Agenda Item No. 10a_attach_8
Meeting Date: January 24, 2023           December 13, 2022

Delegations of Responsibility and Authority

    Table below is from 2020 Port Audit Team Report:
Management Response to Audit Suggestion - Comparator Agencies
AGENCY           DELEGATION                  5 YEAR CAPITAL BUDGET
King County           No limit – within bi-annual budget   $5 B
City Seattle              No limit – within bi-annual budget    $5.2 B
UW           15,000,000              $3.7 B
Sound Transit          5,000,000                           $14 B*
Port of Seattle           300,000                               $4.4 B^ plus SAMP in 10 -year horizon
NWSA            300,000                   $440 M
*Per Sound Transit Development Plan (2020-2025) from 2019 Annual Report, adopted by the Board of Directors on September 24, 2020
^ Per 2022 Port Plan of Finance.
From this scan it is clear the Port delegations are outdated .

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  Delegations – Audit Team, 18 Month Scan Results
•  Earlier test of a 1-1/2 years period demonstrates the delegation system is
performing well and as designed.
•  While delegations can be complex in nature, audit testing demonstrates guidance
documents are clearly laid out and are being followed by staff
•  An efficiency opportunity was identified.
Port Staff Survey – Business Intelligence / Delegations Team
•  Aviation, Maritime, Econ. Dev., Corporate Services - over 200 responses,
achieved statistical reliability, 80-page report echoed efficiency need.
•  Report Summary indicated important Commission items bureaucratically
overwhelmed by operational and functional items.

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       Inflation Erosion upon Delegation Threshold
The delegation was last updated 13 years ago in 2009 from $200k to $300k
Port Delegations       2009           2021 – Purchasing Power   Percentage Decrease
All Delegations          $300,000       $213,772                   28.7%
Capital Delegations     $300,000       $158,242                   47.3%
Port Budgets          2009 Value     2022 Value                Percentage Increase
Operating Revenue     $486.4 million  $766.9 million            36.6%
Expense Budget       $277.9 million  $499.1 million            44.3%
74.6% (not including
Capital 5-year forecast  $1.123 billion   $4.435 billion
SAMP)
Delegation buying power is down, while Port and its budgets are up. Situation is out of balance.
Creates inefficiency and robs Commission and Leaders of valuable policy and strategy time.
Our proposal creates efficiency and maintains transparency

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       3 YEAR SCAN – Commission Efficiency Opportunity
332 monetary items of 664 items over 65 meetings
$4,500                                                                                                                       100
Efficiency Opportunity:
$4,000                                                           80/20 Rule: Focus on the                               90
94                      Vital 20% for Commission
Action                                           80
$3,500
83                                                                       $ 3,700
70
$3,000                                                  72
60
$2,500
50
$2,000                                                                                                   47  47
40
$1,500
30
2525
25             2323
$1,000                                                  23                24
20
$500                              19            17             8 8            12
9
9                                   10
5
6
$230
0              $42            $149                           $95            $108                              0
0-1M         1M-2.5M       2.5M-5M       5M-7.5M       7.5M-10M        >10M
Commission Approval Actions
$ Value of actions          Efficiency Opportunity                            Delegations in ED Remarks
Public Session Necessary

     Raising ED Delegation Level from $300k to $ 5 - 10 mil increases efficiency
for Port operations, while allowing more commission time to focus on
policy, community impact, and high - cost programs
$4,500                                                                                                                       100
$4,000                                                                                                                       90
94
80
$3,500
83                                                                        $ 3,700
70
$3,000
72
60
$2,500                                                                    Recommend
$5, $7.5, or $10 mil                             50
$2,000                                                                       Delegation               47  47
40
$1,500
30
$1,000                                                                    24
20
12
$500                                                                                                             10
0              $42            $149           $230            $95            $108                              0
0-1M         1M-2.5M       2.5M-5M       5M-7.5M       7.5M-10M        >10M
Commission Approval Actions
$ Value of actions

