A Guide To Developing And Documenting Cost Estimates During . - Us Epa
US Army Corpsof EngineersUS EnvironmentalProtection AgencyEPA 540-R-00-002OSWER 9355.0-75www.epa.gov/superfundJuly 2000
EPA 540-R-00-002OSWER 9355.0-75www.epa.gov/superfundJuly 2000A Guide to Developing and Documenting Cost EstimatesDuring the Feasibility StudyU.S. Army Corps of EngineersHazardous, Toxic, and Radioactive WasteCenter of ExpertiseOmaha, NebraskaU.S. Environmental Protection AgencyOffice of Emergency and Remedial ResponseWashington, D.C.
NOTICEThis document provides guidance to EPA and State staff. It also provides guidance to the publicand to the regulated community on how EPA intends to exercise its discretion in implementingits regulations. The guidance is designed to implement national policy on these issues. Thedocument does not, however, substitute for statutes EPA administers or their implementingregulations, nor is it a regulation itself. Thus, it does not impose legally binding requirements onEPA, States, or the regulated community, and may not apply to a particular situation based uponthe specific circumstances. EPA may change this guidance in the future, as appropriate.ADDITIONAL COPIESThis document is available on the Internet at http://www.epa.gov/superfund/.EPA employees can obtain copies of this guidance, or copies of documents referenced in thisguidance, by calling the Superfund Docket at 703-603-9232.Non-EPA employees or members of the public can order a limited number of paper copies ofEPA documents at no fee from EPA’s National Service Center for Environmental Publications(NSCEP) by calling (800) 490-9198 or by placing a request at http://www.epa.gov/ncepihom/.When free copies are not available, NSCEP will refer the requestor to the National TechnicalInformation Service (NTIS), which offers documents for a fee. NTIS can be reached by calling1-800-553-6847 or by placing a request at http://www.ntis.gov/. Fees for these documents aredetermined by NTIS.L
ABSTRACTThis guidance document addresses cost estimates of remedial alternatives developed during theremedial investigation/feasibility study. The goals of this guidance are to improve theconsistency, completeness, and accuracy of cost estimates developed to support the Superfundremedy selection process. To help achieve these goals, the document presents clear proceduresand expectations, a checklist of cost elements, and example formats. It also identifies resourcesfor estimating costs during the feasibility study. This guide is designed to help those withvarying levels of cost estimating expertise, including cost estimators, design engineers, technicalsupport contractors, remedial project managers, and program managers.This document updates and clarifies previous USEPA guidance for developing and documentingremedial alternative cost estimates during the feasibility study. Previous guidance superceded bythis document are Chapter 3 of Remedial Action Costing Procedures Manual, October 1987(EPA/600/8-87/049), and Section 6.2.3.7 of Guidance for Conducting Remedial Investigationsand Feasibility Studies under CERCLA - Interim Final, October 1988 (EPA/540/G-89/004).ACKNOWLEDGEMENTSThis document was produced through a joint effort of the United States EnvironmentalProtection Agency (USEPA) Office of Emergency and Remedial Response (OERR) and theUnited States Army Corps of Engineers (USACE) Hazardous, Toxic, and Radioactive Waste(HTRW) Center of Expertise (CX). Technical assistance was provided under USACE ContractNo. DACA45-97-D-0019 by URS Greiner Woodward Clyde Federal Services (URS).The project management team consisted of Mike Goldstein, USEPA OERR; Stan Hanson,USACE HTRW CX; and Jon Ritterling, URS. Active members of the project workgroup wereJohn Abraham, USEPA Office of Research and Development, National Risk ManagementResearch Laboratory; Keith Hemmer, Project Time & Cost, Inc.; Miguel Jumilla, USACEHeadquarters Cost Engineering Branch; Leslie Voss, URS; and Sid Wolf, EnvironmentalManagement Support, Inc. In addition, numerous others provided careful review andconstructive comments, contributing to the overall quality of the document.LL
1.1Purpose of Guide.1-21.2Scope of Guide .1-21.3How to Use the Guide .1-3 2.1Overview of Superfund Process.2-12.2Role of Project Definition in Cost Estimates .2-22.3Cost Estimating During the Superfund Process .2-32.4Cost Estimating During the Feasibility Study.2-4 3.1Definitions.3-13.2Relationship of Capital and O&M Costs to Superfund Phases.3-23.3Cost Element Checklists .3-3 4.1Define the Period of Analysis .4-14.2Calculate Annual Cash Outflows .4-34.3Select a Discount Rate.4-44.4Calculate the Present Value.4-6 5.1Describe the Alternative.5-15.2Identify Cost Element Structure.5-35.3Estimate Construction/O&M Activities Costs .5-55.4Apply Contingency .5-95.5Estimate Professional/Technical Services Costs.5-125.6Institutional Controls.5-145.7Present Value Analysis.5-155.8Sensitivity Analysis.5-155.9Review Estimate.5-17 6.1Detailed Cost Backup.6-16.2Individual Cost Summary.6-16.3Comparative Cost Summary .6-16.4Cost Estimate of Proposed or Selected Remedy .6-2 LLL
