Template revised September 22, 2016; formatting update October 19, 2016. COMMISSION AGENDA MEMORANDUM Item No. ITEM March , 2017 ACTION REQUESTED EXECUTIVE SUMMARY ��COMMISSION AGENDA Action Item No. __ Page of Template revised September 22, 2016. Template revised September 22, 2016. JUSTIFICATION In July 2015, Clark/SOM , the IAF Design/Build eam gan the work of validating the Port’s early planning work. In January 2016, design services for the new IAF commenced. That design has now progressed to the Design Development level milestone in the design process where the project’s scope is set. Begi nning in the summer of 2016, Clark began bidding selected trade contract work. Clark has now bid 19 different trade packages or approximately 70% of the work (measured in dollars) reflected on the Design Development plans. Initially, i t was the desire of the Port to conclude the negotiation of a Guaranteed Maximum Price (GMP) contract with the IAF Design/Build team by the end of 2016, but higher than expected bid results have tempered the team’s thinking. Seattle’s robust construction market has present ed risk and uncertainty regarding the cost of the balance of the work. We propose continue to look for ways to enhance trade competition as a means of mitigating those rising costs and to explore design and work phasing options that can save money on the trade already bought in addition to the work remaining to be bid. It remains staff’s expectation that in the coming months the Port and Clar k/SOM will be successful in negotiating a fair and equitable GMP. We recognize the possibility of cost growth above the budget, but there remains uncertainty as to amount. SMALL BUSINESS PARTICIPATION As a result of outreach and community inclusion efforts by Clark/SOM , as of February 2017, Clar k/SOM has achieved 6.8 % or $86. million in small busines utilization. Due to Clark /SOM ’s efforts and results to date, staff confidence has remained high on Clark /SOM ’s continued dedication and support of the Port’s efforts to maximize small business utilization for this project. ETAILS The additional funding authorization required falls within the previously forecast project budget of $684 .4 million which includes the base project budget of $608.4 million and two added scope authorizations of $41.0 million (Sterile Corridor Extension) and $11.0 million (Acce lerate Phase 2 work to include Baggage Claim Devices ) for a total IAF project cost of $660.4 million. Additionally, the Port Commission previously authorized $24 million for two related projects: $5.5 million (SSAT Narrow Body Aircraft Optimization) and $18.5 million (Domestic Outbound Baggage Opportunity). ��COMMISSION AGENDA Action Item No. __ Page of Template revised September 22, 2016. Template revised September 22, 2016. Key Points: Previous authorizations for the IAF project include: Description $millions Through 2015 300.0 July 2016 41.0 October 2016 11.0 Current Funding Authorization 352.0 This Request 130.0 Total Funding Authorization 482.0 Cla rk/SOM has taken bids and executed partial value subcontracts on work for which it cannot fully contract until additional project funding is approved. ALTERNATIVES AND IMPLICATIONS CONSIDERED 1. Defer Request for Additional Interim Funding Cost Implications: Cost impact would depend on the length of delay, but a delay of six months could increase project cost by an estimated $30 million Pros (1) Provides opportunity to further develop design and procure additional components of the work with greater cost certainty Cons (1) Prevents the achievement of the 2019 opening (2) Forces forfeiture of solicited sub contractor proposals (3) Forces downsizing of currently assembled project team (4) Balance of risk res ponsibility shifts against Port for example, cost escalation for components of the work still to be procured must be borne by Port (5) Reduces benefit of Progressive Design Build delivery method This alternative is not recommended. 2. Request the Authorization of a Reduced Additional Interim Funding Amount Cost Implications: The project would have to return for additional funds authorization sooner, again facing the risk of expensive delay. If the funds are provided when needed, the n cost impact would be minimal. Pros (1) Provides opportunity to continue design development and to procure limited additional components of the work for greater cost certainty Cons (1) Prevents the achievement of the 2019 IAF opening ��COMMISSION AGENDA Action Item No. __ Page of Template revised September 22, 2016. Template revised September 22, 2016. (2) Balance of risk responsibility shifts against Port for example, cost escalation for components of the work still to be procured must be borne by Port (3) Reduces benefit of Progressive Design Build delivery method This alternative is not