added freeway signing –Increased C/A Fence unit cost D/B Risk –Increased from 2% to 5% 8.0 Agency Cost –Design and Construction Management cost increased

14 Canyonero Parkway Major Risks Right-of-way –Delayed start in acquisition due to lack of funding –Potential for acquisitions costing more than appraised (fair market value) –Full take vs. partial take –Existing landfill –D/B responsible for acquisition Effect on construction operations Pass through costs Increased costs due to fast tracking Increased risk to D/B due to work arounds due to lack of complete access through project or at work sites. D/B Contract –Level of design may limit D/B innovation Earthwork –Triassic soils Change is cut slopes from 2:1 to 3:1may require retaining walls next to neighborhoods Mixing, may need borrow –Finding borrow sites, environmental clearance, and haul routes

15 Canyonero Parkway Major Risks Utility relocations –Delayed start due to lack of funding requires D/B to be working during relocations –2 year relocation of transmission lines in two locations on Canyonero –Schedule risks due to utility companies performing own relocations, some at their own costs Railroads –CSX –Undetermined scope and needed agreements –Limited access to parcels due to railroad crossing Structures –Estimates based on concrete girders; some spans may require more expensive steel girders –RCBC may be bridge –Cash lanes require retrofitting new bridge Uncertain future market conditions impacting inflation if construction and/or R/W are delayed due to funding

16 Canyonero Parkway Major Opportunities Potential earthwork balance –Excess on Section C Material price and right-of-way stabilization Investigate adjacent or on-site borrow sources –Work with Landfill Follow up on VE Study Report Recommendations Encourage Alternate Technical Concepts from potential D/B Contractors prior to award

17 Canyonero Parkway Risk Analysis Sample Qty/ Unit Price Assumption Curve

18 Canyonero Parkway Risk Analysis Sample Allowance Assumption Curve

19 Summary Cost Estimate Current Year $ 60% probability from $740 to $760 M

20 Right of Way Risk Allocations Contingency for Acquisition over Appraised Value Historically 140% Most likely and best case based on 25% (50) of remaining parcels going beyond negotiation phase –45 parcels at 200% –5 parcels (condemnation) at 300% Weighted contingency of 179% which is 13% greater than 140% Worst case based on 50% (100) of remaining parcels going beyond negotiation phase –80 parcels at 250% –20 parcels (condemnation) at 350% Weighted contingency of 205% which is 46% greater than 140% 5% D/B Pass Through and 5% Fast Tracking = Total 10% Miscellaneous risks for Full Takes and Landfill issues = 2%

21 Summary Cost Estimate Current Year $ Current Estimate - $226 Million 60% probability from $740 to $760 M

22 Inflation Rates and Years of Inflation Construction BC = 4%ML = 6%WC = 10% BC = 1.5 yearsML = 1.5 yearsWC = 2.5 years Right-of-Way BC = 5%ML = 7%WC = 10% BC = 1.5 yearsML = 2 yearsWC = 2 years All Other Costs BC = 3%ML = 3%WC = 5% BC = 1.5 yearsML = 1.5 yearsWC = 2.5 years (Prior Expenditures were not inflated)

23 Total Project Cost (YOE) 60% probability from $740 to $760 M

24 60% probability from $740 to $760 M

25 Review Findings Summary Confidence Levels for Updated Estimate (YOE) 20% $809.2 million 50% $828.3 million 70%$842.0 million 80%$850.3 million 90%$861.5 million

26 Canyonero Parkway Cost Estimate Review Draft Recommendations Finalize project revenue strategy Revaluate Right-of-Way costs Monitor construction and Right-of-Way inflation Resolve Triassic soil and earthwork balance issues Finalize RR work scope and begin coordination with CSX Begin Utility relocations and Right-of-Way acquisitions Monitor and update project costs through design and project completion at least annually Develop a plan to manage risks and opportunities Consider the use of a Management Reserve (Promotion, PR, Unknown Unknowns above the project level)

27 Canyonero Parkway Cost Estimate Review Next steps: 1. FHWA HQ will prepare a final report documenting review findings. 2. State DOT will prepare Initial Finance Plan for FHWA approval consistent with the review findings. 3. State DOT will prepare annual updates to the Finance Plan until project completion.

28 Canyonero Parkway Cost Estimate Review Questions ?