FTA Oversight Procedures - Federal Transit Administration - U.S. ...

The scope review identifies risk in the overall budget for ROW (SCC-60) based on the present lack of
progress in this area. The current ROW cost estimate of $15 million is based upon previous designs and
does not include the [name of railroad] ROW or current design revisions. Sponsor is currently developing
a more recent cost estimate, which includes the [name of railroad] property. However, these estimates are
considered very preliminary, based on the fact that ROW plans have not been developed at this time. It is
therefore proposed that the baseline cost estimate associated with this item be adjusted to reflect these
issues and the potential cost impacts. However, these adjustments and associated risks should be tweaked
at mitigation benchmarks as the project moves forward and as sponsor continues to work on the
development of ROW plans and appraisals, which sponsor estimates to have completed by the end of
2006. Future progress also includes the completion of the [name of railroad] agreement and a better
understanding of complex acquisitions and relocations.
The scope review indicates that the risk associated with these scope items may not be included in the final
design estimate. Therefore, it is suggested that the final design cost (SCC-80.02) be increased by 30%.
Uncertainty over the final design firms and their inclusion of insurance costs also suggests that budget
should be included for insurance, with a suggested figure of $1.5 million.
REVIEW AND ANALYSIS OF GENERAL CONDITIONS COSTS
Etc.
REVIEW AND ANALYSIS OF ESCALATION AND INFLATION RATES AND APPROACH
Escalation is the term for increases in the cost of material, labor and equipment due to global or local
increases in demand for those materials, labor and equipment. Related but different, inflation is the term
for increases in the cost of equipment, material, labor, and other cost items due to nationwide changes in
the value of money over time. These phenomena were treated separately.
Inflation and deflation multipliers are used to estimate the future cost of a project or to bring historical
costs to the present. Most cost estimating is performed in “current” year dollars and then escalated to the
time when the project will be accomplished. Since the duration of large construction projects extends
over several years, it is necessary to have a method of forecasting or predicting the funds that must be
made available in the future to pay for the work. Accordingly, predictive or forecast escalations indices
are used to produce an estimate of the future cost of the construction project.
The Preliminary Design Project Cost Estimates prepared for the [name of project] were initially estimated
in year 2006 dollars. In order to reflect year-of-expenditure (YOE) dollar values, these year 2006 capital
costs were inflated to year-of-expenditure by using an approximate project implementation schedule and
an inflation index to account for the rising prices of transit construction. The project implementation
schedules were provided by [Grantee] and a 4% annual escalation rate was used for this effort.
The project implementation schedule was approximated for the major project phases as follows:
• The design phase is approximately 2.25 years in duration spanning October 2006 to December
2008.
• The construction phase for the Breakout Contracts is 2 years from January 2008 to December
2009.
OP 33 Capital Cost Estimate Review
Revision 0, June 2008
Page D-8