5c memo
PORT OF SEATTLE MEMORANDUM COMMISSION AGENDA Item No. 5c ACTION ITEM Date of Meeting January 7, 2014 DATE: December 20, 2013 TO: Tay Yoshitani, Chief Executive Officer FROM: David Soike, Director, Aviation Facilities and Capital Program Wayne Grotheer, Director, Aviation Project Management Group SUBJECT: NorthSTAR Program North Satellite Refurbish Baggage System Project (CIP#C800555) Amount of This Request: $6,253,000 Source of Funds: Airport Development Fund, Existing Bonds Est. Total Project Cost: $22,000,000 and Future Revenue Bonds Est. State and Local Taxes: $1,159,000 ACTION REQUESTED Request Commission authorization for the Chief Executive Officer to increase the project authorization of the North Satellite Refurbish Baggage System Project in the amount of $6,253,000 for higher estimated project costs in addition to the previously authorized $15,747,000 for a total project authorization of $22,000,000. SYNOPSIS This request for authorization is within the existing budget earlier identified for the Commission and is within the annual capital plan of finance budget that was earlier approved by Commission in the 2014 budget process. This project is one of many that support the consolidation and growth of Alaska Air Group (AAG). This request for additional authorization is a result of final detailed design work that has occurred between September when the Commission last provided authorization and now. During this time, investigation and final design of the aging baggage conveyance system have determined it is necessary to consolidate bag-screening functions to minimize outages, modify manual encoding stations, perform abatement of regulated hazardous materials, and provide contingency for the project. AAG is now using all gates at the North Satellite, including the gate locations formerly occupied by United Airlines. This project will refurbish existi ng baggage systems in support of AAG's expanding operations at the North Satellite and continued use of Concourse D. AAG's baggage volumes are an estimated five times greater than United's requirements in recent years. The work will extend the service life for portions of the C92 Concourse D baggage systems, C88 North Satellite systems, and C88 tunnel systems. This project is a component of the North Sea- Template revised May 30, 2013. COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer December 10, 2013 Page 2 of 7 Tac Airport Renovation (NorthSTAR) program and is included in the 2014-2018 capital budget and plan of finance. The project will replace aging conveyor belts, motors, drives, and controls of the existing C88 and C92 systems, as required to improve reliability and provide greater functionality. The project will provide significant operational benefits to AAG including potentially increasing the rate of speed for certain conveyers. The Port and AAG worked together to develop evaluation criteria and metrics to minimize component replacements and costs to refurbish the systems. During the refurbishment, the Port and AAG staff will continue to work collaboratively to refine selection of component replacements to improve functionality. BACKGROUND As part of the Airline Realignment and United Airlines' relocation fromthe North Satellite to Concourse A, AAG's baggage handling consultant evaluated the existing systems and conditions and prepared a detailed analysis of each system's performance requirements to meet future baggage volumes. These volumes are based on AAG's future growth projections. The scope of work for this project is a result of AAG's previous study and Port staff input. It represents a critical component in providing improved baggage handling systems for AAG. AAG prefers to continue all baggage makeup operations at the C92 system under Concourse D to allow for early completion of the North Satellite baggage refurbishment prior to its use. The C88 system that connects to and serves the North Satellite will be shut down for limited durations as coordinated closely with AAG operations during construction to minimize impacts to AAG and Airport operations and to allow for early completion of the refurbishment. The typical (or standard) design life of a baggage system is 15 years. The C92 system is 21 years old. This project will allow the Port to extend the useful life of the system to satisfy the customer's requirements. This project is being coordinated with the Checked Baggage Optimization Project. The physical work may be completed by a construction contract within the Optimization project. Port and AAG staff will work together to coordinate both projects to include the most beneficial and cost-effective elements. The current C88 tunnel systems and C88 North Satellite systems are nearly 25 years old. The longevity of the C88 system can be attributed to: 1) the relatively slow current running speed of the conveyors, resulting in minimal wear on the conveyor components; 2) the current low demand on the system of approximately 3,000 bags per day on a system designed for up to 15,000 bags per day; and 3) the proactive and extensive maintenance program of the existing system. On September 24, 2013, the Port Commission authorized an additional $11,987,000 for advertising for bids, construction and for Port crews to perform baggage tunnel conveyor work. This authorization was prior to completion of the final design documents and final scope decisions from the review of the C92 Failure Analysis due to schedule and authorizing for port crew work. The design is being finalized and project is now estimated at $20,000,000; higher than the $15,747,000 estimate in the previous