Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
8d
ACTION ITEM
Date of Meeting
November 12, 2019
DATE: November 4, 2019
TO: Stephen P. Metruck, Executive Director
FROM: Jeffrey Brown, Director Aviation Facilities and Capital Programs
James Schone, Director Aviation Business Development
Wayne Grotheer, Director Aviation Project Management
Janice Zahn, Assistant Director Engineering, Construction Services
SUBJECT: Central Terminal Infrastructure Upgrade budget increase request (CIP #C800722)
Amount of this request:
$5,000,000
Total estimated project cost:
$21,834,000
ACTION REQUESTED
Request Commission authorization for the Executive Director to (1) increase the authorized
funds for the Central Terminal Infrastructure Upgrade project in the amount of $5,000,000 for a
revised total estimated project cost of $21,834,000; and (2) execute two construction change
orders in excess of $300,000 and 60-day time extensions.
EXECUTIVE SUMMARY
The Central Terminal Infrastructure Upgrade project provides the shell space and associated
vertical circulation for expansion of and improvements to the Airport Dining and Retail (ADR)
Program in the Central Terminal which will improve customer service, create more jobs and
increase non-aeronautical revenues.
The most recent Airport Dining and Retail (ADR) demand analysis, completed in 2016, showed
there was a significant deficiency of space for food service throughout the main terminal
building to meet the anticipated 2025 passenger volume projections. And since that analysis,
enplanements have grown faster than the 2016 forecast, creating an even greater deficiency.
This project, which will add over 11,000 square feet of new leasable space to the Central
Terminal, was determined to be the best option to address that deficiency.
The project estimate at completion (including replenishment of contingencies) exceeds the
current project authorization by $5,000,000. The anticipated budget overrun is primarily a result
of scope additions, unforeseen conditions, and design errors and omissions. While scope
changes to this project have resulted in the current budget shortfall, these change orders such
as the deferred closing of Anthony’s, pest mitigation, and provisions for temporary food carts
COMMISSION AGENDA – Action Item No. __8d__ Page 2 of 6
Meeting Date: November 12, 2019
Template revised September 22, 2016; format updates October 19, 2016.
have resulted in significant benefit to the Port and the traveling public. The deferred closing of
Anthony’s and the investment in the temporary food carts not only had a significant positive
impact on customer service, together they generated over $1.25 million in revenue to the Port.
Project scope additions and Port requested schedule delays have resulted in about 40% of the
$5,000,000 budget overrun.
JUSTIFICATION
This project supports the redevelopment of the ADR program which is a significant contributor
to customer service for the travelling public as well as the creation of jobs for residents of this
region and is the second-largest source of non-aeronautical revenue for the Port. At the end of
2018, there were over 2,000 full and part-time jobs directly associated with the tenants that
comprise the ADR Program. During 2018, the ADR program generated $336 million in gross sales
with over $52 million paid to the Port as rent and concession payments. The ADR units in the
Central Terminal alone generated $95.5 million in gross sales in 2018 (28% of total ADR gross
sales) with over $11.75 million (12%) paid to the Port as rent and concession payments.
The 2016 ADR Demand Analysis showed that there was a significant shortfall in dining and retail
capacity to meet the forecasted demand based on passenger projections for 2025. Specifically,
there was a shortfall of over 26,000 square feet of food and beverage service forecasted for the
post-security area in the main terminal building.
This project, which will add over 11,000 square feet of leasable space on the mezzanine level of
the Central Terminal, was determined to be the best option to significantly reduce this shortfall.
It develops spaces in the Central Terminal that are currently unused and
reconfigures/repurposes existing spaces for improved utilization. The completion of this project
will enable the Port to better meet passenger demand for food service while creating more jobs
and increasing non-aeronautical revenues. This project will also ensure that the base building
systems and all points of connection for utilities are code compliant.
Diversity in Contracting
It is a requirement of this project that 25 percent of the total construction contract value be
performed by one or more small businesses. Small business participation is currently in excess
of 78 percent. Minority and Women-owned Business Enterprise (MWBE) participation is
currently at 11.3 percent.
DETAILS
Given the sizeable shortfall of space identified in 2016 ADR Demand Analysis, staff looked
throughout the Airport for space to meet the forecasted demand. Staff determined that the
expansion of the ADR Program in the Central Terminal through the utilization of unused spaces
COMMISSION AGENDA – Action Item No. __8d__ Page 3 of 6
Meeting Date: November 12, 2019
Template revised September 22, 2016; format updates October 19, 2016.
on the mezzanine level, would be the best alternative to reduce the shortfall. This project is
necessary to enable the utilization of these spaces.
This project was originally bid as two separate construction projects. All bids received for the
two projects exceeded the engineer’s estimate, and as a result the projects were combined and
rebid as a single construction package. The current project estimate at completion is
$21,834,000 this includes the request for $5,000,000 in this memorandum. If the original bids
would have been accepted and contracts awarded the total project cost would have been
$24,716,000. If these contracts had been awarded the project team is confident that an
authorization for additional budget would still have been required.
The project has experienced major construction change orders above and beyond the projected
costs due to business and customer service improvements, costlier than anticipated unforeseen
field conditions, and designer errors and omissions. These costs include additional barricades,
errors in elevator pit depths, added power and communications for temporary food carts,
delays in closing tenant spaces, pest mitigation, unforeseen conditions, and additional support
costs for AV Maintenance, Port Construction Services, and design.
