Template revised September 22, 2016; formatting update October 19, 2016.
COMMISSION
AGENDA MEMORANDUM
Item No.
6a
ACTION ITEM
Date of Meeting
March 28, 2017
DATE: March 10, 2017
TO: Dave Soike, Interim Chief Executive Officer
FROM: Ralph Graves, Senior Director, Capital Programs
David Brush, IAF Project Leader
SUBJECT: Additional International Arrivals Facility (IAF) Project Funding
(CIP #C800583)
ACTION REQUESTED
Request Commission authorization for the Chief Executive Officer to (1) increase the current IAF
project funding authorization by $130 million from $352 million to $482 million and extend the
current phase of the contract to September 30, 2017, and (2) execute needed contract
amendments and change orders as required to execute this funding provision.
EXECUTIVE SUMMARY
The unprecedented double-digit growth in international passenger traffic at Seattle-Tacoma
International Airport drove the decision to construct a new federal inspection facility capable of
processing up to 2,600 passengers per hour.
The Port elected to use Progressive Design Build delivery methodology because among other
advantages it allows the Port to open the new IAF approximately 18 months sooner than other
delivery methods evaluated. The Port subsequently contracted with a Design-Build Team,
Clark/SOM, to design and construct a new IAF.
Using the partial project funding ($352 million) previously approved by the Commission, the
design-builder has been able to contract for critical work needed to maintain the ambitious
completion schedule (fall of 2019). However, in order to maintain that opening schedule,
additional incremental project funding ($130 million) is now required to permit the design-
builder to execute upcoming construction contracts with trade contractors. During the late
spring and throughout the summer these trade contractors will be working on the IAF building
site installing underground utilities, driving piles and pouring foundations. On the airside, trade
contractors will be completing required demolition, building the A20/21 hard stand ramp,
drilling caissons, pouring foundations and refurbishing several passenger loading bridges. The
project team will continue to advance the design and bid subcontracts. Staff plans to return to
the Commission in September with a proposed Guaranteed Maximum Price (GMP) and a
request for authorization of the balance of the project funding.
COMMISSION AGENDA – Action Item No. __6a__ Page 2 of 6
Meeting Date: March 28, 2017
Template revised September 22, 2016.
Template revised September 22, 2016.
JUSTIFICATION
In July 2015, Clark/SOM, the IAF Design/Build team, began the work of validating the Port’s
early planning work. In January 2016, design services for the new IAF commenced. That design
has now progressed to the Design Development level—a milestone in the design process where
the project’s scope is set.
Beginning in the summer of 2016, Clark began bidding selected trade contract work. Clark has
now bid 19 different trade packages or approximately 70% of the work (measured in dollars)
reflected on the Design Development plans.
Initially, it was the desire of the Port to conclude the negotiation of a Guaranteed Maximum
Price (GMP) contract with the IAF Design/Build team by the end of 2016, but higher-than-
expected bid results have tempered the team’s thinking. Seattle’s robust construction market
has presented risk and uncertainty regarding the cost of the balance of the work. We propose
to continue to look for ways to enhance trade competition as a means of mitigating those rising
costs and to explore design and work phasing options that can save money on the trades
already bought in addition to the work remaining to be bid. It remains staff’s expectation that
in the coming months the Port and Clark/SOM will be successful in negotiating a fair and
equitable GMP. We recognize the possibility of cost growth above the budget, but there
remains uncertainty as to amount.
SMALL BUSINESS PARTICIPATION
As a result of outreach and community inclusion efforts by Clark/SOM, as of February 2017,
Clark/SOM has achieved 16.8% or $86.7 million in small business utilization. Due to
Clark/SOM’s efforts and results to date, staff confidence has remained high on Clark/SOM’s
continued dedication and support of the Port’s efforts to maximize small business utilization for
this project.
DETAILS
The additional funding authorization required falls within the previously forecast project budget
of $684.4 million, which includes the base project budget of $608.4 million and two added
scope authorizations of $41.0 million (Sterile Corridor Extension) and $11.0 million (Accelerate
Phase 2 work to include Baggage Claim Devices) for a total IAF project cost of $660.4 million.
