ALASKA STATE LEGISLATURE Senator Albert M. Kookesh
ALASKA STATE LEGISLATURE Senator Albert M. Kookesh State Capitol, Room 7. Juneau, Alaska 99801-1182
Standing Committees: Transportation Community & Regional Affiairs
(907) 465-3473 Toll Free: 1-888-288-3473 Fax (907) 465-2827 E-mail: Senator_Alber [email protected],us
April 10, 2008 DISTRICF C
,~lat~, Athk,,ket n,,~goo,,, ~
The Honorable Sarah Palin Governor of Alaska P.O. Box 110001 Juneau, AK 99811-0001 Dear Governor Palin:
Hyder Kake Kaltag Kasaan Katalh Kennlcott Kenny Lake Klawock Klukwan Koyukuk Labouchere Bay Lake Mtnchumina
Li=o Vahge
B~N C~ek I wish to express my appreciation for your consistent and firm support of open and credible public Livengood ~unda~ processes. We are fnlly in agreement regarding your statement of October 27 to the Juneau Chamber t~.g I,lana Ca~ Pole Cent! that "it is critical that we take extra care to ensure that the [Juneau Road] project progresses Manley M..kor~exl t~ke Hot Sphngs Chalkyitsik ¯ . ¯ )) Marsh~all Cha.a.hr ~g_ppropnatmy. McCarthy Chenega Bay C~,icken Therefore, it was with some dismay that the Senate Transportation Committee learned at an oversightMcGrath Medfra Chisana Methkada Chlstochlna hearing on February 26 that the state Department of Transportation (DOT) plans to begin Mentasta c~a,,a construction of the Juneau Road without completing the engineering work necessary for the most Minto " Chuathbaluk Nabesna difficult section of the road and without a credible and comprehensive cost estimate. With issuance c~le Bay Co~n~,n Co~eof the U.S. Army Corps of Engineers’ permit imminent, the deadline for a decision on this 12-year Naukati Nenana Cordova Nikolal c~,e Co~e construction project is fast approaching. Northway Cold foot Nulato Copper Center ophir Craig DOT’s engineering/geotechnical consultant, Golder Associates, testified at the hearing that DOT’s Point Baker c,~ok~ C~ee~ .rr_nt cost estimate is a work-in-progress since the road alignment had not yet been fully Polk Inlet Delta Junction- Ul G Port ARee oeltan~ determined, and it is known whether costly tunnels will be required. Additionally, Senator Elton
not
Dot Lake has questioned DOT since the hearing about the low inflation rate DOT quotes for this project. AndP°*t Protection Rampart Dry Creek Red Devil Mayor Bob Weinstein of Ketchikan, in a March 11 letter to Commissioner von Scheben stated that Eagle auhv Eagle Village DOT’s presentation at the hearing "lacked the candor and objectivity that we expect from state Russian Mission Edna Bay Shageluk ~"~rnar officials, especially when they are testifying before the Legislature." Skagway Ernestine Excursion 1hiI
Slana
Slee~uto believe it would go a long way toward restoring credibility to DOT to involve independent Eureka ~wns,~e technical experts in the Juneau Road Project’s evolving cost estimate process. Such an approach is Stev~n, val,go Stony River E~ak s,,~h~, used in Washington State for all transportation projects over $100 million as part of what Flat Takotna t~o,-t areelr Washington calls "informed decision-making." Fort Yukon Fortutaa Ledge
Tanana Tatitlek
~t~r Eay As follow-up to the hearing, I urge you to require DOT to undertake a "Cost Estimate Validation Gakona Process" (CEVP) workshop, an action recommended by one of the hearing’s invited witnesses, Mark Tel.lda Graylh-xg Gabel from Washington DOT. A CEVP workshop includes geologic, construction, and cost expertS~e,akee Gulkana who do not have a financial interest in a particular project. These workshops produce credible cost TetllnJtmetlOnTok G~.~,tavus estimate ranges that help decision-makers prioritize among transportation projects because decisionHaines Healy Lake makers then better understand the financial risks they are authorizing. Additionally, CEVP Utopia Creek Venetie Hobart Bay workshops can help identify the greatest risks so appropriate mitigation strategies can be developed. View Cove Holy Cross HOonah Hughes Hnslla Hydaburg
Watedall whate Pass Wiseman Yakutat
PRA_GSP02_0009023
Governor Sarah Palin April 10, 2008 The attached article from the June 2006 issue of Roads and Bridges Magazine, which I understand Commissioner von Scheben has reviewed and expressed interest in, provides evidence of the value of the workshop process. To better inform you, the legislature, DOT, and the public of the costs of proceeding with the Project, we urge you to require DOT to undertake a CEVP workshop prior to beginning construction. Thank you very much for your consideration of this request. Sincerely,
Senator Albert Kookesh Chair, Senate Transportation Committee
Senate and House Transportation Committees Commissioner Leo von Scheben
PRA GSP02 0009024
SGC
Pa~e 2 of 3
One answer WSDOT found to these fundamentaJ questions is the realization that an estimate is more accurately expressed not a,s a single number but as a range. To put this into practice, WSDOT developed the Cost Estimate Validation Process (CENP) for projects over $100 million, and subsequently the less intense Cost Risk Assessment (CRA) wo~ksholos for projects valued between $25 million and $100 million.
