Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
8g
ACTION ITEM
Date of Meeting
July 26, 2022
DATE: July 26, 2022
TO: Stephen P. Metruck, Executive Director
FROM: Eileen Francisco, Director Aviation Project Management
Wendy Reiter, Director Aviation Security
SUBJECT: Baggage Optimization Phase 3 (CIP #C800612, WP #N04420)
Amount of this request:
$34,215,000
Total estimated Phase 3 cost:
$432,430,000 – $497,295,000
ACTION REQUESTED
Request Commission authorization for the Executive Director to (1) execute an agreement with
the Transportation Security Administrative (TSA) to provide clear access to screening equipment
for Phase 2, (2) authorize $34,215,000 for Phase 3 to complete pre-construction services, (3)
utilize, advertise, and execute a General Contractor/Construction Manager (GC/CM) for Phase 3,
(4) advertise and execute a project specific Construction Management (CM) and Airline Technical
Representative (ATR) contract for Phase 3, (5) amend Service Agreement (SA) P-00317641 to add
$18,340,000 for a total contract value of $49,500,000 to complete design services and provide
construction support for Phase 3, and (6) utilize Port crews for Phase 3 activities, for Baggage
Optimization Project at Seattle-Tacoma International Airport. The total amount of this request
is $34,215,000.
EXECUTIVE SUMMARY
Baggage Optimization is an airport-wide public safety and security program that improves
customer service for both airlines and passengers. This is a long-term, three-phase program that
is anticipated to be completed in 2027. The program allows the flexibility for bags to be checked
in from any ticket counter and be conveyed to serve any gate. The project is being bid and
constructed in three separate phases. Phase 1 has been completed, Phase 2 is under
construction, and development of Phase 3 will begin in Q3 2022. Phase 2 is approximately 45%
complete with an expected date of August 2024. Due to the lack of interconnectivity until the
project is complete, near continuous operation, and a fixed footprint, this project is complex and
has various constraints that requires detailed construction sequencing plans. As part of this
request, Phase 3 project delivery is changing the delivery method from Design Bid-Build to
GC/CM.
COMMISSION AGENDA – Action Item No. _8g___ Page 2 of 9
Meeting Date: July 26, 2022
Template revised June 27, 2019 (Diversity in Contracting).
JUSTIFICATION
Memorandum of Agreement:
The Port would like to enter into a Memorandum of Agreement (MOA) with the Transportation
Security Administration (TSA) regarding a requested variance for service access and/or removal
of the baggage screening machines in Phase 2. The requested variance includes sprinkler heads,
piping, and a section of removable catwalk that impedes the maintenance envelope of the
screening machines. When maintenance is needed or a screening machine needs to be removed
and/or replaced, the Port will be responsible to shut down the fire protection system and
sprinkler heads, take down pipe sections, and remove catwalk necessary to provide the proper
clearance.
General Contractor/Construction Management:
Previous Baggage Optimization phases and baggage projects at SEA used traditional design-bid-
build, however, discussions with executives and airlines led the team to consider changing the
project delivery method to GC/CM. GC/CM will allow for the contractor to be part of the complex
design and intricate construction sequence development that will minimize risk to 24/7 baggage
operations and gain earlier insight and control of construction costs. The Phase 2 audit and
major airline carriers recommended that the GC/CM project delivery method be analyzed and
considered for Phase 3.
Construction Manager Project Specific Contract:
The Baggage Optimization team does not have experience in delivering baggage projects utilizing
the GC/CM method. The team would like to bring on board a construction management (CM)
firm that has expertise in GC/CM and ideally baggage and airports to be an advisor through the
project process. The team would also like to gain knowledge and experience from this CM firm
to deliver future baggage projects utilizing GC/CM.
ATR Project Specific Contract:
ATRs have played a critical role in successfully delivering Phase 1 and Phase 2 of the Baggage
Optimization Program. Phase 3 would benefit from having a project specific ATR contract
through the life of the project to serve as a liaison between the project and Airlines. Having an
ATR that is consistent through the life of Phase 3 is critical to the success of delivering the project
in such ways as decision making, communications, and implementation of plans. The contract
will have a duration of five years in the amount of $1.5M.
