8b Baggage Optimization Phase 2 Presentation
Item No. 8b_ supp Meeting Date: January 28, 2020 Baggage Optimization Results of Phase 2 Bids January 28, 2019 Agenda Overall Program Purpose & Scope Airport Growth Phase 2 Chronology Phase 2 Bid Results Phase 2 Budget Increase and Request Phase 2 Bid Evaluation Phase 2 Alternatives Lessons Learned Commission Request 2 Overall Program Purpose Working with TSA Safety and Security for travelling public Optimize outbound baggage system for Airlines and public Replace aging systems that won't last much longer Meeting the demands of growing Airlines Existing 6 separate systems Future connected system 3 Airport Growth Facts In the last five years, 10 new airlines added service to SEA. In 2013, when the project started, the airport served 33 million passengers. In 2018, the airport served 49.8 million passengers and processed over 43,000 outbound bags on the busiest day. Passenger volume has stretched the existing baggage handling system to capacity. The current system has 10 miles of conveyor belt, 3,000 motors, and 28 CTX screening machines. New system must be built within the same space as existing system but will increase capacity. 4 Phase 1 5 Phase 2 6 Final Configuration 7 Phase 2 Chronology Activities Completed Commission Briefings regarding potential budget Phase 2 & 3 increases October 23, 2018 Baggage Optimization Quarter 3 Project Briefing February 26, 2019 Baggage Optimization Quarter 4 Project Briefing April 2, 2019 Aviation Committee April 23, 2019 Baggage Optimization Phase 2 Construction Authorization Marketed project to bidders Conducted peer reviews of Phase 2 scope of work and estimates with other airports June 2019 - Raleigh Durham June 2019 - San Francisco November 19, 2019 - Bid opening for low bid December 3, 2019 - Meeting with Low Bidder and subcontractors December 5, 2019 - Airline Update 8 Phase 2 Bid Results Table Bid Item Engineer's Hensel Phelps Siemens Logistics Estimate Main Terminal $134,331,000 $266,937,000 $282,407,076 Scope South Satellite $ 44,826,000 $ 27,000,000 $ 39,809,375 Scope Total Bid $179,157,000 $293,937,000 $322,216,451 Variance $114,780,000 $143,059,451 Market Results: The two bids were only 9% apart from each other 9 Phase 2 Budget Increase Estimate with Low Bidder Estimate at Time of Bid Cost Necessary Budget Increase (November 2019) (December 2019) Bid Amount $179,157,000 $293,937,000 $114,780,000 Tax, Construction $37,935,200 $67,727,000 $30,791,800 Contingency, Other Port Oversight Cost $ 26,160,000 $ 45,588,000 $ 19,428,000 Project Contingency & Executive Director $ 4,781,000 $ 18,423,000 $ 13,642,000 Reserve Total Estimated Phase 2 Project Cost $248,033,200 $425,675,000 $177,641,800 10 This Budget Request Current Estimate at Requested Phase Budget Completion Budget Phase 1 $101,375,000 $101,375,000 $101,375,000 Phase 2 $248,033,200 $425,675,000 $425,675,000 Phase 3 $ 95,641,800 Construction TBD $13,000,000 (Design Only) Total $445,050,000 $527,050,000 $540,050,000 Original Budget for Phase 1 was $135M; Phase 2 Requested Budget includes a request for $10M of Executive Director Reserve. 11 Bid Evaluation Construction Market: Competitive automated material handling market. Five possible bidders Only two bids. All bidders requested an additional year. Bids received Schedule: required two shifts over the 4 years. Our estimate assumed one shift. Did not adequately predict operating risks, work Risk and Complexity: complexities, and inefficiencies that bidders foresaw in the 24/7 operations of a growing airport. Contractors knew the productivity impact upon their work. Logistic Inefficiencies: Everything must be brought in at start of work shift and taken out at the end of work shift. Shutdown Requirements: Contractor must ensure Airline baggage operations never stops. 12 Bid Evaluation South Satellite vs Main Terminal The difference between the final estimate and bids is in the risk, inefficiencies, and working within a live Airport operation Engineer's Estimate vs Bid: South Satellite line item came in below Engineer's Estimate Scope of Work: 24/7 site access with limited operational impacts Risk: Significantly less operational risk than the rest of the project 13 Alternatives Alternative 1 Repackage the design to include Phase 3 and use General Contractor/Construction Manager (GC/CM). No guarantee of any bidders, huge bonding requirement, Costs may be higher, 2+ year delay, impacts major capital projects to improve passenger service, aging systems need upgrades. Alternative 2 Significantly change the Phase 2 scope of work and/or contract terms to re-advertise the project. No guarantee of any bidders, bids may be higher, 1-1.5 year delay, impacts major capital projects to improve passenger service, aging systems need upgrades. Alternative 3 Recommended Proceed with constructing Phase 2 as bid Bid prices are within 9% of each other and are market prices, airlines and travelers need baggage service, Airlines support this alternative. Provides opportunity to seek additional TSA funding. 14 Lessons Learned Require a second independent estimate for large or more complex projects (one already underway for the C1 building project) Improved communication to the Commission about project risk (similar to Checkpoint 1 Relocation Authorization last quarter) Review more projects with other airports / airlines (this baggage project was reviewed with SFO and RDU) Periodic review/evaluation of contracting method for phased projects, considering use of outside advisors Evaluate potential cost estimate increase factors for large or more complex projects 15 Today's Meeting Request Request authorization to: 1. Execute a construction contract with the low responsive and responsible bidder for $293,937,000; 2. Authorize an increased budget totaling $190,737,800 for a total project authorization of $540,050,000 for Phase 2 construction and Phase 3 design. 