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!