Estimating contingencies To determine an accurate estimate t~r~e fo~ both cost and schedule, risk must be measured, Formerly, W[~DOT measured dsk base¢l on the estimator’s experience and best judgment, without explicitly identifying the project’s uncettaintie~ and risks. "That has changed, t:stimates now comprise two components: the base cost component and the risk (or uncertainly) component. Base cost is defined as the most probable cost of the planne~ proje~ that can be expected if no significant problems occur. -IVe base cost does not include contingency. Once the base cost is established, a liSt of uncertainties is create0 of both opportunities arK/risks, called a =ri=k register." The risk assessment replases general and vaguely defined contingermy with explicitly defined risk events and w~th the probability of occurrence and the consequences of each potential risk event, Scope control is necessary but is not addressed in this short article.
Ot~ce a project manager has determined that a CEVP or CRA workshop iS required for the project, the process goes as follows: At the prep session the project team and cost dSk team ~evlew ~e project for the upcoming workshop, determine 10~.~cipants and draft a high-level project schedule that takes the project to completion, This is translated tnto a basic flowchart of the significant project activities, At the workshop, which typ|ca~ly runs from two tO five days depending on the complexity and size of the prelect, the cost estimate is reviewed and validated, and a base cost for the project is determine~. Potential dsk events a~e identified and, through el!citation of the project team and subject-matter experts. the probabilities and consequences of risk events are quantified. After the workshop, the flowchart activities, the base cost and risk events (as determined in the workshop) are then entered into a Monte= Cado simulation model. The model produces an estimated range, with probabilities, for project cost and schedule; results are conveyed in terms of onfidence levels for COSTS and time to complete the project. The simulation also ranks the risk events in order of sign~eance so project managers can locus on the top-ranked risks for risk-mitigation planning to gain the best cost benefit from the risk m~n~gement ~.c1~ons. The workshop results are complied into a report, which includes a spreadsheet that can be used for risk-management planning and a one-page summary of the modeling results with the mos~ essential information and proie~ data.
For example, a road interchange projec~ in Ki~sap County, Wash., went through a CRA workshop with results summarized as follows: ¯ Project estimate prior to workshop: $16 million; ¯ GRA workshop estimate r~nge: $20.2 million to $25.3 million; ~nd ,= Total project amount at award: $22.2 million. The actual awarded a~’nount te!! within the estimates of tl~e workshop, Additionally, the workshop provided the project team w~ a dsk register of events with estimated probabilities and consequences. Using this tool for i~e-emptive management, the project team could address ways to manage the dsks through avoidance, mitigation or transference. Risks that were accepted were known and monitored. This identi~ation allows the project team to be anticipatory in responding to risk.
