Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
8i
ACTION ITEM
Date of Meeting
February 14, 2023
DATE: February 6, 2023
TO: Stephen P. Metruck, Executive Director
FROM: Janice Zahn, Director, Engineering
Eileen Francisco, Interim Chief Development Officer
Jeff Moken, Senior Manager Airline Affairs & Aviation Properties
SUBJECT: Post IAF Airline Realignment Scope Development (C801158)
Amount of this request:
$7,000,000
Estimated project cost range:
$98,000,000 – $172,000,000
ACTION REQUESTED
Request Commission authorization for the Executive Director to (1) amend a project-specific
design contract to increase the contract value by $5,200,000, and (2) execute a Change Order to
the General Contractor/Construction Manager Pre-Construction Services contract for $1,800,000
in support of the Post IAF Airline Realignment project at Seattle-Tacoma International Airport.
EXECUTIVE SUMMARY
The Post IAF Airline Realignment project is facilitating the relocation of United Airlines’ domestic
only operations from Concourse A to Concourse B at Seattle-Tacoma International Airport
(Airport). This allows for airlines with international flights at SEA to use the vacated international
capable gates on Concourse A. Associated office and support spaces to support both relocations
will be delivered as part of the project. This project will also reconfigure and add ticket counters
to support international airline operations in the central main terminal (also known as Zone 4) by
demolishing an Airport Dining and Retail facility to make room. Additionally, United Airlines will
self-perform the construction of their new lounge on Concourse B under a Memorandum of
Agreement with the Port.
Since March 2021, progress on the Post IAF Airline Realignment project includes award and
execution of contracts for project management services, construction management services,
design services, and General Contractor/Construction Manager (GCCM) pre-construction support
activities through 30% design development. Site investigation, condition documentation, and
verification of the primary construction sites is ongoing and project design has advanced to
approximately a 15% level of completion.
COMMISSION AGENDA – Action Item No. 8i Page 2 of 8
Meeting Date: February 14, 2023
Template revised June 27, 2019 (Diversity in Contracting).
Site investigation and design development efforts have revealed gaps in the project scope. This
includes significant code deficiencies identified during preliminary design, requiring
unanticipated renovations and construction phased to be completed before initiating the base
scope work. Early programming confirmed the relocation of United Airlines and consolidation of
Delta Air Lines on Concourse B would increase the occupancy load, exceeding the capacity of
existing air handling units (AHU) to serve conditioned air to the expanded space. The existing
AHUs serving Concourse B, planned for replacement in a future project, must be included now to
support the new space. The project has identified two additional work packages to facilitate the
confirmed scope. Additional budget authorization is required for the design and pre-construction
efforts, to develop and design these additional scope elements.
With the current understanding of scope development, it is the project team’s assessment that
additional budget will be required for this project in the future. The current budget is
$102,000,000. As detailed further in this memo, the project is currently estimated to fall within
a range of $98,000,000 and $172,000,000.
JUSTIFICATION
Authorizing the design and pre-construction contract changes is required to continue progressing
the Airline Realignment design and support the Port’s overall airline realignment criteria and
future gate allocation by advancing the relocation of airlines as planned.
While this project completed a preliminary project definition process as part of a project
notebook, current Port project management practices would now require a more thorough
project definition document level of understanding (typically taking a project design to a 15%
level of completion). This process would best document project requirements and conditions
such that more accurate assessments of project scope, cost, and schedule could be made at the
time of design contract solicitation. This action supports the additional design services required
to incorporate necessary code upgrades and advancement of mechanical system upgrades.
Diversity in Contracting
The project team has worked with the Diversity in Contracting team to understand the women-
and minority-owned business enterprise (WMBE) aspirational goals for the project management,
construction management, design, testing & special inspections and GCCM contracts. The testing
& special inspections, and GCCM goals will be modified as design progresses and the scopes of
work are further developed.
Contract
Goal
Commitment
PM
14%
98%
CM
30%
30%
Design
15%
17%
Testing & Special Inspection
TBD
TBD
GCCM (Construction)
13%
TBD
COMMISSION AGENDA – Action Item No. 8i Page 3 of 8
Meeting Date: February 14, 2023
Template revised June 27, 2019 (Diversity in Contracting).
