6a. Memorandum
COMMISSION AGENDA MEMORANDUM Item No. 6a ACTION ITEM Date of Meeting June 27, 2017 DATE: May 5, 2017 TO: Dave Soike, Interim Executive Director FROM: Jeffrey Brown, Director Aviation Facilities and Capital Programs James Schone, Director Aviation Business Development Wayne Grotheer, Director Aviation Project Management SUBJECT: Central Terminal Infrastructure Upgrade (CIP #C800722) Amount of this request: $4,032,000 Total estimated project cost: $16,834,000 ACTION REQUESTED Request Commission authorization for the Executive Director to (1) transfer ADR Infrastructure Modifications project scope and associated budget of $6,190,000 (CIP C800638) to the Central Terminal Infrastructure Upgrade project (CIP C800722); (2) increase this combined CIP budget by $4,032,000 for the construction of the project; (3) use Port crews and small works contracts for construction work; and (4) advertise and award a major works construction contract for the Central Terminal Infrastructure Upgrade project. This authorization is for $4,032,000 for a total estimated project cost of $16,834,000. EXECUTIVE SUMMARY The purpose of the Central Terminal Infrastructure Upgrade project is to provide the shell space and associated vertical circulation for expansion of and improvements to the Airport Dining and Retail (ADR) space in the Central Terminal in order to improve customer service and increase non-aeronautical revenues. In August 2016, the ADR Infrastructure Modifications project was advertised and the single bid received was 127 percent above the engineers estimate. Similarly, in October 2016, the Central Terminal HVAC Upgrade project was advertised and the single bid received was 197 percent above the engineers estimate. Both procurements were cancelled in October 2016. In an effort to attract multiple bidders and obtain competitive bids, the two projects will be re-advertised as one project with revisions made to address concerns expressed by the single bidder for both projects. Template revised September 22, 2016. COMMISSION AGENDA Action Item No. _6a_ Page 2 of 5 Meeting Date: June 27, 2017 JUSTIFICATION Improvements to the Central Terminal infrastructure support economic growth and future passenger demands for products and services. Developing spaces that are currently unused and repurposing and reconfiguring existing spaces will enable the Port to meet future passenger demands. Current space demand analysis shows there is a need in the Central Terminal for an additional 12,000 square feet of Airport Dining and Retail space to meet the anticipated 2025 passenger projections. This project will add approximately 10,000 square feet of new Airport Dining and Retail space to the Central Terminal. This project will also ensure that the base building systems and all points of connection for utilities are code compliant. Small Business Under the current scope of work, this project presents a number of opportunities for small businesses to participate. The Small Business team along with the Port's Project Management staff will be promoting this project under the Port's Small Business Generator Program (Port- Gen) to maximize small business knowledge of this project. The aspirational goal is 30 percent small business participation and the Small Contractors and Suppliers requirement will be determined by the Small Business team. Scope of Work Upgrade the infrastructure in the Central Terminal to include adding new Heating Ventilation Air-conditioning air handling units, variable air volume boxes, plumbing, electrical, mechanical systems demising walls, elevators and stairways, demolition in order to prepare the mezzanine and all Central Terminal spaces for future tenant build-out projects. This will require closing all Central Terminal tenant spaces in multiple phases in order to accomplish the work. Schedule Activity Design start 4th Quarter 2016 Construction start 1st Quarter 2018 In-use date 4th Quarter 2019 Cost Breakdown This Request Total Project Design $0 $1,851,000 Construction $4,032,000 $14,983,000 Total $4,032,000 $16,834,000 ALTERNATIVES AND IMPLICATIONS CONSIDERED Alternative 1 Do not upgrade the Central Terminal Infrastructure Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. _6a_ Page 3 of 5 Meeting Date: June 27, 2017 Cost Implications: $1,851,000 in design effort would need to be expensed. This combined design is 90% complete. Pros: (1) No capital investment required. (2) The need to invest in upgrading the Central Terminal Infrastructure could be deferred if the Central Terminal mezzanine spaces will remain