Procedures Guide for Right-of-Way Cost Estimation and Cost Management (2009)

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TRANSPORTAT ION RESEARCH BOARD WASHINGTON, D.C. 2009 www.TRB.org N A T I O N A L C O O P E R A T I V E H I G H W A Y R E S E A R C H P R O G R A M NCHRP REPORT 625 Subject Areas Planning and Administration • Highway and Facility Design Procedures Guide for Right-of-Way Cost Estimation and Cost Management Stuart Anderson TEXAS TRANSPORTATION INSTITUTE College Station, TX Keith Molenaar UNIVERSITY OF COLORADO Boulder, CO A N D Cliff Schexnayder DEL E. WEB SCHOOL OF CONSTRUCTION ARIZONA STATE UNIVERSITY Tempe, AZ Research sponsored by the American Association of State Highway and Transportation Officials in cooperation with the Federal Highway Administration

NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM Systematic, well-designed research provides the most effective approach to the solution of many problems facing highway administrators and engineers. Often, highway problems are of local interest and can best be studied by highway departments individually or in cooperation with their state universities and others. However, the accelerating growth of highway transportation develops increasingly complex problems of wide interest to highway authorities. These problems are best studied through a coordinated program of cooperative research. In recognition of these needs, the highway administrators of the American Association of State Highway and Transportation Officials initiated in 1962 an objective national highway research program employing modern scientific techniques. This program is supported on a continuing basis by funds from participating member states of the Association and it receives the full cooperation and support of the Federal Highway Administration, United States Department of Transportation. The Transportation Research Board of the National Academies was requested by the Association to administer the research program because of the Board’s recognized objectivity and understanding of modern research practices. The Board is uniquely suited for this purpose as it maintains an extensive committee structure from which authorities on any highway transportation subject may be drawn; it possesses avenues of communications and cooperation with federal, state and local governmental agencies, universities, and industry; its relationship to the National Research Council is an insurance of objectivity; it maintains a full-time research correlation staff of specialists in highway transportation matters to bring the findings of research directly to those who are in a position to use them. The program is developed on the basis of research needs identified by chief administrators of the highway and transportation departments and by committees of AASHTO. Each year, specific areas of research needs to be included in the program are proposed to the National Research Council and the Board by the American Association of State Highway and Transportation Officials. Research projects to fulfill these needs are defined by the Board, and qualified research agencies are selected from those that have submitted proposals. Administration and surveillance of research contracts are the responsibilities of the National Research Council and the Transportation Research Board. The needs for highway research are many, and the National Cooperative Highway Research Program can make significant contributions to the solution of highway transportation problems of mutual concern to many responsible groups. The program, however, is intended to complement rather than to substitute for or duplicate other highway research programs. Published reports of the NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM are available from: Transportation Research Board Business Office 500 Fifth Street, NW Washington, DC 20001 and can be ordered through the Internet at: http://www.national-academies.org/trb/bookstore Printed in the United States of America NCHRP REPORT 625 Project 8-49(2) ISSN 0077-5614 ISBN: 978-0-309-11780-7 Library of Congress Control Number 2009903134 © 2009 Transportation Research Board COPYRIGHT PERMISSION Authors herein are responsible for the authenticity of their materials and for obtaining written permissions from publishers or persons who own the copyright to any previously published or copyrighted material used herein. Cooperative Research Programs (CRP) grants permission to reproduce material in this publication for classroom and not-for-profit purposes. Permission is given with the understanding that none of the material will be used to imply TRB, AASHTO, FAA, FHWA, FMCSA, FTA, or Transit Development Corporation endorsement of a particular product, method, or practice. It is expected that those reproducing the material in this document for educational and not-for-profit uses will give appropriate acknowledgment of the source of any reprinted or reproduced material. For other uses of the material, request permission from CRP. NOTICE The project that is the subject of this report was a part of the National Cooperative Highway Research Program conducted by the Transportation Research Board with the approval of the Governing Board of the National Research Council. Such approval reflects the Governing Board’s judgment that the program concerned is of national importance and appropriate with respect to both the purposes and resources of the National Research Council. The members of the technical committee selected to monitor this project and to review this report were chosen for recognized scholarly competence and with due consideration for the balance of disciplines appropriate to the project. The opinions and conclusions expressed or implied are those of the research agency that performed the research, and, while they have been accepted as appropriate by the technical committee, they are not necessarily those of the Transportation Research Board, the National Research Council, the American Association of State Highway and Transportation Officials, or the Federal Highway Administration, U.S. Department of Transportation. Each report is reviewed and accepted for publication by the technical committee according to procedures established and monitored by the Transportation Research Board Executive Committee and the Governing Board of the National Research Council. 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CRP STAFF FOR NCHRP REPORT 625 Christopher W. Jenks, Director, Cooperative Research Programs Crawford F. Jencks, Deputy Director, Cooperative Research Programs Lori L. Sundstrom, Senior Program Officer Eileen P. Delaney, Director of Publications Hilary Freer, Senior Editor Andrea Briére, Editor NCHRP PROJECT 8-49(2) PANEL Field of Transportation Planning—Area of Forecasting G. Scott Rutherford, University of Washington, Seattle, WA (Chair) Nigel Blampied, California DOT, Sacramento, CA Christopher D. Crachi, New York State DOT, Latham, NY Greg Davis, Florida DOT, Tallahassee, FL Daryl James Greer, Kentucky Transportation Cabinet (Retired), Versailles, KY Timothy A. Henkel, Minnesota DOT, St. Paul, MN Cheryl A. “Cherie” Kyte, Glendale, CA Robert J. Munchinski, H.W. Lochner, Inc., Bellevue, WA Jeffrey M. South, Illinois DOT, Springfield, IL Gerald Solomon, FHWA Liaison Kimberly Fisher, TRB Liaison C O O P E R A T I V E R E S E A R C H P R O G R A M S

