5d Memo rev
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
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