authorization. The increased cost is the result of refined design details and the cost to: 1) construct the consolidated baggage screening office that COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer December 10, 2013 Page 3 of 7 will minimize conveyor downtime during the future North Satellite Renovation project, 2) modify the baggage manual encoding station layout to meet current Airport standards, and 3) abate additional regulated materials for the consolidated baggage screening office based on a survey of this office. The consolidated baggage screening office was included in the September 24, 2013 Commission Authorization. E ven though the cost has risen significantly, it is important to maintain the efficiency of Alaska Airlines baggage operations because the office houses the central monitoring and controls for the North Satellite conveyor system. The estimate for this scope was not fully vetted by the design team. The scope of the manual encode station layout was found not to meet current Port standards and the new layout is central to AAG's operational efficiency. The request for the additional $6,253,000 covers the higher project cost and includes a project contingency of $2,000,000 for additional work for the C92 baggage system and abatement of additional incidental regulated materials, which brings the total project authorization to $22,000,000. This provides a $2,000,000 reserve. Staff has determined Port crews will perform additional work on the C92, Concourse D baggage system. PROJECT JUSTIFICATION AND DETAILS The volume of AAG's projected baggage would be too heavy a burden on existing systems, therefore improvements are required. Port Maintenance provided statistical data tying volume of passenger traffic to critical failure of conveyors. Although the data cannot quantify impacts to airline operations, it shows that with increasing AAG bag traffic there is increased failure frequency potential of critical components. Currently, at peak loads, the system has a critical failure once every three days. This current peak load is AAG's baseline. If refurbishment of the conveyors is not completed before the increased demand, it is reasonable to expect there will continue to be a critical failure at least once every three days at baseline levels, with an increased frequency of critical failures during AAG's peak loads. As a result of this detailed analysis, AAG approved the addition of a redundant recirculation conveyor at the C88 systems and construction of other scope within the North Satellite. Another system improvement addressed in this project is avoiding the congestion of the C1 sortation loops. Currently, all transfer bags are conveyed through the central C1 sortation loops. These loops are congested and may cause delivery times to increase during peak operations. The proposed modifications will divert most of the transfer bags to the appropriate sortation systems before they enter the C1 loops, creating baggage sortation efficiencies. Project Objectives 1. Improve the long-term reliability of the baggage conveyance system 2. Increase the overall speed of the conveyors 3. Reduce baggage volume pressure on C1 sortation loop 4. Extend the service life of the systems COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer December 10, 2013 Page 4 of 7 Scope of Work The C92 systems between the C1 sortation loops and the C92/C88 connection, the C88 tunnel systems, and the C88 North Satellite systems will be refurbished and/or overhauled. A mini-sort system will be installed to presort transfer bags at the C92 transfer input to sort bags directly to the C92 and C88 systems, instead of sending them to the C1 sortation loops, which will reduce C1 sortation-loop bag volume pressure. The scope includes the following elements: 1. Refurbish North Satellite tunnel and pier conveyor: replacement or refurbishment of motors, gears, conveyor belts, and support equipment. 2. Evaluate and replace pushers as necessary: total replacement of internal pusher hardware and components in the C88 system. 3. Add mini-sort conveyor system at C92-TX1 transfer input to presort transfer bags. 4. Upgrade / replace programmable logic controllers (PLC's) at C92. 5. Refurbish C1 to the C88 cross-over: replacement or refurbishment of conveyor sections, motors, gears, belts, and support equipment. 6. Upgrade of C88 computer systems and programmable logic controllers (PLC's). Relocate the existing three control rooms and consolidate to a single baggage screening control office. 7. Replacement of automatic tag readers (ATRs) at C88 North Satellite system. 8. Add a redundant recirculation conveyor for the C88 system at the North Satellite Bagwell. Modify the C88 manual encode station to match existing airport standards. 9. Add in C88 sortation. Selectively replace other field control devices and wiring for both the C92 and C88 systems. 