Dodging costs Two of the risks identified in the workshop for the interchange project in Kitsap County are described as follows. One risk involved uncertainty in construction of the b~dga widening dueto aesthetic and technical concerns surrounding the need to widen a bridge and p~’ovide a retaining wall. Because of the detailed discussion that ensued in the workshop, ane of the subject-matter experts s~lgested a retaining wall that cOUld also serve as the bridge support or abutment. The design team ultimately adopted this
http:llwww.rosdsbddgos.com/popup_applJt~dex.cfm?fu~acdo~=showA~cl¢&appD~rect.., 11/13/2006 PRA_GSP02_0009026
Page 3 of :3
SGC
sugge~on and developed a design for the combined retaining wall and bridge abutment, thereby avoiding an estimated $260,000 in costs. The second dsk involved uncertainty in storm-water collection and treatment. As a resutt of identifying this dsk and estimating its effect and p~’obability, the design team responded by avoiding a combined-use detention pond and instead designed a project-spec, ific pond, thereby avoi~ling an estimated $220,000 in costs. Experience indicates that ~osts of changes during construction are managed to around 6°7% of bid price. The benetlts of risk-based eslfmating u~ilizing the CFVP workshops are manifold and in~ude:
¯ Increased and improvecl communication within the proiect team, in an~l among cross-functional groups, stakeho~ers, management, the iegislature and the public ~t large; ¯ Known dsks are identified and quantified; new dsks are revealed; ¯ The dsks are quantified in terms of probability and effect: ¯ The risk-based modeling analysis prioritizes the risks and provides guidance for Project managers needing to know where to focus t~eir risk-mitigation resources; and ¯ Provides the information necessary for developing effective risk-management plans, As with any new process, lessons are lea(ned lhrough experience and praoti~e. Observations are offered tlete for those cont,idedng Implementation of CEVP or similar rit,k.based estimating processes.
Risk-based estimating it, only possible if ~e owner truly wan~ to knOw 1he ~’ealistic range of probable Costs and is prepared to communicate these contingencies to the publi~ and decision makers, H~gh-profite projects benefit (rom lhe open and robust review of estimated cost and ~eheduleContingency estim~ting a~so can increase punic ~onflderme at a time when chronic underestimation of project costs on large projects has fed to a significant erosion of public confidence in infrastructure ~encles, in W~.shingtot~ slate and elsewhere in the U,8, Fortunately, WSDOT has been able to show that it is addressing this problem, leading to a recent public vote in 2005 that approved the use of increased gas taxes for critical t~ansportation projects.
The added openness a~d tiuthfulness about what we know and do not know with regard to project estimatet, and scl~edufe is a healey thing. The CEVP/CRA process has led to ine.reased accountability with regard to public decla~ations of ~ost estimates and better management ot resources.
Gabe/ is manager of the Cost Risk Assessment Office at WSDOT. He can be reached at gabe/[email protected]. Reil/y is president of John Rei/ly Associates International, Framingham, Mass. He can be reached at info@johnreil/yassociates, com. ¯ ~;Ou~e: Ro~d~,~ B/fdges June 2008 Vblur~e: 4~ Number: Copyrlghl © 20(18 ~¢ranton Gillette Comrnuni~a6ons
httpi/~www~r~adsbridg~c~m/p~pup-app/index~cfm?f~s~act~n=sh~wArticIe.:&appDirect~ 1 I/I3/2006 PRA_GSP02_0009027
Sponsored by Ro~ds & B~f~ge~ m~j~Ine (RB)
Liffing the Veil ¯ By MarkGabel and John J. Reill¥, Con~buting. Authors
Inaccurate ~ost estimating has dogged transportation projects for years. B. Flyvbjerg’s noted study on the results of transportation project estimating found that for the p~st 70 years, the cost of t~ansportation projects has been consistently underestimated in many parts of the world, including the U.S. J.J. Reilly documented in 2001 that a significant number of complex inkastructure projects substantia!ly exceeded their budgets. He i~esented his findings at the Mamh 2001 American Underground Construction Conference. Fryvbjerg published his results in "Underestimating Costs in Public Works, Error or Lie?" in the summer 2002 American Planning A~o~iation Journal. FIwbjerg repo~ted on the cost perfownance of 258 international transportation infrast~ct~re projects, with the following results. Cost c, ompadsons are from the published cost at decision to proceed--normally related to the Final Environmental Impact Statement or Record of Decision in the U.S_mto the final delivered cost.
