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Tools & Programs

Cost Estimating

Process

Cost estimates are often first developed early in the project's planning stage. As the scope of the project becomes more clearly defined during the Delivery process, cost estimates will also become increasingly refined and should reflect the project's actual costs more accurately. Due to this gradually evolving nature of cost estimates, it is important that a meticulous documentation/tracking system be implemented, where estimates are kept up-to-date, and can be easily checked and verified. As indicated in the FHWA Major Project Delivery timeline (PDF), there are generally two Cost Estimate Reviews - one at the end of the NEPA process and the other before the start of construction - in the delivery of a Major Project.

Cost Estimate Review 1

During the NEPA process, initial cost estimates are prepared by the recipient of Federal funding (usually the STA). These estimates generally involve the identification, analysis and quantification of all potential risks. In the event that sufficient information is not available, a "worst-case" analysis may be used to estimate costs. At this stage, cost estimates are often presented as a range due to the uncertainty of the specific elements of the project. It is recommended that the first review of cost estimates be conducted 30 days before the completion of the NEPA document. This review is coordinated between Federal, State and appropriate involved parties (such as the Federal Transit Administration, MPOs, non-metropolitan local officials, local/regional transit service providers, and/or Native American Tribal Governments.)

Generally, during this review process, FHWA conducts a site visit, enters cost data into the agency's database for analysis and all involved parties actively engage in a dialogue with the objective of narrowing down the range and enhancing the accuracy of the initial cost estimates.

Cost Estimation Review 2

For most Major Projects, cost estimates will once again be reviewed along with the Initial Finance Plan (IFP) before the beginning of the Construction phase. In the case of Design/Build projects, the review of the IFP and the cost estimates contained therein will be reviewed prior to the Design/Build Contract award.

The review of cost estimates at this stage will be conducted by a multi-agency, multi-functional team that may consist of Federal, State and consultant personnel to establish consensus. For further guidance and Cost Estimating techniques and requirements, please refer to the Major Project Program Cost Estimating Guidance-January 2007 document.