unoccupied and not developed for public use. Cons: (1) Increased passenger demand for food service in the Central Terminal cannot be met without expansion into the undeveloped spaces on the mezzanine levels. (2) The planned ADR Lease Group 3 tenant spaces in the Central Terminal would not be remodeled as part of the Central Terminal Infrastructure Upgrade project. That scope of work would need to be completed by another project This is not the recommended alternative. Alternative 2 Upgrade the Central Terminal Infrastructure Cost Implications: $16,834,000 Pros: (1) Design for Central Terminal Infrastructure Upgrade project is 90% complete. (2) Enables the ADR Lease Group 3 expansion into the mezzanine spaces not currently being used by the traveling public. (3) Concerns expressed by the single bidder for the prior design have been addressed. Cons: (1) Requires capital investment by the Port of Seattle. (2) Project will require complex construction in support of the planned expansion that will affect the traveling public; closure of tenant spaces during construction. (3) An additional $4,032,000 is required to complete the project. (4) Estimated total cost to complete this project is $16,834,000. This is the recommended alternative. FINANCIAL IMPLICATIONS Cost Estimate/Authorization Summary Capital Expense Total COST ESTIMATE Original estimate, CTE HVAC $6,589,000 $23,000 $6,612,000 Original estimate, ADR Infrastructure (transfer) $6,190,000 $0 $6,190,000 Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. _6a_ Page 4 of 5 Meeting Date: June 27, 2017 Current change $4,032,000 $0 $4,032,000 Revised estimate $16,811,000 $23,000 $16,834,000 AUTHORIZATION Previous authorizations $12,779,000 $23,000 $12,802,000 Current request for authorization $4,032,000 $0 $4,032,000 Total authorizations, including this request $16,811,000 $23,000 $16,834,000 Remaining amount to be authorized $0 $0 $0 Annual Budget Status and Source of Funds This project, CIP C800722, was included in the 2017-2021 capital budget and plan of finance with a budget of $6,589,000. The revised estimate includes a scope transfer for the ADR Infrastructure Modifications project from CIP C800638 Concession Infrastructure with a budget amount of $6,190,000 and a budget increase of $4,032,000 transferred from the Aeronautical and Non-aeronautical Allowance CIPs. The funding source will be 2018 revenue bonds. Financial Analysis and Summary Project cost for analysis $16,811,000 Business Unit (BU) Terminal Building (HVAC) and Terminal Non-Aeronautical (vertical circulation) Effect on business performance NOI after depreciation will increase (NOI after depreciation) IRR/NPV (if relevant) 14% / $19.6 million CPE Impact $0.05 in 2020 Future Revenues and Expenses (Total cost of ownership) Aviation Maintenance anticipates only a minimal increase in Operations & Maintenance costs with respect to the additional 13 Variable Frequency Drives and the Light Emitting Diode lighting for the sides of the two staircases which will be absorbed with current resources. No impact is anticipated as a result of the renewal and replacement of existing equipment. There will be an increase in O&M costs related to the two additional elevators of approximately $35,000/year on the current elevator service contract, and a total annual increase of $8,000 for the two additional HVAC units as a result of this project. ATTACHMENTS TO THIS REQUEST (1) Presentation slides (2) Video presentation PREVIOUS COMMISSION ACTIONS OR BRIEFINGS August 9, 2016 Central Terminal Expansion Heating Ventilating and Air-conditioning Upgrade Construction Authorization (CIP C800722) Template revised September 22, 2016; format updates October 19, 2016. COMMISSION AGENDA Action Item No. _6a_ Page 5 of 5 Meeting Date: June 27, 2017 June 28, 2016 Airport Dinning & Retail (ADR) Infrastructure Modifications Construction Authorization (CIP C800638) May 26, 2015 the Port Commission authorized design and construction documents for Central Terminal HVAC Upgrade Project October 28, 2014 Authorization for Airport Dining and Retail Infrastructure Modifications (CIP C800638) June 25, 2013 Authorization for United Services Organization Northwest Lease and Associated Second Floor Utilities Preparations (CIP C800615) January 22, 2008 Authorization for the upgrade of heating, ventilation, and airconditioning (HVAC) system to the north side of the second floor of Main Terminal Administration Building/CTE (CIP C800249) Template revised September 22, 2016; format updates October 19, 2016.
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