5i
PORT OF SEATTLE MEMORANDUM COMMISSION AGENDA Item No. 5i ACTION ITEM Date of Meeting July 24, 2012 DATE: July 20, 2012 TO: Tay Yoshitani, Chief Executive Officer FROM: Wayne Grotheer, Director, Aviation Project Management Group SUBJECT: Construction of the South Satellite Concessions Project (CIP # C800412) and South Satellite Additional Gate Lobby Project (CIP # C800466) Amount of This Request: $378,200 Source of Funds: Airport Development Fund Est. State and Local Taxes: $210,700 Est. Jobs Created: 27 Est. Total Project Cost: $4,257,900 ACTION REQUESTED: Request Commission authorization for the Chief Executive Officer to (1) execute a contract with the low responsive and responsible bidder for the combined South Satellite Concessions Project (CIP #C800412) and South Satellite Additional Gate Lobby Project (CIP #C800466) in the amount of $1,771,981, as required by Resolution No. 3605, as amended, Section 4.2.3.4., due to the bids being greater than 10 percent over the engineer's estimate; (2) increase the budget for the South Satellite Concessions Project (CIP #C800412) by $207,200 to $2,742,900 to cover additional costs related to the bid; and (3) increase the budget for the South Satellite Additional Gate Lobby Project (CIP #C800466) by $171,000 to $1,515,000 to correct design deficiency. The total amount requested for additional budget funding is $378,200. SYNOPSIS: This project will relocate gate podiums, demolish underutilized restrooms, construct a new duty free shell space, demolish the existing duty free store, upgrade the finishes throughout the gate lobby areas, modify existing infrastructure to accommodate the change in use, and create a food and beverage shell for future build out by a tenant. It will create one large contiguous hold area for the wide-body gates S-10 S16, adding nearly 1,500 square feet of seating capacity and allows for more efficient and comfortable use of the space by passengers. On June 27, 2012, the Port of Seattle bid the South Satellite Concessions Project and South Satellite Additional Gate Lobby Project as a Major Public Works project. The engineer's estimate was $1,569,249. On July 17, 2012, the Port of Seattle received 3 bids ranging from $1,771,981 to $1,837,000, see table below. Bids were greater than 10% over the engineer's COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer July 20, 2012 Page 2 of 6 estimate; therefore, in accordance with Resolution No. 3605, as amended, staff is seeking Commission approval to execute this contract. Contactor Bid PCL Construction Services, Inc. $1,771,981.00 Pease construction, Inc. $1,791,822.00 Regency NW Construction, Inc. $1,837,000.00 Staff analyzed the engineer's estimate of $1,569,249 and found the following items: Inadequate estimation of mobilization and demobilization costs related to the phasing requirements of the project to ensure continuity of operations; Additional badging costs for work in the international facility. Based on the reasons stated above, and because the bidders were within 4% of each other, which appears representative of the marketplace, and because all three bids were above the engineer's estimate, Port staff believes the low bid represents a fair and reasonable price. In addition, as preparatory investigations to complete gate podium moves have been undertaken, design deficiencies are requiring additional funds in the amount of $171,000 to complete this project element. The design specified outdated communications infrastructure and needs to be improved to meet current standards. BACKGROUND AND PROJECT SCOPE: The west end of the South Satellite will be reconfigured to create a new, efficient space for both airline and retail operation. The projects will also relocate gate podiums, demolish underutilized restrooms and exterior stairs, remediate regulated materials, construct a new duty free shell space, demolish the existing duty free store, upgrade the finishes throughout the gate lobby areas, modify existing infrastructure to accommodate the change in use, and create a food and beverage shell for future build out by a tenant. The projects will create one large contiguous hold area for the wide-body gates S10 S16, adding nearly 1,500 square feet of seating capacity and allowing for more efficient and comfortable use of the space by passengers. COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer July 20, 2012 Page 3 of 6 FINANCIAL IMPLICATIONS: The total estimated cost of both projects is $4,257,900, and is divided between CIP #s C800412, C800466, and expense as shown below: Budget/Authorization Summary: C800412 Capital Expense Total Project Original Budget $2,020,200 $515,500 $2,535,700 Budget Increase $207,200 $0 $207,200 Updated Budget $2,227,400 $515,500 $2,742,900 Previous Authorizations $2,020,200 $515,500 $2,535,700 Current request for authorization $207,200 $0 $207,200 Total Authorizations, including this request $2,227,400 $515,500 $2,742,900 Remaining budget to be authorized $0 $0 $0 Total Estimated Project Cost $2,227,400 $515,500 $2,742,900 Project Cost Breakdown: This Request Total Project Construction $176,800 $1,717,200 Construction Management $10,000 $313,000 Design $0 $262,000 Project Management $4,800 $273,000 Permitting $500 $17,000 State & Local Taxes (estimated) $15,100 $160,700 Total $207,200 $2,742,900 Budget Status and Source of Funds: The capital budget for this scope of work was included in the 2012-2016 capital budget and plan of finance under CIP# C800412 in the amount of $2,535,700. The capital