DETAILS
A detailed code analysis of Concourse B identified significant code deficiencies initiating restroom
improvements not previously included in the project and the need for an interior corridor to be
constructed at the ramp of Concourse B. An Enabling work package is required to facilitate initial
infrastructure relocations and construction activities necessary to bring Concourse B Ramp
operational space to full code compliance. The existing Air Handling Units (AHUs)and Heating,
Ventilation, and Air Conditioning (HVAC) system have been a known deficiency for the Airport
and scheduled to be updated under a future airport-wide project. The increase in leasable square
footage and building occupancy necessary on B Concourse for Airline Realignment requires the
project accelerate the future AHU and HVAC scope of work to meet minimum code requirements.
Additionally, scanning and subsequent building information modeling (BIM) efforts facilitated
through the GCCM Pre-Construction contract, are identifying the location and extents of
unknown and unforeseen existing utilities. In support of the schedule milestone deliverables, the
Design Team has continued to progress all five work packages to approximately 15% design
development.
The project-specific design contract amendment that would increase the contract value by
$5,200,000 would bring the contract total value to $10,200,000. In accordance with RCW
53.19.060, this memorandum constitutes notification to the Commission that the amended
amount of the design contract exceeds 50 percent of the original not-to-exceed contract value.
Additional GCCM Pre-construction services are required to identify existing conditions and
provide as-built documentation. The activities represented by the contract changes are required
to support the remaining design development and have been reevaluated, informed through site
investigation and preliminary design coordination. Documentation of existing conditions for
Concourse B to support this project is either deficient or missing. This has driven a need for the
GCCM to provide additional laser scanning, 3D space modeling, and site investigation activities
not previously anticipated. To maintain progress, the GCCM pre-construction contract
(established at $900,000) required a change order in the amount of $281,105.87. This was
executed from project contingency funds in January. The GCCM change order included in this
action will fully fund pre-construction support activities through the balance of the schedule.
These efforts support design progression, the current GCCM Pre-construction Bid Package
Schedule and ultimately limit delays in relocating airlines.
The project will be returning to the Commission in Q2 2023 after design has reached a 30% level
of completion to establish a more definitive project budget and schedule. The current project
budget range relies on a Class 5 Estimate that captures the conceptual scope and projected
project costs prior to 30% design development.
Current project risks that represent the majority of potential cost increases can be attributed to:
(1) Industrywide inflation and cost escalation since the project budget establishment in 2021.
COMMISSION AGENDA – Action Item No. 8i Page 4 of 8
Meeting Date: February 14, 2023
Template revised June 27, 2019 (Diversity in Contracting).
(2) Magnitude and extents of utility relocations and mechanical system upgrades being
identified now in Preliminary Design.
(3) Existing space building code deficiencies that have triggered additional improvements to
restrooms and accessibility on the Concourse B ramp.
(4) Additional design and pre-construction efforts to incorporate building code upgrades,
expanded mechanical system requirements and continued site investigation to mitigate
project risk.
As an industry standard, a Class 5 Estimate provides a range with accuracy from -50% on the low
side and +100% on the high side. Preliminary Design efforts and verification of existing
infrastructure have allowed the project to define and mitigate project risks. As a result, the
project team has evaluated the estimate range for Airline Realignment to be -20% and +40% of
current budget estimate.
Low Range -20%
Estimated Costs
High Range +40%
$98,000,000
$122,000,000
$172,000,000
Additional risks to the project that the team continues to track include the development of smoke
control as new standards are being developed, unforeseen conditions in the aging facilities, and
the continued impact of cost escalation.
Scope of Work
At the time of solicitation, the project anticipated three packages of work to provide: (1) remodel
and expansion of airline operational space on the ramp level of Concourse B, (2) remodel of
airline operational space on the ramp level of Concourse A, and (3) remodel of ticket counters in
Zone 4 of the Airport Main Terminal.
