FHWA Major Projects Estimate Training Florida TEA Conference and Workshop 2005

FHWA Major Projects Team: Rodney Barry, Team Leader, (202) Jim Sinnette, Engineering, (202) Daniel C. Wood, Engineering, (202) John Broadhurst, Finance, (202) Chris Allen, Risk Management, (202) Phil Barnes, Stewardship/Oversight,(202)

SAFETEA-LU Title I – Federal-Aid Highways Subtitle I (Miscellaneous) Section1904. Stewardship and Oversight Major Projects now $500 million Value Engineering – More than 1 analysis for major projects. Finance Plans still required –$100 million projects Project Management Plans now required

SAFETEA-LU Title I – Federal-Aid Highways Subtitle I (Miscellaneous) Section1904. Stewardship and Oversight Project costs.--The Secretary shall develop minimum standards for estimating project costs and shall periodically evaluate the practices of States for estimating project costs, awarding contracts, and reducing project costs.

14 States with $1 billion projects (TEA-21) Active States DC 14

20 States with $500 million projects (SAFETEA-LU) Active States DC 20

33 States with active and future $500 million projects Active States Future States DC 20 13

Cost Estimate Training for Major Projects 2 Pilots in DC in FY Course in Atlanta – September Course in Austin – October Courses in St. Louis and Denver – December 2005 Dwight Sangrey of Golder Associates will be delivering a course to the Minnesota DOT and to Eastern Federal Lands Highway Division

Why? History of Cost Estimating issues with Major Projects Government Auditing Agencies (GAO, DOT IG) NCHRP 20-7 (152), Flyvbjerg, LA County Metro Transportation Planning Authority, etc. Another Resource: July/August 2004 issue of Public Roads

Why? On a recent survey, FHWA Division Offices were asked what was needed to improve cost estimating: Responses: –Nothing (32%) –Guidance (25%) –Best Practices (23%) –Other (11%) –Training (9%)

Why? SAFTEA-LU –A f inancial plan shall– ``(A) be based on detailed estimates of the cost to complete the project; and ``(B) provide for the annual submission of updates to the Secretary that are based on reasonable assumptions, as determined by the Secretary, of future increases in the cost to complete the project.

LESSON 1: Recent example Evolution of Cost for Boston Central Artery & Tunnel

LESSON 2: Past Example Interstate Highway System Case Study 1954 to 2000 Authorization in 1956 for 41,000 miles of high quality highway for estimated $27 B... ($1955) Scope later increased to 42,500 miles Revised estimate of cost in 1958 was $41B ($1957) Original planned build-out schedule was 1975 By 1980 … 40,000 miles completed—up to 42,793 today

LESSON 2: Past Example Evolution of Cost for US Interstate Highway System Again…scope & inflation are the changes

LESSON 3: Current Example East Span of the San Francisco – Oakland Bay Bridge –Earthquake Retrofitting (just under $1 billion) –Things happened … –Now over $6 billion … July 2005 Newspaper Reports –And scheduled for completion in 2012

As a result FHWA has begun implementing the following: “Major Project Program Cost Estimating Guidance” And Cost Estimate Training for Major Projects

Cost Estimating Guidance and Training Guidance and Training are based on the concept of including estimates of all costs at all stages of a project. –Deterministic with contingencies = VDOT –Risk-based probabilistic = WS DOT For Major Projects, there appears to be initial successes with risk-based probabilistic estimates, like WS DOT’s CEVP –Utah and Pennsylvania Turnpike have already used CEVP. –EFLHD is planning to use a risk-based assessment on one of their $10 million projects –Nevada, Minnesota, Texas have all expressed interest

PlanningProgramming Preliminary Design Final DesignA/B/AConstruct Where Uncertainties (Risks) Need to be Resolved Environment Right of Way Governance/Stakeholders Financing Civil & Environmental Justice Multi-modal Systems Teaming Options/Alternatives Geotechnical Structures Pavements Hydraulics Stormwater Tunnels Intelligent Transportation Permitting Contracts Insurance/Bonds Construction Methods MOT Market Conditions Disputes Weather Security SCOPE

Cost Risk Contribution By Item also: uncertainty in escalated cost prioritized list of activities (for VE) effectiveness of risk management chance of meeting milestones cash flow CEVP Results & Deliverables RICH SOURCE OF INFORMATION Quantified risk registry can feed & focus VE & Risk Management Current $ or YOE $ prioritized list of delay risks

Using Results of a Risk-Based Analysis Project Assessment & Validation Risk Management Communication Financial Management

Cost Risk Contribution By Item – March %Future Leadership & Management 2 11%Contracting Process 3 11%Guideway Design Cost Risk 4 10%ROW Acquisition Uncertainty 5 8%Additional Parking Required 6 8%Urban Design Risk 7 6%other risk items 8 6%Utility Relocation Issues 9 5%Other Scope Risk 10 5%W. Seattle Bridge Design Risk all others17% Rank Relative Contribution to Risk Cost Rank

Comparison of Probability Mass Functions

Uncertainty Decreases with Design Development Range of Initial Estimate

Communications CEVP – Washington State DOT Developed CEVP for proposed “mega-projects” in Seattle area (assessment & communication) Success led to broad application within WSDOT: More than 150 projects $10M up to $4B CREM staff function In use by 150+ staff

Communications Value of audience understanding –More realistic expectations –Framework for time delay & low probability risk –WSDOT experience in 2002 is good example The public is very savvy when it comes to transportation projects. –WS DOT CEVP –VDOT’s Dashboard

Financial Management (Programming) Total Project Cost (Current $10k) Probability Total Project Cost (Current $M) Probability Total Project Cost ($100k) Probability Total Project Cost (Current $M) Probability Total Project Cost (Current $k) Probability

Simulated Program Cost

QUESTIONS ????