PORT OF SEATTLE
MEMORANDUM
COMMISSION AGENDA
Item No.
5c
ACTION ITEM Date of Meeting
June 14, 2011
DATE: June 6, 2011
TO: Tay Yoshitani, Chief Executive Officer
FROM: Rees Robinson, Project Manager, Marine Maintenance
Lindsay Pulsifer, General Manager, Marine Maintenance
SUBJECT: Funding Increase Request for Maintenance Shop Solution Projects
CIP# C800187
Amount of This Request: $340,000 Source of Funds: Tax Levy
State and Local Taxes Paid: $120,000 Est. Workers Employed: 12
Total Project Budget (including previous authorization): $ 2,640,000
ACTION REQUESTED: Authorization to increase the budget by $340,000 for the
Marine Maintenance Solution Capital Improvement Project for a total estimated project
cost of $2,640,000. This will cover costs beyond budgetary estimates due to a regulated
material survey; regulatory requirements to install insulation and design and install a roof
fall protection system which were not included in the original scope of work; design,
code requirements, computer network and communications for the north-end office; and
the 80% overhead rate on Port labor during the first quarter of 2011. The funding increase
will allow completion of all projects in CIP #C800187.
SYNOPSIS: The Commission authorized Maintenance Shop Solution Projects on May
4, 2010. Authorization was for the total not to exceed cost of $2,300,000 for engineering
analyses and design, project management, preparation of construction documents,
advertisement for bids and execution of a construction contract, purchase of materials and
Shop self-performance of work.
The Marine Maintencance Solution CIP was authorized based on preliminary project
scopes and estimates. As the projects progressed through design, permitting and
construction, project requirements resulted in project delays and additional costs.
COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
June 6, 2011
Page 2 of 6
Maintenance Shop Solution Projects include:
Roof Replacement
Office Space Expansion
Kitchen / Break Room Upgrade
Electrical Service Upgrade
North-end Office
All projects are underway except the Kitchen / Break Room Upgrade.
PROJECT JUSTIFICATION: The original project justification still pertains. The Port
of Seattle and its tenants rely on Marine Maintenance to be responsive and operationally
efficient. Completion of Maintenance Shop Solution projects is necessary to insure
continued high performance from Marine Maintenance crews and staff.
The Port of Seattle had been considering relocating the Marine Maintenance Shop to a
more central location, in relation to POS Marine Facilities, since 2000. Pursuant to a
cost/benefit analysis of the relocation, the decision was made to keep the Shop operating
at its current location.
Marine Maintenance Solution projects were identified to meet the following objectives:
Increase the operational capacity of the Marine Maintenance Shop
Preserve the Marine Maintenance Shop building asset
Improve efficiency of existing space
Complete construction with minimal impact to maintenance operations
Reduce maintenance crew travel times
Increase remodeled area energy efficiency
PROJECT SCOPE OF WORK AND SCHEDULE:
Roof Replacement: The Shop roof will be removed and replaced with a single ply
membrane roof. Work will be performed under a Major Construction contract. The
contract is expected to go out to bid in June, 2011. The original intention was to put the
project out to bid in the summer of 2010. However, a licensed Architect was required to
prepare the bid documents. The Project Architect was retained under the Building IDIQ
contract, executed on Aug 18, 2010, making a 2010 summer bid impossible. The project
was deferred for a year. The following two scope changes add significant cost to the
project:
1. The 2006 Seattle Building Code requires installation of roof insulation when
removing and replacing a roof. Most of the existing roof is uninsulated. This
requirement will add an estimated $140,000 to the construction cost.
COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
June 6, 2011
Page 3 of 6
2. A roof fall protection system, satisfying Labor and Industries safety requirements
for workers on the roof, will be included in the roof replacement bid documents.
This increases the project cost by an estimated $56,000.
Office Space Expansion: The office space expansion project is nearing completion. The
existing second floor office layout was reconfigured and new office space was built on
the first floor. The expansion provides a total of eleven new workstations (four of which
are enclosed offices), a new first floor conference room and enclosure of the Shop
computer kiosk. A significant portion of the work, performed by Marine Maintenance
labor, occurred during the first quarter of 2011. Additional project costs resulted
primarily from Marine Maintenance’s high burden rate during the first quarter.
Kitchen / Break Room Upgrade: To save costs, the existing kitchen will be upgraded
rather than relocated as originally intended. The Kitchen / Break Room gets continual
daily use, is used for food preparation and clean up during Marine Maintenance events,
and, being adjacent to the front lobby, is often used by visitors to the Shop. The room is
outdated with old, inefficient appliances and deteriorated finishes. An upgrade to this
space is overdue. Construction has not yet started. The estimated cost of the kitchen
upgrade is $145,000.
Electrical Service Upgrade: The Electrical Service Upgrade will replace the existing
electrical service system with a new, energy efficient distribution system that has the
capacity to meet future electrical needs of the Shop. The existing electrical service
equipment at the Shop is estimated to be more than 50 years old. Typically, the life
expectancy of electrical service equipment is 30 years. The existing equipment is old, at
risk of failure, presents safety risks, does not meet regulatory requirements, and doesn’t
have adequate capacity to meet future Shop electrical requirements. Design is complete
and equipment is out to bid.
