Item No. 8b_ supp
Meeting Date: January 28, 2020
Baggage Optimization
Results of Phase 2 Bids
January 28, 2019

Agenda
Overall Program Purpose & Scope
Airport Growth
Phase 2 Chronology
Phase 2 Bid Results
Phase 2 Budget Increase and Request
Phase 2 Bid Evaluation
Phase 2 Alternatives
Lessons Learned
Commission Request
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Overall Program Purpose
Working with TSA  Safety and Security for travelling public
Optimize outbound baggage system for Airlines and public
Replace aging systems that won't last much longer
Meeting the demands of growing Airlines



Existing 6 separate systems                                Future connected system
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Airport Growth Facts
In the last five years, 10 new airlines added service to SEA.
In 2013, when the project started, the airport served 33 million
passengers.
In 2018, the airport served 49.8 million passengers and processed over
43,000 outbound bags on the busiest day.
Passenger volume has stretched the existing baggage handling system to
capacity.
The current system has 10 miles of conveyor belt, 3,000 motors, and 28
CTX screening machines.
New system must be built within the same space as existing system but
will increase capacity.
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Phase 1



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Phase 2



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Final Configuration



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Phase 2 Chronology  Activities Completed
Commission Briefings regarding potential budget Phase 2 & 3 increases
October 23, 2018  Baggage Optimization Quarter 3 Project Briefing
February 26, 2019  Baggage Optimization Quarter 4 Project Briefing
April 2, 2019  Aviation Committee
April 23, 2019  Baggage Optimization Phase 2 Construction Authorization
Marketed project to bidders
Conducted peer reviews of Phase 2 scope of work and estimates with other airports
June 2019 - Raleigh Durham
June 2019 - San Francisco
November 19, 2019 - Bid opening for low bid
December 3, 2019 - Meeting with Low Bidder and subcontractors
December 5, 2019 - Airline Update
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Phase 2 Bid Results Table
Bid Item          Engineer's       Hensel Phelps    Siemens Logistics
Estimate
Main Terminal
$134,331,000      $266,937,000      $282,407,076
Scope
South Satellite
$ 44,826,000     $ 27,000,000     $ 39,809,375
Scope
Total Bid    $179,157,000       $293,937,000       $322,216,451
Variance                       $114,780,000      $143,059,451
Market Results: The two bids were only 9% apart from each other

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Phase 2 Budget Increase
Estimate with Low Bidder
Estimate at Time of Bid
Cost              Necessary Budget Increase
(November 2019)
(December 2019)
Bid Amount    $179,157,000        $293,937,000        $114,780,000
Tax, Construction
$37,935,200         $67,727,000          $30,791,800
Contingency, Other
Port Oversight Cost     $ 26,160,000          $ 45,588,000          $ 19,428,000
Project Contingency &
Executive Director     $  4,781,000         $  18,423,000         $  13,642,000
Reserve
Total Estimated
Phase 2 Project Cost     $248,033,200        $425,675,000        $177,641,800

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This Budget Request
Current          Estimate at         Requested
Phase
Budget          Completion          Budget
Phase 1    $101,375,000       $101,375,000       $101,375,000
Phase 2    $248,033,200       $425,675,000       $425,675,000
Phase 3    $ 95,641,800     Construction TBD      $13,000,000
(Design Only)
Total    $445,050,000        $527,050,000        $540,050,000
Original Budget for Phase 1 was $135M;
Phase 2 Requested Budget includes a request for $10M of Executive Director Reserve.
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Bid Evaluation
Construction Market:      Competitive automated material handling market.
Five possible bidders  Only two bids.
All bidders requested an additional year. Bids received
Schedule:                 required two shifts over the 4 years. Our estimate
assumed one shift.
Did not adequately predict operating risks, work
Risk and Complexity:       complexities, and inefficiencies that bidders foresaw in the
24/7 operations of a growing airport.
Contractors knew the productivity impact upon their work.
Logistic Inefficiencies:       Everything must be brought in at start of work shift and
taken out at the end of work shift.
Shutdown Requirements:  Contractor must ensure Airline baggage operations never
stops.
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Bid Evaluation
South Satellite vs Main Terminal
The difference between the final estimate and bids is in the risk,
inefficiencies, and working within a live Airport operation

Engineer's Estimate vs Bid:      South Satellite line item came in below
Engineer's Estimate
Scope of Work:                24/7 site access with limited operational
impacts
Risk:                              Significantly less operational risk than the
rest of the project

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Alternatives
Alternative 1  Repackage the design to include Phase 3 and use General
Contractor/Construction Manager (GC/CM).
No guarantee of any bidders, huge bonding requirement, Costs may be higher, 2+ year delay,
impacts major capital projects to improve passenger service, aging systems need upgrades.
Alternative 2  Significantly change the Phase 2 scope of work and/or
contract terms to re-advertise the project.
No guarantee of any bidders, bids may be higher, 1-1.5 year delay, impacts major capital
projects to improve passenger service, aging systems need upgrades.
Alternative 3 Recommended  Proceed with constructing Phase 2 as bid
Bid prices are within 9% of each other and are market prices, airlines and travelers need
baggage service, Airlines support this alternative.
Provides opportunity to seek additional TSA funding.
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Lessons Learned
Require a second independent estimate for large or more complex
projects (one already underway for the C1 building project)
Improved communication to the Commission about project risk (similar
to Checkpoint 1 Relocation Authorization last quarter)
Review more projects with other airports / airlines (this baggage project
was reviewed with SFO and RDU)
Periodic review/evaluation of contracting method for phased projects,
considering use of outside advisors
Evaluate potential cost estimate increase factors for large or more
complex projects
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Today's Meeting Request
Request authorization to:
1.  Execute a construction contract with the low
responsive and responsible bidder for $293,937,000;
2.  Authorize an increased budget totaling $190,737,800
for a total project authorization of $540,050,000 for
Phase 2 construction and Phase 3 design.

