Assessment of Federal 

Highway Administration 

Highway Project Cost 

Estimation Tools

FHWA Publication No.: FHWA-HRT-22-077

FHWA Contact: Matthew R. Corrigan, P.E. 

(ORCID: 0000-0002-1230-8462), HRDI-20, 202-493-3365, 

matthew.corrigan@dot.gov.

This document is a technical summary of the Federal 

Highway Administration report Assessment of Federal 

Highway Administration Highway Project Cost Estimation 

Tools (forthcoming).

TECHBRIEF

Research, Development, 

and Technology

Turner-Fairbank Highway 

Research Center

6300 Georgetown Pike

McLean, VA 22101-2296

https://highways.dot.gov/research

OBJECTIVE

The primary objective of this task order was to identify what, when, why, 

and how the Federal Highway Administration (FHWA) and the Office of 

Federal Lands Highway (FLH) oversee and/or develop cost estimations 

for transportation construction projects. FHWA will use this information 

to provide more consistent oversight of project cost estimates by State 

transportation agencies (STAs). For the purpose of this publication, FLH 

includes projects on Federal lands that are managed by the U.S. Bureau 

of Land Management, U.S. Fish and Wildlife Service, U.S. National Park 

Service, and the U.S. Forest Service.

INTRODUCTION

Transportation agencies are charged with developing and delivering highway 

construction and maintenance programs that enhance the safety, mobility, and 

economic competitiveness of communities. While the design and construction 

of these projects are vital, accurate estimates of project costs during the 

multiple developmental stages are incredibly important in both developing the 

agency’s project budget as the project advances and verifying that contractor 

bids represent fair market value during award (Georgia Department of 

Transportation (GDOT) 2020). Having consistent and reliable cost estimates 

provides agencies with numerous benefits when making financial decisions 

and providing oversight related to estimating project funds, conducting 

benefit-cost analysis to prioritize projects, determining the funds needed to 

deliver projects, obligating funds for specific project phases, and determining 

the basis for cashflow requirements over time. The researchers identified and 

ranked a series of five practices used to oversee the cost estimation process. 

These practices are useful for providing oversight for a single project cost 

estimate. However, the researchers went further and used the research project 

to integrate the practices into a comprehensive cost oversight program to 

maximize their benefits.
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For FHWA, accurate and effective cost estimating is 

critical during the National Environmental Policy Act 

process and the development of the initial financial plan 

for a number of reasons, including establishing the basis 

for significant project decisions, establishing a baseline 

cost to help measure project success, and communicating 

the project’s status to internal and external stakeholders 

(House of Representatives 2020a; FHWA 2018). The 

ability to develop reasonable and defensible cost 

estimates is also important in maintaining public trust and 

confidence during a project.

Cost estimate methods typically fall within five different 

approaches (Molenaar, Anderson, and Schexnayder 2013):

1. Historical bid-based estimation—uses a bid-history 

database to estimate unit bid costs for major items. 

Based on the historical averages, FHWA can use the 

estimated quantities of a proposed project to develop 

a target price. Much of this approach’s accuracy 

relies on the quantity and level of detail in the 

bid-history database.

2. Conceptual estimation—is usually performed during 

the early planning and scope development stage and 

typically uses primary project parameters (e.g., project 

location, length, type of project, scope details, design 

parameters, site characteristics, and broad design 

assumption) to develop a cost estimate.

3. Risk-based estimation—involves developing probable 

costs for project components and the project as a 

whole based on identified known quantities, costs, 

and contingencies developed from a list of identified 

uncertainties from both opportunities and threats and 

their potential impact on the project.

4. Cost-based estimation—involves estimating the 

cost for items of work based on the cost of each 

component of a project, considering the associated 

labor, equipment, and materials costs. The method also 

involves adding a reasonable amount for a contractor’s 

overhead and profit. The process mimics the same 

method that a contractor uses for preparing a bidday estimate. When prepared with the proper skill, 

experience, and effort, cost-based estimates are usually 

considered the most accurate of the five methods.

5. Combination of historical and cost-based estimation—

involves estimating the cost for items of work based 

on the cost of each component of a project and 

considering the associated labor, equipment, and 

materials costs, based on historical bid items of past 

projects. The method also involves adding a reasonable 

amount for a contractor’s overhead and profit. The 

process involves developing cost estimates for each 

project (like the cost-based method). However, it uses 

a bid-history database instead of cost estimates from 

material suppliers and historical production rates that 

are typically used in a cost-based method.