North-end Office: A modular office is being installed in the parking lot adjacent to the
Northwest Harvest building. At the time of Commission authorization, the project scope
was unknown except that the office would be a modular structure or an update of an
existing facility and would be located central to north-end Port of Seattle Seaport and
Real Estate properties. The preliminary project budget was $340,000. Project costs for
design, permitting and computer network requirements necessitate increasing the project
budget to complete the North-end Office.
COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
June 6, 2011
Page 4 of 6
Expected Project Completion:
Project
Roof Replacement
Office Space Expansion
Kitchen / Break Room Upgrade
Electric Service Upgrade
North-end Office
FINANCIAL IMPLICATIONS:
Budget/Authorization Summary
Original Budget
$2,300,000
Previous Authorizations
$2,300,000
Current request for authorization
$340,000
Total Authorizations, including this request
$2,640,000
Remaining budget to be authorized
$0
Total Estimated Project Cost
$2,640,000
Project Cost Breakdown
Project Cost Breakdown
Preliminary Budget
Revised Budget
Shop Roof *
$935,000
$1,170,000
Kitchen / Break Room
$145,000
$145,000
Office Space Expansion
$525,000
$545,000
Electrical / Network Upgrade
$355,000
$355,000
North-end Office
$340,000
$425,000
Total
$2,300,000
$2,640,000
* Project Cost for the Roof Replacement Project is based on the consultant’s construction
cost estimate. If the winning bid exceeds the consultant’s estimate, additional funds may
be required and staff will return to Commission for authorization before awarding the
construction contract.
Source of Funds
This project was included in the 2011 Draft Plan of Finance under Committed CIP#
C800187 Maintenance Shop Solution in the amount of $2,300,000. The additional
$340,000 which is required to fund this project is available due to project deferrals on
other 2011 Plan of Finance Committed projects, such as the Bell Harbor Lighting
Controls Upgrade Project.
COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
June 6, 2011
Page 5 of 6
This project will be funded from the Tax Levy.
Financial Analysis Summary:
CIP Category
Renewal/Enhancement
Project Type
Renewal & Replacement
Risk adjusted
Discount rate
7.0%
Key risk
factors
Construction costs may increase if bids to complete the required work are
higher than anticipated.
Project schedule could be delayed due to project complexity, weather, or
the need to minimize disruptions to maintenance shop operations.
Project cost for
analysis
$2,640,000
Business Unit
(BU)
Maintenance, Real Estate Division
Effect on
business
performance
This project will not generate any incremental revenue.
The estimated incremental increase to depreciation expense resulting
from this $340,000 funding request is $24,000/year. Total depreciation
expense from this project is estimated at $190,000/year, based on the assets
identified in the preliminary asset plan. The allocation of actual project costs
to specific assets will be finalized near the end of the project. NOI after
Depreciation for this facility will decrease by the associated depreciation
expense from this project.
IRR/NPV
ECONOMIC IMPACTS AND BUSINESS PLAN OBJECTIVES:
Completing all the Marine Maintenance Solution projects allows Marine Maintenance to
continue operations to maintain Seaport and Real Estate properties and to respond to
emergencies.
NOI (in $000's) 2011 2012 2013 2014 2015
NOI $0 $0 $0 $0 $0
Depreciation ($72) ($190) ($190) ($190) ($190)
NOI After Depreciation ($72) ($190) ($190) ($190) ($190)
NPV
(in $000's)
($2,640)
COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
June 6, 2011
Page 6 of 6
STRATEGIC OBJECTIVES:
The proposed projects support the Port’s strategies to “Be a High-Performance
Organization” and to “Ensure Airport and Seaport Vitality.” Marine Maintenance is
currently operating out of a facility that requires improvements to preserve the building
asset and to increase the operational capacity and efficiency of a high performing group.
Marine Maintenance supports Seaport Vitality by maintaining Seaport and Real Estate
properties.
ENVIRONMENTAL SUSTAINABILITY AND COMMUNITY BENEFITS:
Each project will be designed and constructed considering the environmental impacts
of the construction and of the asset.
The projects will use materials having demonstrated long lives and durability.
Environmentally preferable products will be purchased whenever practical.
All equipment and appliances purchased will be energy efficient.
Creation of a North-end office will reduce travel times of Marine Maintenance crews.
Increase of Maintenance Shop Office Space will be within the existing building
footprint.
The roof will be completely insulated increasing the energy efficiency of the building.
ALTERNATIVES CONSIDERED AND THEIR IMPLICATIONS:
Alternative 1: Authorize $340,000 to complete the proposed projects: Roof
Replacement; Office Space Expansion; Kitchen / Break Room Upgrade; Electrical
Service Upgrade; and creation of a North-end Office. These projects insure that Marine
Maintenance remains operational and increases its capacity and functionality. This is the
recommended alternative.
Alternative 2: Authorize $200,000 to allow for completion of all projects with the
exception of the Kitchen / Break Room Upgrade. Alternative 2 is not recommended.
Alternative 3: Eliminate the Kitchen / Break Room Upgrade and stop work on the
Electrical Service Upgrade to stay within the authorized CIP budget. Alternative 3 is not
recommended.
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS:
Commission authorized $2,300,000 for CIP C800187, Maintenance Shop Solution on
May 4, 2010 (Item No. 6c, Memo dated April 16, 2010).