Template revised September 22, 2016.

DATE: September 7, 2018

TO: Stephen P. Metruck, Executive Director

The purpose of this briefing is to:

1. Briefly explain of the progressive design build project delivery model;

2. Summarize Commission and Executive Director actions to date;

3. Summarize current status of the project and context of necessary changes and

4. Identify the proposed guaranteed maximum price and time schedule of the project;

5. Allow for a presentation by an independent Expert Review Panel retained by the

6. Allow for a discussion between the Commission and design builder and port staff.

The Port contracted a Design-Build team, Clark/SOM, to design and construct a new

International Arrivals Facility (IAF) at Seattle-Tacoma International Airport (the Airport) using a

Progressive Design Build (PDB) project delivery model. Simply stated, in progressive design

build, the construction of the project begins during preliminary design and continues while the

design progresses. During this period, the project is guided by a target budget and target

schedule. When the design is sufficiently complete to identify and allocate cost and schedule

risk, the owner and the design-builder negotiate a guaranteed maximum price (GMP) for the

work along with a final schedule. On the IAF project, the scope of the project has increased and

the project has been negatively affected by other factors, all of which have increased the

the construction is approximately 20% complete.

In Spring of this year, Commissioners grew concerned that the project was encountering

significant problems. As a result, they retained an independent Executive Review Panel (ERP)

to, among other things:

 Evaluate the project;

 Recommend to the Commission whether to continue to move forward with the

pertinent documents relating to the project.

The Executive Director simultaneously took early actions relating to the project. He engaged

with the President of Clark Construction and held an in person meeting in Seattle. He assigned

the Port Chief Operating Officer to personally take on the project along with Clark’s Vice

President of Operations in order to find a solution to the ongoing problems. Subsequently new

leadership was inserted at the top of the project for both parties. Port staff changed existing

IAF subcontracts to allow financial portability among various subcontractor contracts to provide

flexibility among contingencies to speed payment processes to ensure timely material ordering

and site progress. Construction progress with growing stability was a key goal of the Executive

The project has encountered time delays and cost increases in both design and in construction.

The dynamics of the growing airport have increased needs that necessitated significant design

and construction scope additions to the project. For example additional basement level space

was added to accommodate baggage operations while making necessary space available for US

Customs and Border Protection staff. Two additional aircraft gates capable of allowing

international arrivals were added early in design due to growing numbers of international

from the IAF to connecting passengers next aircraft along with life safety refinements to the

design related to fire systems and emergency electrical generators. All scope additions will

allow the completed IAF project to perform better for the airport operators and for passenger

benefit in terms of their processing speed and convenience moving through the airport.

Recent changes have also affected construction cost and schedule. Examples include a robust

long-term baggage system rather than an interim system and an emergency generator scope

addition noted above. That necessary change was made relatively late in design and affected

the ongoing construction work because additional underground vaults and conduit for electrical

power had to be installed that delayed or impacted building foundation work that was already

in progress. In addition contaminated soils were discovered in the areas of foundations and

These recent scope additions have been necessary and wise to help make this signature airport

facility efficient for airlines, federal partners, and travelers over its estimated 30-50 year life.

Changes made later in design have a compounding effect upon schedule. As a result necessary

changes have contributed to lengthening the construction portion of the schedule for the main

part of the facility by 8 months from September 2019 to May 2020. Two additional

international capable gates will reach construction completion 6 months later in November

2020. Additional time to complete projects requires additional time from site workers,

equipment, suppliers, office staff, etc. that all drive costs to rise. Added schedule time driven

by subcontractor concerns and contamination found on site and design refinements continued

fewer bidders on each particular construction package bid for the project. At times 4 to 6 firms

would show interest in a package, but it was not uncommon to only have 2 bidders, sometimes

only 1. This is because contractors are very busy and other faster time-cycle projects on less

restrictive sites (without security badging requirements, etc.) can be viewed as more attractive.

This is such a competitive market that in the last 4 months, additional cost requests from IAF

subcontractors totaled over $8 million.

gotten underway. The project on-site construction is approximately 20% complete and

construction activity is gaining speed as underground and foundation work is completed. Most

designs are nearly 100%; however, the baggage handling system design is approximately 85%

complete. Renewed emphasis on negotiations to move the project forward in the last few

months, along with design and construction progress yield a cost and schedule picture that has

allowed a GMP with accompanying schedule to be set. An agreement framework was reached

July 24

after lengthy negotiations between Port and design builder leaders.

employees are trained, and all building systems are robustly tested to ensure 24/7/365

operational uptime. This culminates in a projected in-service opening date for airline customer

operations of July 30,

2020.

This in-service date includes three major components of the project:

 Third, the pedestrian overhead walkway that links the South Satellite gates to the

A long-planned, separate, and later substantial completion of construction work date is

November 20, 2020 for the fourth major portion of the project that is comprised of three swing

gates that includes two international swing-gates and one domestic gate. This completion

would be followed by similar necessary activation and readiness testing work that leads to an

entire program.

The GMP Amendment itself was the result of substantial negotiation between the Port and

Clark/SOM, with the assistance of senior leaders of both the Port and the design builder,

outside counsel for both parties, and many contributing team members. Generally speaking,

and if the Commisison approves its execution, it will reset the project as of the date of

execution of the GMP Amendment.

FINANCIAL IMPLICATIONS

The funding plan for the IAF includes $200 million of cash (Airport Development Fund), $100

million of Passenger Facility Charges (PFCs) with the remainder funded by revenue bonds.

million cash and $100 million of PFCs as described above), the project would add approximately

$2.08 to the Airport’s passenger airline cost per enplaned passenger (CPE) in 2021.

Potential Future Request:

Following todays briefing, the Commission will consider the information in the briefing. Should

the Commission deem it wise to continue with the project GMP proposal as identified, then

staff would return with a request in the future requesting authorization for the unfunded

balance offo the program, extension of the completion date, approval by the Executive Director

of a contract amendment with both the design builder and necessary consultants to support

the program in order to complete the entire program.

Services.

VENTURES 2010 LLC for IAF program management office space near Sea-Tac

International Airport.

program leader.

and inspection; surveying and locating and safety service agreements.

factor design-build methodology.