PORT OF SEATTLE
MEMORANDUM
COMMISSION AGENDA
Item No.
6a
Date of Meeting
September 27, 2011
DATE: September 20, 2011
TO: Tay Yoshitani, Chief Executive Officer
FROM: Dave Soike, Director, Aviation Facilities and Capital Program
Wayne Grotheer, Director, Aviation Capital Improvement Program
SUBJECT: Centralized Pre-Conditioned Air Project at Seattle-Tacoma International Airport
(CIP # C800238)
Amount of This Request: $3,525,000 Source of Funds: Airport Development Fund
FAA–AIP, VALE Grants
and Revenue Bonds
Total Project Budget: $44,125,000 Est. State and Local Taxes: $2,972,000
Grants Available: $21,912,679 Est. Construction Jobs Generated: 120
Net Cost to the Airport: $22,212,321
ACTION REQUESTED:
Request Commission authorization to increase the project budget for the Centralized Pre-
Conditioned Air Project at Seattle-Tacoma International Airport by $3,525,000 to include
$1,610,000 for additional construction contingency, $1,096,000 for additional Port project team
support, $419,000 for additional support by Port Construction Services and $400,000 for
additional Design team support; and authorization for the Chief Executive Officer to execute an
amendment to the professional service agreement with Stantec Consulting in the amount of
$400,000 in accordance with Resolution No. 3605, as amended, Section 7.2.4.
SYNOPSIS:
The Pre-Conditioned Air (PC-Air) project is one of the most complex and invasive utility
projects that the Airport has undertaken. It reaches through occupied areas to each of 73 gates.
The design nature of a project of this type has added to the complexity because detailed design
cannot occur in certain occupied, wall interior and ceiling areas until specialty subcontractors
have investigated those areas and prepared detailed shop fabrication and installation drawings.
As a result, additional construction costs in the amount of $2,029,000 have been identified that
were unknown at bid time. Those additional construction costs also drive additional necessary
consulting and staff costs. Additional construction management and Port project team costs are
estimated to be $1,096,000. The Stantec professional service agreement amendment is estimated
COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
September 20, 2011
Page 2 of 7
to be $400,000. The new total project cost is $44,125,000. The net cost to the Seattle-Tacoma
International Airport is $22,212,231, with the balance to be covered by a Federal Aviation
Administration (FAA) Voluntary Airport Low Emission (VALE) Grant.
There are significant environmental and cost benefits associated with this project since the total
amount of energy used to heat and cool aircraft will decrease. CO2 emissions and other
emissions could be reduced by more than 69,000 metric tons per year, which represents 2% of
emissions from aircraft at the Airport, and is roughly equivalent to taking 13,500 cars off the
road. Life-cycle costs, fuel consumption and ramp noise will also be reduced.
PROJECT STATEMENT AND OBJECTIVES:
Project Statement:
Construct the PC Air system, with an associated central plant including individual PC Air gate
units at all passenger loading bridges.
Project Objectives:
Provide a PC Air System that will accomplish the following:
Decrease the amount of energy used to heat and cool the aircraft.
Significantly reduce the amount of CO2 and other air emissions produced.
Provide aircraft with cabin heating and cooling while eliminating the need for using the
onboard APU, which consumes jet fuel.
Minimize life-cycle costs.
Minimize fuel consumption.
Minimize ramp noise.
BACKGROUND:
The PC-Air project will provide heated and cooled air to aircraft at all 73 airport boarding gates.
The system to provide this service includes:
A new centralized PC-Air plant with 4 new chillers, 32 ice tanks and other equipment
Several pumpsConnection to existing Centralized Plant equipment
Approximately 10 miles of distribution pipe for chilled and heating water
73 PC-Air units, one at each gate, to transfer the heat or cooling from the water in the
piping to the air flowing to the aircraft.
Retrofitting this quantity of equipment and piping in an already congested facility is a unique
challenge. The challenges include:
Constructing these improvements in many areas of the airport including the Central Plant,
Central Terminal basement, ramp and roof levels of Satellites and concourses, and North
and South utility tunnels.
Obtaining access to the spaces to move material and resources into the construction areas.
Avoiding or relocating utilities and equipment throughout the airport to facilitate the PC
air piping. Existing utilities and equipment include electrical boxes, conduit and panels,
ventilation ducts and fans, fire alarm systems, lights, etc.
COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
September 20, 2011
Page 3 of 7
Connecting to existing building structures to provide structural support for equipment and
piping.
