Building and Updating Accurate Project Budgets

  1. 1. Background

    The Charlotte Area Transit System (CATS) South Corridor Light Rail Project (SCLRP) is located in Mecklenburg County, North Carolina, and links Uptown Charlotte’s Central Business District to the I-485 Station.  The light rail line operates within the existing Norfolk Southern Railroad (NSRR) Right of Way (ROW) for approximately 9.6 miles. 

    A number of items impacted the schedule and budget of the SCLRP since the start of the construction package procurement process in September 2004. In late 2004, two contract packages (approximately $125 million total) were advertised for public bid and awarded.  Both of these contract units (CU-3 – Vehicle Maintenance Facility and CU-4 – Roadbed Bridges & Track) came in 30% higher than the estimated cost and both of these bid packages received less than three bids in response to the bid advertisements.  These events caused both bid packages to be re-advertised and re-bid ten days after receiving the initial bids.  This short re-advertisement period is outlined in the NC General Statutes; however, on a contract this size (over $90 million), it was not conducive for new bidders to enter into and participate in the bidding process, virtually guaranteeing that the same bidders would return and deliver their new bids.

    In October 2005, the PMOC, in the process of monitoring the construction phase of the SCLRP observed that, as a result of the single bid for the Station Finishes Contract (Contract Unit 03), the FFGA amount for this line item would be exceeded by nearly $30 million.  FTA requested the Recovery Plan (October 2005) as a result of the sole bid for the Station Finishes Contract (Contract Unit 03). Other factors contributing to cost increases included:

    • No schedule impact cost was included in the project Budget or forecast prior to the RPCE.
    • Delays caused by changes and different site conditions (129 calendar days)
    • NSRR access and flaggers availability (90 calendar days)
    • Interface milestone access date conflicts between the facilities and the system (49 calendar days)
    • Impact of the above facility contracts impacts on the system contracts

    The Project Recovery Plan Cost Estimate (RPCE) determined by CATS and the PMOC for presentation to FTA was $462.7 million with $8.9 million in unallocated contingency. The RPCE had good durability to absorb some expected and some unknown, unidentified risks.  From September 2006 to December 2006, the RPCE absorbed approximately $2 million in risk events ($300,000 in unidentified known risk and approximately $1.7 million in identified known risk) and contained $2 million for unknown delays occurring between November 26, 2007, and December 31, 2007. It was determined that CATS needed the proper amount of staffing to successfully execute the project within the RPCE budget and schedule and that it also needed to be diligent in its project management activities and reporting of impact events throughout the remainder of the project to insure successful execution of the project within the RPCE budget and schedule.    

    2. The Lesson

    Project cost analysis requires all aspects of the project to be addressed and considered in detail.  Project cost evaluation needs to have an accurate estimate of all the known issues or changes plus the risks and unknowns allowances.  It is also essential to have a detail procedure and guidelines for development and maintenance of project cost.

    FTA/PMOC/Grantees have the ability and means to look at existing technical issues and estimate their cost reasonably.  However, other elements exist that are much more difficult to estimate, such as:

    • Schedule delays and impacts
    • Project potential risks
    • Project and contract contingency
    • Evaluation of various options

    All available options should be used to consider the project variable and account for them in budget and EAC.

    3. Applicability

    A detailed and accurate project budget is important to managing any project cost and to amend it effectively when it is necessary.

    4. References

    Documented in PMOC reports
    Project FFGA Amendment