Design Project Specific Contract:
BNP Associates is the program’s project specific design consultant that has designed the
comprehensive program design and provided design services through construction. Their
contract has been in place since 2014 and will require a contract amount increase to complete
Phase 3 design, design services support through construction, and contract contingency. The
request to add $18,340,000 was determined by previous phases design fees and design support
through construction fees. This Service Agreement P-00317641 increase is within Commission
authorized project spending. In accordance with RCW 53.19, the Commission is notified that this
COMMISSION AGENDA – Action Item No. _8g___ Page 3 of 9
Meeting Date: July 26, 2022
Template revised June 27, 2019 (Diversity in Contracting).
amendment exceeds 50 percent value of the original contract, and this memorandum will be
made available for public inspection. Contingency has also been included in the requested
amount.
Port Construction Crews:
Port construction crews have been utilized throughout the Baggage Optimization Phase 1 and
Phase 2. They will be used to perform manual baggage handling services and construction
services outside of the major contract work.
Diversity in Contracting
The project team will work with Diversity in Contracting team to conduct outreach and setting a
Women and Minority Owned Business Enterprise (WMBE) aspirational goal for the future GC/CM
construction contract.
DETAILS
Scope of Work
Phase 3 concludes the Baggage Optimization Program (BOP) allowing for complete baggage
flexibility to check in any bag into any ticket counter and be delivered to any airplane. It also
accommodates for passenger volume growth and meets TSA safety mandates. This phase will
tie-in all the south end systems to centralized screening, including the International Arrivals
Facility (IAF), and finalize the sortation and ticket counter connections.
Schedule
Phase 1 was completed in Q2 2020. Phase 2 is currently under construction and scheduled to be
completed in Q3 2024. Phase 3 design is scheduled to start in Q3 2022 and is scheduled to be
constructed by Q2 2027.
Phase Design Construction
Phase 1 Q3 2015 Q1 2016 - Q2 2020
Phase 2 Q1 2020 Q3 2020 – Q3 2024
Phase 3 Q1 2023 – Q1 2024 Q1 2024 – Q2 2027
Activity
Commission design authorization
Design start – Phase 3
Commission construction authorization
Construction start
Substantial Completion
COMMISSION AGENDA – Action Item No. _8g___ Page 4 of 9
Meeting Date: July 26, 2022
Template revised June 27, 2019 (Diversity in Contracting).
Cost Breakdown
This Request
Total Project
Design
$16,642,000
$42,157,000
Construction
$17,573,000
$390,293,000
Total – Phase 3
$34,215,000
$432,450,000
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Complete the Phase 3 as traditional design bid build instead of GC/CM. This
alternative would still allow for the Baggage Optimization Program to be completed.
Cost Implications: Phase 3 Estimate: $367M - $460M
Pros:
(1) Baggage projects at the Port have traditionally been delivered successfully as design bid
build projects; this includes Baggage Optimization Phases 1 and 2. Through various
baggage projects the plans and specifications have continually been refined; BHS
equipment and components have been studied and implemented in previous phases;
and construction sequencing documents are developed and vetted with constructability
and minimizing operational impacts while keeping overall schedule in mind.
(2) The baggage team is adept in developing and understanding the construction
documents, requirements, and delivery of design bid build baggage projects. This
internal team includes subject matter experts in baggage design and operations that
enables the Airlines to continue operations with minimal impacts during complex
construction sequencing.
(3) Phase 3 completes the Baggage Optimization program allowing for a complete baggage
flexibility, allows for growth, meets TSA mandates, and honors the Other Transaction
Agreement (OTA) with TSA.
Cons:
(1) Construction costs and the bidding market have been volatile in recent years and puts
the project at a high risk for unbudgeted increase in construction costs and the potential
for less-than-optimal bidders interested in the project. This risk is not fully accounted
for in the Phase 3 Estimated Costs above. As an example, the Phase 2 low bidder
proposal was approximately $114 million over the engineer’s estimate (approximately
64% over) at the time of bid. As we have seen in Phase 2, the supply chain for essential
construction material has been an issue, and is something that we cannot accurately
predict.
(2) Utilizing design bid build does not allow for the contractor to be part of the discussion
during design development, selection is based on low bid rather than qualifications,
there is no flexibility in the contract for changes, and the risk is put onto the contractor
and is reflected in the bids.
This is not the recommended alternative.
COMMISSION AGENDA – Action Item No. _8g___ Page 5 of 9
Meeting Date: July 26, 2022
Template revised June 27, 2019 (Diversity in Contracting).
Alternative 2 – Approve the request to proceed with Phase 3 and to change the project delivery
to GC/CM.