The Contract addresses the majority of these issues; however, some were not identified until
means of access was discussed with the contractor and the contractor submitted detailed shop
and installation drawings.
Total estimated cost of change orders is $4,050,000. Current construction contract contingency
is $2,450,000. We are requesting authorization of $1,600,000 for the difference between our total
estimate of change orders and the current contingency, so that the contingency is sufficient for all
currently anticipated change orders. Staff will return to Commission at a later date for specific
construction contract change order authorizations when required by Resolution 3605.
The change orders include the following elements:
Access challenges--$600,000 – The majority of this increase is for access to the North
and South Satellite utility tunnels, where access limitations do not allow pipe lengths as
long as assumed in the Engineers Estimate.
Field conditions; i.e., Piping conflicts and interferences--$1,500,000 - During the
preparation of detailed drawings, the contractor identified additional interferences and
conflicts with existing utilities and equipment.
Building and Electrical Code required revisions--$450,000 - To qualify the project for the
VALE FAA Grant, the project was bid before the building permit was approved. The
permit review generated some changes to the project requirements due to Code and to
correct electrical power issues.
Potential Contract disputes--$450,000 - During the process of reviewing contract required
submittals it has become apparent that the Port and Contractor disagree about some areas
of work. These issues will be resolved through contract negotiations
Contract Scope changes --$700,000 – There have been changes to airport facilities and to
Port technical requirements since contract documents were completed and contract was
awarded.
Miscellaneous change orders for scope omissions and field conditions discovered during
construction--$350,000 Additionally, Port Construction Services (PCS) is supporting this project
by relocating tenants and removing and reinstalling covers and panels for piping installation. The
original project estimate for this work was $331,000. To support alternate routing of concourse
piping additional work is required. The revised cost of this work is estimated to cost $750,000,
an increase of $419,000.
Additional design team support is needed for project changes and unanticipated field conditions.
This increased cost is estimated to be $400,000 ($50,000 for scope changes and $350,000 for
additional construction support. The initial contract with Stantec Engineers was for $2,011,564
($ 1,608,911 for design and $402,653 for construction support). Total current contract value
following amendments to date is $2,579,257 ($1,176, 591 for design and $402,666 for
construction support). Staff is negotiating the fee with Stantec and will finalize the amendment
for execution once this request is approved. Pending negotiations, this will increase total contract
value to $3,129,257. The Period of Performance for the Service Agreement will not change.
COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
September 20, 2011
Page 4 of 7
The above list of items requires additional support from Construction Management, Project
Management, and other staff members of the Port’s project team. The supports include
estimating costs of potential change orders, negotiating, preparing change order documents, and
contract administration. Estimated additional costs for this support are $1,096,000.
PROJECT SCOPE OF WORK AND SCHEDULE:
Scope of Work:
This project would involve the Port contracting to install utility infrastructure improvements
ensuring long-term stable, useable site conditions.
Schedule:
The following is a list of key milestone dates for the Centralized Pre-Conditioned Air Project:
Start Preliminary Design Feb 2009
Complete Design Apr 2010
Seek approval from Commission to advertise May 2010
Award Contract Sept 2010
Construction Notice to Proceed Nov 2010
Anticipated Project Completion Dec 2012
FINANCIAL IMPLICATIONS:
Budget/Authorization Summary
Original Budget
Budget Increase
Budget Transfers
Revised Budget
Previous Authorizations
Current request for Authorization
Total Authorizations, including this request
Remaining Budget to be Authorized
COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
September 20, 2011
Page 5 of 7
Project Cost Breakdown This Request Total Project
Capital
Construction
$1,853,000
$ 33,091,000
Sales Tax
$ 176,000
$ 3,066,000
Outside Professional Services
$ 400,000
$ 3,309,000
Aviation PMG & Other Soft Costs
$1,096,000
$ 4,069,000
Sub-total Capital Project Costs
$ 3,525,000
$ 43,535,000
Environmental Remediation Liability
Construction
$ 290,000
Environmental & Other Soft Costs
$ 218,000
Sales Tax
$ 82,000
Sub-total Environmental Remediation Liability
Project Costs
$ 590,000
Total Project Costs
$44,125,000
Source of Funds
This project (CIP # 800238) is included in the 2011-2015 capital budget and plan of finance. The
funding plan is predicated upon the Port receiving $21.9 million in VALE program grants, with
the remaining costs funded with Airport Development Fund, 2010 revenue bonds, and revenue
bonds to be issued in 2012. This project was reviewed by the airline representatives and
approved through a Majority-In-Interest vote in June 2008.