Additionally, the Port Commission previously authorized $24 million for two related projects:
$5.5 million (SSAT Narrow Body Aircraft Optimization) and $18.5 million (Domestic Outbound
Baggage Opportunity).
COMMISSION AGENDA – Action Item No. __6a__ Page 3 of 6
Meeting Date: March 28, 2017
Template revised September 22, 2016.
Template revised September 22, 2016.
Key Points:
• Previous authorizations for the IAF project include:
Description
$millions
Through 2015
300.0
July 2016
41.0
October 2016
11.0
Current Funding Authorization
352.0
This Request
130.0
Total Funding Authorization
482.0
• Clark/SOM has taken bids and executed partial value subcontracts on work for which it
cannot fully contract until additional project funding is approved.
ALTERNATIVES AND IMPLICATIONS CONSIDERED
1. Defer Request for Additional Interim Funding
Cost Implications: Cost impact would depend on the length of delay, but a delay of six months
could increase project cost by an estimated $30 million.
Pros:
(1) Provides opportunity to further develop design and procure additional components of
the work with greater cost certainty
Cons:
(1) Prevents the achievement of the 2019 opening
(2) Forces forfeiture of solicited sub-contractor proposals
(3) Forces downsizing of currently assembled project team
(4) Balance of risk responsibility shifts against Port – for example, cost escalation for
components of the work still to be procured must be borne by Port
(5) Reduces benefit of Progressive Design Build delivery method
This alternative is not recommended.
2. Request the Authorization of a Reduced Additional Interim Funding Amount
Cost Implications: The project would have to return for additional funds authorization sooner,
again facing the risk of expensive delay. If the funds are provided when needed, then cost
impact would be minimal.
Pros:
(1) Provides opportunity to continue design development and to procure limited
additional components of the work for greater cost certainty
Cons:
(1) Prevents the achievement of the 2019 IAF opening
COMMISSION AGENDA – Action Item No. __6a__ Page 4 of 6
Meeting Date: March 28, 2017
Template revised September 22, 2016.
Template revised September 22, 2016.
(2) Balance of risk responsibility shifts against Port – for example, cost escalation for
components of the work still to be procured must be borne by Port
(3) Reduces benefit of Progressive Design Build delivery method
This alternative is not recommended.
3. Request the Authorization of Additional Interim Funding of $130 Million
Cost Implications: Providing the funding authorization does not inherently increase the cost of
the project. The manner in which the funds are provided may affect how the general
contractor bids out the work and how the GMP is negotiated, with potential cost impacts.
Pros:
(1) Provides opportunity for the design-builder to bid and procure additional components
of work needed to maintain the IAF’s project schedule
Cons:
(1) Provides additional funding in advance of the negotiation of a final GMP
(2) Balance of risk responsibility remains against the Port – for example, cost escalation
for components of the work still to be procured must be borne by Port
(3) Reduces benefit of Progressive Design Build delivery method
This alternative is recommended.
FINANCIAL IMPLICATIONS
Cost Estimate/Authorization Summary
Capital
Expense
Total
COST ESTIMATE
Original estimate
$300,000,000
$0
$300,000,000
Previous changes – net
$360,365,000
0
$360,365,000
Current change
0
0
0
Revised estimate
$660,365,000
0
$660,365,000
AUTHORIZATION
Previous authorizations
$352,000,000
0
$352,000,000
Current request for authorization
$130,000,000
0
$130,000,000
Total authorizations, including this request
$482,000,000
0
$482,000,000
Remaining amount to be authorized
$178,365,000
$0
$178,365,000
COMMISSION AGENDA – Action Item No. __6a__ Page 5 of 6
Meeting Date: March 28, 2017
Template revised September 22, 2016.
Template revised September 22, 2016.
Annual Budget Status and Source of Funds
This project was included in the 2017-2021 capital budget and plan of finance with a budget of
$649,365,000. As presented to the Commission on October 11, 2016, the funding plan includes
$200 million of cash (Airport Development Fund), $100 million of passenger facility charges
(PFCs) and $360 million of future revenue bonds.
