Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
8c
ACTION ITEM
Date of Meeting
March 10, 2020
DATE: March 3, 2020
TO: Stephen P. Metruck, Executive Director
FROM: Wayne Grotheer, Director Aviation Project Management Group
Laurel Dunphy, Director Airport Operations
Jeffrey Brown, Aviation Chief Operating Officer
SUBJECT: North Satellite (NSAT) Modernization Project Budget Increase
Amount of this request:
$40,000,000
Total estimated project cost:
$712,125,232
ACTION REQUESTED
Request Commission authorization for the Executive Director to increase the North Satellite
Modernization Project budget by $40,000,000 ($32 million capital and $8 million expense) for a
total project authorization of $712,125,232.
EXECUTIVE SUMMARY
The NSAT Modernization project helps meet the needs of our growing airline customers by
making a deliberate and significant step to improve Seattle-Tacoma International Airport’s
capacity, customer level of service and competitive ranking among peer airports.
The current NSAT Modernization project estimate at completion spending forecast is greater
than the budget authorized by the Commission. This request allows 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.
The budget increase includes $5 million for the project’s management reserve, which will only
be utilized with approval of the Executive Director.
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
COMMISSION AGENDA – Action Item No. __8c__ Page 2 of 9
Meeting Date: March 10, 2020
Template revised June 27, 2019 (Diversity in Contracting).
passenger service to mitigate passenger impacts during construction. These factors have all
drawn down the construction contingencies and Project Reserves. As a result, we request to
augment our authorization and funding to deliver the project.
Diversity in Contracting
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, 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, opened to operations the renovated
Concourse C STS station, and are more than halfway through the overall project construction.
We continue to show project turnover for final operational readiness activities to be Q3 2021,
on schedule as projected in August 2017. As of December 31, 2019, the total construction
contract is $470.5 million capital construction cost and $15 million expense. The $485.5 million
current HP contract 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 progress metrics observed. We completed Phase 1 construction
and began a rigorous lessons-learned process to deliver Phase 2 with even better passenger
service. The team evaluated all current expenditures, risks and trends and has projected an
estimated total cost 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) Settlement of change orders in process (e.g., negotiation of construction labor costs due
to critical trade worker shortages)
(4) Added Scope:
a. Restroom redesign
b. Nursing suite
c. Baggage Handling System revisions
COMMISSION AGENDA – Action Item No. __8c__ Page 3 of 9
Meeting Date: March 10, 2020
Template revised June 27, 2019 (Diversity in Contracting).
d. Elevator/Escalator changes required by Washington State Department of Labor
and Industry, 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
to maintenance of customer level of service standards through 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
KEY POINTS
Alaska Airlines 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.
• Another Majority-in-Interest (MII) approval from the Airlines is not required as the
project is under construction
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 construction. The team is employing lessons learned on turning over the facility
for operational use. We have successfully maintained Alaska’s operations and are providing 10
gates during Phase 2.
Scope of Work
Approval of this request will enable the project team to proceed with the following four
actions:
(1) Amend the Hensel Phelps (HP) contract to complete the project including executing all
pending and future change orders to the HP contract. The team requests to continue
COMMISSION AGENDA – Action Item No. __8c__ Page 4 of 9
Meeting Date: March 10, 2020
Template revised June 27, 2019 (Diversity in Contracting).
the practice of executing all change orders and amending the contract within
authorized budget to complete the construction in a timely manner and maintain
contract and labor harmony.
(2) Include $5 million to replenish the project’s Management Reserve in the budget
increase. The reserve will only be utilized with approval of the Executive Director.
(3) Amend consulting contracts for design/construction support services and project
management services as may be necessary to complete the project.
(4) Use Port crews in support of the NSAT construction in addition to utilizing small works
contractors to accommodate unforeseen/changed conditions and install equipment.
Schedule
The NSAT Modernization project remains on schedule for opening the overall facility in the
summer of 2021. The complexities of constructing this project while maintaining Alaska’s
active operations and maintaining a high level of customer experience has been a continuous
challenge and remains one of the highest risks.
Activity
Commission design authorization
2012 Quarter 2
Design start
2012 Quarter 2
Commission construction authorization
2012 Quarter 4
Construction start
2013 Quarter 4
In-use date
2021 Quarter 3
Cost Breakdown
This Request
Total Project
Design
$4,891,341
$87,250,347
Construction
$35,108,659
$624,874,885
Total
$40,000,000
$712,125,232
FINANCIAL IMPLICATIONS
Cost Estimate/Authorization Summary
Capital
Expense
Total
COST ESTIMATE
Previous estimate
$659,825,232
$12,300,000
$672,125,232
Current change
$32,090,895
$7,909,105
$40,000,000
Revised estimate
$691,916,127
$20,209,105
$712,125,232
AUTHORIZATION
Previous authorizations
$659,825,232
$12,300,000
$672,125,232
Current 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
COMMISSION AGENDA – Action Item No. __8c__ Page 5 of 9
Meeting Date: March 10, 2020
Template revised June 27, 2019 (Diversity in Contracting).
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. The capital budget increase of $32,090,895 will be transferred from the
Aeronautical Reserve CIP (C800753) resulting in zero net change to the Aviation capital budget.
The funding sources will include the Airport Development Fund, revenue bonds and Passenger
Facility Charge revenue (PFCs).
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
$0.34-$1.79 depending on amounts of PFCs 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 PFC-eligible revenue bonds debt service. Debt service
paid by PFCs is also excluded from the airline rate base.
Future Revenues and Expenses (Total cost of ownership)
Maintenance staff will be increased to support the activation of the facility in a phased
approach through 2021. A key objective of the project is installing sustainable materials and to
maximize the maintainability of the new equipment. The complete renovation/replacement of
the mechanical, electrical, lighting, communications, pre-conditioned air, 400 Hz, baggage and
other major systems provides an opportunity to achieve life cycle cost efficiencies and savings.
The project is pursuing Leadership in Energy and Environmental Design (LEED) certification,
gained United Stated Green Building Council (USGBC) approval for the design and is tracking to
LEED Silver status to date. Rigorous studies and evaluation of options for 30-year life cycle cost
have resulted in more holistic decision making throughout the design process, balancing first
cost, energy consumption, replacement cost of infrastructure, construction materials and
methods, and maintenance over the life of the facility. The resulting facility champions total
cost of ownership for the Port.
COMMISSION AGENDA – Action Item No. __8c__ Page 6 of 9
Meeting Date: March 10, 2020
Template revised June 27, 2019 (Diversity in Contracting).
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
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%
COMMISSION AGENDA – Action Item No. __8c__ Page 7 of 9
Meeting Date: March 10, 2020
Template revised June 27, 2019 (Diversity in Contracting).
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
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
COMMISSION AGENDA – Action Item No. __8c__ Page 8 of 9
Meeting Date: March 10, 2020
Template revised June 27, 2019 (Diversity in Contracting).
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 Sea-Tac Airport Renovations program for: 1)
preliminary project funding; 2) execution of consulting 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.
COMMISSION AGENDA – Action Item No. __8c__ Page 9 of 9
Meeting Date: March 10, 2020
Template revised June 27, 2019 (Diversity in Contracting).
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
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.
