Transcript Board of Directors Template

CMAA Owners’ Forum
May 2010
American Airlines
Ken Bower, MD Facilities
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AMR Capital Planning

An annual forecast of all capital needs They are grouped into one
of the following categories: 1) business critical, 2) has a quick ROI,
3) a regulatory requirement or 4) improves the customer experience

Capital spending falls into the following six asset categories
– Aircraft
– Facility
– Interior A/C Modification
– Other A/C Modifications
– Ground Equipment
– Computer
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PROPOSED PROJECTS 2010
Project Name
Asset Type
2010 $,000
Dept
Location
BOS Admirals Club
Facility
$ 2,200
MKTG
BOS
BWI GSE & Cargo Relocation
Facility
1,050
Cargo
BWI
HDQ Campus Furnishings
Facility
7,500
CRE
HDQ
HDQ FTA Central Plant Analysis
Facility
388
CRE
HDQ
HDQ TCC Refurbishment and Remodel (3 Yr Plan)
Facility
1,000
CRE
HDQ
JFK Admirals C Club Expansion
Facility
4,100
MKTG
JFK
JFK Concourse B Scanners
Facility
900
DCS
JFK
JFK Expand FIS Recheck Facility
Facility
1,344
DCS
JFK
JFK Hangar 10 Fire Alarm
Facility
400
DCS
JFK
JFK Interstitial Level Ventilation
Facility
600
DCS
JFK
JFK Master Plan Baggage
Facility
335
DCS
JFK
JFK Relocation to Nippon Cargo Facility
Facility
7,124
DCS
JFK
LAX Prelim A&E In-Line Bag Screening System
Facility
3,235
DCS
LAX
LAX Priority Check-in
Facility
260
DCS
LAX
LGA Admirals Club Executive Center
Facility
500
DCS
LGA
LGA Admirals Club Refurbishment
Facility
1,500
DCS
LGA
LGA Brick Restoration
Facility
300
DCS
LGA
LGA Concourse D Security Checkpoint
Facility
800
DCS
LGA
LGA Concourse D Upgrade
Facility
2,475
DCS
LGA
LGA Escalator
Facility
4,100
DCS
LGA
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PROPOSED PROJECTS 2010
Project Name
Asset Type
2010 $000
Dept
Location
LGA Fire Alarm Replacement Hgr 1,3,5
Facility
$ 380
DCS
LGA
LGA Prelim A&E Fees In-Line Bag Screening
Facility
822
DCS
LGA
LHR Admirals Club
Facility
9,937
MKTG
LHR
MIA Capitalized Management Costs
Facility
400
CRE
MIA
MIA Communications Infrastructure
Facility
196
CRE
MIA
MIA Conveyor & Airfield Equipment
Facility
512
DCS
MIA
MIA Early Bag Storage System
Facility
312
DCS
MIA
MIA Flagship Lounge
Facility
995
MKTG
MIA
MIA North Terminal Expansion - CRE
Facility
1,495
CRE
MIA
MIA Program Contingency
Facility
640
CRE
MIA
MIA Regional Commuter Facility
Facility
570
DCS
MIA
MIA Sabre Infrastructure & Equipment
Facility
609
DCS
MIA
ORD- Baggage Handling System Upgrade (BHS Computer)
Facility
206
DCS
ORD
ORD Hanger 1&2 Fire Protection
Facility
5,650
DCS
ORD
ORD Jet-bridges
Facility
5,200
DCS
ORD
RNO Right Sizing
Facility
150
DCS
RNO
SFO Admiral Club Refurbishment
Facility
1,077
MKTG
LHR
SFO Terminal Move
Facility
240
DCS
MIA
TUS SWRO UPS Replacement
Facility
176
CRE
ORD
YYZ Admirals Club Relocation
Facility
150
MKTG
ORD
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Departmental Guidelines

If a firm is interested in doing work for American…it will go through
a comprehensive prequalification process
– Complete our standard qualification form and get that in front
of the right person
– Include all pertinent company information, i.e. staff, financials,
experience, etc

AA requires that all qualified firms must have:
– Airport experience
– Project type of experience
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Departmental Guidelines

We only use AA standard contracts

Normally, Initial project funding will provide for design services
through the Design Development Phase
– A&E agreement : compensation based upon DLM
– cost estimate / schedule