Financial Analysis and Summary
The costs of the IAF will be recovered from the airlines through a charge on the use of the
facility, referred to as a passenger facility charge (PFC). Consistent with previous funding plans,
the Port’s goal is to maintain a competitive Federal Inspection Services (FIS) rate compared to
peer airports. Sufficient PFCs will be used to pay ongoing revenue bond debt service to manage
the FIS rate base, and thus the FIS rate.
ATTACHMENTS TO THIS BRIEFING
(1) Presentation slides
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
October 11, 2016 – The Commission authorized IAF to add balance of Phase 2 for
accelerated execution
September 27, 2016 – The Commission was briefed on IAF reconsidering phasing and
project update
September 13, 2016 – The Commission authorized IAF FAA reimbursement agreement
July 12, 2016 – The Commission authorized IAF to add Phase 2 scope to meet continuing
rapid growth
June 28, 2016 – The Commission was briefed on two additional international aircraft gates
at IAF to meet continuing rapid growth briefing.
May 17, 2016 – The Commission was briefed on Plan of Finance update.
April 26, 2016 – The Commission was briefed on IAF 1Q2016 update.
February 9, 2016 - The Commission was briefed on IAF 4Q2015 update.
December 8, 2015 – IAF guaranteed maximum price (GMP) Development Period
authorization (presented in combination with NSAT authorization request).
November 10, 2015 – The Commission was briefed on IAF update.
August 11, 2015 – The Commission lead a special meeting, roundtable with airline
representatives.
July 28, 2015 – The Commission lead an IAF forum.
July 14, 2015 – The Commission lead an IAF forum.
June 23, 2015 – The Commission authorized execution of the IAF Design-Build Contract.
May 26, 2015 – The Commission approved IAF preliminary funding plan motion.
April 28, 2015 – The Commission authorized a service agreement for Commissioning
Services.
COMMISSION AGENDA – Action Item No. __6a__ Page 6 of 6
Meeting Date: March 28, 2017
Template revised September 22, 2016.
Template revised September 22, 2016.
April 28, 2015 – The Commission authorized execution of a lease agreement with SEATAC
VENTURES 2010 LLC for IAF program management office space near Sea-Tac
International Airport.
February 24, 2015 – The Commission authorized a service agreement for IAF consultant
program leader.
January 27, 2015 – The Commission was briefed on IAF funding plan.
January 27, 2015 – The Commission approved IAF request for proposals advertisement.
January 13, 2015 – The Commission was briefed on IAF update.
December 2, 2014 – The Commission was briefed on IAF scope and budget update.
October 28, 2014 – The Commission was briefed on IAF 3Q2014 update.
August 19, 2014 – The Commission was briefed on IAF 2Q2014 update.
August 5, 2014 – The Commission authorized IAF request for qualifications advertisement.
July 22, 2014 – The Commission was briefed on IAF progress.
June 10, 2014 – The Commission was briefed on IAF 1Q2014 update.
May 6, 2014 – The Commission was briefed on IAF project delivery.
April 22, 2014 – The Commission was briefed on capital program.
March 11, 2014 – The Commission authorized IAF master planning.
February 25, 2014 – The Commission was briefed on IAF program.
November 19, 2013 – The Commission authorized IAF construction management, testing
and inspection; surveying and locating and safety service agreements.
July 23, 2013 – The Commission authorized IAF project and program support; and price
factor design-build methodology.
July 9, 2013 – The Commission was briefed on IAF.
July 9, 2013 – The Commission was briefed on alternative public works contracting.
April 9, 2013 – The Commission was briefed on IAF.
June 26, 2012 – The Commission was briefed on airport terminal development challenges at
Seattle-Tacoma International Airport.
June 14, 2011 – The Commission was briefed on international air service growth and future
facility.
February 2, 2010 – The Commission was briefed on South Satellite passenger growth and
facility considerations, Delta’s proposed airline lounge and other possible future
aviation projects.