 Benefits for Commission to Raising Delegation Level
•   Eliminates clogging calendar by low priority Commission Action Items.
•   Allows added time for the many competing pressures upon Commissioners.
•   Allows more focus time for Commissioners on high priority issues such as: policy, strategy,
business, community related items, workforce development, apprenticeship, WMBE and small
business, transportation, community and social issues, etc.
•   Increases time for Commissioner Committee work and areas of interest.
•   Allows time for more in-depth check-in briefings for ongoing initiatives.
Benefits for ED and Port Staff
•   Allows ED’s budgeted priorities to receive more time and effort.
•   Enables the ED, Executive Leaders, and Port employees to focus on the most vital issues.
•   Century Agenda Goal to be Efficient Agency - Saves Time and Money
•   Equivalent to cost savings of 6-8 FTE’s that could be redeployed to greater value work during this
era of FTE losses and hiring shortages
Benefits to Business Partners and Community
•   Saves up to 8 weeks of processing for certain small and large businesses partnerships
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           Estimated Financial and Time Savings
•   Total estimated savings is approximately 16,600 hours per year which is conservatively equivalent to
a range of 6-8 FTEs.
Current Model -        New Model -
estimate              estimate
Commission Actions – Based on average from     249                   83
2018-2021
Estimated Staff hrs. per transaction                81                       43
Average employee staff hour cost                 $134                   $110
•   Key Factors
– Raising the delegation from 300k to 10M reduces the number of actions per year
– Meeting time is reduced 55% in the new model and drafting time is reduced 30%
•  The new process lends itself to shorter meetings
•  The new drafting process requires less detailed preparation and public quality documents
– The shorter meetings of the new process change the mix of staff hours resulting in an overall lower per hour
cost.

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     Illustrative Split of Future Actions up to Delegation
ED Delegation:          ED Report: Highlight     Policy and Strategy votes in
Public Session:
Applications software    in Commission           Joint Tourism Marketing
Buy Deicer              Meeting:                ILA with City of Seattle, partner
cities, WA State, Tribes
IDIQ solicitations         Train and Escalator
FAA Sound Insulation Program
maintenance contracts
Purchase trash cans                               in SeaTac and Des Moines
5-year trash               Settlement agreements
Initiate Design & Sign    compacting agreement    Workforce, WMBE, etc.
Construction                                     Land, major leases, ADR,
contracts                PSE Utility Agreement     Community Engagement, EDI,
Proclamations, etc.
Tenant utility work       Accept shore-power
Annual Budget
grant                    Huge Aviation Projects
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      Illustrative View of Current ED $300k Delegation
Current Equivalent Time the ED Can Run the Port
Current Buying Power
Average Spend per      of 2009 $300k      Average Time ED
Budget                 2021 Value      Business Days/ Year     Business Hour         Delegation       Can Run the Port
Expense                      $423.4M                261           $202,778             $213,772          63 Minutes
Capital                           $536.6M                    261              $256,992               $158,242            37 Minutes
What Would Current Delegation be if ED Could Run the Port for a Whole Day?
Delegation Level
Budget                8 Hour Day           Divide By         Increase Factor        Buying Power        to Run 1 Day
Expense                  480 Minutes                 63                7.6x             $213,772              $1.6M
Capital                       480 Minutes                    37                    13x               $158,242                 $2.1M
Should ED have Enough Delegation to Run the Port for 1 Day or 1 Week?
Yes – we recommended $10 million option, Governance Committee concurred

   Legal changes to the General Delegations and
general updates throughout the document
•  Removed outdated references and language not necessary to the delegation that
may be updated separately in the future
•  Updated language related to permits, mitigation credits, non-disclosure agreements,
restrictive covenants and hold harmless agreements
•  Added back insurance and surplus delegations from previous delegations
•  Updated Definitions, including Interlocal Agreements and Projects, while removing
definitions that are no longer referenced in the delegation
•  Added delegation for agreements that are not covered by any other specific
delegation that promote operational or logistical efficiency, and do not meet the
definition of Interlocal Agreements, such as reimbursement agreements with TSA,
CBP or other public or private entities
•  Updated Monetary Limits to align with other public entities and inflation since 2009

