Template revised April 12, 2018.
COMMISSION
AGENDA MEMORANDUM
Item No.
9b
BRIEFING ITEM
Date of Meeting
February 25, 2020
DATE: February 14, 2020
TO: Stephen P. Metruck, Executive Director
FROM: Wayne Grotheer, Director Aviation Project Management Group
Laurel Dunphy, Director Airport Operations
Jeffrey Brown, Director Aviation Facilities and Capital Programs
SUBJECT: North Satellite Modernization Budget Increase Briefing
EXECUTIVE SUMMARY
The North Satellite (NSAT) Modernization project helps meet the needs of our growing airline
customers by making a deliberate and significant step to improving Seattle-Tacoma
International Airport’s capacity, customer level of service and competitive ranking among peer
airports. This briefing describes that the current NSAT Modernization project estimate at
completion spending forecast is greater than the budget authorized by the Commission.
Increasing the budget in an upcoming Commission action will allow the NSAT Modernization
project to proceed to completion by providing the budget for scope changes, additional soft
costs, unforeseen conditions, and to respond to the fast-changing dynamics of the airport.
This briefing lays out the intention of the project team to return March 10, 2020 to request
Commission authorization for the Executive Director to increase the project budget by $40
million.
JUSTIFICATION
Approval of the increased budget will provide sufficient construction contingencies for
construction completion and fund remediation efforts and support costs associated with the
construction. The need for additional funding results from differing site conditions found
during construction, additional contaminated and unsuitable soils discovered during
excavation, added scope through Phase 1 and Phase 2 to meet airline, customer service,
environmental, and code compliance needs and expectations, and an increased level of
passenger service to mitigate passenger impacts during construction. These factors have all
drawn down the construction contingencies and Project Reserves.
Diversity in Contracting
Hensel Phelps (HP) was contracted in July 2017 to achieve Small Contractor and Supplier
participation of 5.5%. There were also two aspirational goals that HP was expected to
attain: Small Business Enterprise participation of 16%, and Disadvantaged, Disabled Veteran,
COMMISSION AGENDA – Briefing Item No. _9b_ Page 2 of 8
Meeting Date: February 25, 2020
Template revised September 22, 2016.
Minority, Women’s Business Enterprise participation of 3.6%. The contractor is tracking to
meet or exceed these goals and requirements. Project metrics are included in the table below
in the Background section. Staff has updated and will continue to update the Commission on
progress.
DETAILS
PROGRESS TO DATE
We have completed Phase 1, opened the Alaska Lounge, turned over the Concourse C STS
station, and are halfway through the project construction. We continue to show project
turnover to be Q3 2021 as projected in August 2017 and reaffirmed in subsequent briefings. As
of December 31, 2019, the total construction contract is at $470.5 million capital construction
cost and $15 million expense. The $485.5 million total construction cost includes the
preconstruction services completed by our contractor for a value of $5.5 million.
LOOKING FORWARD
The project team continues to adjust our project completion schedule and spending forecast
based upon current data and metrics observed. We completed Phase 1 construction and a
rigorous lessons learned process to deliver Phase 2 with better passenger service. The team
evaluated all current expenditures, risks and trends and has predicted a financial estimate at
completion of the project. Our estimate includes an increase in the following key elements:
Capital
(1) Finalized Design Development Cost (previously reported as exceeding allowance)
(2) Differing site conditions (e.g., existing building out of plumb, existing floor conditions
requiring complete terrazzo replacement, buried utilities)
(3) Critical trade worker shortages
(4) Added Scope:
a. Restroom redesign
b. Nursing suite
c. Baggage Handling System revisions
d. Elevator/Escalator changes by L&I, including a code revision
e. Added mobile stairway equipment for ground boarding aircraft (Phase 2 gate
mitigation for construction)
f. Rainwater flushing system expansion
Expense
(1) Contaminated and unsuitable soils continue to exceed predictions
(2) Incorporating activities directed towards delivering an enhanced customer level of
service; a feature of the Port’s change in project priority from delivery of new gates
COMMISSION AGENDA – Briefing Item No. _9b_ Page 3 of 8
Meeting Date: February 25, 2020
Template revised September 22, 2016.
to maintenance of customer level of service standards during construction. This
work has helped the project identify operational challenges, engage stakeholders,
and employ measures prior to and during the turnover of the facility from
construction to operational use. We have included this work in the project through
completion.