Cost Implications: Phase 3 Estimate: $400M - $500M
Construction cost and total Phase 3 cost will be refined as the project goes through the GC/CM
process. Commission will be updated regularly prior to finalizing the maximum allowable
construction cost (MACC).
Pros:
(1) Phase 3 completes the Baggage Optimization program allowing for complete baggage
flexibility, allows for growth, meets TSA mandates, and honors the OTA with TSA.
(2) GC/CM project delivery method for Phase 3 follows the audit recommendation with the
support of Airport Executives and Airlines.
(3) This project delivery method will also bring the contractor in earlier to assist in
developing a better understanding of construction costs and construction sequencing.
(4) GC/CM mitigates risk between the Port, designer, and the contractor. GC/CM estimates
will be generated during each phase of the design process. This will allow more price
certainty, and provides the ability to adjust the design and sequencing efforts to better
manage estimated costs to the budget prior to finalizing the Maximum Allowable
Construction Costs (MACC). This method better addresses the risk of a significantly large
bid overage as was experienced in Phase 2.
Cons:
(1) Baggage projects at the Port have historically been delivered as design-bid-build. The
BOP team is inexperienced in GC/CM project delivery, however, part of this request is
to hire a consultant construction management team as advisors.
(2) The design of the baggage handling system for all three phases was completed to
receive federal funding. GC/CM typically benefits from bringing the contractor on
earlier in the design phase. However, the construction sequencing, mechanical,
electrical, structural, and architectural is at about 30% design.
This is the recommended alternative.
FINANCIAL IMPLICATIONS
Phase 1 was completed at $101,275,000. Phase 2 has a budget of $415,675,000 with a
substantial completion date of Q3 2024. However, now that we are anticipating about a $20M
savings, barring any major issues, that amount can be rolled into Phase 3. The team has been
projecting a range of $400-$500M for Phase 3, with a likely cost of $432,450,000.
COMMISSION AGENDA – Action Item No. _8g___ Page 6 of 9
Meeting Date: July 26, 2022
Template revised June 27, 2019 (Diversity in Contracting).
Budget
Current
Authorization
Estimate At
Completion
Budget Delta Notes
Phase 1 $101,375,000 $101,375,000 $101,375,000
$ -
Phase 2 $415,675,000 $415,675,000 $395,675,000 $(20,000,000)
• Savings of $20M as
of June 2022
• Substantial
Completion Q3
2024
Phase 3 $313,000,000 $13,000,000 $432,450,000 $119,430,000
• Commission Range
presented April
2022 is $400M -
$500M
• MII anticipated Q3
2024
• Additional budget
request assumes a
$20M unspent
from Ph2 will be
transferred
Executive
Management
Reserve
$10,000,000 $10,000,000 $10,000,000 $ -
Transfer $15,500,000 $15,500,000 $15,500,000 $ -
• Commission
approval April
2022
TOTAL $855,550,000 $555,550,000 $955,000,000 $99,430,000
stimate/Authorization Summary
Capital
Expense
Total
COST ESTIMATE
Original estimate
$317,000,000
$150,000
$317,150,000
Previous changes – net
$538,084,000
$316,000
$538,400,000
Current change
$99,050,000
$400,000
$99,450,000
Revised estimate
$954,134,000
$866,000
$955,000,000
AUTHORIZATION
Previous authorizations
$555,084,000
$466,000
$555,550,000
Current request for authorization
$34,215,000
$0
$34,215,000
Total authorizations, including this request
$589,299,000
$466,000
$589,765,000
Remaining amount to be authorized
$364,835,000
$400,000
$365,235,000
COMMISSION AGENDA – Action Item No. _8g___ Page 7 of 9
Meeting Date: July 26, 2022
Template revised June 27, 2019 (Diversity in Contracting).
Annual Budget Status and Source of Funds
This project, C800612, was included in the 2022-2026 capital budget and plan of finance with a
budget of $839,584,000. The budget increase of $99,050,000 was transferred from the
Aeronautical Reserve CIP C800753 resulting in zero net change to the Aviation capital budget.
This project has prior Majority In Interest (MII) airlines approval for Phase 1 and 2. The Phase 3
MII ballot is anticipated in 2023. The funding source would be future revenue bonds.