    Updates to Monetary Limits
Monetary limits                    2009                     2022
Capital Projects and Contracts        $300,000                   $10,000,000
Airport Tenant Reimbursement       $200,000                 $10,000,000
Utilization of Port Crews               $300,000                   $10,000,000
Street Vacations                      $300,000                   $10,000,000
Budget Transfers                     $300,000                  $10,000,000
Preliminary Work                   $300,000                 $2,000,000
Critical Work                          $500,000                   $15,000,000
Claims and Settlements              $300,000                  $1,000,000
Real Estate Agreements              $300,000                  $1,000,000

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          Transparency in Public Session in 2023
Proposed Agenda                            Public Agenda Item 8c
1      Call to Order                                              Category of    Reference  Description              Category
2      Executive Session                                          Approval      Numbers                           Amount
3      Approval of the Agenda
4      Special Orders of the Day                                    Real Property   O013       4-year lease to XYZ company     $670,985
Agreements
5      Executive Director’s Report, including highlights of
delegation use above
6      Committee Reports
Projects         0008         PCS project - install airline       $4,000,000
7      Public Comment                                                                   ticket kiosks
8      Consent Agenda                                                         0012       Maritime project - improve
8a Approval of Minutes
8b Approval of Claims & Obligations                                                             T91 dock                      $6,904,380
8c Listing of monthly delegation use >$2.5 mil,                      Contract and     0009         Aviation signage for new        $1,000,000
two months in arrears                                        Procurement                 passenger flow
9      Unfinished Business                                        Administration  0011       Tourism agreement with City   $2,245,672
10     New Business Items                                                                of Seattle
11    Presentations & Staff Reports
Legal            0010         Settlement Agreement            $380,000
12    Questions on Referral to Committee & Closing                    Administration
Comments
13    Adjournment                                              Other         0014       Non-profit Agreement         $452,340
(Commission briefed)
Suggest Audit process within 18 months, and when               Grand Total                                        $17,653,377
working well, then sunset the public monthly report

      Work Flow: Requests for ED Signature Approval
APPROVAL FLOW OF REQUESTS:         APPROVAL QUESTIONS AND CHECKS for ELT and COO:
1.  Subject Matter Experts Pull Template
from Executive SharePoint Site              Is this request of high Commissioner interest ?         Yes,  No,  NA
Is this of high community interest ?                        Yes,   No,  NA
2.  Select Approval Type from drop-down        Is this a potential Commission Policy Item ?             Yes,  No,  NA
3.  Yes or No clicks through delegation           Is this a potential Commission or Ed Strategic Item ?    Yes,  No,  NA
4.  Fill out approval form with fewer
attachments than Comm. process                External Relations check     Yes, No, NA
5.  Send through Manager to ELT Member              Finance check                Yes,  No, NA
Legal check                   Yes,  No, NA
for Approval                                      Procurement check          Yes, No, NA
6.  ELT Sends to COO and Exec. Office                   OEDI check                  Yes,  No, NA
7.  COO Review, Checks, and Phone Calls               Executive COS check          Yes,  No, NA
8.  Recommendation to ED                              Commission COS check       Yes,  No, NA
9.  ED Decision                                           Decision Record Notes from Discussions:
Saves XXX – YYY FTE’s                           Recommendation to Executive Director:
Approve Request                                 Yes, No, NA
Move Request to Commission Public Session          Yes, No, NA
Add Commission & Public Notification in ED Remarks    Yes, No, NA
Suggest Audit Team check process within
24 months, and then sunset                   Add to ED 2:2:1 discussion list                         Yes, No, NA
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                                                  Infrastructure
Regulatory
Ecosystem
Provides Boundaries
and Guidance



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                                               .