Familiarity with these methods is an important aspect of 

helping provide oversight for other agencies that conduct 

cost estimates required by FHWA (FHWA 2018).

METHODOLOGY

This research project used a qualitative research method 

in which the two major components were an extensive 

literature review and interviews with subject matter 

experts. The literature review was instrumental in 

developing the questionnaires used in the interviews. 

The research panel selected and later contacted the 

subject matter experts. The following sections describe 

the literature review and data collection process.

Literature Review

The team conducted a literature review to compile the 

most common practices for cost estimating and cost 

estimate development oversight for transportation 

agencies. A portion of the literature used for the 

development of the project was obtained from 

extensive internet research. Additionally, multiple 

agencies from different States, including FHWA 

Federal-aid division offices (DOs) and STAs, provided 

guidelines and documentation on how to create, 

document, review, and oversee cost estimates.

Data Collection

Once the researchers gathered relevant information from 

the literature review, they created the survey for the first 

of two rounds of structured interviews (appendix A and 

appendix C in the final report) (Nevett and Goodrum 

forthcoming). They distributed the survey to the 

previously selected subject matter experts. The experts 

were asked to review the survey, which was completed 

during a video conference interview conducted by the 

researchers. These interviews were then used to determine 

the most useful methods for cost estimate development 

and oversight methods.

The participants in both rounds of interviews were 

subject matter experts from DOs, STAs, and FLH. 

The participants were selected because of their 

experience, roles, and responsibilities in the cost 

estimate development and oversight processes in their 

respective agencies.

The purpose of the first round of interviews was twofold. 

First, the interviews were conducted to validate the cost 

estimate development and oversight practices found in 

the literature. Second, the interviewees played a key 

role in contributing information about practices used in 
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their States as well as practices that they had seen used 

in other agencies. After the first round of interviews, the 

researchers compiled a list of best practices for the second 

round of interviews along with diagrams describing the 

cost estimate oversight processes.

The purpose of the second round of interviews was to 

validate the practices obtained during the first round. After 

the second round of interviews, the researchers developed 

a final list of practices and multiple diagrams to include in 

the final report.

First Round of Interviews

In total, eight DOs, six STAs, and one FLH office 

participated in the first round of interviews. The interviews 

consisted of a series of questions related to the participant’s 

knowledge of approaches used in cost estimation, efficacy 

of the methods, perception of counterparts’ knowledge of 

cost estimation (i.e., what do STAs think of the DOs and 

vice versa), challenges, cost performance measures, cost 

estimate development, estimate oversight, and post-bid 

practices. Copies of the interview guides are provided in 

appendix A and appendix C of the final report (Nevett and 

Goodrum forthcoming).

The report identifies States using unique capital letters 

to protect the interviewees’ privacy. If experts from a 

DO and STA from the same State were interviewed, 

they are presented as X-DO and X-STA, respectively. 

Compiled transcripts of the interviews can be found 

in the appendices: appendix B includes the compiled 

transcripts from STA interviews, and appendix D includes 

the compiled transcripts from DO interviews (Nevett and 

Goodrum forthcoming).

Second Round of Interviews

After conducting the first round of interviews and writing 

the interim report, the research team met to review 

the report and evaluate the next steps. They decided 

to conduct a second round of interviews to evaluate 

the subject matter experts’ views on the identified best 

practices for cost estimate oversight, cost estimate 

oversight checklist, and process diagrams developed for 

cost estimate oversight at a project and program level. The 

followup interview document can be found in appendix E 

of the full report (Nevett and Goodrum forthcoming).

RESULTS

This research generated guidelines to assist agencies in 

overseeing cost estimates. The project was limited to 

DOs, STAs, and FLH. The practices described herein 

are not the only acceptable or used practices; however, 

they are a product of the literature review and validation 

method described in the methodology. The best practices 

mentioned are applying the Pareto principle, comparing 

historical projects, identifying factors that influence 

project costs, monitoring and updating cost estimates, 

and analyzing cost estimate procedures.

The research team created three flowcharts on how to 

oversee cost estimates at a project level for STAs, DOs, and 

FLH, as well as a program-level cost estimate oversight 

flowchart for DOs and STAs. The research team created 

these diagrams to be used in conjunction with a checklist 

and the list of best practices, both of which can be found in 

the full report (Nevett and Goodrum forthcoming).

Program-Level Oversight Process

This section describes the procedures that DOs must 

follow to ensure that the program-level cost estimate 

is overseen as established by the laws and regulations 

described in section 106(h) of title 23 United States 

Code (House of Representatives 2020b). This section 

also ensures that individuals are aware of their roles and 

responsibilities as well as the expected timeframes for 

each specific deadline.

