PORT OF SEATTLE
MEMORANDUM

COMMISSION AGENDA            Item No.     5d

ACTION ITEM            Date of Meeting   April 27, 2010

DATE:   April 7, 2010

TO:     Tay Yoshitani, Chief Executive Officer

FROM:   Dakota Chamberlain, Director, Seaport Proj ct ManagemeW
Mark Longridge, Capital Project Manager21"

SUBJECT: Project budget increase for barge layberth improvements at Terminal 25,
Pier 28 and Terminal 46

Amount of This Request:  $38,000     Source of Funds:  Expense project

State and Local Taxes Paid:  $10,700 (Total Project)

ACTION REQUESTED:

Request Commission authorization for the Chief Executive Ofcer to increase the amount
authorized for this project by $38,000 to pay additional in-house and contractor costs to
complete the barge layberth improvements at Terminal 25, Pier 28 and Terminal 46, for a
total authorization of $338,000.

SYNOPSIS:

The Commission previously authorized $300,000 for construction based on average allocated
overhead rates for each department involved. For this project the actual allocated overhead
rates for the months of construction activity were signicantly above average, resulting in the
need for an additional budget request as detailed in the following table:

Original Estimate   Current Estimate   $ Variance  % Variance
Direct Costs            242,000.00       246,000.00   $ 4,000.00
58,000.00     92,000.00  $ 34,000.00
,
Total               300,000.00      338,000.00  $ 38,000.00   12.7%

COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
April 7, 2010
Page 2 of 5

ADDITIONAL BACKGROUND:

Allocated overhead is calculated as a percentage of some or all of the direct costs
incurred on work projects. While the specific calculation varies by department the
principle is the same. All overhead costs such as vehicles, rent, ofce equipment and
supplies, staff training and other costs of operation are spread throughout the direct
charges to projects. Some departments spread these costs over all project costs (such as
PCS), and others over only the salary and consultant costs (such as Project Management)

In planning and budgeting for this work staff had estimated an assumed allocated
overhead rate for Port Construction Services (PCS) and Marine Maintenance staff based
on a historical average for these departments. In reality, the overhead rates for the
months of construction activity and billing were substantially higher than these assumed
rates as shown in the following table:



Marine Maintenance

The high variability of these rates from month to month can make accurate estimating
and forecasting particularly difficult for smaller projects with limited construction
duration such as the Barge Layberth projects.

Project expenditures to date are $251,925. Actual construction costs for the work were
also above budgeted amounts, and had the overhead rates remained at the predicted 18%
the project is estimated to have been completed for $306,230.

PROJECT JUSTIFICATION:

This project includes fender pile and site improvements at three Port facilities to restore
barge layberth capacity displaced by the activation of cruise operations at Terminal 91. It
provides an additional 1,100 linear feet of available barge moorage in the harbor.

PROJECT SCOPE OF WORK AND SCHEDULE:

Scope of Work:

0  The scope at Terminal 25 included fencing and site improvements to allow secure barge
layberth for MTSA compliant barges.

COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
April 7, 2010
Page 3 of 5

o  The scope at Pier 28 included repair to eight fender piles originally identied in the
condition survey, plus replacement of two additional broken piles identied since the
survey, and associated chock, waler and walkway repairs to upgrade the condition of the
berth, and to improve safety for line handling and vessel berthing operations.

0  The scope at Terminal 46 included replacement of two fender piling at the NE corner of
the terminal to provide protection of the pier structure and replacement of the ladder used
by Puget Sound Pilots.

Schedule:
0  All work for these projects has been completed and the berths have been returned to
service as of February 2, 2010. Final billing and payment for all contracted work is
pending receipt and review of contractor invoices and backup documentation.

FINANCIAL IMPLICATIONS:

Budget/Authorization Summary

$300,000
$300,000
$38,000
$338,000

$338,000

Pro'ect Cost Breakdown
$265300
$46,000
$16,000
$10,700
$338,000

Source of Funds

This project was included in the 2009 Operating Budget in the amount of $250,000. Due to
changes in the construction schedule, this project was not completed in 2009. The actual
2008/2009 project costs were $129,000, and the actual 2010 project costs are expected to be
$209,000. The 2010 portion of this project will create an unfavorable operating expense
variance. Seaport Division will strive to offset this incremental operating expense with
savings in other operating expenses.

This project will be funded from the general fund.

COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
April 7, 2010
Page 4 of 5

Financial Analysis Summary:
CIP Cate_or   Renewal/Enhancement
Pro'ect T e   Renewal and Relacement

Discount rate

factors

anal sis

(BU)
Effect on      The estimated project costs will have the following effect on N01.
business      Depreciation Expense will not be impacted by this project as this repair is an
performance operating expense.
2008 m 2010 TOTAL
Incremental Expense        (17,000)   (112,000)   (209,000)   (338,000)
NOI                ($17,000)  ($112,000)  ($209,000)  ($338,000)
Depreciation - - -
NOI After Depreciation  (17,000) (112,000) (209,000) (338,000)

STRATEGIC OBJECTIVES:
0  This work is aligned with the Industrial Moorage Initiative as it is intended to preserve
and expand berth facilities in the harbor to provide for a vibrant Seaport that adequately
serves the requirements of all essential sectors of the maritime community.

ALTERNATIVES CONSIDERED AND THEIR INIPLICATIONS:

1.  Do nothing. This alternative could result in the non-payment of invoices and
reimbursement of in-house costs. This action would not be consistent with Port project
accounting procedures and policies. This is not the recommended alternative.
2.  Increase the authorized amount to $338,000 for the projected costs to complete the
project. The requested increased authorization addresses actual expenditures and
projected costs through project closeout. This is the recommended alternative.

COMMISSION AGENDA
Tay Yoshitani, Chief Executive Ofcer
April 7, 2010
Page 5 of 5

PREVIOUS COMMISSION ACTIONS OR BRIEFINGS:

o  Modication of scope for barge layberth improvements at Terminal 25, Pier 28 and
Terminal 46, November 10, 2009

0  Authorization for construction of barge layberth improvements at Terminal 25, Pier
28 and Terminal 46, March 10, 2009

o  Authorization for design and permitting of barge layberth improvements at Terminal
25, Pier 28 and Terminal 46, October 14, 2008
0  Policy and Staff Briefing - Industrial Moorage Initiative, June 3, 2008