APPENDIX

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       Updates to the Real Estate Delegations
Existing:                                    Revised:
•    For leases and other use agreements, $300,000 limit for     •    $1,000,000 limit for specific, noncontingent monetary
lease reimbursement or payments, and five years or less.       payments or reimbursements, and five years or less.
•    For amendments over five years, delegation included a      •    Amendments for leases over five years only delegated if term,
$300,000 limit and “substantive” provisions remain             rental rates, environmental provisions are unchanged, any
unchanged.                                             square footage changes are less than 10%, security deposit is
not decreased, and cumulative noncontingent monetary
•    Easements or use agreements of Port property were              obligations do not exceed $1,000,000.
delegated if they related to or benefit the Port’s             •   Easements are delegated if they do not deprive the Port of
operations and didn’t require any new financial                 substantial use of the property or are less than 1000 square
obligation.                                                        feet, and monetary obligations do not exceed $1,000,000.
•    Leasing, easements or otherwise using the property of      •    Leasing, easements or otherwise using the property of others
others was limited to five years and less than $300,000.         is delegated so long as payments are less than $1,000,000,
with no duration limit.

           Updates to Legal Delegations
Legal                     2009                  2022
Claims and Settlements        <$300,000                  <$1,000,000
Reporting requirements       Quarterly/As issues arise/None    Annually
Updated and clarified language throughout the section, including the supervision of
legal services; the retention of counsel and experts, including an update to the
definition of “litigation” to limit the delegated authority to retain an attorney to
represent an individual employee or commissioner to litigation matters, but not
allow such retention for responding to a Port inquiry about workplace conduct or
ethics; and the standards for settling litigation and claims.

             Updates to Project Delegations
Added delegation for agreements that are not covered by any other specific
delegation but are less than $10 Million dollars and promote operational or
logistical efficiency
– Covers exchange of goods/services with any public or private entity, such as
reimbursement agreements with entities like TSA/CBP, and MOAs and MOUs with other
public and private entities that do not meet the definition of Interlocal Agreements
– All Interlocal Agreements will continue to require Commission approval
Capital                          2009                   2022
Delegation                     $300,000              $10,000,000
Airport Tenant Reimbursement  $200,000              $10,000,000
Utilization of Port Crews          $300,000                $10,000,000

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       Updates to Project Delegations – Continued
– Project is now a defined term including more than public works.
– Preliminary work on projects over $10 Million is allowable up to $2M
with an expanded definition
– Expand Project Changes section
• Generally, changes are allowed if within approved project budget
• Remove 10% memos and 60-day memos
– Remove Bid irregularities section, Alternative Public Works contract
delivery methods, Reporting
– Updated threshold for Critical Work from $500k to $15 Million for
work requiring immediate action to avoid significant adverse
consequences to public health, safety or property

               Boundaries and Guidelines
US:                   WA:                   Region:
•   NEPA                    •   SEPA                     •  PSRC
•   Labor - Davis Bacon    •   L&I Prevailing Wage   •  Tribal and agency
•   Uniform Bldg.          •   RCW’s & CPARB           input to permits
Codes
•   FAA                      •   Seismic Standards
•   AIA, ASTM, ASCE       •   Round Tables

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               Boundaries and Guidelines

MUNICIPAL:         PORT POLICIES:        PORT ADMINISTRATION:
•   Land Use Codes      •   Century Agenda       •  Procurement, Contract
•   Zoning Codes         •   Policy Committees       type to best fit project
•   Building Codes       •   Initiatives: E&S, Art,  •  Tenant Guidelines
•   Fire Codes                Workforce, W/MBE,   •  Monthly Cost Roll-ups
etc.                     •  Delegation of Authority
•   Internal Audit
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                  Boundaries and Guidelines,
Port Capital Administration Controls
ENGINEERING:            SAFETY & SURVEY:         CONSTRUCTION:
•   Master Specifications             •   Port Datums and Controls        •   Notify of CO’s with large
dollar or time
•   Design independent checks      •   4 crews know AV & MD
•   Change orders by type
•   PE encouraged                     •   Understand FAA needs
•   Nexus System
•   Involve maintenance              •   GIS for new                         •   CAF’s for operational
•   Asset work with F&I & MD       •   Data ranks for old                     interface & shutdowns
•   Lessons Learned with PMs       •   OSHA to L&I-WISHA               •   CM’s, RE’s, Daily Inspectors
•   PPE requirements                 •   PLA, Apprenticeship, PH
•   Safety specs and manual         •   Notifications