10. Replace motor control panels (MCPs) for C88 sortation system 11. Evaluate and refurbish the C92 sortation system pushers, sortation conveyers, and recirculation conveyers as necessary. Schedule Design Completion January 2014 Advertise for bids January 2014 Construction begins May 2014 Construction completion June 2015 FINANCIAL IMPLICATIONS Budget/Authorization Summary Capital Expense Total Project Original Budget $22,000,000 $0 $22,000,000 Budget reduction -$500,000 $500,000 $0 Revised budget $21,500,000 $500,000 $22,000,000 Previous Authorizations $15,747,000 $0 $15,747,000 COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer December 10, 2013 Page 5 of 7 Current request for authorization $5,753,000 $500,000 $6,253,000 Total Authorizations, including this request $21,500,000 $500,000 $22,000,000 Remaining budget to be authorized $0 $0 $0 Total Estimated Project Cost $21,500,000 $500,000 $22,000,000 Project Cost Breakdown This Request Total Project Construction $5,204,000 $14,625,000 Construction Management $557,000 $1,974,000 Design $25,000 $2,194,000 Project Management $164,000 $1,755,000 Permitting $86,000 $293,000 State & Local Taxes (estimated) $217,000 $1,159,000 Total $6,253,000 $22,000,000 Budget Status and Source of Funds This project was included in the 2014-2018 capital budget and plan of finance within CIP project #C800555. Funding sources include the Airport Development Fund, existing bond proceeds, and future revenue bonds. As indicated in the plan of finance, the Port anticipates issuing revenue bonds in 2014 to fund a number of projects. Financial Analysis and Summary CIP Category Renewal/Enhancement Project Type Security Risk adjusted discount rate N/A Key risk factors N/A Project cost for analysis $22,000,000 Business Unit (BU) Terminal baggage system Effect on business performance NOI after depreciation will increase IRR/NPV N/A CPE Impact Will increase CPE by $.10 in 2015 Lifecycle Cost and Savings The renovation of existing baggage systems in this project will decrease the risk of expensive equipment replacements due to operationally challenging unforeseen failures of aging equipment. The renovations will increase system size (conveyor length, etc.) and increase availability (operational up time as a result of newer components with less risk of failure), but the renovations will not appreciably decrease the number of preventive maintenance activities performed on the systems. COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer December 10, 2013 Page 6 of 7 STRATEGIES AND OBJECTIVES The anticipated growth in domestic and international enplanements will require additional capacity in baggage processing for all airlines. This project supports the Port's Century Agenda objective of meeting the region's air transportation needs at Sea-TacAirport for the next 25 years. This project also supports the Aviation Division's strategy of anticipating and meeting the needs of our tenants, passengers, and the region's economy. TRIPLE BOTTOM LINE Economic Development This project will increase the long-term ability of the Airport to serve AAG's future growth. This project cost effectively meets AAG's needs by upgrading existing systems rather than building entirely new systems. Environmental Responsibility This project demonstrates environmental sustainability by improving existing Port assets to extend their life, installing variable frequency drives and higher efficiency components when replacing equipment, and better utilizing existing resources. Community Benefits Long-term vitality of the Airport benefits the regional economy, the local environment and nearby communities. The Office of Social Responsibility (OSR) will provide support in determining small business participation, as described in Resolution No. 3618. ALTERNATIVES AND IMPLICATIONS CONSIDERED Alternative 1) Fully renovate or replace significant portions of the existing C88 and C92 systems to provide a newer system with adequate capacity for processing 100% of the AAG's future forecasted check-baggage volumes. Future baggage recapitalization projects are expected to replace C88 and possibly portions of C92 prior to their expected life and full depreciation making this alternative very expensive. This is not the recommended alternative. Alternative 2) Modify the existing C88 and C92 systems to replace all sort-piers with eight recirculating makeup carousels to handle AAG's increase flight schedule and baggage loads. The infrastructure costs and the impacts to Alaska's operations due to the downtime required to implement this alternative are not desirable. This is not the recommended alternative. Alternative 3) Renovate and upgrade existing systems to relocate much, but not all, of AAG's make-up to the North Satellite existing C88 system, while maintaining a split operation with some baggage make-up remaining on the Concourse D C92 system. This option balances the highest operational efficiency while minimizing impacts to system failures for the investment. This is the recommended alternative. ATTACHMENTS TO THIS REQUEST Airport Overall Baggage System Map COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer December 10, 2013 Page 7 of 7 PREVIOUS COMMISSION ACTIONS OR BRIEFINGS September 24, 2013 Commission Quarterly Update for NorthSTAR Program. September 24, 2013 The Commission authorized staff to: (1) advertise, award, and execute a major public works contract for the construction of the North Satellite Refurbish Baggage System Project; and (2) authorize the use of Port crews. July12, 2013 The Commission was notified of 1 added scope item and 2 scope items moved into the scope that were previously identified as suggested scope in the November 6, 2012 Commission Memo. June 25, 2013 Commission Quarterly Update for NorthSTAR Program. March 26, 2013 Commission Quarterly Update for NorthSTAR Program. November 6, 2012 The Commission authorized staff to prepare design documents and use Port crews to support site investigation needed to develop the contract documents, in the amount of $3,760,000. April 10, 2012 - The Commission authorized the execution of consultant contracts for design and construction support services; program management services; and the completion of site surveys for regulated materials management, in the amount of $1,200,000.
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