¯ Construction costs are underestimated in almost nine out of 10 transportation infrastructure proiects; , A~tual costs are on average 28% higher thanestimated costs; ¯ Road projeat costs averaged 20=/; higller than estimated; ¯ Tunnel and ~ddge costs averaged 34"/= higher than estimated: and = Rail project costs averaged 45=/o higher than estimated. Even though thero may be good masons for the increase in cost relative to that estimated, the public perception is ~et estimates o! project costs and schedules are unreliable and not to be trust~. The public wants to know how much a project costs, how long it well take and why, The public also wants to know why estimates change over time. ACrOS~ the Country, the difficulty in answering the public’s questions is a consequence of many factors, including poor cost estimating practices, poor project management and poor communication within the design and construction community and with the various publio bodies.
The Washington State Department of Transportation (WSDO’I’), like many agencies grappling w~th large, complex projects, began a critical self-examination after one particularly sensiti~e project, the S.R. 167 Freeway Extension, experienced sk3nificant increases in cost estimates during the early stages of project development, Politicians asked 9ecretary Doug MacDonald to explain, In answer, WSDOT has developed a new methodology to better estimate the cost of large projects,
Uncertain future ThOSe close to the transportation industry may recognize the following scenario: During planning, early in project definition, an e~mate of a project cost and SChedule is made known. Early figures based on a rudimentary scope of work with few project details ate meant to be a ~ough approximation of the project. But somehow this early estimate can become a pubJic "pronouncement" of a proiect’s cost and scheduleAs the p~oject develops an~ moves through scoping and early design p~ases, much more knowledge about the project becomes available. W’flh the rising knowledge about a proie~t’s scope comes an understanding that contending with some elements of the project will require signifioant additional resources. Such elemet’Ks coul~l t)e related to scope, environmental relegation and permitting, rising cost of right-of-way as corridors develop in advance of the project, utilities, seJsmic and other considerations.
Why were early scoping and planning estimates defPJent? Traditional e~matlng practices tend to produce ~the number" for a p~ject. Bu~ the single number ~asks the critical uncertainty inherent in a particular project. It implies a sense of precision beyond what can be achieved during planning, scoping O~ early design phases.
http~~~www~r~adsbrid~cs~c~m/p~pup-a~p/~nd¢x~cfm?fus~’a~ti~n=sh~wArtic~e&appDirect~~~ 11/13/2006 PRA GSP02 0009025
Standing Committees: Transportation Community & Regional Affiairs
(907) 465-3473 Toll Free: 1-888-288-3473 Fax (907) 465-2827 E-mail: Senator_Alber [email protected],us
April 10, 2008 DISTRICF C
,~lat~, Athk,,ket n,,~goo,,, ~
The Honorable Sarah Palin Governor of Alaska P.O. Box 110001 Juneau, AK 99811-0001 Dear Governor Palin:
Hyder Kake Kaltag Kasaan Katalh Kennlcott Kenny Lake Klawock Klukwan Koyukuk Labouchere Bay Lake Mtnchumina
Li=o Vahge
B~N C~ek I wish to express my appreciation for your consistent and firm support of open and credible public Livengood ~unda~ processes. We are fnlly in agreement regarding your statement of October 27 to the Juneau Chamber t~.g I,lana Ca~ Pole Cent! that "it is critical that we take extra care to ensure that the [Juneau Road] project progresses Manley M..kor~exl t~ke Hot Sphngs Chalkyitsik ¯ . ¯ )) Marsh~all Cha.a.hr ~g_ppropnatmy. McCarthy Chenega Bay C~,icken Therefore, it was with some dismay that the Senate Transportation Committee learned at an oversightMcGrath Medfra Chisana Methkada Chlstochlna hearing on February 26 that the state Department of Transportation (DOT) plans to begin Mentasta c~a,,a construction of the Juneau Road without completing the engineering work necessary for the most Minto " Chuathbaluk Nabesna difficult section of the road and without a credible and comprehensive cost estimate. With issuance c~le Bay Co~n~,n Co~eof the U.S. Army Corps of Engineers’ permit imminent, the deadline for a decision on this 12-year Naukati Nenana Cordova Nikolal c~,e Co~e construction project is fast approaching. Northway Cold foot Nulato Copper Center ophir Craig DOT’s engineering/geotechnical consultant, Golder Associates, testified at the hearing that DOT’s Point Baker c,~ok~ C~ee~ .rr_nt cost estimate is a work-in-progress since the road alignment had not yet been fully Polk Inlet Delta Junction- Ul G Port ARee oeltan~ determined, and it is known whether costly tunnels will be required. Additionally, Senator Elton