Financial Analysis and Summary
Project cost for analysis
$955,000,000
Business Unit (BU)
Baggage System
Effect on business performance
(NOI after depreciation)
NOI after depreciation will increase due to inclusion of
capital (and operating) costs in airline rate base
IRR/NPV (if relevant)
N/A
CPE Impact
$0.26 in 2020, $1.03 in 2024 and $2.75 in 2028
ADDITIONAL BACKGROUND
The Baggage Optimization project was scoped in 2012 to accommodate 45 Million Annual
Passengers (MAP) with an expandable design to accommodate future growth.  At the time,
growth forecasts were flat and predicted that 45 MAP would be adequate through 2027. The
decision was made to proceed in building an expandable 45 MAP system with the expectation
that an expansion would occur in the future in time to accommodate growth up to the 60 MAP
level. Due to unprecedented growth at the airport, the 45 MAP threshold was met in 2016, over
ten years earlier than anticipated. In June 2017, the Commission authorized the project to
incorporate a capacity expansion of the Baggage Optimization project in order for the new
outbound baggage system to accommodate 60 MAP.
ATTACHMENTS TO THIS REQUEST
(1) Presentation slides
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
• April 19, 2022 – Baggage Optimization Program Update – Quarter 2, 2022
• January 28, 2020 – Commission Authorization to (1) execute a construction contract with
the low responsive and responsible bidder for the Baggage Optimization Phase 2 Project
at Seattle-Tacoma International Airport, notwithstanding the low bid exceeding the
estimate at time of bid by more than 10 percent, and (2) authorize an additional
$190,737,800 for Phase 2 construction and Phase 3 design for a total
program authorization of $540,050,000
COMMISSION AGENDA – Action Item No. _8g___ Page 8 of 9
Meeting Date: July 26, 2022
Template revised June 27, 2019 (Diversity in Contracting).
•
April 23, 2019 – Commission Authorization to (1) advertise, award, and execute a
construction contract for the Baggage Optimization Phase 2 project at Seattle-Tacoma
International Airport; (2) employ a project labor agreement (PLA); and (3) utilize Port
crews and small works contracts to perform construction work 
• February 26, 2019 – Baggage Optimization Quarter 4 Project Briefing 
• October 23, 2018 – Baggage Optimization Quarter 3 Project Briefing 
• June 12, 2018 – Baggage Optimization Quarter 2 Project Briefing 
• January 9, 2018 – Baggage Optimization Quarter 4 Project Briefing 
• September 26, 2017 – Baggage Optimization Quarter 3 Project Briefing 
• June 27, 2017 – Commission authorization to (1) authorize additional design and project
management funds to expand the capacity to 60 million annual passengers (MAP); (2) use
Port crews and small works contracts to perform additional construction work; and (3)
amend Service Agreement P-00317641 to add $10,160,000 
• October 25, 2016 – Baggage Optimization Quarter 4 Project Briefing 
• July 12, 2016 – Commission authorization to advertise and execute a contract for
construction Phase 1 
• June 28, 2016– Baggage Program Briefing 
• May 17, 2016 – Checked Baggage Optimization Project Briefing 
• March 8, 2016 – Commission authorization for the Chief Executive Officer to amend the
Baggage Optimization Design Services contract 
• June 23, 2015 – Checked Baggage Optimization Project Briefing 
• September 10, 2013 – The Commission authorized the execution of an Other Transaction
Agreement (OTA) with TSA for reimbursable costs for design; construction, and to
authorize $15 million to continue from 30% to 100% design; and execute a consultant
service agreement for program management support services 
• August 20, 2013 – Response to questions from Commissioners asked during August 6,
2013 Commission Meeting 
• August 6, 2013 – The Commission was briefed on the near-term and long-term challenges
related to handling checked baggage at the Airport 
• January 22, 2013 – The Commission authorized $5 million for staff to begin design through
30%, and to enter into an agreement to allow reimbursement from the federal
government to the Port for eligible elements of the 30% design effort 
• January 8, 2013 – Baggage Systems Briefing 
• August 14, 2012 – Baggage system recapitalization/optimization was noted in the 2013
business plan and capital briefing as a significant capital project not included in 2013-17
capital program 
• August 7, 2012 – Baggage system recapitalization/optimization was referenced as one of
the drivers for the need to develop an Airport Sustainability Master Plan 
• June 26, 2012 – The Airport’s baggage systems were discussed during a briefing on
terminal development challenges 
• May 10, 2012 – TSA’s interest in a national recapitalization/optimization plan for all
baggage-screening operations was referenced in a design authorization request for the
C60-C61 Baggage Handling System Modifications Project 
COMMISSION AGENDA – Action Item No. _8g___ Page 9 of 9
Meeting Date: July 26, 2022
Template revised June 27, 2019 (Diversity in Contracting).