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Over $1B in DIA Contract Changes Approved

Thursday, January 13, 2022

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The Denver City Council announced earlier this week that it has approved several contract amendments totaling $1.3 billion for Denver International Airport’s Great Hall Project.

The four resolutions to amend contracts regarding the project were approved in a 10-3 city council vote and will allow for six additional years of construction.

“The failure of the (earlier partnership deal) left it a mess,” said Councilman Kevin Flynn prior to voting. “A ‘no’ vote on this contract is a vote to keep it a mess, and I believe we can’t do that. I regret that we have to undertake it in the way we have … (but) it simply has to be completed.”

According to The Denver Post, the additional $1.3 billion in project spending has ballooned the Great Hall project cost to as much as $2.1 billion. Over the course of construction, crews plan to update the nearly three-decade-old terminal building, address security vulnerabilities in the checkpoints and increase passenger-processing capacity.

Other changes include refurbished baggage claims, added and renovated restrooms, changes to curbside setups outside and, on Level 5, replacement of the current security-screening spaces with public plazas and meeting areas for arriving passengers.

Tucker Gladden, CC-BY-SA-4.0, via Wikimedia Commons

The Denver City Council announced earlier this week that it has approved several contract amendments totaling $1.3 billion for Denver International Airport’s Great Hall Project.

As a result of the new additional funding, travelers passing under the DIA’s signature tented roof can expect to see continued construction through 2027 or mid-2028. However, the remaining construction efforts are expected to be out of the way, as most changes being made to central portions of the airport have already been completed.

Specifically, the resolutions amend the following contracts with the City and County of Denver regarding the airport’s big renovation project:

  • Adding $900 million for a new total of $1.265 for the extension of construction management and general contracting services with Hensel Phelps Construction Co.;
  • Adding $50 million for a new total of $102 million for program management services with Jacobs Engineering Group Inc.;
  • Adding $50 million for a new total of $78 million for project management with LS Gallegos & Associates Inc.; and
  • Adding $100 million for a new total of $133,125,000 architectural and engineering services with Stantec Architecture Inc.

“It is essential that we finish the full build-out of the terminal now so we can prepare DEN for the future,” said new airport CEO Phil Washington, following the council’s approval. “By investing in our airport, we will generate more flights, more local jobs, increased revenue for the region, and more economic impact for our region.”

The DIA reports that it will be paying for the project through a combination of existing and future revenue streams, in addition to federal funding.

Project Background

In November 2017, the DIA proposed the addition of 39 gates in an expansion project, up from the airport’s original proposal of 26. At the time, the project was estimated to cost $1.5 billion and would be a P3 headed by Ferrovial Airports. The overall deal was slated to include a $650 million terminal renovation, which would be overseen by Saunders Construction over the course of four years. (Cost estimates for the actual expansion at the time were not yet available, however.)

A couple months later, in January 2018, two subsidiaries of Hochtief, a Germany-based construction company, were announced as the companies to oversee the expansion. The companies, Turner Construction and Flatiron Construction, would be building two new hubs for the airport, with the capacity for three more, as well as 16 new gates and installing additional pavement.

That summer, DIA would announce an official multi-year, multi-phase renovation timeline headed by Great Hall Partners with a budget of $650 million. The P3 also included 30 years of private oversight of expanded terminal concessions. A groundbreaking ceremony followed on July 12, 2018.

However, first delays struck in February 2019 when concrete on the main floor was found to be weaker than expected. According to officials, early testing of the concrete’s compressive strength was lower than what the project’s plan specified, so the area followed up with intensive testing. The DIA also noted that the testing needed to be complete prior to cranes going onto the main floor to erect steel.

At the time of the discovery, preliminary estimates stated that the project could be delayed by 209 workdays—roughly 10 months total.

In July, GHP reported that the renovation of Jeppesen Terminal wouldn’t be complete until at least 2024, three years behind its 2021 deadline. The companies (Ferrovial Airports, Saunders Construction and JLC Infrastructure) claimed the delay was due to various airport-requested design changes and structural issues found in old concrete initially used for the airport’s construction.

However, Channel 4 CBS Denver claimed that the project’s full completion could extend to 2025—with costs projected to increase by nearly 50%, or $311 million.

Contract Saga

A month later, not long after DIA announced that it would be ending its P3 relationship with GHP for terminal renovations, the contractors released documents showing that the project requires more than $1 billion to complete.

Up $650 million from the original budget, the documents also claimed that various delays have pushed the completion date back to February 2024 as well.

