Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No. 10d
ACTION ITEM Date of Meeting April 22, 2025
DATE: April 14, 2025
TO: Stephen P. Metruck, Executive Director
FROM: Eileen Francisco, Director Aviation Project Management Group
Wendy Reiter, Director Airport Security
SUBJECT: Baggage Optimization Program Phase 3
Amount of this request: $477,373,982
Total estimated project cost:
$1,074,638,982
ACTION REQUESTED
Request Commission authorization for the Executive Director to take all steps necessary,
including the execution of all contracts, including Public Works, Alternative Public Work
procedures in accordance with RCW 29.10, Goods and Services Personal Services, Professional
Services, other consulting services, and any other types of contracts or agreements to complete
the Baggage Optimization Program Phase 3 for a total program budget authorization of
$1,074,638,982.
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 2029. 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 constructed
in three separate phases. Phase 1 and Phase 2 have been completed, and development of Phase
3 began in Q3 2022. Due to the lack of interconnectivity until the project is complete, near
continuous operation, and a fixed footprint, this project has various constraints requiring detailed
construction sequencing plans. A General Construction/Construction Manager (GC/CM) was
selected for Phase 3 to leverage cost certainty early on during the design phase. This request is
for full authorization to complete the last phase of the Baggage Optimization Program.
To leverage cost certainty early on during the design phase, the project team worked with the
Contractor to develop the Phase 3 estimate. During design, the project team negotiated pricing
associated with scope and construction schedule and was able to negotiate the cost down;
however, Phase 3 requires a budget increase to complete the overall program. Budget increases
are attributed to lack of competition for the specialized baggage handling system installation and
electrical work. Since 2022 there has also been a continued escalation in cost in electrical labor
and equipment. The project budget was also impacted by the specialized baggage handling
contractor and electrical contractors’ fees. Construction duration also increased by a year due
COMMISSION AGENDA – Action Item No. 10d Page 2 of 7
Meeting Date: April 22, 2025
Template revised June 27, 2019 (Diversity in Contracting).
to operational risk mitigation to keep the baggage systems functional during construction and
minimizing downtime to Airlines operations. This duration has also impacted the overall project
costs. The team analyzed alternatives to reduce scope and budget however the alternatives did
not meet the overall project objective and Airlines expectations.
JUSTIFICATION
The highly utilized and aging Baggage Handling System (BHS) is one of the most complex systems
in the airport. Originally the Airport’s baggage system was not a single system, but rather six
separate outbound systems. Phase 1 and Phase 2 have completed two thirds of the system;
Phase 3 completes the program for an optimized system. After the events of September 11,
modifying the separate systems was the best way to rapidly increase security. At the time, each
separate system was designed to include a nominal amount of passenger growth. Over the
ensuing years as specific airline needs emerged or as airlines were relocated, the separate
systems have been updated to meet the carriers’ specific operating needs. Although various
baggage projects have been implemented to address operating needs over the years, the systems
continue to have limited capacity to meet both near- and long-term growth needs of the Airport.
The airport baggage system is faced with three problems:
1. The existing systems have major subsystems, such as controls, that are aging and must be
replaced.
2. There is limited ability for the current systems to be expanded in their current
configuration to adequately meet growing passenger demands; and
3. These separate systems lack interconnectivity between ticket counters and all their
aircraft gates.
Passenger growth has increased in unprecedented amounts and is expected to continue. This is
a major and near-term challenge for the Airport due to both the complexity of keeping operations
ongoing during construction and major space constraints on expanding the systems’ capacity to
meet future growth.
Diversity in Contracting
Baggage Optimization Phase 3 construction contracts have a 4% Women and Minority Business
Enterprises (WMBE) goal.
DETAILS
Scope of Work
Baggage Optimization Phase 3 will conclude the Baggage Optimization Program allowing for
complete baggage flexibility to check in any bag into any ticket counter and be delivered to any
airplane. It also accommodates passenger volume growth and meets Transportation Security
Administration (TSA) safety mandates. This phase will tie-in all the south end systems into the
centralized screening, including the International Arrivals Facility (IAF), and finalize the sortation
and ticket counter connections.
COMMISSION AGENDA – Action Item No. 10d Page 3 of 7
Meeting Date: April 22, 2025
Template revised June 27, 2019 (Diversity in Contracting).
Schedule
Phase 1 was completed in 2020. Phase 2 was completed in Q3 2024. Phase 3 is under way with
GC/CM preconstruction activities and construction is scheduled to complete in Q4 2029.
Phase Design Construction
Phase 1 Q3 2015 – Q1 2016 Q1 2016 – Q2 2020
Phase 2 Q1 2020 – Q3 2020 Q3 2020 – Q3 2024
Phase 3 Q1 2023 – Q1 2025 Q2 2025 – Q4 2029
Activity
Commission design authorization - All Phases 2013 Q1
Phase 3 Design start 2022 Q2
Phase 3 Commission construction authorization 2025 Q1
Phase 3 Construction start 2025 Q4
Phase 3 In-use date 2029 Q4
Cost Breakdown This Request
Total Project
Design $0
$80,731,152
Construction $477,373,982
$993,907,830
Total $477,373,982
$1,074,638,982
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Non-integration of IAF would delete scope to fully integrate IAF into the optimized
system keeping it as a separate airline and screening operation.