The program-level oversight process should use the 

following general procedures:

1. The deadline for the financial plan annual update 

(FAPU) is reached. This date should be the end of the 

State fiscal year, hereafter referred to as t.

2. The STA takes a snapshot of the financial data, and the 

STA starts to develop the FAPU, as well as the final 

financial plans (t+1 w).

3. The STA central office submits a draft of the FAPU to 

the DO and schedules a review meeting (t+5 w).

4. The STA addresses any comments received by the 

DO during the review meeting and updates the 

FAPU (t+7 w).

5. The program oversight manager submits any 

comments to the STA, and the DO makes final draft 

financial plans available for STA (t+9 w).

6. The STA submits the final FAPU to the DO (t+13 w).

7. The designated program oversight manager updates 

FAPU and the statistics sheet and submits them to the 

FHWA Office of Infrastructure Major Projects Team 

(MPT) (t+16 w).

8. The MPT conducts the final review (30 d).

9. The MPT updates the database while the DO 

administrator sends an approval letter to the STA, 

and the project oversight manager updates the 

FHWA organizational information system and Fiscal 

Management Information System.

Figure 1 shows the program-level oversight process 

between DOs and STAs.
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Figure 1. Flowchart. Program-level oversight process (Nevett, Goodrum, and Corrigan 2022).

Source: FHWA.

Project-Level Oversight Process—

STA Perspective

There are different perspectives to consider for the projectlevel oversight process. Since the STAs and DOs use 

different internal processes, the research team created 

different diagrams for the same process as viewed by STAs 

and DOs. Additionally, since FLH operates as a hybrid 

between STAs and DOs by creating their own estimates but 

only receives internal oversight instead of oversight from a 

DO, there is also a diagram that describes the FLH process.

Overall, the process has to meet several milestones, 

regardless of which perspective is considered. These 

milestones are described as follows:

1. The initial cost estimate should reflect anticipated 

preliminary engineering, reimbursable utility, right-ofway (ROW), construction, and other costs.

2. The initial cost estimate approval must be followed by 

the project manager (PM) requesting estimates from 

the ROW and utilities offices.

3. The preliminary field plan review (PFPR) must 

include all updated cost estimates, including ROW, 

utilities, and design phase leader (DPL) approval 

(GDOT 2012, 2013, 2020).

Figure 2 shows the project-level oversight process from 

the STA perspective. The diagram depicts the interfacing 

between DOs and STAs for project-related activities 

selected by the DO risk assessment. The described 

process only happens for projects in which the DOs 

provide oversight.

Project-Level Oversight Process—

DO Perspective

Figure 3 describes the oversight process from a DO 

perspective. It only shows what would interest someone 

from a DO providing oversight to an STA. The DO receives 

the initial cost estimate from the STA, which is then revised 

by the DO and sent back to the STA for comments or 

amendments. This process is repeated until the estimate 

is not considered intermediate, and the STA prepares the 

final field plan review. The DO diagram is more condensed 

than the STA diagram because the STA internal processes 

(ROW, utilities, consultant oversight) are not relevant to 

the DO. This oversight process only occurs for projects 

considered major projects, which are usually deemed highrisk projects (FHWA 2018).
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Figure 2. Flowchart. Project-level oversight process—STA perspective (Nevett, Goodrum, and Corrigan 2022).

Source: FHWA.

CE = cost estimate; CS = consultant; ES = engineering services; FFPR = final field plan review; STIP = State Transportation Improvement Program.

Note: “A” indicates the continuation of the process.

Figure 3. Flowchart. Project-level oversight process—DO perspective (Nevett, Goodrum, and Corrigan 2022).

Source: FHWA.
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Figure 4. Flowchart. Project-level oversight process—FLH perspective (Nevett, Goodrum, and Corrigan 2022).

Source: FHWA.

Note: “A” indicates the continuation of the process.

Project-Level Oversight Process—

FLH Perspective

Figure 4 represents the internal oversight process that an 

FLH project goes through in its lifecycle. Because FLH 

does not receive oversight from other agencies, all the 

interfacing described happens internally. Otherwise, the 

process is similar to that of STAs. In general, there are 

three major milestones in the FLH oversight process:

1. The initial cost estimate should reflect anticipated 

preliminary engineering, reimbursable utility, ROW, 

construction, and other costs.

2. The initial cost estimate approval must be followed 

by the PM requesting estimates from the ROW and 

utilities offices.