recommended. equest the Authorization of Additional Interim Funding of $ 130 illion Cost Implications: Providing the funding authorization does not inherently increase the cost of the project. The manner in which the funds are provided may affect how the general contr actor bids out the work and how the GMP is negotiated, with potential cost impacts. Pros (1) Provides opportunity for the design builder to bid and procure additional components of work needed to maintain the IAF’s project schedule Cons (1) Provides additional funding in advance of the negotiation of a final GMP (2) Balance of risk responsibility remains against the Port for example, cost escalation for components of the work still to be procured must be borne by Port (3) Reduces benefit of Progressive Design Build delivery method This alternative is recommended. FINANCIAL IMPLICATIONS Cost Estimate/Authorization Summary Capital Expense Total COST ESTIMATE Original estimate 0,000,000 0,000,000 Previous changes net $360,365,000 $360,365,00 Current change Revised estimate $660,365,00 $660,365,000 AUTHORIZATION Previous authorizations $352,000,00 $352,000,000 Current request for authorization $130,000,000 $130,000,000 Total authorizations, including this request $482,000,000 $482,000,000 Remaining amount to be authorized 178,365 178,365,000 ��COMMISSION AGENDA Action Item No. __ Page of Template revised September 22, 2016. Template revised September 22, 2016. Annual Budget Status and Source of Funds This project was included in the 2017 2021 capital budget and plan of finance with a budget of 649,365,000. As presented to the Commission on October 11, 2 016, the funding plan includes $200 million of cash (Airport Development Fund), $100 million of assenger acility charges (PFCs) and $3 million of future revenue bonds. Financial Analysis and Summary The costs of the IAF will be recovered from the airlines through a charge on the use of the facility , referred to as a passenger facility charge (PFC) . Consistent with previous funding plans, the Port’s goal is to maintain a competitive Federal In spection Services (FIS) rate compared to peer airports. Sufficient PFCs will be used to pay ongoing revenue bond debt service to manage the FIS rate base, and thus the FIS rate. ATTACHMENTS TO THIS BRIEFING (1) Presentation slides PREVIOUS COMMISSION ACTIONS OR BRIEFINGS October 11, 2016 The Commission authorized IAF to dd alance of Phase 2 for ccelerated xecution September 27, 2016 The Commission was briefed on IAF econsidering hasing and roject pdate September 13, 2016 The Commission authorized IAF FAA eimbursement greement July 12, 2016 The Commission authorized IAF to dd Phase 2 cope to eet ontinuing apid rowth June 28, 2016 The Commission was briefed on wo dditional nternational ircraft ates at IAF to ��COMMISSION AGENDA Action Item No. __ Page of Template revised September 22, 2016. Template revised September 22, 2016. April 28, 2015 The Commission authorized xecution of a ease greement with SEATAC VENTURES 2010 LLC for IAF rogram anagement ffice pace near Sea Tac International Airport. February 24, 2015 The Commission authorized a ervice greement for IAF onsultant rogram eader January 27, 2015 The Commission was briefed on IAF unding lan January 27, 2015 The Commission approved IAF request for proposals dvertisement January 13, 2015 The Commission was briefed on IAF pdate December 2, 2014 The Commission was briefed on IAF cope and udget pdate October 28, 201 The Commission was briefed on IAF 3Q2014 pdate August 19, 2014 The Commission was briefed on IAF 2Q2014 pdate August 5, 2014 The Commission authorized IAF request for qualifications a dvertisement. July 22, 2014 The Commission was briefed on I rogress June 10, 2014 The Commission was briefed on IAF 1Q2014 pdate May 6, 2014 The Commission was briefed on IAF roject elivery April 22, 2014 The Commission was briefed on apital rogram March 11, 2014 The Commission authorized IAF aster lanning February 25, 2014 The Commission was briefed on IAF rogram November 19, 2013 The Commission authorized IAF onstruction anagement , testing and inspection; surveying and locating and safety service agreements. July 23, 2013 The Commission authorized IAF roject and p rogram upport; and rice actor esign build ethodology. July 9, 2013 The Commission was briefed on IAF July 9, 2013 The Commission was briefed on lternative ublic orks ontracting. Apr il 9, 2013 The Commission was briefed on IAF June 26, 2012 The Commission was briefed on irport erminal evelopment hallenges at Seattle Tacoma International Airport. June 14, 2011 The Commission was briefed on nternational ervice rowth and uture acility. February 2, 2010 The Commission was briefed on South Satellite assenger rowth and acility onsiderations , Delta’s roposed irline ounge and ther ossible uture viation rojects