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

This escalation amount was computed as follows. The escalation costs of $56,691,000 in the Preliminary
Design Project Cost Estimate Summary represents 14.4% of the Project Subtotal plus Project Level
Contingency ($393,434,258). Furthermore, a 1.04 factor (4% escalation) compounded for 3.5 years
yields approximately 1.147 (or 14.7%). Therefore, a 1.0505 factor (5.05%) compounded for 3.5 years is
equivalent to 1.1882 (or 18.82%). By applying this 18.82% to $393,434,258, an escalation cost of
$74,045,000 is computed.
As noted previously, the implementation schedule has a measurable impact upon the eventual capital cost
of the completed projects. Any delays or slippage to the schedule in the performance of the design and
construction activities will result in higher costs than estimated. As such, if these schedules are extended,
the costs will likely increase from these estimates.
The most common delays are those that are outside of the [Grantee’s] control, such as weather, utility
relocation and right-of-way acquisition. The current schedule for this project lacks sufficient detail in
these areas to estimate the probability of any delay with reasonable accuracy.
However, by reference to the “Managing Capital Costs of Major Federally Funded Public Transportation
Projects - Final Report,” June 2006, Transit Cooperative Transportation Research Program, the average
delays for federally funded public transit projects were 1.0 year for design and 0.8 year for construction.
Thus, an average delay of 1.8 years was used for this project to estimate any additional escalation impacts.
By considering only a design and construction schedule delay and/or extension of 1.8 years, the project’s
escalation cost would increase by $34,213,000 to $90,904,000. This escalation amount was computed as
follows. The escalation costs of $56,691,000 in the [Grantee’s] Cost Estimate Summary represents 14.4%
of the Project Subtotal plus Project Level Contingency ($393,434,258). Furthermore, a 1.04 factor (4%
escalation) compounded for 3.5 years yields approximately 1.147 (or 14.7%). Therefore, a 1.04 factor
(4.00%) compounded for 5.3 years (3.5 yr + 1.8 yr) is equivalent to 1.2311 (or 23.11%). By applying this
23.11% to $393,434,258, an escalation cost of $90,904,000 is computed, which yields a $34,213,000
variance with the estimated escalation cost of $56,691,000 used in the [Grantee’s] Project Cost Estimate
Summary.
A worst case scenario for the escalation cost impact could be calculated with an escalation percentage of
5.05% and an extension or delay of the design and construction schedule by 1.8 years. Accordingly, the
escalation impact would be $60,699,000. This escalation variance was calculated as follows. A 1.0505
factor (5.05% escalation) compounded for 5.3 years (3.5 yr + 1.8 yr) yields approximately 1.2984 (or
29.84%). Applying this 29.84% to $393,434,258 (Project Subtotal plus Project Level Contingency)
results in an escalation cost of $117,390,000, or a $60,699,000 variance with the estimated escalation cost
of $56,691,000 used in the Preliminary Design Project Cost Estimate Summary.
In summary, the escalation costs variance has the potential to range between $17,350,000 and
$60,699,000.
OP 33 Capital Cost Estimate Review
Revision 0, June 2008
Page D-11