Appendix AAppendix BAppendix CAppendix DLYInternet Resources . A-1Cost Adjustment Factors . B-1Example Cost Templates. C-1Glossary. D-1
Exhibit 2-1Exhibit 2-2Exhibit 2-3Exhibit 3-1Exhibit 3-2Exhibit 3-3Exhibit 3-4Exhibit 4-1Exhibit 4-2Exhibit 4-3Exhibit 4-4Exhibit 4-5Exhibit 4-6Exhibit 5-1Exhibit 5-2Exhibit 5-3Exhibit 5-4Exhibit 5-5Exhibit 5-6Exhibit 5-7Exhibit 5-8Exhibit 5-9Exhibit 5-10Exhibit 5-11Exhibit 5-12Exhibit 5-13Exhibit 6-1Exhibit 6-2Exhibit 6-3Exhibit A-1Exhibit A-2Exhibit B-1Exhibit B-2Exhibit B-3Exhibit B-4The Superfund Pipeline.2-2Relationship of Project Definition to Cost Estimate for a Remedial ActionProject.2-3Expected Cost Estimate Accuracy Along the Superfund Pipeline.2-4Relationship of Capital and O&M Costs to Superfund Phases.3-2Capital Cost Element Checklist .3-5Annual O&M Cost Element Checklist.3-12Periodic Cost Element Checklist.3-15Non-Discounted vs. Discounted Costs for an Example Project with a 100Year Duration.4-3Example Array of Constant Dollar Costs for Present Value Analysis.4-4Comparison of Present Value of Six Remedial Alternatives .4-6Annual Discount Factors at 7%.4-7Example Present Value Calculation for a Remedial Alternative .4-8Multi-Year Discount Factors at 7% .4-9Steps to Develop a Basic Cost Estimate for a Remedial Alternative.5-2Example Cost Element Structure .5-4Example Calculation of Sub-Element Unit Cost .5-8Example Estimation of Cost Element .5-9Relationship of Scope, Bid, and Total Contingency .5-10Example FS-Level Scope Contingency Percentages .5-11Example Contingency Application .5-12Example Percentages for Professional/Technical Services Capital Costs .5-13Example Estimation of Professional/Technical Services Costs.5-14Example Estimation of Institutional Controls Costs .5-15Example Present Value Analysis .5-15Example Sensitivity Analysis.5-17Key Questions to Ask when Reviewing a Remedial Alternative CostEstimate.5-18Example Cost Worksheet .6-4Example Remedial Alternative Cost Summary .6-5Example Comparative Cost Summary .6-7Internet Resources – Government . A-2Internet Resources – Non-Government. A-11ENR Building Cost Index . B-1USACE Area Cost Factors as of March 10, 2000. B-2HTRW Productivity Factors – Light Work. B-4HTRW Productivity Factors – Heavy Work . B-5Y
AACEAssociation for the Advancement of Cost EngineeringCERCLAComprehensive Environmental Response, Compensation, and Liability ActCFRCode of Federal RegulationsEC2Environmental Cost Engineering CommitteeFRFederal RegisterFRTRFederal Remediation Technologies RoundtableFSFeasibility StudyG&AGeneral and AdministrativeHCASHistorical Cost Analysis SystemHTRWHazardous, Toxic, or Radioactive WasteICEGInteragency Cost Estimating GroupMCACESMicro Computer Aided Cost Engineering SystemNCPNational Oil and Hazardous Substances Pollution Contingency PlanNRRBNational Remedy Review BoardO&MOperation and MaintenanceOMBOffice of Management and BudgetOSWEROffice of Solid Waste and Emergency ResponsePRPPotentially Responsible PartyPVPresent ValueQA/QCQuality Assurance/Quality ControlRARemedial ActionRACERRemedial Action Cost Engineering and RequirementsRCRAResource Conservation and Recovery ActRDRemedial DesignRIRemedial InvestigationRI/FSRemedial Investigation/Feasibility StudyRODRecord of DecisionSARASuperfund Amendments and Reauthorization ActUSACEUnited States Army Corps of EngineersUSDOEUnited States Department of EnergyUSEPAUnited States Environmental Protection AgencyUPBUnit Price BookWBSWork Breakdown StructureYL
In the Superfund program,1 the remedial investigation/feasibility study (RI/FS) process isused to characterize the nature and extent of risks posed by hazardous waste sites and toevaluate potential remedial options. Duringthe feasibility study (FS) phase of thisprocess, cost estimates are developed for each remedial action alternative being evaluated.Cost estimates of remedial alternatives providedin feasibility study reports should clearly presentthe following information:The U.S. Environmental Protection Agency(USEPA) first published guidance for Expected accuracy range of the cost estimatedeveloping and documenting remedial(e.g., –30 to 50 percent for detailed analysisalternative cost estimates during the FS asof alternatives)part of the