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             Boundaries and Guidelines, Port Capital
Administration Controls
MD PROJECT MANAGEMENT      AV PROJECT MANAGEMENT
•   All PM's use standard tools for     •   Two estimates for mega projects by
budget tracking & updates           30%
•   Baselines set at 30% and at         •   2020 lessons learned improvement
contract award for monitoring     •  Investment Committee (IC) changes
•   Partnership with finance
•   15% project definition before IC
regarding what costs goes into
plan of finance in October            approval
•   Discretionary changes pre-approval
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  Management Response - Values and Objectives for Staff Approach
Values:
•  Generate more Commissioner time for policy, strategies, and mission
priorities, while delegating lesser risk and operational items to ED.
•  Find transparent means to assure Commission awareness and
involvement commensurate with delegation: quarterly briefs,
commission committee work, public action items and briefings, monthly
reports, dashboards, 1:1’s, ED briefs, and other means.
Objectives:
•  Find best balance for efficient delegation level(s) while ensuring
transparency and governance that best matches the Port’s Business.
•  Efficiency for Commission, staff and business/community partners.
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       The Choice – Comparing Efficiency of Alternatives
About ½ (334 of 664) of all items that reach public session involve financial authorizations
Delegation    Who Approves        Commission     Dollar        Commission   Efficiency Benefit
Level                                Reviews Dollar   Percent       Reviews
Value                         Policy Items
If $300,000    Commission Action    $4.4 B            100%          100%          Baseline – Status Quo – Zero
(baseline)
Executive Director                         0%
If $5 mil        Commission Action     $3.9 B             90%             100%           Improved Commission time for
policy, strategy, committees
Executive Director                        10%                          Improved Staff Efficiency
If $7.5 mil      Commission Action     $3.8 B             88%             100%           More Commission time for
policy, strategy, committees
Executive Director                        12%                          More Staff Efficiency
If $10 mil       Commission Action     $3.7 B             85.6%          100%           Most Commission time for
policy, strategy, committees
Executive Director                        14.4 %                        Most Staff Efficiency
NOTE: The percentage difference between delegation levels is minor (approximately 2% of spend).
In addition, the Commission approves the annual budget, and then re-approves items through the year.
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   Port Staff Survey and 3-Year Public Action Study Facts
•  Survey widely agreed with Audit Team’s suggestion about efficiency.
•  High survey response produced statistically significant results.
•  Study indicated %’s by category over 3 years of public session:
– Policy Items – 23% (less than one-quarter of all public session items)
– Real Estate, Leasing, Concession Agreements – 6%
– Briefings - 11%
– Purchases for operational and capital – 13%
– Consulting Agreements & amendments – 18%
– Design – 11%
– Various Capital Improvement items – 20%
– Other – 10%+ (21 categories that overlap, thus add up beyond 100%)
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                 Port Delegation’s History
•  1994 – Resolution 3181 passed setting Delegation value to $200k
•  2009 – Resolution 3628 passed increasing Delegation value to $300k
•  2016 – NWSA formation on August 4th
•  2017 – Study conducted on Commission Memo processing time
•  2018 – Staffing Process improvement study conducted by KMPG
•  2020 – Delegation of Authority internal audit
•  2021 – Project Team Formed
•  2021 – Port Delegation Survey distributed Port-Wide, statistically
significant response level, and results identified.

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      Efficiency Opportunity – 2017 Internal Study re: Commission Memos
$6 million project to modernize HVAC required 41 revisions by 15 persons
Instead focus on Higher Value Policy Work in Public Session




Ensuring Memos & PowerPoints are thorough and accurate for public session requires extensive staff hours
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EndEnd

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