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Appendix

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Outbound Baggage System Flow



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Alternative 1
Repackage the design to include Phase 3 and pursue an
alternative delivery method for construction GC/CM.
Cost Implications:
Phase 3 estimate would need to be updated to match the contract method and
verified.

This is not the recommended alternative.
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Alternative 1 - Pros
No risk of loss in continuity of Contractors between Phases 2 and 3;
There will be an opportunity to optimize risk allocation with the GC/CM in
developing a construction sequencing plan;
A GC/CM delivery method allows for prequalification of the general and electrical
contractor; and
GC/CM delivery method leverages innovations/ideas/expertise in design and
constructability.


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Alternative 1 - Cons
Major capital projects to improve passenger service and provide needed upgrades are dependent on work being completed by Phase 2.
For example, Main Terminal Optimization, Airline Realignment, Main Terminal Low Voltage, Main Terminal Smoke Control, and C1
Building. In addition, Airlines have requested South Satellite makeups to be accelerated to meet demand, and a delay would affect their
operations;
Potential TSA OTA funding expires in 2023 unless TSA grants extension, and the project could lose the funds
TSA would oppose this due to risk of system failure due to further delays in replacement of outdated screening equipment. Increased
cost in TSA staffing and equipment maintenance.
Construction will be even more inefficient and therefore more costly if the construction is delayed due to continued growth in passenger
and baggage volume;
Due to the aging systems, lack of sortation capacity and flexibility to keep up with Airport growth, the existing baggage system will
experience increased operational demand and stress that will likely cause impacts to airlines and passengers. The Port would still need
to invest in upgrading the aging existing system to keep the airport operational;
Design will require repackaging and redesign
Phase 2 design cost beyond 70% would be lost;
Schedule impact of 1.5-2 years;
New design will create unknown schedule impacts to develop construction sequencing plan with contractor and stakeholder buy-in;
No guarantee of an improved construction sequencing plan; and
No guarantee of any cost savings.
Contractors including small businesses have invested four months and significant expense in preparing a bid. Rebidding this project may
not result in low bids and/or sufficient bidder interest. The Port may also be perceived as a less preferred owner if bids are rejected.

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Alternative 2
Significantly change the Phase 2 scope of work and/or contract
terms to re-advertise the project.
Cost Implications:
Taking the design back to 70% plus cost for redesign equals approximately $4M.


This is not the recommended alternative.
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Alternative 2 - Pros
Bid amount could potentially come in lower.




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Alternative 2 - Cons
Major capital projects to improve passenger service and provide needed upgrades are dependent on work being completed by Phase
2. For example, Main Terminal Optimization, Airline Realignment, Main Terminal Low Voltage, Main Terminal Smoke Control, and C1
Building. In addition, Airlines have requested South Satellite makeups to be accelerated to meet demand, and a delay would affect
their operations;
Potential TSA OTA funding expires in 2023 unless TSA grants extension, and the project could lose the funds
TSA would oppose this due to risk of system failure due to further delays in replacement of outdated screening equipment. Increased
cost in TSA staffing and equipment maintenance.
Construction will be even more inefficient and therefore more costly if the construction is delayed due to continued growth in
passenger and baggage volume;
Due to the aging systems, lack of sortation capacity and flexibility to keep up with Airport growth, the existing baggage system will
experience increased operational demand and stress that will likely cause impacts to airlines and passengers. The Port would still need
to invest in upgrading the aging existing system to keep the airport operational;
There are limited opportunities to modify the scope of work to deliver a valuable project at the end of Phase 2
Holiday moratoriums could be reduced and relaxed to reduce Contractor risk. This could cause operational impacts to airlines during
busy holiday seasons;
Add Port contracts for portering services for system shutdown and Contractor system impacts;
Schedule impact of 1-1.5 years;
Redesign will create unknown schedule impacts to develop construction sequencing plan with contractor and stakeholder buy-in;
Contractors including small businesses have invested four months and significant expense in preparing a bid. Rebidding this project
may not result in low bids and/or sufficient bidder interest.

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Alternative 3
Proceed with constructing Phase 2 as originally planned and
evaluate GC/CM contracting for Phase 3.
Cost Implications:
Requested amount of $190,737,800 additional Phase 2 budget, including $10M for
management reserves to be managed by the Executive Director.

This is the recommended alternative.
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Alternative 3 - Pros
Lowest risk of operational impacts due to aging equipment and growing demands
on the existing systems;
Fastest alternative in terms of delivery of the new system elements, providing
increased capacity, flexibility, redundancy, and higher reliability;
Lowest impact to Major capital projects that are dependent on work being
completed by Phase 2;
Construction sequencing plans have been coordinated with Airlines and Port of
Seattle stakeholders to minimize impacts during construction; and
Port can begin to prepare for Phase 3 including evaluation of GC/CM contracting to
complete the intended design and meet growing Airport demands.

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Alternative 3 - Cons

Increase in overall program budget



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Engineer's Estimate vs Bid Results
Aviation Only (2017-2019)
Total Contracts bid out     33

Total Awards Below EE     25

% of Awards Below EE    76%

Total Awards Within 110% of EE     27

% of Awards Within 110% of EE    82%

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