(3) Additional construction barricade mitigation efforts for critical passenger circulation
paths using escalators, stairs, and elevators. The number of passenger escalators
and elevators needed to be reduced to complete the construction, creating single
points of failure for access to the Concourse. We have deployed customer service
personnel, increased passenger wayfinding, improved the aesthetics of barricades
separating the public from the construction areas, and provided for better
operational activation activities to provide a better customer experience through
the STS station up to the gates.
Included in this budget increase is $5 million to replenish the project’s Management Reserve.
The reserve is held outside of the construction contract and will only be used with approval of
the Executive Director.
KEY POINTS
Alaska has expressed verbally to Port that they concur with the budget increase and moving
forward with completion of this project. The Airlines were briefed on December 5, 2019 about
the current status of the project.
The team has refined the phasing to better address customer and operational service, gate
capacity and the passenger experience to ensure there is no significant degradation in level of
service during the construction. The team is employing lessons learned on turning over the
facility for operational use. The team continues to improve the detailed phasing and
construction sequencing to continue to improve the passenger experience while constructing
the project. We have successfully maintained AS’s operations and are providing 10 gates during
Phase 2.
FINANCIAL IMPLICATIONS
Cost Estimate/Authorization Summary
Capital
Expense
Total
COST ESTIMATE
Original estimate
$659,825,232
$12,300,000
$672,125,232
Pending change
$32,090,895
$7,909,105
$40,000,000
Revised estimate
$691,916,127
$20,209,105
$712,125,232
COMMISSION AGENDA – Briefing Item No. _9b_ Page 4 of 8
Meeting Date: February 25, 2020
Template revised September 22, 2016.
AUTHORIZATION
Previous authorizations
$659,825,232
$12,300,000
$672,125,232
Pending request for authorization
$32,090,895
$7,909,105
$40,000,000
Total authorizations, including this request
$691,916,127
$20,209,105
$712,125,232
Remaining amount to be authorized
$0
$0
$0
Annual Budget Status and Source of Funds
This project is included in the 2020-2024 capital budget and plan of finance with a budget of
$659.8 million. Staff will return to Commission to request a capital budget increase of
$32,090,895, which would be transferred from the Aeronautical Reserve CIP (C800753)
resulting in zero net change to the Aviation capital budget. The funding sources will be the
airport development, revenue bonds and Passenger Facility Charge revenue (PFCs).
This project is under construction, per Signatory Lease and Operating Agreement (SLOA) any
additional budget increase does not require further Majority in Interest (MII) approval.
Financial Analysis and Summary
Project cost for analysis
$712,125,232
Business Unit (BU)
Terminal Building
Effect on business performance
(NOI after depreciation)
NOI after depreciation will increase due to inclusion of
capital (and operating) costs in airline rate base.
Increasing use of PFCs reduces Port revenue as capital
costs are excluded from airline rate base.
IRR/NPV (if relevant)
N/A
CPE Impact
$0.60-$1.95 depending on amounts of PCs applied to
ongoing revenue bond debt service.
The funding plan includes approximately $126 million of PFCs to fund construction costs.
Capital costs funded with PFCs are excluded from the airline rate base and therefore do not
impact passenger airline cost per enplaned passenger (CPE). The funding plan also includes the
use of PFCs to pay some level of ongoing revenue bonds debt service. Debt service paid by PFCs
is also excluded from the airline rate base.
BACKGROUND
Project Metrics
Budget/Planned
Utilization
to Date
Cumulative Spent Against Authorization
$672.1 M
$425.8 M
Overall Work Complete
60%
60%
Cash flow for Reporting Period (Q1 2019)
$43.7 M
$37.1 M
Net Construction Contingency
$24.7 M
$17.0 M
COMMISSION AGENDA – Briefing Item No. _9b_ Page 5 of 8
Meeting Date: February 25, 2020
Template revised September 22, 2016.
