PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA STAFF          Item No.     7d 
BRIEFING 
Date of Meeting    April 21, 2009 
DATE:    April 21, 2009 
TO:      Tay Yoshitani, Chief Executive Officer 
FROM:    Ralph Graves, Managing Director, Capital Development 
SUBJECT:  New Port Procedure for Engineer's Estimates 
SYNOPSIS 
Under the Chief Executive Officer's authority, Port staff is proposing a new procedure governing
the Engineer's Estimate. The Engineer's Estimate is prepared when a construction contract is
advertised for bids to assist accomplishing the project within budget and to assess the
contractors' bids. Recent audits and investigations of Port contracting procedures have pointed
out inconsistent and incomplete policy for the development and use of the Engineer's Estimate.
The new procedure is based on State law, Resolution 3605, and best practices of other
government agencies. 
BACKGROUND 
The 2007 State Performance Audit of Port Construction Management identified problems with
the way the Engineer's Estimates were handled in the past, and the 2008 Report to the Special
Investigative Committee by McKay Chadwell PLLC recommended that the Port clarify policies
relating to the Engineer's Estimate and specifically address when an Engineer's Estimate could
be changed. The new procedure was drafted with these criticisms in mind. 
Cost estimates are prepared during the course of project design in order to keep the scope of the
work and the budget aligned. When a project is to be advertised for fixed-price bidding, the
agency prepares an Engineer's Estimate (sometimes called the Government Estimate) "to reflect
the amount that the contracting agency considers fair and reasonable and is willing to pay for
performance of the contemplated work." (USDOT, 2004) To the extent that it takes market
conditions into consideration, the Estimate also has the somewhat contradictory goal of
predicting the winning bid price. Agency practices vary, but generally the Estimate is held
confidential until bid opening. After opening, the lowest acceptable bid is compared to the
Estimate, and the agency decides whether to award the contract.
Washington State Law (RCW 39.04.020) requires that before taking "further action" on a public
works project, the agency shall make plans, specifications and a cost estimate. The law is
unclear as to whether "further action" means advertisement, bid opening or contract award.
Published agency guidelines are either silent on the question of when an Estimate can be changed

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
April 21, 2009 
Page 2 of 4 

or else assert merely that the cost estimate needs to be completed before bid opening. (The Corps 
of Engineers provides procedures for changing the Estimate after bid opening.) The Washington
State Department of Transportation procedure is typical: plans, specification and estimate must
be completed before contract advertisement, but procedures exist and are often used to amend
any or all three prior to bid opening. Similarly, the proposed Port procedure requires all three 
elements to be completed before advertising but allows, with appropriate review and approval,
that Estimate updates can be made up until bid opening. 
Two past Port practices caused problems. Formerly, under a project-wide authorization,
Resolution 3181 allowed the CEO and staff to award a construction contract without
Commission notification or approval in the absence of bid irregularities, one of which was the
low bid exceeding the Engineer's Estimate by 10% or more. This has led to accusations that
staff was tempted to change the Estimate prior to bid opening for the purpose of avoiding
Commission notification. Resolution 3605 removes this situation by requiring all bid opening
results to be notified to Commission prior to award. Further, the proposed procedure requires
notifying Commission if an Engineer's Estimate is changed after contract advertisement. 
The second problem related to publication of the Range of Estimated Cost. As a courtesy to
contractors, agencies include in the advertisement a rough idea of the anticipated value of the
contract, so that prospective bidders can rapidly decide whether the work would be within the
firm's performance capability and bonding capacity. Federal guidelines suggest that the upper
and lower limits of such a Range be far apart, for example "$100,000 to $250,000." The Port has
been publishing much tighter Ranges. For example, when the T-91 Cruise Terminal Engineer's
Estimate was $30 million, the published Range was $28 to 32 million. Besides revealing a fairly
close idea of the Estimate, this practice often resulted in the final Estimate and/or the award price
falling outside the published Range. In the case of the Cruise Terminal project, design changes
and an updated assessment of market conditions led the Estimate to be changed to $38 million,
within 2% of the low bid, but the published Range was never updated. The proposed procedure 
mandates publishing a broad Range and requires the published Range to be updated if the revised
Engineer's Estimate approaches or crosses either limit. 

PROCEDURE DESCRIPTION 
The new procedure may later be incorporated into broader project management or contracting
procedure documents, but in order promptly to resolve questions related to the use of the
Engineer's Estimate in project advertising, it is proposed to be published as Port Procedure
CDD-1. 
The procedure document is attached. It defines terms and specifies the preparation, approval and
handling of the Engineer's Estimate and Range of Estimated Cost. Specific provisions include
the following:

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
April 21, 2009 
Page 3 of 4 
The Engineer's Estimate shall be prepared and approved prior to contract advertisement. 
The Estimate can be changed after advertisement, but changes will be subject to review
and approval similar to the process for amending the plans or specifications. 
The Estimate should take into consideration market conditions, including the anticipated
number of bidders, but for the purpose of establishing a fair and reasonable price, the
Estimate will always assume that at least two bids will be received. 
The published Range of Estimated Cost shall be broad, and it must be amended if the
changed Estimate approaches either the lower or upper limit. 
The Commission will be notified if an Engineer's Estimate is changed after contract
advertisement, and if needed, a new range will be published by addendum to the
advertisement. 
The Engineer's Estimate will remain confidential until bid opening, after which it is
public information. 
Notification to Commission of intent to award a construction contract will include a
complete listing of the Engineer's Estimate and bids received. 
ALTERNATIVES CONSIDERED AND THEIR IMPLICATIONS: 
Alternative 1: Require that the Engineer's Estimate be established at time of advertising and not
changed afterwards. This restriction would deny Port staff and Commission
opportunity to assess the impacts of design and market changes after
advertisement. Staff is unaware of any public agency that follows this restrictive
procedure. It could lead either to project delays or to inflated Estimates. For
these reasons, Alternative 1 is not recommended. 
Alternative 2: Require that the Engineer's Estimate be prepared only prior to bid opening.
Although this relaxed procedure is consistent with the practices of some agencies,
it runs the risk of advertising the work with incomplete information. It may be
inconsistent with State law. For these reasons, Alternative 2 is not recommended. 
Alternative 3: Require that the Engineer's Estimate be prepared and approved along with plans
and specifications prior to advertisement for bids. Allow that the Estimate be
changed, subject to review and approval, if plans or market conditions change.
Provide for updating the published Range of Estimated Cost. This procedure is
consistent with the practice of WSDOT. Alternative 3 is recommended. 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS: 
None

