8n. Memo
C Concourse Expansion Budget Authorization and Transfer
COMMISSION AGENDA MEMORANDUM Item No. 8n ACTION ITEM Date of Meeting April 26, 2022 DATE: April 14, 2022 TO: Stephen P. Metruck, Executive Director FROM: Wayne Grotheer, Director Aviation Project Management Dawn Hunter, Interim Chief Operating Officer SUBJECT: C Concourse Expansion Budget Authorization and Transfer (CIP# C800845) Amount of this request: $15,500,000 Total estimated project cost: $324,500,000 ACTION REQUESTED Request Commission authorization for the Executive Director to (1) authorize up to an additional $15,500,000 of the C Concourse Expansion budget to fund baggage transfer line work, (2) transfer up to $15,500,000 in funds from the C Concourse Expansion Project (CIP# C800845) to the Baggage Optimization Project (CIP# C800612), (3) request authorization to execute a Project Labor Agreement. EXECUTIVE SUMMARY The C Concourse Building Expansion (CCE) was created to address shortfalls in Airport Dining and Retail (ADR) capacity, public amenities, office space, and premium lounge space. The project is located at the intersection of Concourses C and D and will add four floors to the existing three floor structure. At this time, the project is programmed to provide additional food and beverage space, retail space, and lounge space. The public amenities being provided include new restrooms, a meditation room, a sensory room, nursing suites, and an "outdoor" public lookout. This authorization will transfer funds from the C Concourse Expansion to the Baggage Optimization Project (BOP) for the design, construction, and phasing of baggage transfer lines that are in the C Concourse Expansion footprint. Template revised January 10, 2019. COMMISSION AGENDA Action Item No. __8n__ Page 2 of 6 Meeting Date: April 26, 2022 JUSTIFICATION The baggage system is a complicated system that requires specialized experience to design, construct, and operate. Outages or impacts to one part of the system can have airport wide effects. Because of the complexity and interdependency, the C Concourse Expansion project has been working with the Baggage Optimization team to coordinate the relocation and phasing of transfer lines that are inside of the CCE construction footprint. During these partnering sessions it was determined that the most efficient way of executing the transfer line relocations is for the BOP team to manage this scope of work. The Baggage Optimization Project has the expertise required to execute this work expeditiously with minimal disruptions to the larger baggage system. Transferring this scope and budget would enable the CCE team to start enabling work in Quarter 2 of 2022 since the BOP team would be able to leverage their knowledge and resources to remove and relocate transfer lines much more quickly than the CCE team can accomplish. The funds to be transferred are over and above what was originally estimated and scoped. The original scope of the CCE project was to relocate exiting transfer lines and open them for use at the end of the project. Since the project was initially conceived, the transfer line requirements have changed. The project will now provide at least one transfer line for use by the airlines for the duration of the project. This will necessitate complicated phasing and the demolition and rebuilding of portions of the transfer lines multiple times. Because of this, the project will be utilizing approximately two thirds of the program contingency to cover the additional cost. At a later date, the project team may return to Commission to authorize a budget increase that will replenish the program contingency. Diversity in Contracting Baggage Optimization Phase 2 has a WMBE goal of 2%. This is due to the nature of the scope of work primarily being baggage conveyors and limited building work. DETAILS The preliminary scope of work to be executed by the Baggage Optimization Project includes: (1) Temporary removal of the C94 transfer line (2) Temporary reinstall of the C94 transfer line (3) Permanent removal of the TX7 transfer line (4) Design and construction of a new D1 transfer line (5) Feasibility review, design and construction of a new permanent C94 configuration Schedule The following schedule represents the overall C Concourse Expansion Project: Template revised June 27, 2019 (Diversity in Contracting). COMMISSION AGENDA Action Item No. __8n__ Page 3 of 6 Meeting Date: April 26, 2022 Commission design authorization 2020 Quarter 2 Design start 2021 Quarter 1 Commission construction authorization early 2021 Quarter 2 work packages Construction start early work packages 2022 Quarter 2 Commission construction authorization 2022 Quarter 4 In-use date 2027 Quarter 2 This Request Total Project Cost Breakdown Design $2,100,000 $51,000,000 Construction $13,400,000 $273,500,000 Total $15,500,000 $324,500,000 ALTERNATIVES AND IMPLICATIONS CONSIDERED Alternative 1 Have the C Concourse Expansion Project perform the design and construction of the baggage transfer lines Cost Implications: Minimum of $15,500,000 Pros: (1) Does not burden Baggage Optimization project with additional C Concourse Expansion scope. (2) No budget transfer required. Cons: (1) Risk of cost and schedule premiums since the C Concourse Expansion does not have the applicable expertise to manage this portion of work. (2) Increased potential for the C Concourse Expansion baggage work to cause issues to the larger baggage system. This is not the recommended alternative. Alternative 2 Transfer funds from the C Concourse Expansion to the Baggage Optimization Project Cost Implications: $15,500,000 Pros: (1) Baggage Optimization has the correct skillset and experience to perform the scope of work quickly and correctly. Template revised June 27, 2019 (Diversity in Contracting). COMMISSION AGENDA Action Item No. __8n__ Page 4 of 6 Meeting Date: April 26, 2022 (2) Baggage Optimization understands the larger baggage systems and how and where to tie into the system. Cons: (1) Both projects need close coordination for the phasing and timing to be successful. There is a potential that one program could delay the other. (2) Depletes program contingency. This is the recommended alternative. FINANCIAL IMPLICATIONS Cost Estimate/Authorization Summary Capital Expense Total COST ESTIMATE Original estimate $331,776,000 $8,224,000 $340,000,000 Transfer to BOP ($15,500,000) $0 ($15,500,000) Revised Estimate $316,276,000 $8,224,000 $324,500,000 AUTHORIZATION Previous authorizations $86,174,000 $7,926,000 $94,100,000 Current request for authorization $15,500,000 $0 $15,500,000 (Concourse C Expansion) Total Auth, including this request $101,674,000 $7,926,000 $109,600,000 (Concourse CExpansion) Transfer of Authorization to BOP ($15,500,000) $0 ($15,500,000) Remaining amount to be authorized $230,102,000 $298,000 $230,400,000 (Concourse C Expansion) Template revised June 27, 2019 (Diversity in Contracting). COMMISSION AGENDA Action Item No. __8n__ Page 5 of 6 Meeting Date: April 26, 2022 Annual Budget Status and Source of Funds This project is included in the 2022-2026 capital budget and plan of finance with a budget of $340,000,000. The capital budget decrease of $8,224,000 would be transferred to the Aeronautical Allowance CIP C800753. The expense budget would be included in the Aviation Division's annual operating expense budget. The funding sources will include the Airport Development Fund and future revenue bonds. This project was approved by airlines through a Majority-In-Interest (MII) vote in April 2021. Financial Analysis and Summary Project cost for analysis $340,000,000* Business Unit (BU) Terminal Building Effect on business performance NOI after depreciation will increase due to inclusion of (NOI after depreciation) capital (and operating) costs in airline rate base. IRR/NPV (if relevant) PV (40 years) for non-aero $44.5 million CPE Impact $0.68 in 2028 * Financial implication for this project has not changed, but the $15.5 million is being transferred to the Baggage Optimization project. Future Revenues and Expenses (Total cost of ownership) As presented on April 27, 2021, when completed the project will generate incremental nonairline revenues of $12 million by 2028 and over $15 million by 2031. Aeronautical revenues will also increase as the allocated operating and capital costs (debt service) are included in airline terminal rate base. ATTACHMENTS TO THIS REQUEST (1) Presentation PREVIOUS COMMISSION ACTIONS OR BRIEFINGS April 12, 2022 - C Concourse Expansion Briefing March 8, 2022 Authorization to execute a Service Agreement for a third-party Commissioning Agent April 27, 2021 C1 Building Project Additional Design and General Contractor/Construction Manager Early Work Authorization Special Inspection and Testing Authorization May 26, 2020 C1 Building Project Design and General Contractor/Construction Manager Authorization March 10, 2020 C1 Building Project Briefing and Introduction June 26, 2018 C1 Building Project Authorization for Planning Funds Template revised June 27, 2019 (Diversity in Contracting). COMMISSION AGENDA Action Item No. __8n__ Page 6 of 6 Meeting Date: April 26, 2022 July 11, 2017 The Commission authorized (1) advertise and execute a construction contract for the Gate C3 Holdroom Expansion project at Seattle-Tacoma International Airport; and (2) use Port crews in executing the project January 26, 2016 The Commission authorized design of an expansion for the existing Gate C3 passenger Holdroom at Seattle-Tacoma International Airport Template revised June 27, 2019 (Diversity in Contracting).
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