Remedial Action Costing Source references for quantity and unit costProcedures Manual (USEPA 1987). Thatinformationdocument provided the basis for the Contingency to account for possible costdiscussion of cost estimating in Guidance foroverrunsConducting Remedial Investigations and Basis for applied contingencyFeasibility Studies under CERCLA (USEPA Costs for professional and technical services1988). Since these documents were Period of present value analysis (e.g., 50published, remedial alternative cost estimatesyears)prepared during feasibility studies generally Basis for period of present value analysishave followed this basic guidance, but have(e.g., time required to achieve remedialtypically varied in approach and content.action objectives)Additionally, the number of available cost Discount rate used in present value analysisestimating resources has increased during this(e.g., 7 percent)time. To take advantage of lessons learned Basis for discount rate used in present valueanalysis (e.g., per USEPA policy)and help improve the consistency, Major assumptions and sources ofcompleteness, and accuracy of remedy costuncertainty in the overall estimateestimates during the FS, this guide was Analysisof sensitivity of cost estimate toprepared to update and clarify previousuncertainfactorsUSEPA guidance in this policy area. Logical and organized presentation of costSpecific guidance superceded by this guideestimate summaries and detailed backupare Chapter 3 of Remedial Action CostinginformationProcedures Manual (USEPA 1987) andSection 6.2.3.7 of Guidance for ConductingRemedial Investigations and Feasibility Studies under CERCLA (USEPA 1988).1As used by this guide, “Superfund” refers to the program operated under the authority of the ComprehensiveEnvironmental Response, Compensation, and Liability Act (CERCLA) of 1980 and the Superfund Amendments andReauthorization Act (SARA) of 1986.
The purpose of this guide is to provide a current reference for developing and documentingcost estimates of remedial action alternatives during the FS. The goals of this guide includeimproving the consistency, completeness, and accuracy of cost estimates prepared during theFS. To help achieve these goals, the guide presents clear procedures and expectations,presents a checklist of cost elements and example formats, and points out resources for costestimating.This guide is designed to help those with varying levels of cost estimating expertise,including cost estimators, design engineers, technical support contractors, remedial projectmanagers, and program managers. This guide addresses cost estimates of remedial alternatives developed during the FS insupport of the Superfund remedy selection process. Therefore, Superfund terms areprimarily used to describe the concepts presented. However, many of these cost engineeringconcepts are universal in nature and could be applied to other environmental cleanup projectsor programs.2While cost estimates are developed at different stages of the Superfund process (Chapter 2),this guide specifically addresses the FS phase. Cost estimates are developed during the FSprimarily for the purpose of comparing remedial alternatives during the remedy selectionprocess, not for establishing project budgets or negotiating Superfund enforcementsettlements.3 During remedy selection, the cost estimate of the preferred alternative istypically carried over from the FS to the proposed plan for public comment. The subsequentcost estimate included in the record of decision (ROD) reflects any changes to the remedialalternative that occurs during the remedy selection process as a result of new information orpublic comment.Finally, this guide does not address how to use cost estimates in making a remedy selectiondecision or how to make a cost-effectiveness determination in the Superfund program.USEPA guidance that addresses this issue can be found in The Role of Cost in the SuperfundRemedy Selection Process (USEPA 1996).2Examples include Superfund removal actions, Superfund enforcement settlements, Resource Conservation and RecoveryAct (RCRA) corrective actions, Federal facilities cleanups, brownfields cleanups, underground storage tank remediation,installation restoration program, base realignment and closure, formerly used defense sites, and cleanup programs underState authorities.3The FS remedial alternative cost estimate can be used as starting point for budgeting purposes, but adjustments may beneeded based on individual agency requirements. For example, estimates may need to be revised based on project scoperequirements, escalation factors may need to be added, or discount factors may need to be removed.