Preliminary Design efforts identified two work packages necessary to support delivery of base
scope: (4) an Enabling work package to correct code deficiencies on Concourse B and facilitate
initial infrastructure relocations, and (5) Replacement of Heating, Ventilation, and Air
Conditioning (HVAC) Air Handler Units (AHUs) and associated systems on Concourse B
Additional Design Services are required to facilitate the fourth and fifth packages of work. GCCM
Pre-construction Activities to support development of the additional packages are required to
continue site investigation and verification of existing conditions. BIM modeling effort included
within this request is ongoing, prioritizing existing unknown mechanical, electrical and other
building systems.
Schedule
The project team continues to collaborate with Airport stakeholders and impacted airlines to
improve the project schedule and identify opportunities for efficiencies in construction phasing
to support the ultimate priority of relocating Delta to the international, wide body, preferential
gates on Concourse A.
COMMISSION AGENDA – Action Item No. 8i Page 5 of 8
Meeting Date: February 14, 2023
Template revised June 27, 2019 (Diversity in Contracting).
Activity
Commission construction authorization
(Enabling/Early Work Packages)
2023 Quarter 2
Construction Start
2023 Quarter 3
In-use date (Concourse B)
2025 Quarter 1
In-use date (Concourse A)
2026 Quarter 1
Cost Breakdown
This Request
Total Project
Design
$7,000,000
$33,000,000
Construction
0
$65,000,000 – $139,000,000
Total
$7,000,000
$98,000,000 – $172,000,000
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Port staff evaluated a “do nothing” alternative; however, it proved not feasible.
Alternative 1 – Delay project until a separate project completes HVAC and Air Handling Unit
(AHU) improvements.
Cost Implications: Overall cost to the Port would increase. No cost reduction would occur as costs
for HVAC AHU improvements are still required but are borne by another project. Due to the delay,
cost increases for escalation are likely to occur, though they have not been estimated.
Pros:
(1) Project will have the opportunity to complete site investigation, verification and as-built
of existing utilities and infrastructure to provide more certainty in design development
documents.
(2) The airport wide HVAC AHU improvement project will be evaluated holistically in lieu of
portions being accelerated. This would limit cost for re-design and re-work when the
future project is delivered.
Cons:
(1) This alternative would delay the Port’s commitment to realign Airline carriers to better
support future IAF airline operations.
(2) United Airlines would be subject to being bumped off their preferential gates by an
international carrier when Common Use availability is insufficient at time of peak
demand.
(3) Concourse A international-capable gates, occupied by United Airlines, would be the last
available gates for use by international operations.
(4) This would delay the relocations for United and Delta included in the project and does
not align with the outcome of lengthy negotiations with the airlines regarding
realignment.
(5) Delays to Airline Realignment project completion may impact international gate closures
currently planned when construction begins on South Concourse Evolution Project in
2026.
COMMISSION AGENDA – Action Item No. 8i Page 6 of 8
Meeting Date: February 14, 2023
Template revised June 27, 2019 (Diversity in Contracting).
This is not the recommended alternative.
Alternative 2 – Increase project scope to include new work.
Cost Implications: Project cost would increase. The project budget will be revisited in Q2.
Pros:
(1) This alternative continues the project that had been reviewed and accepted with the
airlines.
(2) Allows for the relocation of United Airlines, an exclusively domestic carrier at SEA, to free
up more internationally connected gates for international use.
(3) Best achieves the Port’s airline realignment criteria and future gate allocation.
(4) Facilitates upgrades to insufficient and/or failing building systems that have a risk for
catastrophic failure.
(5) Project will have the opportunity to complete site investigation, verification and as-built
of existing utilities and infrastructure to provide more certainty in design development
documents, delivering a model of existing conditions at project completion.
Cons:
(1) The project has cost and schedule uncertainty until the location, capacity and condition
of existing utilities and infrastructure on Concourse B are confirmed.
(2) Advancing Concourse B Smoke Control Design ahead of airport wide upgrade of Smoke
Control Design may increase costs for future project to retrofit the new system installed
under Airline Realignment.
This is the recommended alternative.
FINANCIAL IMPLICATIONS
Port Budget Estimate for the Airline Realignment Project was refreshed on September 9, 2022,
and United Club Port Budget Estimate was refreshed on December 27, 2022, to inform the
increases in Cost Estimate section below. These were refreshed to capture cost increases based
on current markets and escalation forecast through construction. The project will return to the
Commission in Q2 2023 to update the overall project budget after the design has reached 30%
development and more cost and schedule certainty can be provided.