Management Reserve *
$14.7 M
$6.9 M
Small Contractor Supplier (SCS) Design
6.4%
6.2%
SBE Participation (Construction)
16.0%
19.08%
SCS Participation (Construction)
5.5%
5.55%
WMBE Participation (Construction)
3.6%
3.77%
Apprenticeship Utilization to Date
15.0%
18.61%
Minority Utilization to Date (% of
apprenticeship)
15.0%
32.9%
Women Utilization to Date (% of
apprenticeship)
10.0%
10%
* Requires Commission Notification
M = million
Total Construction Contract Metrics
Budget/Planned
Percent
Original Contract Sum
$445.9 M
Executed Change Orders
$24,2 M
5.42%
Current Contract Sum
$470.1 M
Net Construction Contingency
$33.7 M
Contingency Expended/Authorized
$24.2 M
71.7%
Remaining Construction Contingency
$9.5 M
28.3%
Negotiated Support Services (NSS)
NSS Original Budget Value
$40.1 M
NSS Current Budget Value
$39.3 M
NSS Authorized Amount
$19.8 M
50.5%
NSS Remaining Amount
$19.5 M
49.6%
Change Orders executed over $300,000 (since last report):
Number
Summary Description
Cost
544 & 590
Increase Contaminated Soil Allowance
$2.1 M
634
Concourse topping slab removal
$960,000
641 & 684
Concourse C steel and vertical core revision
$946,000
631
Mother’s Room modifications
$415,000
549
Additional GC’s for estimator
$447,000
ATTACHMENTS TO THIS BRIEFING
(1) Presentation slides
COMMISSION AGENDA – Briefing Item No. _9b_ Page 6 of 8
Meeting Date: February 25, 2020
Template revised September 22, 2016.
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
North Sea-Tac Airport Renovations (NorthSTAR) (CIP #C800544)
February 26, 2019 – NorthSTAR Program status update
November 13, 2018 – NorthSTAR Program status update
July 31, 2018 – NorthSTAR Program status update
May 22, 2018 – NorthSTAR Program status update
Jan 30, 2018 – NorthSTAR Program status update
Oct 24, 2017 – NorthSTAR Program status update
July 25, 2017 – NorthSTAR Program status update
April 25, 2017 – NorthSTAR Program status update
January 24, 2017 – NorthSTAR Program status update
September 13, 2016 – Request Commission authorization for the Chief Executive Officer to
(1) increase the North Satellite Renovation & North Satellite Transit Station Lobbies
(NSAT) project scope and budget; (2) increase authorization for project design; (3)
amend design service agreement with URS that exceeds 50% of the value of the original
contract; and (4) increase authorization for Preliminary Work Package #2 (PWP #2)
construction.
August 9, 2016 – NorthSTAR Program Status Update
May 24, 2016 – Commission authorized Chief Executive Officer to 1) increase the North
Satellite project scope and budget; 2) increase authorization for NSAT design and overall
project support; 3) amend service agreements with Jacobs Project Management
Company and AECOM; and 4) authorize the use of port crews and small works
contactors to perform work for the project.
February 23, 2016 – NorthSTAR Program status update
November 24, 2015 – NorthSTAR Program status update
July 14, 2015 – NorthSTAR Program status update
April 28, 2015 – NorthSTAR Program status update
January 27, 2015 – NorthSTAR Program status update
October 28, 2014 - NorthSTAR Program status update
August 19, 2014 - NorthSTAR Program status update
May 27, 2014 – NorthSTAR Program status update
January 14, 2014 – NorthSTAR Program status update
September 24, 2013 – NorthSTAR Program status update
June 25, 2013 –NorthSTAR Program status update
April 9, 2013 – The Commission authorized the Chief Executive Officer to enter into a
project labor agreement covering the NorthSTAR program’s five major construction
projects.
March 26, 2013 –NorthSTAR Program status update
June 26, 2012 – The Commission received a briefing on the status of the Airline
Realignment Program and budget restructuring in association with the NorthSTAR
Program.
April 10, 2012 – Authorizations for the North Seattle-Tacoma International Airport
Renovations program for: 1) preliminary project funding; 2) execution of consulting
COMMISSION AGENDA – Briefing Item No. _9b_ Page 7 of 8
Meeting Date: February 25, 2020
Template revised September 22, 2016.
contracts for design/construction support services and project management services;
and 3) use of Port crews and consultants to conduct regulated materials management
surveys and field support services for preliminary project planning tasks.