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
April 21, 2009 
Page 4 of 4 
REFERENCES AND OTHER AGENCY POLICIES CONSIDERED: 
U.S. Department of Transportation, Guidelines on Preparing Engineer's Estimate, Bid Reviews
and Evaluation, January 2004. 
Washington State Department of Transportation, Ralph Graves experience and conversations 
with Rick Smith and Alec Williamson, January 2009. 
Oregon Department of Transportation, Interoffice Memo: Management of the Engineer's
Estimate, January 2004. 
King County, Nora Huey experience. 
Federal Acquisition Regulation part 36.203, Defense and Corps of Engineers supplements. 
RCW 39.04.020. 
Port of Seattle Resolution 3605.

ENGINEER'S ESTIMATE
I. PURPOSE: 
The purpose of this document is to provide guidance for the preparation and use
of cost estimates in conjunction with advertising and award of construction
projects. This is one part of the larger process of producing cost estimates and
using them to control and adjust the scope of a project to ensure that cost,
budget and scope achieve the business objectives of the Port while meeting
code and other standards. 
II. DEFINITIONS 
Project Budget: The Project Budget includes all costs for development, including
the Construction Estimate; direct costs; contingencies; art; OCIP; taxes; design;
project management; construction management; administration; environmental,
legal, and permitting; environmental remediation, property acquisition and all
other related project costs, whether performed by Port staff or crews or by
contract. 
Construction Estimate: Estimates of the cost of construction are prepared at
various points along the course of planning and designing a project. The
construction estimate is a prediction of the award price of the construction
contracts and the cost of any materials purchased for the project separately by
the Port. It should take into account all contractor costs, including prevailing
costs of materials and labor as well as mobilization, overhead, profit, risk and
escalation. Port-provided materials are a construction cost that is separated from
the Engineer's Estimate. 
Engineer's Estimate: The Engineer's Estimate is the final construction estimate
for a specific contract established prior to bid opening against which the
contractor bids are compared. 
Market Conditions: Estimates need to reflect the market cost of production
factors such as labor and materials as well as the construction bidding climate.
Estimators adjust the profit element of the cost estimate based on the number of
bidders anticipated for an award and the degree that competition or the lack
thereof is expected to affect the bids submitted. In order that the Engineer's
Estimate establishes a fair and reasonable cost for the work, estimates at the
Port will be prepared assuming that at least two bids will be submitted, even if it
is expected that only one bid will be received. If major components of cost, such
as fuel or steel, are expected to fluctuate during the life of a contract, staff may
consider using cost-price adjustment terms in the contract.

Range of Estimated Cost: At the time of advertisement a cost range is published
in order to give prospective bidders a general idea of the magnitude of the work
and the bonding capacity they would need in order to enter into a contract. 
III. PROCEDURE: 
Port staff will use the following procedures with respect to Engineer's Estimates
and contract advertisement and award: 
1.  Plans, Specifications and Estimate. Prior to the Port advertising a
construction contract for bids, officials delegated by the Director of Capital
Development will certify that complete plans, specifications and an
estimate of cost have been prepared and appropriately approved by
signing the cover sheet of the drawing packages and the Advertisement
for Bids. 
2.  Advertisement. The advertisement for bids on fixed-price contracts will
include a Range of Estimated Cost. The range will bracket the current
construction estimate, and the lower and upper values of the range will
differ by at least a factor of two. 
3.  Adjustments to the Cost Estimate. The project team may adjust the cost
estimate after advertisement in order to take into account most current
design information, changed scope, changed pricing of labor or materials
or changed market conditions. Changes to the cost estimate will be
subject to the same degree of review and approval as post-advertisement
changes to plans or specifications. The Port Executive and Commission
will be notified any time an Engineer's Estimate is changed after
advertisement, and details provided if requested. 
4.  Addendum. If the adjusted cost estimate approaches within 5% of the
upper or lower limit of the published Range of Estimated Cost, then a new
range will be published by addendum to the advertisement. 
5. Engineer's Estimate. Before bid opening the project team will provide to 
CPO the approved final Engineer's Estimate. Prior to the public reading of
the Engineer's Estimate at bid opening, it is confidential. Release of the
Engineer's Estimate to unauthorized personnel is a violation of Port and
contracting ethics and may constitute civil fraud. 
6.  Bid Irregularity. If the lowest responsive bid is more than 10% over the
Engineer's Estimate, then Resolution 3605 requires Commission action
before proceeding with award. 
7.  Award Notification. Notification to Commission of intent to award a
construction contract will include a bid tabulation stating the Engineer's
Estimate and all bids received.





IV. COMMENTS 
See related RCW 39.04.020 and Resolution 3605 

For further information contact Bob Maruska, Engineering or Paul Powell, CPO.