not
Dot Lake has questioned DOT since the hearing about the low inflation rate DOT quotes for this project. AndP°*t Protection Rampart Dry Creek Red Devil Mayor Bob Weinstein of Ketchikan, in a March 11 letter to Commissioner von Scheben stated that Eagle auhv Eagle Village DOT’s presentation at the hearing "lacked the candor and objectivity that we expect from state Russian Mission Edna Bay Shageluk ~"~rnar officials, especially when they are testifying before the Legislature." Skagway Ernestine Excursion 1hiI
Slana
Slee~uto believe it would go a long way toward restoring credibility to DOT to involve independent Eureka ~wns,~e technical experts in the Juneau Road Project’s evolving cost estimate process. Such an approach is Stev~n, val,go Stony River E~ak s,,~h~, used in Washington State for all transportation projects over $100 million as part of what Flat Takotna t~o,-t areelr Washington calls "informed decision-making." Fort Yukon Fortutaa Ledge
Tanana Tatitlek
~t~r Eay As follow-up to the hearing, I urge you to require DOT to undertake a "Cost Estimate Validation Gakona Process" (CEVP) workshop, an action recommended by one of the hearing’s invited witnesses, Mark Tel.lda Graylh-xg Gabel from Washington DOT. A CEVP workshop includes geologic, construction, and cost expertS~e,akee Gulkana who do not have a financial interest in a particular project. These workshops produce credible cost TetllnJtmetlOnTok G~.~,tavus estimate ranges that help decision-makers prioritize among transportation projects because decisionHaines Healy Lake makers then better understand the financial risks they are authorizing. Additionally, CEVP Utopia Creek Venetie Hobart Bay workshops can help identify the greatest risks so appropriate mitigation strategies can be developed. View Cove Holy Cross HOonah Hughes Hnslla Hydaburg
Watedall whate Pass Wiseman Yakutat
PRA_GSP02_0009023
Governor Sarah Palin April 10, 2008 The attached article from the June 2006 issue of Roads and Bridges Magazine, which I understand Commissioner von Scheben has reviewed and expressed interest in, provides evidence of the value of the workshop process. To better inform you, the legislature, DOT, and the public of the costs of proceeding with the Project, we urge you to require DOT to undertake a CEVP workshop prior to beginning construction. Thank you very much for your consideration of this request. Sincerely,
Senator Albert Kookesh Chair, Senate Transportation Committee
Senate and House Transportation Committees Commissioner Leo von Scheben
PRA GSP02 0009024
SGC
Pa~e 2 of 3
One answer WSDOT found to these fundamentaJ questions is the realization that an estimate is more accurately expressed not a,s a single number but as a range. To put this into practice, WSDOT developed the Cost Estimate Validation Process (CENP) for projects over $100 million, and subsequently the less intense Cost Risk Assessment (CRA) wo~ksholos for projects valued between $25 million and $100 million.
Estimating contingencies To determine an accurate estimate t~r~e fo~ both cost and schedule, risk must be measured, Formerly, W[~DOT measured dsk base¢l on the estimator’s experience and best judgment, without explicitly identifying the project’s uncettaintie~ and risks. "That has changed, t:stimates now comprise two components: the base cost component and the risk (or uncertainly) component. Base cost is defined as the most probable cost of the planne~ proje~ that can be expected if no significant problems occur. -IVe base cost does not include contingency. Once the base cost is established, a liSt of uncertainties is create0 of both opportunities arK/risks, called a =ri=k register." The risk assessment replases general and vaguely defined contingermy with explicitly defined risk events and w~th the probability of occurrence and the consequences of each potential risk event, Scope control is necessary but is not addressed in this short article.