3. The plans, specifications, and estimate must include all 

updated cost estimates, including ROW and utilities, 

and DPL approval. This estimate is revised by the chief 

engineer, who then approves it for submission.

CONCLUSION

The overall intention of the research was to analyze the 

benefits, complexities, similarities, and differences in 

the roles FHWA provides for cost estimate reviews. The 

researchers successfully identified and ranked a series 

of five practices used to oversee the cost estimation 

process. The researchers developed and validated a set 

of tools, including an oversight checklist and multiple 

process diagrams. These tools are useful for providing 

oversight for a single project cost estimate. However, the 

researchers went further and used the research project to 

show how to integrate the tools into a comprehensive cost 

estimation oversight program to maximize their benefits.

REFERENCES

FHWA. 2018. “FHWA Major Project Delivery Process” 

(web page). https://www.fhwa.dot.gov/majorprojects/

defined.cfm, last accessed February 7, 2021.

GDOT. 2012. “CES Cost Estimating Process.” Policy 

document. GDOT Office of Engineering Services.

GDOT. 2013. “Policy 2425-1: Bid Evaluation.” GDOT 

Office of Construction, Bid Evaluation Section.

GDOT. 2020. “Policy 3A-9: Cost Estimating Purpose.” 

GDOT Commissioner’s Policies. http://mydocs.dot.

ga.gov/info/gdotpubs/publications/3a-9.pdf, last 

accessed April 13, 2022.

House of Representatives, Congress. 2020a. “42 U.S.C. 

4321 - Congressional declaration of purpose.” 

Government. U.S. Government Publishing Office, 

December 30, 2020. https://www.govinfo.gov/app/

details/USCODE-2020-title42/USCODE-2020-

title42-chap55-sec4321, last accessed April 15, 2022.
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Researchers—This study was conducted by the University of Colorado at Boulder in a subcontract role under 

prime contract DTFH6117D00005 held by Engineering & Software Consultants, LLC. The researchers were Paul 

Goodrum (ORCID: 0000-0002-5656-1240) and Guillermo Nevett (ORCID: 0000-0003-4967-7015). 

Distribution—This TechBrief is being distributed according to a standard distribution. Direct distribution is being 

made to the FHWA divisions and Resource Center.

Availability—This TechBrief may be obtained at https://highways.dot.gov/research.

Key Words—Cost estimate, cost estimate oversight, highway, transportation, construction, FHWA, STA, Office of 

Federal Lands Highway.

Notice—This document is disseminated under the sponsorship of the U.S. Department of Transportation (USDOT) 

in the interest of information exchange. The U.S. Government assumes no liability for the use of the information 

contained in this document. The U.S. Government does not endorse products or manufacturers. Trademarks or 

manufacturers’ names appear in this TechBrief only because they are considered essential to the objective of the 

document.

Quality Assurance Statement—The Federal Highway Administration (FHWA) provides high quality information 

to serve Government, industry, and the public in a manner that promotes public understanding. Standards 

and policies are used to ensure and maximize the quality, objectivity, utility, and integrity of its information. 

FHWA periodically reviews quality issues and adjusts its programs and processes to ensure continuous 

quality improvement.

Recommended citation: Federal Highway Administration, 

Assessment of Federal Highway Administration 

Highway Project Cost Estimation Tools 

JUNE 2022 (Washington, DC: 2022) https://doi.org/10.21949/1521881.

FHWA-HRT-22-077

HRDI-20/06-22(WEB)E

House of Representatives, Congress. 2020b. “23 U.S.C. 

§ 106- Project approval and oversight.” Government. 

U.S. Government Publishing Office, December 30, 

2020. https://www.govinfo.gov/app/details/USCODE2020-title23/USCODE-2020-title23-chap1-sec106, 

last accessed April 15, 2022.

Molenaar, K., S. Anderson, and C. Schexnayder. 2013. 

AASHTO Practical Guide to Cost Estimating, 1st 

Edition. Washington, DC: American Association of 

State Highway and Transportation Officials. 

Nevett, G., and P. M. Goodrum. forthcoming. Assessment 

of Federal Highway Administration Highway Project 

Cost Estimation Tools. Washington, DC: Federal 

Highway Administration. 

Nevett, G., P. M. Goodrum, and M. Corrigan. 2022. 

“Assessment of Highway Project Cost Estimating 

Tools: Cost Estimate Development Oversight.” 

FHWA National Webinar. https://connectdot.

connectsolutions.com/pyif2h64b2ei/” https://

connectdot.connectsolutions.com/pyif2h64b2ei/, 

last accessed April 11, 2022.