There are currently two change orders related to these decisions that require Commission
authorization; both will extend the contract duration more than 60 days and increase the
contract value by more than $300,000. Final values are still under negotiation, and staff
estimates the additional cost and time due to changes in construction phasing of approximately
$530,000 and 120 calendar days. Impacts from unforeseen utilities are currently estimated at
$300,000 and 90 calendar days.
Scope of Work
Upgrade the infrastructure in the Central Terminal to include adding new heating, ventilation,
and air conditioning (HVAC) air handling units, variable air volume boxes, plumbing, electrical,
mechanical systems, demising walls, elevators and stairways, and demolition to prepare the
mezzanine and all Central Terminal spaces for future tenant build-out projects. This will require
closing all Central Terminal tenant spaces, in multiple phases, to accomplish the work.
Schedule
Activity
2
nd
Quarter 2015
2
nd
Quarter 2015
2
nd
Quarter 2016
3
rd
Quarter 2017
4
th
Quarter 2017
3
rd
Quarter 2020
COMMISSION AGENDA – Action Item No. __8d__ Page 4 of 6
Meeting Date: November 12, 2019
Template revised September 22, 2016; format updates October 19, 2016.
Cost Breakdown
This Request
Total Project
$450,000
$2,301,000
$4,550,000
$19,533,000
$5,000,000
$21,834,000
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Substantial scope reduction, north penthouse extension not completed
Cost Implications: An estimated $1,500,000 in project costs would need to be expensed.
Pros:
(1) No additional capital investment required.
Cons:
(1) The North Mezzanine would not be available for use and the increased passenger
demand for food service in the Central Terminal would not be met.
(2) The planned ADR Lease Group 3 tenant spaces in the Central Terminal would not be
remodeled as part of the Central Terminal Infrastructure Upgrade project resulting in a
loss of future non-aeronautical revenues.
This is not the recommended alternative.
Alternative 2 – Upgrade the Central Terminal Infrastructure
Cost Implications: $5,000,000
Pros:
(1) Design for Central Terminal Infrastructure Upgrade project is complete.
(2) Enables the ADR Lease Group 3 expansion into the north mezzanine spaces not
currently being used by the traveling public.
(3) This project will add approximately 11,000 square feet of new ADR space to the Central
Terminal.
Cons:
(1) Requires capital investment by the Port of Seattle.
(2) Project will require complex construction in support of the planned expansion that will
affect the traveling public; closure of tenant spaces during construction.
(3) An additional $5,000,000 is required to complete the project for a revised total
estimated cost of $21,834,000.
This is the recommended alternative.
COMMISSION AGENDA – Action Item No. __8d__ Page 5 of 6
Meeting Date: November 12, 2019
Template revised September 22, 2016; format updates October 19, 2016.
FINANCIAL IMPLICATIONS
Cost Estimate/Authorization Summary
Capital
Expense
Total
$6,589,000
$23,000
$6,612,000
$6,190,000
$0
$6,190,000
$4,032,000
$0
$4,032,000
$5,000,000
$5,000,000
$21,811,000
$23,000
$21,834,000
$16,811,000
$23,000
$16,834,000
$5,000,000
$0
$5,000,000
$21,811,000
$23,000
$21,834,000
$0
$0
$0
Annual Budget Status and Source of Funds
This project, CIP C800722, was included in the 2019-2023 capital budget and plan of finance
with a budget of $16,811,000. A budget increase of $5,000,000 will be transferred from the
Aeronautical Reserve CIP (C800753) resulting in zero net change to the Aviation capital budget.
The funding source will be 2018 revenue bonds.
Financial Analysis and Summary
$21,834,000
Terminal Building (HVAC) and Terminal Non-
Aeronautical (vertical circulation)
NOI after depreciation will increase
N/A
$0.06 in 2020
Future Revenues and Expenses (Total cost of ownership)
Aviation Maintenance anticipates only a minimal increase in operations and maintenance costs
with respect to the additional 13 variable frequency drives and the light emitting diode lighting
for the sides of the one staircase, which will be absorbed with current resources. No impact is
anticipated as a result of the renewal and replacement of the existing equipment. There will be
an increase in operations and maintenance costs related to the two additional elevators of
approximately $35,000 per year, and a total annual increase of $8,000 for the two additional
HVAC units as a result of this project.
COMMISSION AGENDA – Action Item No. __8d__ Page 6 of 6
Meeting Date: November 12, 2019
Template revised September 22, 2016; format updates October 19, 2016.
ATTACHMENTS TO THIS REQUEST
(1) Presentation slides
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
June 27, 2017 – Commission transferred the ADR Infrastructure Modifications scope and
budget of $6,190,000 to the Central Terminal Infrastructure Upgrade project and authorized
the construction of the combined project for an additional $4,032,000. The total estimated
cost of the combined project is $16,834,000.
August 9, 2016 – Commission authorized construction of the Central Terminal Infrastructure
Upgrade project for an additional $5,498,000.
June 28, 2016 – Commission authorized an additional $5,825,000 for the ADR Infrastructure
Modifications project and transferred $1,500,000 of savings from the Checked Baggage
Recapitalization / Optimization project.
May 26, 2015 – Commission authorized design for the Central Terminal Infrastructure Upgrade
Project for a total of $1,114,000.
October 28, 2014 – Commission authorized design for the ADR Infrastructure Modifications
project for a total of $2,801,000 and transferred scope and budget of $3,775,000 to the
Checked Baggage Recapitalization / Optimization project for the design and construction of two
elevator pits.