This procedures guide presents practical and effective approaches for developing right- of-way (ROW) cost estimates and for then tracking and managing ROW cost during all phases of project development, including planning, programming, and preliminary and final design. It is a resource for managers, practitioners, and decisionmakers interested in developing and managing realistic and accurate estimates of ROW cost from the earliest ROW cost estimate made during planning through to the management of ROW acquisition cost during final design. Construction project cost escalation, from planning through construction, is a funda- mental problem facing state highway agencies (SHAs). As projects progress through the planning, programming, and design stages of development, the accuracy and precision of project cost estimates vary widely, for various reasons. NCHRP Report 574: Guidance for Cost Estimation and Management for Highway Projects During Planning, Programming, and Preconstruction presents multiple strategies for controlling cost escalation across the spec- trum of planning, programming, and design activities. Building on NCHRP Report 574, this project provides an in-depth analysis and a guidebook designed to give SHAs specific guid- ance on how they can improve the consistency and accuracy of ROW estimates. External factors that influence ROW include real estate market conditions and the effect of inflation. Rapid increases in the value of properties in areas where commercial and resi- dential growth is occurring has sparked large increases in the cost of acquiring property for highway expansion. Growth areas in smaller communities also experience similar increases in the cost of acquiring property. Court settlements can influence the value of subsequent property acquisitions. Internal factors, such as poor estimating, inconsistent application of contingencies, and the lack of risk assessment procedures related to error and omissions in cost estimates, have all played a role in project cost increases related to ROW, especially in the case of early estimates developed during planning and programming. The objectives of this research were to (1) further refine ROW-specific cost estimation techniques, management methods, and tools and (2) provide specific guidance to SHAs on how to implement such techniques, methods, and tools. The research team led by the Texas Transportation Institute explored (1) the challenges faced by SHAs, transit agencies, and other transportation organizations in developing realistic cost estimates for ROW and (2) the difficulty of tracking and managing those estimates to produce accurate and reliable information at all stages of project development. This procedures guide is designed to provide users with processes and practical tools to help manage the cost of ROW and reduce unintended or unanticipated project cost escalation. F O R E W O R D By Lori L. Sundstrom Staff Officer Transportation Research Board

1 Summary 7 Chapter 1 Introduction 7 Background 8 Industry Problem 11 Procedures Guide Development 11 Use of the Guidebook 12 Chapter Summary 14 Chapter 2 Integrated Estimating Process 14 Transportation Project Development Phases 14 Timeline of Cost Estimating and Cost Management 16 Cost Estimating Process 16 Cost Management Process 17 A Strategic Approach 20 Inflation Adjustments 21 ROW Cost Management 21 Supportive Institutional Environment 21 Management Support for ROW Estimating 22 Chapter Summary 23 Chapter 3 Agency-Level Process Overview 23 Introduction 23 Agency-Level Process Flowchart 26 ROW Cost Estimating and Cost Estimation Management 30 ROW Cost Management 34 Chapter Summary 35 Chapter 4 Conceptual ROW Cost Estimation 35 Introduction 36 Conceptual ROW Cost Estimation Flowchart 36 Determine Conceptual ROW Estimate Basis Step 39 Prepare Conceptual ROW Base Estimate 42 Determine Conceptual ROW Risk and Set Contingency 45 Review Conceptual ROW Cost Estimate 47 Approve and Communicate Conceptual ROW Cost Estimate 48 Chapter Summary 49 Chapter 5 Baseline ROW Cost Estimate 49 Introduction 49 Baseline ROW Cost Estimation Flowchart 51 Determine Baseline ROW Estimate Basis 53 Prepare Baseline ROW Base Estimate 57 Determine Baseline ROW Risk and Contingency C O N T E N T S

62 Review Baseline ROW Cost Estimate 65 Approve and Communicate Baseline ROW Cost Estimate 66 Chapter Summary 67 Chapter 6 Update ROW Cost Estimate 67 Introduction 68 Update ROW Cost Estimation Flowchart 68 Update ROW Estimate Basis Step 71 Update ROW Base Estimate 73 Update ROW Risks and Contingency 75 Review Updated ROW Cost Estimate 77 Approve and Communicate Updated ROW Cost Estimate 79 Chapter Summary 80 Chapter 7 ROW Cost Management 80 Introduction 81 ROW Cost Management Flowchart 83 Assess ROW Scope, Conditions, and Costs 84 Evaluate Potential Cost Impact 86 Adjust ROW Budget 87 Chapter Summary 88 Chapter 8 Conclusions 88 A Structured Approach 89 Collaborative Atmosphere 90 Challenges 91 References and Bibliography A-i Appendix A Tools B-1 Appendix B Definitions C-1 Appendix C Project Development Phases D-1 Appendix D Critical Review of the State of Practice E-1 Appendix E State of Practice