Ot~ce a project manager has determined that a CEVP or CRA workshop iS required for the project, the process goes as follows: At the prep session the project team and cost dSk team ~evlew ~e project for the upcoming workshop, determine 10~.~cipants and draft a high-level project schedule that takes the project to completion, This is translated tnto a basic flowchart of the significant project activities, At the workshop, which typ|ca~ly runs from two tO five days depending on the complexity and size of the prelect, the cost estimate is reviewed and validated, and a base cost for the project is determine~. Potential dsk events a~e identified and, through el!citation of the project team and subject-matter experts. the probabilities and consequences of risk events are quantified. After the workshop, the flowchart activities, the base cost and risk events (as determined in the workshop) are then entered into a Monte= Cado simulation model. The model produces an estimated range, with probabilities, for project cost and schedule; results are conveyed in terms of onfidence levels for COSTS and time to complete the project. The simulation also ranks the risk events in order of sign~eance so project managers can locus on the top-ranked risks for risk-mitigation planning to gain the best cost benefit from the risk m~n~gement ~.c1~ons. The workshop results are complied into a report, which includes a spreadsheet that can be used for risk-management planning and a one-page summary of the modeling results with the mos~ essential information and proie~ data.
For example, a road interchange projec~ in Ki~sap County, Wash., went through a CRA workshop with results summarized as follows: ¯ Project estimate prior to workshop: $16 million; ¯ GRA workshop estimate r~nge: $20.2 million to $25.3 million; ~nd ,= Total project amount at award: $22.2 million. The actual awarded a~’nount te!! within the estimates of tl~e workshop, Additionally, the workshop provided the project team w~ a dsk register of events with estimated probabilities and consequences. Using this tool for i~e-emptive management, the project team could address ways to manage the dsks through avoidance, mitigation or transference. Risks that were accepted were known and monitored. This identi~ation allows the project team to be anticipatory in responding to risk.
Dodging costs Two of the risks identified in the workshop for the interchange project in Kitsap County are described as follows. One risk involved uncertainty in construction of the b~dga widening dueto aesthetic and technical concerns surrounding the need to widen a bridge and p~’ovide a retaining wall. Because of the detailed discussion that ensued in the workshop, ane of the subject-matter experts s~lgested a retaining wall that cOUld also serve as the bridge support or abutment. The design team ultimately adopted this
http:llwww.rosdsbddgos.com/popup_applJt~dex.cfm?fu~acdo~=showA~cl¢&appD~rect.., 11/13/2006 PRA_GSP02_0009026
Page 3 of :3
SGC
sugge~on and developed a design for the combined retaining wall and bridge abutment, thereby avoiding an estimated $260,000 in costs. The second dsk involved uncertainty in storm-water collection and treatment. As a resutt of identifying this dsk and estimating its effect and p~’obability, the design team responded by avoiding a combined-use detention pond and instead designed a project-spec, ific pond, thereby avoi~ling an estimated $220,000 in costs. Experience indicates that ~osts of changes during construction are managed to around 6°7% of bid price. The benetlts of risk-based eslfmating u~ilizing the CFVP workshops are manifold and in~ude:
¯ Increased and improvecl communication within the proiect team, in an~l among cross-functional groups, stakeho~ers, management, the iegislature and the public ~t large; ¯ Known dsks are identified and quantified; new dsks are revealed; ¯ The dsks are quantified in terms of probability and effect: ¯ The risk-based modeling analysis prioritizes the risks and provides guidance for Project managers needing to know where to focus t~eir risk-mitigation resources; and ¯ Provides the information necessary for developing effective risk-management plans, As with any new process, lessons are lea(ned lhrough experience and praoti~e. Observations are offered tlete for those cont,idedng Implementation of CEVP or similar rit,k.based estimating processes.
Risk-based estimating it, only possible if ~e owner truly wan~ to knOw 1he ~’ealistic range of probable Costs and is prepared to communicate these contingencies to the publi~ and decision makers, H~gh-profite projects benefit (rom lhe open and robust review of estimated cost and ~eheduleContingency estim~ting a~so can increase punic ~onflderme at a time when chronic underestimation of project costs on large projects has fed to a significant erosion of public confidence in infrastructure ~encles, in W~.shingtot~ slate and elsewhere in the U,8, Fortunately, WSDOT has been able to show that it is addressing this problem, leading to a recent public vote in 2005 that approved the use of increased gas taxes for critical t~ansportation projects.