budget increase of $207,200 will be transferred from the Non-aeronautical New Projects Allowance CIP (C800152), a business plan prospective project, resulting in no net change to the Aviation capital budget. The funding source will be the Airport Development Fund. Financial Analysis and Summary: The financial analysis below is based only on the costs directly associated with the new concessions. COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer July 20, 2012 Page 4 of 6 CIP Category Revenue/Capacity Growth Project Type Business Expansion Risk adjusted discount rate 9% Key risk factors Delay in realized revenues due to construction or other schedule delays. Achieving sales targets. Project cost for analysis Duty free: $1.47 million Food and beverage: $1.07 million Total $2.54 million Business Unit (BU) Aviation Business Development/Concessions Effect on business performance New duty free revenues (first full year): $416,000/year New food and beverage revenues (first full year): $340,000/year IRR/NPV Duty Free: Food/beverage: Total: NPV $800,000 NPV $1.1M NPV $1.9M Payback 5 years Payback 5 years Payback 5 years IRR 12% IRR 15% IRR 13% CPE Impact N/A This summary has not been updated to reflect the additional cost. Capital Expense Total Project Budget/Authorization Summary: C800466 Original Budget $1,344,000 $0 $1,344,000 Budget Increase 171,000 $0 171,000 Updated Budget $1,515,000 $0 $1,515,000 Previous Authorizations $1,344,000 $0 $1,344,000 Current request for authorization $171,000 $0 $171,000 Total Authorizations, including this request $1,515,000 $0 $1,515,000 Remaining budget to be authorized $0 $0 $0 Total Estimated Project Cost $1,515,000 $0 $1,515,000 Project Cost Breakdown: This Request Total Project Construction $171,000 $991,000 Construction Management $0 $145,000 Design $0 $159,000 Project Management $0 $162,000 Permitting $0 $8,000 State & Local Taxes (estimated) $0 $50,000 Total $171,000 $1,515,000 Budget Status and Source of Funds: The budgeted cost for this scope of work was included in the 2012-2016 capital budget and plan of finance under CIP# C800466. The budget increase of $171,000 will be transferred from the Aeronautical New Project Allowance CIP (C102165), a business plan prospective project, resulting in no net change to the Aviation capital budget. The funding source will be the Airport Development Fund. COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer July 20, 2012 Page 5 of 6 Financial Analysis and Summary: CIP Category Revenue/Capacity Growth Project Type Business Expansion Risk adjusted discount rate N/A Key risk factors N/A Project cost for analysis $1,344,000 Business Unit (BU) Terminal Effect on business performance Increase NOI IRR/NPV N/A CPE Impact Less than $.01, but no change to business plan forecast as this project was included. This summary has not been updated to reflect the additional cost. ALTERNATIVES CONSIDERED AND THEIR IMPLICATIONS: Award Contract: Based upon our technical analysis of the factors which affected the bid prices and the consistency of high bids across all the bidders, Port staff believes this bid price from PCL is fair and reasonable. Staff recommends the Commission authorize for contract award. Do Not Award Contract: Staff evaluated re-scoping and then re-advertising the contract which would delay the project and cause delay to the tenant build out of the new duty free location, taking its opening beyond the high traffic summer season resulting in a loss of revenue. This is not a recommended alternative. PREVIOUS COMMISSION ACTIONS OR BRIEFINGS: November 2, 2010 commission authorized the execution of an IDIQ professional services contract for design services in the amount of $400,000 in support of anticipated capital improvement projects related to South Satellite concession and Gate Lobby Projects at Seattle-Tacoma International Airport. No funding was associated with this authorization. January 25, 2011 commission authorized both design services and the use of Port crews in support of the Additional Gate Lobby Project at Seattle-Tacoma International Airport (CIP # C800466). This authorization was for $414,000 of a total estimated project cost of $1,257,000. March 8, 2011 Commission authorized design services in support of the South Satellite concessions Project (CIP # C800412) at Seattle-Tacoma International Airport. This authorization was for $350,000 of a total estimated project cost of $2,199,000. March 27, 2012 Staff briefing about plans for interim concessions leasing (2012 2014), including Requests for Proposal for a new duty free operator and new fullservice restaurant. COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer July 20, 2012 Page 6 of 6 June 5, 2012 Commission authorized A: For CIP # C800412, (1) advertise for construction bids and execute construction contracts and (2) execute contracts to purchase furnishings and casework for the South Satellite Concessions Project at Seattle-Tacoma International Airport (Airport). This authorization was for $2, 185,700 B: For CIP # C800466, (1) advertise for construction bids and execute construction contracts and (2) execute contracts to purchase furnishings and casework for the South Satellite Additional Gate Lobby Project at the Airport. This authorization is for $930,000 of a total estimated project cost of $1,344,000. The total combined authorization request for both projects is for $3,115,700 of a total combined estimated project cost of $3,879,700.
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