Cost Estimate/Authorization Summary
Capital
Expense
Total
COST ESTIMATE
Original estimate
$35,000,000
$35,000,000
$70,000,000
Previous changes – net
$34,000,000
($2,000,000)
$32,000,000
Current change
$0
$0
$0
Current Budget
$69,000,000
$33,000,000
$102,000,000
AUTHORIZATION
Previous authorizations
$18,200,000
$8,000,000
$26,200,000
COMMISSION AGENDA – Action Item No. 8i Page 7 of 8
Meeting Date: February 14, 2023
Template revised June 27, 2019 (Diversity in Contracting).
Current request for authorization
$5,200,000
$1,800,000
$7,000,000
Total authorizations, including this request
$23,400,000
$9,800,000
$33,200,000
Remaining amount to be authorized
$45,600,000
$23,200,000
$68,800,000
Annual Budget Status and Source of Funds
This project, CIP C801158, was included in the 2023-2027 capital budget and plan of finance with
a capital budget of $69 million and an expense budget of $33 million for a total cost of $102
million. The expense components are estimated to be $555K in 2022, $2.4M in 2023, $6.6M in
2024, $11.5M in 2025, $7.3M in 2026 and $4.6M in 2027 and will be included in annual operating
budgets. The funding sources will be Airport Development Fund for operating expense and future
revenue bonds for capital.
Financial Analysis and Summary
Project cost for analysis
$102,000,000
Business Unit (BU)
Gates
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
CPE of expenses between $0.11-$0.27 in 2023-2027
CPE of capital $0.22 starting in 2027
Future Revenues and Expenses (Total cost of ownership)
As a result of this project, approximately 7,500 additional square feet will be built and a significant
amount of space within the existing terminal will be renovated. These improvements will replace
aging and deficient infrastructure and building systems and improve overall operation and
maintenance of Concourse B Ramp. The project team will coordinate with Aviation Maintenance
when the extents of operating and maintenance costs can be more accurately evaluated at 60%
design development. Complete upgrade and replacement of the HVAC system serving the project
footprint increases code compliant leasable space, giving the Port flexibility and potential for
increased revenues.
ADDITIONAL BACKGROUND
Under the 2018-2022 Signatory Lease and Operating Agreement (“SLOA IV”) between the Port
and many Airlines, Article 5.2 allows the Airport, at its sole discretion, to reallocate Premises
(other than Gates) among the Airlines at SEA. This provision (commonly referred to as “Airline
Realignment”) allows the airport to “rebalance” facilities to achieve an overall airport-wide
operational or capacity benefit. In 2019 and 2020 the Port negotiated the proposed plan with
significant engagement by all Airlines. The Airlines have reviewed and accepted the
recommended alternative.
COMMISSION AGENDA – Action Item No. 8i Page 8 of 8
Meeting Date: February 14, 2023
Template revised June 27, 2019 (Diversity in Contracting).
The Port’s international gating policy (as enumerated in Exhibit D to SLOA IV) states that
international flights have priority for accommodation on international capable gates. United
Airlines faces the very distinct possibility of being forced off their preferential gates on Concourse
A to hardstand operations during the international peak. This would create significant
inefficiencies for United Airlines and diminish the benefit of their preferential rights as well as
their overall level of service.
United Airlines will self-perform the construction of their new lounge on Concourse B under a
MOA with the Port (currently in review for final execution). Under SLOA IV provision 5.2.4., the
Port is obligated to pay the reasonable costs to relocate any impacted airline, and endeavors to
create a “like for like” condition in future spaces. The project team anticipates the United Airlines
lounge design contract to be executed and work to begin Q1 2023.
ATTACHMENTS TO THIS REQUEST
(1) Presentation slides
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
March 23, 2021 – The Commission authorized $26,000,000 to facilitate the following actions:
(1) execute project specific Service Agreements for project management, construction
management, design services, and testing and special inspections; (2) to utilize a General
Contractor/Construction Manager (GCCM) and execute a GCCM construction contract for
pre-construction services; (3) to use port crews; and (4) to execute a Memorandum of
Agreement (MOA) between the Port of Seattle (Port) and United Airlines.