North Satellite Renovation & North Satellite Transit Station Lobbies (CIP #C800556)
August 15, 2017 – The Commission authorized
Increase the authorized budget by $107,000,000 capital and $500,000 expense and
authorize the remaining $261,547,392 capital and $8,800,000 expense, amending the
Hensel Phelps (HP) contract by $161,563,526 for the final MACC to complete the
project in Q3 2021. Authorize execution of all pending and future change orders to
the HP contract within the authorized budget and project scope to avoid potential
delays. Authorize Port crews to support NSAT construction and authorize Port staff to
enter into a TRA with AS for the reimbursement of AS and Port responsible design
efforts and improvements.
June 27, 2017 – The Commission authorized four NSAT related items:
increase project authorization for the North Satellite Renovation & North Satellite
Transit Station Lobbies Project by $200,000,000; execute Preliminary Work
Amendment #3 (PWA #3) with Hensel Phelps (HP) for up to $200,000,000; authorize
Port staff to execute all change orders to the HP contract within authorized budget
and project scope without returning for additional Commission authorization; and
authorize Port Construction Services (PCS) to execute small works contracts and use
Port crews to support NSAT construction
September 13, 2016 – The Commission authorized four NSAT related items:
the increase of project scope and budget (capital) by $7,000,000 for the revised third
floor layout to better accommodate the signature restaurant, provide 3,000 additional
square feet of future airport related leasable space, and increase AS premium traveler
lounge as requested by 4,850 square feet.
Increase authorization by $1,000,000 for project design.
Amend design service agreements with AECOM that exceed 50% value of the original
contract.
Increase authorization by $30,000,000 to accommodate Preliminary Work Package #2
construction.
May 24, 2016 - The Commission authorized four NSAT related items:
Increase of project scope and budget (capital and expense) by $121,219,098 for 30% &
60% design scope additions and risk contingencies
Increased authorization of $11,000,000 for continued NorthSTAR Program/Project
Management services and NSAT design and overall project support.
Amend service agreements with Jacobs Project Management Co. and AECOM.
Authorize the use of port crews and small works contractors.
December 8, 2015 – The Commission authorized $98,100,000 for the following:
Additional Pre-Construction services ($1,200,000)
Construction auditing services
Preliminary Construction work
COMMISSION AGENDA – Briefing Item No. _9b_ Page 8 of 8
Meeting Date: February 25, 2020
Template revised September 22, 2016.
March 24, 2015 – The Commission authorized three NSAT related items:
Expand the baggage handling system increasing the project scope for $14,400,000 and
$1,954,000 to complete the design.
Entering into a developer agreement with Puget Sound Energy and $200,000 in
reimbursement for the design and construction of underground gas infrastructure.
$5,300,000 to Prepare four locations to accommodate temporary passenger loading
bridges, to construct temporary construction offices; To complete construction of a
Satellite Transit System (STS) North loop Dynamic Display system; $600,000 in expense
funds for regulated materials management for AS’s tenant improvement project; and
Approval to use Port crew labor and small works contractors to complete early project
work.
August 5, 2014 – The Commission authorized expansion of the NSAT, $191,323,143 budget
increase, $15,717,800 to complete the design, execute amendments to existing
consulting contracts; execute future consulting contracts and use of and to advertise for
General Contractor/Construction Manager (GC/CM) alternative public works contractor.
July 22, 2014 - NSAT Expansion Briefing
April 22, 2014 – Seattle-Tacoma International Airport Capital Program - Briefing
January 14, 2014 – NSAT expansion briefing.
May 28, 2013, Commission authorized the execution of separate service agreements for
Construction Management Services and Commissioning Services, of approximate values
of $10 million and $1.5 million.
December 11, 2012 – The Commission was briefed on the Vertical Conveyance
Modernization Project Aero Phases 1 and 2 and the possibility of adding the specified
elevators and escalators to the NorthSTAR program.
July 24, 2012 - Commission authorized $32,000,000 for the design of the NorthSTAR NSAT
Renovation and NSTS Lobbies project.
April 10, 2012 - The Commission authorized the execution of consultant contracts for
design and construction support services; program management services; and the
completion of site surveys for regulated materials management, for $1,200,000.