Cost Implications: There would be an estimated $40,000,000 reduction in cost.
Pros:
(1) Operations for Airlines and TSA would not change from current condition.
(2) Decreases the overall construction cost and reduces the budget by an estimated
$40,000,000.
(3) Provides limited screening redundancy for by about 15%.
Cons:
(1) Not supported by Airlines and Port stakeholders.
(2) A split Airline operation for alarmed bags results in an increased labor cost.
(3) Safety concerns with higher tug congestion/traffic with a split operation.
(4) Increases connection times for international recheck baggage.
(5) Increased cost for TSA staff operating in two screening areas.
(6) Reduced flexibility for any bag to go anywhere.
This is not the recommended alternative.
COMMISSION AGENDA – Action Item No. 10d Page 4 of 7
Meeting Date: April 22, 2025
Template revised June 27, 2019 (Diversity in Contracting).
Alternative 2 – Integration of IAF – This option does not change the original scope to integrate
IAF into the optimized system to provide complete flexibility.
Cost Implications: This alternative has a budget of $40,000,000 that is included in the budget
increase request.
Pros:
(1) Supported by the Airlines and internal Port stakeholders.
(2) Reduces the complexity of the control environment running the system and fixes issues
with IAF controls.
(3) Provides a single operation for the Airlines and reduces staffing.
(4) Adds baggage makeup capacity and flexibility to IAF.
(5) Reduces TSA staffing to one screening area.
(6) Less tug traffic and congestion in the bagwell for safer conditions.
(7) Cost to complete the full integration of all baggage systems may be cheaper now that
waiting for a later project.
Cons:
(1) This is the more expensive option.
(2) Lose the limited screening redundancy.
This is the recommended alternative.
FINANCIAL IMPLICATIONS
Estimated
Project Cost
Current
Authorization
Notes
Phase 1 $97,638,982 $101,375,000
Complete
Phase 2 $376,000,000 $415,675,000
Substantial completion reached Q4 2024
Phase 3 $585,500,000
$54,715,000
Design Complete
Executive
Management
Reserve
$0 $10,000,000
Authorized during Phase 2
CCE Transfer
$15,500,000 $15,500,000
Commission approval April 2022
TOTAL $1,074,638,982
$597,265,000
Cost Estimate
/Authorization Summary
COST ESTIMATE Capital
Expense
Total
Original 2013 estimate $317,000,000
$150,000
$317,150,000
COMMISSION AGENDA – Action Item No. 10d Page 5 of 7
Meeting Date: April 22, 2025
Template revised June 27, 2019 (Diversity in Contracting).
Previous changes – net $637,134,000
$716,000
$637,850,000
Current change $119,638,982
$0
$119,638,982
Revised estimate $1,073,772,982
$866,000
$1,074,638,982
AUTHORIZATION
Previous authorizations $596,799,000
$466,000
$597,265,000
Current request for authorization $476,973,982
$400,000
$477,373,982
Total authorizations, including this
request
$1,073,772,982
$866,000
$1,074,638,982
Remaining amount to be authorized $0
$0
$0
Annual Budget Status and Source of Funds
Project C800612 was included in the 2025-2029 Capital Budget and Plan of Finance with an
allocated budget of $954,134,000. A budget increase of $119,638,982 will be transferred from
the Aeronautical Allowance CIP C800753, with no net change to the Airport's capital budget.
Budget increases are due to limited competition for specialized baggage handling and electrical
work, rising electrical labor and equipment costs since 2022, and contractor fees. Phases 1 and 2
received prior Majority-in-Interest (MII) airline approval, and per SLOA V, Phase 3 no longer
requires a ballot. The project funding sources include airport development and revenue bonds.
Financial Analysis and Summary
Project cost for analysis $1,074,638,982
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 $0.34 in 2020, $0.96 in 2024 and $2.79 in 2029
ATTACHMENTS TO THIS REQUEST
(1) Presentation slides
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
March 26, 2024 - Request Commission authorization for the Executive Director to (1)
authorize an early work construction contract for Baggage Optimization Phase 3
including construction of D1 and C94 transfer lines, (2) procure long lead items, and (3)
increase the project authorization by $7,500,000.
January 24, 2023 - Request Commission authorization for the Executive Director to: 1)
execute an OTA with TSA for a 24-month time extension for the period of performance
on the Baggage Optimization Program, 2) execute future Change Orders on the Baggage
Optimization Project Phase 2 and Phase 3 construction contracts (C800612) up to the
executed Commission authorization amount that exceed $300,000 and/or exceed 60
calendar days’ time extensions, and 3) include a Project Labor Agreement (PLA) for
Phase 3.
COMMISSION AGENDA – Action Item No. 10d Page 6 of 7
Meeting Date: April 22, 2025
Template revised June 27, 2019 (Diversity in Contracting).
July 26, 2022 – 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.
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.
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 and
construction, to authorize $15 million to continue from 30% to 100% design and execute
a consultant service agreement for program management support services.
COMMISSION AGENDA – Action Item No. 10d Page 7 of 7
Meeting Date: April 22, 2025
Template revised June 27, 2019 (Diversity in Contracting).
August 20, 2013 – Response to questions from Commissioners asked during the 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.