Financial Analysis Summary:
CIP Category
New/Enhancement
Project Type
Infrastructure
Risk adjusted Discount rate
10%
Key risk factors
Realizations of savings due to lower jet fuel usage
Grant funding
Project cost for analysis
$22,212,321 (Excludes VALE grant funded portion)
Business Unit (BU)
Terminal cost center
COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
September 20, 2011
Page 6 of 7
Effect on business performance
NOI after depreciation will decrease due to recognizing
depreciation on the full cost yet recovering capital costs for
the non Vale funded portion only.
IRR/NPV
NPV range of net savings to airlines: $ 5 million to $ 30
million. (calculated in 2010)
CPE Impact
CPE will increase by $.16 in 2013; however, this cost will
be more than offset by decreased airline operating costs.
This project was included in our business plan forecast so
there is no change.
ECONOMIC IMPACTS AND BUSINESS PLAN OBJECTIVES:
From a financial analysis perspective, the positive net present value for this project is based on
viewing the Airport and airlines together, as the Port will incur capital and operating costs, while
the airlines will realize the cost savings. The extent of the savings is dependent on: 1) the price of
jet fuel 2) the number of days per year the system is actually used, and 3) the number of carriers
that use the system rather than their own POU system. The Airport will incur increased
Operations and Maintenance costs of about $800,000 per year. In addition, the Port will incur
annual debt service costs of about $1.2 million per year. The financial analysis assumes
$2/gallon for the price of jet fuel (recent prices have ranged from ~$1.50 to ~$3.50), PCA
System use during summer only (17 weeks) and it assumes Alaska Airlines and Southwest
Airlines continue to use their POU systems. These conservative assumptions generate a positive
NPV of $5 million and generate net savings to the airlines from the first year of operations. The
savings increase each year, making this a financially sound project.
STRATEGIC OBJECTIVES:
The PC Air project supports the following Port strategies:
Ensure Airport Vitality:
This project will provide a cost effective and efficient heating and cooling system for aircraft
parked at the gates. It will have a positive effect on the airline’s operating costs by reducing fuel
consumption through reduced APU operation.
ENVIRONMENTAL SUSTAINABILITY AND COMMUNITY BENEFITS:
There are significant air quality improvements achieved by installing a centralized pre-
conditioned air system. CO2 emissions and other emissions could be reduced by more than
69,000 metric tons per year, which represents 2% of emissions from aircraft at the Airport, and is
roughly equivalent to taking 13,500 cars off the road. Airport noise will also be reduced.
ALTERNATIVES CONSIDERED AND THEIR IMPLICATIONS:
Alternative 1 – Reduce Project Scope to Current Approved Funding. To reduce the project
scope by $3,525,000 would require removing PC-Air installation for Concourse D and the
North Satellite. This change would reduce funding recovery from the VALE phase II grant
COMMISSION AGENDA
Tay Yoshitani, Chief Executive Officer
September 20, 2011
Page 7 of 7
by $3.6 million and still incur significant costs for Port staff to negotiate changes to the
existing contract. This is not the recommended alternative.
Alternative 2 –This alternative is to have the engineering consultant use the contractor’s
proposed piping layout to revise the design. This will remove much of the piping from the
roof, eliminate concourse utility shutdowns, and minimize change orders from interferences
and obstructions. This is the recommended alternative.
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS:
On January 13, 2009, the Commission authorized procurement and execution of service
agreements with consultants to perform design; to prepare contract documents; and perform
contract administration for the Pre-Conditioned Air project at Seattle-Tacoma International
Airport in the amount of $3,770,000.
On May 11, 2010, the Commission authorized staff to advertise for bids, apply a Project
Labor Agreement (PLA) and authorize Port Construction Services to perform pre-
construction work, including moving tenants, for Phase I and Phase II of the Centralized Pre-
Conditioned Air (PC Air) Project (CIP # C800238) at Seattle-Tacoma International Airport
(Airport) and execute a construction contract. This authorization was for $36,830,000. The
estimated total project cost is $40,600,000.
On May 24, 2011, Commission authorized execution of a $400,000 amendment to the
professional service agreement with Stantec Consulting. Total project funding authorization
remained at $40,600,000.