This guide is intended to provide the user with the basic information necessary to developand document cost estimates for remedial action alternatives during the FS. This guide is notmeant to contain all of the information necessary to complete the cost estimate, but to be aprimary reference, pointing to other resources as necessary. The objectives of each chapterand appendix are listed below: Chapter 1: Introduce the guide, including its purpose, scope, and use. Chapter 2: Provide background information on applicable regulatory and costengineering concepts, including the Superfund process, role of project definition in costestimates, cost estimating within Superfund, and cost estimating during the FS. Chapter 3: Provide a cost element checklist to help identify capital, annual operation andmaintenance (O&M), and periodic costs to include in the cost estimate for a remedialaction alternative. Chapter 4: Provide guidelines for conducting a present value analysis, including periodof analysis and discount rate. Chapter 5: Provide steps to develop the basic cost estimate for a remedial actionalternative, including alternative description, identification of cost element structure,estimation of cost elements, application of contingency, present value analysis, sensitivityanalysis, and review of estimate. Chapter 6: Provide information on how to document the cost estimates of remedialaction alternatives developed during the FS, including an example cost summary. Chapter 7: Provide a list of references used in the document. Appendix A: Provide a list of government and non-government resources on the Internetthat can be used to help develop remedial alternative cost estimates during the FS. Appendix B: Provide information on how to adjust costs for geographic location,escalation, and for impacts of health and safety requirements on productivity. Appendix C: Provide example templates for cost estimate summaries and backupinformation. Appendix D: Provide a glossary of key terms used in the document.Rules of thumb for cost estimating during the FS, identified by the symbol, are highlightedperiodically within the document text. These rules of thumb, many of which provide typicalcost percentages, are based on engineering judgement and not on detailed analysis ofhistorical cost data. Also, highlight boxes throughout the document provide information ontopics that are important, but not necessarily central to the discussion at hand. Web siteaddresses cited in the document were current at the time of publication.
Estimating the cost of remedial action alternatives during the FS requires a basicunderstanding of applicable regulatory and cost engineering concepts. Therefore, thischapter provides background information on these subjects, including an overview of theSuperfund process, discussion of the role of project definition in cost estimates, costestimating within the Superfund process, and cost estimating during the FS. The Superfund “pipeline” (Exhibit 2-1)illustrates the major phases and decisionpoints of the Superfund remedial responseprogram.The RI/FS process is used to gather theinformation necessary to select a remedy thatwill meet the statutory and regulatoryrequirements of the Superfund cleanupprogram. The remedial investigation (RI)includes sampling and analysis tocharacterize the nature and extent ofcontamination; baseline risk assessment toassess current and potential future risks tohuman health and the environment; andtreatability studies, as appropriate, toevaluate the effectiveness of treatment orrecovery technologies to reduce the toxicity,mobility, or volume of hazardous substancesor contaminated media.The FS consists of two main phases:(1) development and screening of remedialaction alternatives; and (2) comparison ofeach alternative that passes screening in adetailed analysis. A range of remedial actionalternatives is developed during the FS asdata become available from the RI sitecharacterization, with treatability studieshelping to reduce uncertainties concerningcost and performance of treatmentalternatives. For further information on the Superfund remedyselection process, see the following publications: National Oil and Hazardous SubstancesPollution Contingency Plan (NCP),Subpart E - Hazardous Substance Response,Section 300.430 – Remedial Investigation/Feasibility Study and Selection of Remedy(40 CFR Part 300 ch-J/)Guidance for Conducting RemedialInvestigations and Feasibility Studies UnderCERCLA, Interim Final (USEPA 1988)A Guide to Selecting Superfund RemedialActions (USEPA 1990)The Role of Cost in the Superfund RemedySelection Process (USEPA 1996)(http://www.epa.gov/superfund/resources/cost dir/index.htm)Rules of Thumb for Superfund RemedySelection (USEPA /index.htm)A Guide to Preparing Superfund ProposedPlans, Records of Decision, and OtherRemedy Selection Decision Documents(USEPA y/rods/index.htm)
