Developer Fee and Remediation Cost
Hello, I am wondering what the best sectors are to model Developer Fee and Remediation Cost as part of the Construction Costs for a mixed-use project? Would I model the Developer Fee in the Real Estate Sector and the Remediation Cost in the Waste Management and Remediation Services Sector? I am modeling the other Hard Costs in the Construction sectors and the other Soft Costs in the A/E and Environmental and other technical consulting services sectors.
Hello Lorianne, IMPLAN Construction sectors do include many Soft Costs, including purchases of Waste management and remediation services and Architectural services (commodities 3471 and 3449 respectively). You can see the list of all commodities purchased by an IMPLAN sector by navigating to Social Accounts > Balance Sheets > View By: Industry Balance Sheet > Commodity Demand tab. Select the sector in which you are interested and scroll down to see the list of all commodities purchased by that sector as part of its production. If you seek to utilize IMPLAN construction sectors for Hard Costs only, then you will need to modify the sector so that it does not purchase any of your Soft Costs. For this we suggest the use of Analysis-by-Parts. Regards, IMPLAN Staff
In the past I thought we were told to model Soft Costs separately using sectors such as A/E, Legal, and Real Estate for more accurate analysis, rather than lumping everything into one or more of the Construction sectors. We have never done an Analysis by Parts but we did watch a webinar on it recently. Given a detailed construction budget with line items for hard and soft costs, what is the recommended approach among the following options?: 1) Lump the total construction cost into one or more Construction sectors. 2) Do an ABP, modeling hard costs in one or more of the Construction sectors and soft costs into sectors such as A/E, Legal, and Real Estate or 3) Do what we usually do which is to model hard costs in one or more of the Construction sectors and Soft Costs into sectors such as A/E, Legal, and Real Estate without doing an ABP. While this is unlikely to be the preferred method, what are the disadvantages of doing it this way or how have our analyses been compromised in the past by doing it this way?
Hello Lorianne, 1. This is the most common way construction impacts are analyzed and is a fine choice for users that do not possess specific construction budget information. 2. The ABP method utilizes the spending pattern associated to the selected sector. In your case, you would use your budget information to add/remove commodities that are or are not part of your construction budget and then use your purchase breakdown to weigh the spending pattern to better reflect your budget's cost ratios. When combined with a Labor Income Change, this method basically creates a sector that matches your budget. 3. You certainly can model Soft Costs separately using the appropriate sectors. However, if you use a construction sector that purchases those same commodities as part of its spending pattern, then part of the sales value utilized for the construction impact will be directed at purchasing goods and services that you are also capturing through the Soft Costs sectors (effectively over estimating the impact of those goods and services and reducing the sales value amount that is directed at just Hard Costs). If you want to resolve for the double-counting of certain soft costs that are also part of the IMPLAN spending patterns for construction moving forward, you can import the standard spending pattern for the construction Sector(s) that you would normally use and remove the Events for the soft costs that you want to account for separately. We would then recommend normalizing the spending pattern and using only the goods and services budget value as your Activity Level. You will need to run a Labor Income Change to account for the construction labor. We also typically suggest running the soft costs in this type of breakout in a different Scenario because typically they are entered as Industry Change Activities, although they will be often be defined as Indirect Effects. While making this change will certainly improve the way that the values are distributed in the results, since the overall Output value is the same regardless of the distribution, you may not see remarkable changes in the Summary Results between these two methods. Regards, IMPLAN Staff
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