Federal Agency Update - A Public Real Estate Symposium

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

2. NCHRP 8- 49 (2) Stuart AndersonTexas A&MKeith MolenaarUniv. ColoradoCliff SchexnayderDel E. Webb School of Const., Arizona State U.

3. Outline • Background • Methodology • Data Collection & Results • Issues • Procedure Guide • Discussion

4. 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

5. NCHRP Report 574Guidance forCost Estimation and Management for Highway Projects During Planning, Programming, andPreconstruction http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_rpt_574.pdf

6. Phase II of NCHRP 8-49 • Targeted – Right of Way • Cost estimation and • Cost estimation management

7. NCHRP Report 625Procedures Guide forRight-of-Way Cost Estimationand Cost Management http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_rpt_625-2.pdf

8. NCHRP Report 625Procedures Guide forRight-of-Way Cost Estimationand Cost Management This ROW Guidebook includes content from the accompanying project Research Report 132 and the Estimating Guide 574

9. NCHRP Web-Only Document 132Right of Way Methods and Tools to Control Project Cost Escalationhttp://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_w132.pdf

10. 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

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

12. 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

13. 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

14. 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

15. 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

16. Data Collection Documents collected • ROW manuals • Unique tools used in practice (i.e. cost estimating systems, estimate documents, spreadsheets) Early flowchart feedback

17. Data Analysis • Review of Practices • Critical issues to ROW cost estimation • Successful practices and tools

18. Data Analysis • Flowchart technique • Data subdivided into four categories: • Inputs (primary and secondary) • Process steps • Outputs • Decisions and loops(cycles within the process)

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

20. Results Problem Areas • Damages • Condemnations • Appreciation & market conditions • Risk analysis & contingency • Early scope definition • Estimating tools • Estimator experience & knowledge

21. 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.

22. 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.

23. ProceduresGuide ROW Research Results

24. 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

25. 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.

26. Transportation Need Conceptual ROW estimate Agency Level ProcessFlowchart Baseline ROW estimate Update ROW estimate ROW Cost Management

27. ROW Estimating Elements • Land only • Land and structures • Other property improvements • Damages • Utility relocations

28. 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

29. Key ROW Estimating Inputs • Requirements • Values for land and structures • Historical data • Inflation/appreciation rates • Condemnation rates • Future highest and best use

30. Baseline ROW Estimate Basis PrepareBaseline ROW Base Estimate Baseline ROW Cost Estimate Baseline ROW Risk/Contingency Review Baseline ROW Estimate Approval Baseline ROW Estimate

31. Update ROW Estimate Basis Update ROW Base Estimate Update ROW Cost Estimate Update ROW Risks/contingency Review Updated ROW Estimate Estimate in Budget NO Yes Approve Updated ROW Estimate

32. Management Final Design Phase ROW Cost

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

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

35. 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.

36. 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.

37. 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.

38. 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

39. Risk Analysis Tips 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

40. Guide Conclusions Structured Approach Collaborative Atmosphere Key Principles • Create an environment for success • Create procedures for establishing a Baseline ROW Cost Estimate

41. 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

42. Magic Bullets 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.

43. Communicate estimate consistency and accuracy to the project team and management

44. Questions - Discussion!