16 Appendix 17 Outbound Baggage System Flow 18 Alternative 1 Repackage the design to include Phase 3 and pursue an alternative delivery method for construction GC/CM. Cost Implications: Phase 3 estimate would need to be updated to match the contract method and verified. This is not the recommended alternative. 19 Alternative 1 - Pros No risk of loss in continuity of Contractors between Phases 2 and 3; There will be an opportunity to optimize risk allocation with the GC/CM in developing a construction sequencing plan; A GC/CM delivery method allows for prequalification of the general and electrical contractor; and GC/CM delivery method leverages innovations/ideas/expertise in design and constructability. 20 Alternative 1 - Cons Major capital projects to improve passenger service and provide needed upgrades are dependent on work being completed by Phase 2. For example, Main Terminal Optimization, Airline Realignment, Main Terminal Low Voltage, Main Terminal Smoke Control, and C1 Building. In addition, Airlines have requested South Satellite makeups to be accelerated to meet demand, and a delay would affect their operations; Potential TSA OTA funding expires in 2023 unless TSA grants extension, and the project could lose the funds TSA would oppose this due to risk of system failure due to further delays in replacement of outdated screening equipment. Increased cost in TSA staffing and equipment maintenance. Construction will be even more inefficient and therefore more costly if the construction is delayed due to continued growth in passenger and baggage volume; Due to the aging systems, lack of sortation capacity and flexibility to keep up with Airport growth, the existing baggage system will experience increased operational demand and stress that will likely cause impacts to airlines and passengers. The Port would still need to invest in upgrading the aging existing system to keep the airport operational; Design will require repackaging and redesign Phase 2 design cost beyond 70% would be lost; Schedule impact of 1.5-2 years; New design will create unknown schedule impacts to develop construction sequencing plan with contractor and stakeholder buy-in; No guarantee of an improved construction sequencing plan; and No guarantee of any cost savings. Contractors including small businesses have invested four months and significant expense in preparing a bid. Rebidding this project may not result in low bids and/or sufficient bidder interest. The Port may also be perceived as a less preferred owner if bids are rejected. 21 Alternative 2 Significantly change the Phase 2 scope of work and/or contract terms to re-advertise the project. Cost Implications: Taking the design back to 70% plus cost for redesign equals approximately $4M. This is not the recommended alternative. 22 Alternative 2 - Pros Bid amount could potentially come in lower. 23 Alternative 2 - Cons Major capital projects to improve passenger service and provide needed upgrades are dependent on work being completed by Phase 2. For example, Main Terminal Optimization, Airline Realignment, Main Terminal Low Voltage, Main Terminal Smoke Control, and C1 Building. In addition, Airlines have requested South Satellite makeups to be accelerated to meet demand, and a delay would affect their operations; Potential TSA OTA funding expires in 2023 unless TSA grants extension, and the project could lose the funds TSA would oppose this due to risk of system failure due to further delays in replacement of outdated screening equipment. Increased cost in TSA staffing and equipment maintenance. Construction will be even more inefficient and therefore more costly if the construction is delayed due to continued growth in passenger and baggage volume; Due to the aging systems, lack of sortation capacity and flexibility to keep up with Airport growth, the existing baggage system will experience increased operational demand and stress that will likely cause impacts to airlines and passengers. The Port would still need to invest in upgrading the aging existing system to keep the airport operational; There are limited opportunities to modify the scope of work to deliver a valuable project at the end of Phase 2 Holiday moratoriums could be reduced and relaxed to reduce Contractor risk. This could cause operational impacts to airlines during busy holiday seasons; Add Port contracts for portering services for system shutdown and Contractor system impacts; Schedule impact of 1-1.5 years; Redesign will create unknown schedule impacts to develop construction sequencing plan with contractor and stakeholder buy-in; Contractors including small businesses have invested four months and significant expense in preparing a bid. Rebidding this project may not result in low bids and/or sufficient bidder interest. 24 Alternative 3 Proceed with constructing Phase 2 as originally planned and evaluate GC/CM contracting for Phase 3. Cost Implications: Requested amount of $190,737,800 additional Phase 2 budget, including $10M for management reserves to be managed by the Executive Director. This is the recommended alternative. 25 Alternative 3 - Pros Lowest risk of operational impacts due to aging equipment and growing demands on the existing systems; Fastest alternative in terms of delivery of the new system elements, providing increased capacity, flexibility, redundancy, and higher reliability; Lowest impact to Major capital projects that are dependent on work being completed by Phase 2; Construction sequencing plans have been coordinated with Airlines and Port of Seattle stakeholders to minimize impacts during construction; and Port can begin to prepare for Phase 3 including evaluation of GC/CM contracting to complete the intended design and meet growing Airport demands. 26 Alternative 3 - Cons Increase in overall program budget 27 Engineer's Estimate vs Bid Results Aviation Only (2017-2019) Total Contracts bid out 33 Total Awards Below EE 25 % of Awards Below EE 76% Total Awards Within 110% of EE 27 % of Awards Within 110% of EE 82% 28
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