Federal Agency Update - A Public Real Estate Symposium Las Vegas, Nevada January 26, 2010 Procedures Guide for Right of Way Cost Estimation and Cost Management

NCHRP (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

Background State 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 574 Guidance for Cost Estimation and Management for Highway Projects During Planning, Programming, and Preconstruction 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 for Right-of-Way Cost Estimation and Cost Management onlinepubs/nchrp/ nchrp_rpt_625-2.pdf

NCHRP Report 625 Procedures Guide for Right-of-Way Cost Estimation and 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 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

Framework Phase I  Implications  Project development phases  General project cost estimation & estimate management steps  Cost estimating & cost management flowcharts  Tool appendix approach

Framework Impact 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

Framework Impact 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 Collection Documents 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 Analysis Flowchart technique Data subdivided into four categories:  Inputs (primary and secondary)  Process steps  Outputs  Decisions and loops (cycles within the process)

Limitations Small sample size Differences between agencies:  Large verses small  Organizational make-up ― centralized verses decentralized  Project development phases  Terminology and acronyms

Results Problem 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.

ROW Research Results Procedures Guide

Organization of Guide Chp 1 Introduction Chp 2 Integrated Estimating Process Chp 3 Agency Process Overview Chp 4 Conceptual ROW Estimating Chp 5 Baseline ROW Estimating Chp 6 Update ROW Estimating Chp 7 ROW Cost Management Chp 8 Conclusions Appendix - Tools

Organization of Guide Tools 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 Process Flowchart Transportation Need Conceptual ROW estimate Update ROW estimate Baseline ROW estimate ROW Cost Management

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 Prepare Baseline ROW Base Estimate Baseline ROW Risk/Contingency Review Baseline ROW Estimate Approval Baseline ROW Estimate

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 NO Yes

ROW Cost Final Design Phase Management

“How to” Chapter Estimation/Cost Management Introduction Flowchart  Project complexity  Phase inputs  Process step description  Tools (tied to tool appendix)  Tips for success  Outputs

Tools Generic methods include: B1 Budget Control C1 Communication E2 Estimate Review - External E3 Estimate Review - Internal I2 Identification of Risk R3 Risk Analysis

Risk Analysis Analysis of Risk and Uncertainty Analysis 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 Analysis Why? 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 Analysis When? 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 Analysis Tips Conduct the risk analysis early in the project development process. Resources Project Risk Management Handbook: Threats and Opportunities, Caltrans, 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!