Denver airport seeks $1.1 billion to finish terminal renovation

Denver International Airport officials have decided to go big in their quest to finish the terminal renovation project, unveiling proposed contract additions that would send the $770 million endeavor soaring to nearly $1.9 billion.

If approved, the additional work would extend construction out from 2024 through 2028 — potentially a full decade after the Great Hall project got underway.

The upshot from $1.1 billion in proposed contract additions disclosed late Thursday to the Denver City Council is that DIA is seeking to add back several major components that officials cut from the project once it ran into budget and schedule turbulence early on. Those include full main security checkpoint relocations and completion of new check-in areas for all airlines.

After terminating the original project team, DIA officials reduced the scope to keep it within a revised budget of $770 million, which accounted for the original $650 budget and a $120 million contingency fund for unforeseen costs or overruns. At the time, then-CEO Kim Day repeatedly promised to hold the line.

But DIA’s pitch now is that all of the work will be needed in coming years to keep up with rapid growth in passenger traffic, which has been disrupted only by the coronavirus pandemic. DIA, in part because it serves as a domestic connecting hub for several airlines, has seen one of the quickest recoveries among U.S. airports, recently approaching 2019 levels of traffic.

“Next year we are expecting to exceed where we were pre-COVID,” DIA spokeswoman Stacey Stegman told The Denver Post Friday. “Our growth is still happening, and as one of the fastest-growing and busiest airports in the world, we have to plan now to be ready for the future. The longer we wait, the harder it’s going to get.

“We have an opportunity right now, with construction underway (on earlier phases), to build this out before it becomes so difficult and even more impactful for passengers in the future.”

But the proposed contract amendments reveal a gargantuan scope that’s well beyond anything discussed publicly — until now. City Council consideration is set to begin at a meeting of the business and aviation services committee on Wednesday afternoon.

DIA will need approval from a council that’s expressed reluctance to throw more money at a big project — while also lamenting that core components had been trimmed back.

“I personally have some concerns about the amount of money that they’re asking for — and the consequences of what that would do to our bond rating and our cost per emplaned passenger, etc.,” Councilwoman Amanda Sawyer said.

But she added that she understood the importance of finishing the upgrades to “the largest economic driver in the region. “I haven’t decided how I’ll vote yet,” Sawyer said.

After firing the original team in 2019, DIA reworked the project. Officials jettisoned the planned relocation of one of two main security checkpoints to the upper level. They reduced by roughly half the work planned to expand and reconfigure airline check-in areas, which leaves airlines with smaller operations at cramped at old ticket counters. And they eliminated the repurposing of the lower level — where most security screening is now — into a larger passenger meeting and greeting space.

But earlier this year, DIA officials said they were examining ways to restore the second security move in a final phase of the project. Some council members were among those who expressed misgivings that the security relocations were among the components scaled back, since the vulnerability of the main-floor checkpoints from balconies was among the motivating factors behind the project.

The contract documents reveal plans to essentially restore nearly all of the major components to their original scope — including the security relocations and check-in area expansions — and at much higher costs than contemplated several years back.

One part that Stegman says is not planned for revival: a controversial original plan to fill part of the lower level, where security is now, with shops and outlets that would make for a post-security mall of sorts. The plans have changed in the last two years so that passengers screened up on Level 6 would take long escalators straight down to the concourse train platform, bypassing Level 5.

She said officials expect the years of continuing work would be less disruptive for passengers since the parts of the project occurring in the center of the terminal were wrapped up this fall. Future work would be more out of the way, she said.

The contracts include one notable proposed new addition: the building of a Center of Excellence and Equity in Aviation on a lower level of the airport’s hotel and transit center, located just south of the terminal. It’s unclear how much that component would cost.

It’s an idea contributed by new CEO Phil Washington. When he was appointed by Mayor Michael Hancock last summer, Washington said in an interview that he hoped to create programs aimed at encouraging young people — “especially young people of color” — to pursue careers in aviation and other airport-related fields. Stegman added Friday that the goal is “to build a pipeline for aviation talent in the future.”

DIA, which operates as a city enterprise, would pay for the expanded terminal work by tapping its own revenues. They largely come from fees assessed on airlines, passengers and concessionaires.

Huge increases for four contracts

The contract additions for the four contractors brought in to restart the project in early 2020, led by Hensel Phelps Construction, would dwarf their original values:

  • Hensel Phelps’ construction management and general contracting deal would expand from $365 million to nearly $1.3 billion, a $900 million increase.
  • Stantec Architecture’s $33.1 million contract would increase by $100 million.
  • Jacobs Engineering’s $52 million contract would increase by $50 million.
  • Engineer consulting firm LS Gallegos’ $38 million contract for project management and support also would increase by $50 million.

The proposed contract amendments also would expand the scope of work without a new bid process. There’s never been a full bid for the restarted project, since DIA selected Hensel Phelps in late 2019 from among three contractors that had experience working at the airport. That setup was chosen to streamline the process.

Stegman said Friday that soliciting new bidders for the future work would pose complications for the project.

As for cost estimates that have increased way beyond the original project — even with many of the same components — Stegman cited soaring costs for materials and labor as well as early cost projections by the original contracting team that proved to be wrong.

“I would venture to say that our estimates of completing the originally proposed Great Hall project were unrealistic,” she said. “This is the position that we are in now to be able to get this done.”

As he took over as CEO this year, Washington pledged to review DIA’s extensive capital needs and keep projects under control. He’s overseen big projects before, as the top official at the Regional Transportation District from 2009 to 2015 and most recently at the L.A. Metro transit agency in California, but the DIA job is his first at an airport.

Future growth prospects have complicated attempts to rein the projects in.

In recent months, Washington announced an initiative called Vision 100, a nod to projections that DIA would achieve the milestone of 100 million passengers per year in the next decade or so, rising from a record 69 million in 2019. Other projects that predate Washington include new gates under construction on all three concourses — all set to be done within six months or so — and prep work for a seventh runway, which will take several years to build.

Day, the previous CEO, retired in July after 13 years in charge of the airport, which grew to become the fifth-busiest in the United States in terms of passenger traffic in 2019.

Amid the scrambled travel dynamics of the pandemic, DIA clocked the third-highest passenger traffic in the world in the first six months of 2021, according to data gathered by Airports Council International.

Original project was supposed to be done now

The Great Hall project got underway in mid-2018, with completion targeted for late 2021 — right about now.

But after early project squabbling over costs and delays between airport brass and the contracting team, Great Hall Partners, led by Madrid-based Ferrovial Airports and Centennial-based Saunders Construction, DIA and city officials terminated their $1.8 billion deal in August 2019. That setup was a more complex public-private partnership, and it included a $650 million renovation as well as fees for three decades of oversight of the expanded concession spaces in the terminal.

Airport officials and Ferrovial traded accusations about project performance, oversight problems and meddling that led to delays and projected overruns.

When it restarted the project, the airport adopted a more straightforward contracting approach. Since the reset, the Great Hall project has chugged along.

In late October, the mayor joined airport and airline officials to cut the ribbon on Phase 1, which brought new, multi-sided check-in spaces for United and Southwest airlines to the middle sections of the east and west sides of the building’s Level 6.

Phase 2 is underway and will relocate the south Level 5 Transportation Security Administration screening checkpoint upstairs, to an expanded part of the terminal’s northwest corner. Carrying out the same relocation of the north level 6 checkpoint to the northeast corner would require the extension of the floor plate farther into the atrium, as is happening on the other side now.

Source: Read Full Article