The added openness a~d tiuthfulness about what we know and do not know with regard to project estimatet, and scl~edufe is a healey thing. The CEVP/CRA process has led to ine.reased accountability with regard to public decla~ations of ~ost estimates and better management ot resources.
Gabe/ is manager of the Cost Risk Assessment Office at WSDOT. He can be reached at gabe/[email protected]. Reil/y is president of John Rei/ly Associates International, Framingham, Mass. He can be reached at info@johnreil/yassociates, com. ¯ ~;Ou~e: Ro~d~,~ B/fdges June 2008 Vblur~e: 4~ Number: Copyrlghl © 20(18 ~¢ranton Gillette Comrnuni~a6ons
httpi/~www~r~adsbridg~c~m/p~pup-app/index~cfm?f~s~act~n=sh~wArticIe.:&appDirect~ 1 I/I3/2006 PRA_GSP02_0009027
Sponsored by Ro~ds & B~f~ge~ m~j~Ine (RB)
Liffing the Veil ¯ By MarkGabel and John J. Reill¥, Con~buting. Authors
Inaccurate ~ost estimating has dogged transportation projects for years. B. Flyvbjerg’s noted study on the results of transportation project estimating found that for the p~st 70 years, the cost of t~ansportation projects has been consistently underestimated in many parts of the world, including the U.S. J.J. Reilly documented in 2001 that a significant number of complex inkastructure projects substantia!ly exceeded their budgets. He i~esented his findings at the Mamh 2001 American Underground Construction Conference. Fryvbjerg published his results in "Underestimating Costs in Public Works, Error or Lie?" in the summer 2002 American Planning A~o~iation Journal. FIwbjerg repo~ted on the cost perfownance of 258 international transportation infrast~ct~re projects, with the following results. Cost c, ompadsons are from the published cost at decision to proceed--normally related to the Final Environmental Impact Statement or Record of Decision in the U.S_mto the final delivered cost.
¯ Construction costs are underestimated in almost nine out of 10 transportation infrastructure proiects; , A~tual costs are on average 28% higher thanestimated costs; ¯ Road projeat costs averaged 20=/; higller than estimated; ¯ Tunnel and ~ddge costs averaged 34"/= higher than estimated: and = Rail project costs averaged 45=/o higher than estimated. Even though thero may be good masons for the increase in cost relative to that estimated, the public perception is ~et estimates o! project costs and schedules are unreliable and not to be trust~. The public wants to know how much a project costs, how long it well take and why, The public also wants to know why estimates change over time. ACrOS~ the Country, the difficulty in answering the public’s questions is a consequence of many factors, including poor cost estimating practices, poor project management and poor communication within the design and construction community and with the various publio bodies.
The Washington State Department of Transportation (WSDO’I’), like many agencies grappling w~th large, complex projects, began a critical self-examination after one particularly sensiti~e project, the S.R. 167 Freeway Extension, experienced sk3nificant increases in cost estimates during the early stages of project development, Politicians asked 9ecretary Doug MacDonald to explain, In answer, WSDOT has developed a new methodology to better estimate the cost of large projects,
Uncertain future ThOSe close to the transportation industry may recognize the following scenario: During planning, early in project definition, an e~mate of a project cost and SChedule is made known. Early figures based on a rudimentary scope of work with few project details ate meant to be a ~ough approximation of the project. But somehow this early estimate can become a pubJic "pronouncement" of a proiect’s cost and scheduleAs the p~oject develops an~ moves through scoping and early design p~ases, much more knowledge about the project becomes available. W’flh the rising knowledge about a proie~t’s scope comes an understanding that contending with some elements of the project will require signifioant additional resources. Such elemet’Ks coul~l t)e related to scope, environmental relegation and permitting, rising cost of right-of-way as corridors develop in advance of the project, utilities, seJsmic and other considerations.
Why were early scoping and planning estimates defPJent? Traditional e~matlng practices tend to produce ~the number" for a p~ject. Bu~ the single number ~asks the critical uncertainty inherent in a particular project. It implies a sense of precision beyond what can be achieved during planning, scoping O~ early design phases.
http~~~www~r~adsbrid~cs~c~m/p~pup-a~p/~nd¢x~cfm?fus~’a~ti~n=sh~wArtic~e&appDirect~~~ 11/13/2006 PRA GSP02 0009025