During remedy selection, a preferred alternative is identified, presented in a proposed plan,and documented in a ROD following evaluation of public comment.1 Plans, specifications,and other documents necessary to construct or implement the remedy are developed duringremedial design (RD). Remedial action (RA) is the actual implementation of the remedy.Operation and maintenance (O&M) is used to maintain the effectiveness of the remedialaction. More information on the differences between the RA and O&M phases and how theyrelate to estimating the cost of remedial action alternatives is provided in Chapter 3. The Association for the Advancement of Cost Engineering (AACE) International defines acost estimate as “an evaluation of all the costs of the elements of a project or effort as definedby an agreed-upon scope” (AACE 1990). The total estimated cost of a project is primarilydependent on how well, or to what degree, the project is defined (i.e., “scope” orcompleteness of design).1Cost is one of nine criteria established by USEPA to guide remedy selection decision making and is a critical factor in theprocess of identifying a preferred remedy. In addition, CERCLA and the NCP require that every remedy selected must becost-effective. See The Role of Cost in the Superfund Remedy Selection Process (USEPA 1996) for a more completediscussion.
A change (Δ) in project definition will result in a change (Δ) in the project cost estimate.This relationship, including factors that may affect a change in project definition and,therefore, a change in the cost estimate for a remedial action project, is illustrated inExhibit 2-2. Definition of RemedialTechnology andAssociated UncertaintyModificationof RemedialApproach orTechnologyΔNew or RevisedInformation Quality of Cost EstimateModification ofRemedial ActionObjectives As a project moves from the planning stage into the design and implementation stage, thelevel of project definition increases, thus allowing for a more accurate cost estimate. An“early” estimate of the project’s life cycle costs is made during the FS to make a remedyselection decision.2At the FS stage, the design for the remedial action project is still conceptual, not detailed, andthe cost estimate is considered to be “order-of-magnitude.” The cost engineer must makeassumptions about the detailed design in order to prepare the cost estimate. As a projectprogresses, the design becomes more complete and the cost estimate becomes more“definitive,” thus increasing the accuracy of the cost estimate. This process is depicted inExhibit 2-3 for remedial action projects in the Superfund program.32The term “life cycle cost” refers to the total project cost across the life span of a project, including design, construction,operation and maintenance, and closeout activities. The cost estimate developed during the FS is a projection of the lifecycle cost of a remedial action project, not including the RI/FS or earlier phases.3The accuracy range curves shown in Exhibit 2-3, representing both construction and operation costs, are for illustrativepurposes only. The specific percentages correlate with generally accepted rules of thumb for cost estimating accuracyand are not meant to imply that these goals will be precisely achieved.
During the FS, cost estimates are developed for each remedial action alternative forcomparison purposes. The accuracy of these estimates is linked to the quality of the RI data,which helps define the scope of each alternative. Because the RI/FS cannot remove alluncertainty no matter how good the data may be, the expected accuracy of cost estimatesduring the FS is less than that of estimates developed during later stages of the Superfundprocess.Cost estimates are developed at both the “screening of alternatives” and “detailed analysis ofalternatives” phases of the FS, with expected accuracy ranges of –50 to 100 percent and –30to 50 percent, respectively, as shown in Exhibit 2-3.4 Cost estimates developed duringthese two phases are further described in the following paragraphs.4If the number of viable alternatives developed during the FS process is limited, the “screening of alternatives” step is notalways performed, nor is it required (Section 4.1.2.1 of RI/FS guidance [USEPA 1988]). However, the “detailed analysisof alternatives” is performed regardless to evaluate each alternative against the NCP evaluation criteria.
Screening-level cost estimates are used to screen out disproportionately expensivealternatives in determining what alternatives should be retained for detailed analysis. TheNational Oil and Hazardous Substances Contingency Plan (NCP) includes the followinglanguage in its description of the cost criterion for screening of alternatives:“The costs of construction and any long-term costs to operate and
EPA employees can obtain copies of this guidance, or copies of documents referenced in this guidance, by calling the Superfund Docket at 703-603-9232. Non-EPA employees or members of the public can order a limited number of paper copies of EPA documents at no fee from EPA's National Service Center for Environmental Publications
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