Modeling Construction Impacts

A school District in our region would like to build a new High School. They have provided me with a detailed budget broken into hard costs (labor and materials = $32,992,497) and soft costs (studies, insurance, fixtures, etc = $7,085,700). My question is do I input the total of $40,078,197, which includes hard and soft costs , or just the hard costs?
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  • If you are planning to model each expenditures as a separate Industry Change Activity, then yes - I would include all of these expenditures (though any land purchases should be omitted). You would then also need to run a Labor Income Change Activity for the construction wages. Note that with this method (a version of analysis-by-parts), you are missing the direct effect since the reported 'direct' effect from the expenditures are truly indirect effects. To get the direct output, etc. you can simply multiply the per-Employee Compensation ratios (Output per Employee Compensation, IBT per Employee Compensation, etc.) from the Study Area Data for that sector by your known Employee Compensation figure. If, on the other hand, you are planning to model this as an Industry Change Activity in the appropriate construction sector, furniture and fixtures are not included in the construction sectors' production functions so the cost of those should be pulled out and modeled separately. As for the other soft costs, please see this forum discussion:
  • Jenny - can I set up the hard costs like I did for a Hotel construction project back on 5-29-12 - see below? In the case of the school construction I would use industry 34 - construction of other new non-residential structures. You said "The simplest way for you to do this is to estimate direct construction Output by using the Study Area Data for the appropriate construction sector and then running that as an Industry Change Activity.Data for the appropriate construction sector and then running that as an Industry Change Activity. Assuming that the hard costs of $32,992,497 includes payroll: 1. Go to Customize > Study Area Data and select the appropriate construction sector. 2. Divide Output by the sum of Intermediate Expenditures + Employee Compensation. This gives you an Output per budget ratio. I cannot remember where I found the "intermediate expenditures"? 3. Multiply this ratio by your budget to get an estimate of your direct Output. 4. Create an Industry Change Activity for the construction sector and enter this output value into the Industry Sales field. Zero out Proprietor Income then run the analysis. Is there an industry that covers the "soft costs" that I can set up using the same method, or would I have to use specific line items, i.e. architectural design, playground equipment and so on?
  • Although the sector title doesn't suggest it, the construction of educational buildings actually falls under sector 34-Construction of new nonresidential commercial and health care structures. The attached spreadsheet lists many of the types of structures in each of IMPLAN's construction sectors. You can calculate Intermediate Expenditures by subtracting total Value-Added from Output. Alternatively, if you go to Customize > Study Area Data and scroll down to sector 34, this table displays Intermediate Expenditures for you. Unfortunately, there is not an industry that covers the various "soft costs". You could certainly use specific line items if you know the approximate breakdown between them. Otherwise, since this is likely a relatively straightforward and simple construction plan, you could just add the soft costs in with the hard costs for sector 34. If you go to Explore > Social Accounts > Balance Sheets tab > View By: Industry Balance Sheets > Industry Demand tab and select sector 34 from the drop-down menu, you will see that sector 34 makes purchases of architectural and engineering services (3369), legal services (3367), etc. So unless you think the school construction will involve higher than average costs for these services, I would recommend just running those expenditures through 34 along with the hard costs. [attachment=322]Construction_Sector_Descriptions_440_2012-08-09.xls[/attachment]

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