According to a DIA-hired independent consultant, inspections revealed that no safety issues were present in the concrete. However, additional testing was recommended for alkali-silica reaction, known to cause swells, cracks and even weaken concrete. Traces of the ASR were later found in the terminal.

In September, Day presented a revised renovation budget totaling $770 million, which included the original budget and a $120 million contingency.

According to Day, subcommittees and steering groups were working to process the closing of GHP’s contract and settling associated claims so that the contractor could successfully vacate the property by Nov. 12. Although a 34-year concession deal was included in GHP's contract, Day also confirmed that the DIA will run that component themselves after the renovation is complete.

It was also noted that although the new $770 million budget failed to include GHP's termination fees, a report from Moody’s Investors Service shows that the airport has roughly $900 million in liquidity to back up any settlement.

The following month, the DIA announced that it had selected Hensel Phelps to serve as the preferred construction manager and general contractor for Phase 1 of the project previously held by GHP. Canada-based engineering company Stantec has been chosen as the preferred lead design firm for the entire project moving forward.

In addition, the DIA also selected Gilmore Construction, Sky Blue Builders and roughly another dozen subcontractors it hopes to take over from GHP to continue to aid in design, engineering, steel placement and electrical work. Those contracts totaled about $136 million.

At the end of March, the DIA announced that it had settled all claims with Great Hall Partners and the Denver Post reported that the two reached a final settlement of $183.6 million.

The agreement, which was dated March 13, details more than $55 million in promised final payments on top of the $128.2 million previously reported.

In May of this year, contract amendments were requested and included:

  • the $700 million contract to the JV of Turner and Flatiron would increase to $940 million;
  • the $655 million contract with Holder and FCI would increase to $920 million;
  • the Jacobs’ design contract and the HNTB’s contract would increase from $65 million to $85 million; and
  • program manager WSP’s contract would increase from $45 million to $60 million.

Phase Statuses

In November, the DIA announced that construction on Phase 1 of the project had reached competition. The now-$770 million terminal renovation project was originally slated to reach completion in 2021. However, what’s more is the phase was able to be completed under budget. (In July, Phase 1 was reported to be about $25 million under budget.)

The milestone arrived just in time, as The Denver Post reported that the airport had started to recover from the COIVD-19 pandemic and recently ranked as the third-busiest airport in the world.

Renovation updates to the space include new ticketing areas for Southwest, United and Frontier airlines in the Jeppesen Terminal’s midsection, on both the east and west sides of Level 6. Construction crews were also reported to have extended the upper level’s floor plates farther into the tented atrium, making room for multi-sided check-in spaces and larger arrays of ticketing kiosks.

Crews also renovated roughly 160,000 existing square feet of the terminal and built four new restrooms.

Over the course of the next few weeks, crews are slated to remove most of the remaining construction walls on levels five and six within the terminal.

Southwest and United airlines began using the renovated spaces and its new self-serve bag-drops at the beginning of the month. Frontier is expected to take over some of these new stations in the coming months.

In July, a groundbreaking was hosted for Phase 2 of the DIA’s Great Hall Project, which was slated to focus on building a new security checkpoint.

DIA Chief Executive Officer Kim Day was joined by Alan Salazar, Chief of Staff for Mayor Michael B. Hancock; Larry Nau, TSA Federal Security Director, Colorado; and Derek Hoffine, Hensel Phelps Vice President and District Manager for the ceremony.

The plan estimates that all work for Phase 2 will be done by mid-2024 (despite the plan also scheduling the checkpoint itself to be open in early 2024).

Phase 2 work will take place simultaneously with the completion of Phase 1 as crews finish the work on the new ticketing areas for United and Southwest Airlines. The scaled-down, $170 million plan for Phase 2 was released in December 2020 with officials noting that Hensel would also take point for this work.

While the second phase no longer involves the relocation of a second, parallel security checkpoint, it does still plan to expand the floor on level six in the atrium’s northwest corner to make room for a new, larger security checkpoint that will replace the existing south checkpoint downstairs.

Although this decision was made during budget cuts to the project earlier this year, DIA officials said that in the spring they plan to finish out security after all—in a project addition that would add significant new costs. However, in order to undertake a third phase on the project, the DIA will first need to gain approval from City Council.

   

Tagged categories: Airports; Construction; Contracts; Funding; Government contracts; Maintenance + Renovation; Maintenance programs; NA; North America; Ongoing projects; Project Management; Projects - Commercial; Rehabilitation/Repair; Renovation

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