Estimate is basis for creation of construction funding document
used to gain company approval.
– Over $25M …..must be approved by BOD
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Departmental Guidelines

AA Project Manager Responsible for development of project’s
business plan, i.e. project implementation/delivery

For those projects that exceed $10M, AA will typically secure
additional resources to assist the Project Manager
–
Project auditor/accountant
– Contract project manager

For those projects that exceed $50M we will secure supplemental
staff via:
– Program Manager
– Construction Manager
– Extended A&E Services
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Recipe for Project Delivery

Selecting a project delivery method is a lot like ordering off a menu
at a NY diner

Everyone here is aware that there are numerous methods and that
the language and terms used for each can be confusing

Design-Bid-Build: The most tried and true way to contract for a
project. Owners hires architect to design and prepare contract
documents, general contractor then bid on the documents with the
successful bidder being awarded a contract to build it.
– Considered by American to be the safest option
– In theory, it may be the slowest way to execute a project
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Recipe for Project Delivery

Design-Bid-Build: (cont)
– It is price driven and prices may reflect an artificially low bid/s
– Owner must have in-house expertise and resources to play the game
– Provides owner with desired checks and balances

Design –Build: Owner elects to secure services for design and
construction from a single entity.
– Faster project completion
– Enhanced communications between A/E & contractor
– Fewer administrative duties
– A/E under contractor…owner loss of control over designer
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Recipe for Project Delivery

Design –Build: (cont)
– No checks and balances
– Requires owner’s in house staff resources with an additional challenge

Construction Management: A method of delivery with the most
variations There are three basic ways to use with the manager
acting as an advisor, an agent or at risk constructor
– CM-Advisor : Contractual relationship is with owner to oversee
the designer and contractor
* Something goes wrong…CM says “sorry” as he is not financially
at risk
* Additional cost to owner
* More appropriate for large projects and owners without in-house
resources
* No guarantees to owner
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Recipe for Project Delivery

Construction Management: (cont)
– CM-Agent : Contractual relationship is with owner acting as its
agent , CM administers the construction throughout the
planning design and construction phases of the project.
* Usually empowered to act in behalf of the owner, but, CM is not
financially at risk for anything that may go wrong
– Owner still holds separate contracts with designer and general
contractor and/or various prime subs
– CM not responsible for means or methods
* Additional cost to owner
* More appropriate for large projects & owners w/o in-house
resources
* No guarantees to owner
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Recipe for Project Delivery

Construction Management: (Cont)
– CM-at -Risk: Perhaps the most popular model with most owners
The CM is hired by owner and engaged during the initial stages
of design and ultimately becomes the general contractor
* Owner gains expertise of builder early in the project’s development.
* Removes any ‘mystery’ of pricing for the contractor
*

Cost and schedule of the project are guaranteed
Program Management: The PM serves an ‘owners representative’
in all aspects
– Any company with restricted resources or is lacking in-house expertise
– True PM is also completely free from any conflict of interest
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Recipe for Project Delivery

So how many project delivery methods are there?
– Traditional ‘Design-Bid-Build ‘and …
– The ‘Team Approach’

You can use any term you want….general contractor, designbuilder, construction manager, program manager or any other
names ….…
– They all simply help describe how you want to assign design and
construction responsibilities….and
– They all work off of the customary owner-architect-contractor
relationships
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What AA’s Menu Looks like

So which project delivery system is best….from one owner’s
perspective it is the one that :
– Has the right People (integrity, confidence and trust)
– Completes the project within Budget
– Completes the project on Schedule
– Has the ability to cost effectively Manage Change
– Produces uncompromising Quality
– Delivers a Safe work environment
– Provides for DMWBE participation
– Provides the Resources necessary to get the job done
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This Owner
Selected the wrong Delivery Method
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Intro
 Thank you……………… I do recall that there was a pre-AMR
life for me …but time has blurred the details?
 Following the suggested framework…I will start by touching
upon AMR’s programs and plans related to capital
construction
 Slide 1 AMR Capital Planning
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AMR Capital Planning
Talking points

The following two slides represent the majority of the projects that
actually made the 2010-2011 Capital plan

Each department, division, station compiles its list of projects
along with a brief description/scope of work…..this is often referred
to as the “wish list”

Process begins each September and is completed in January when
the final project list is reviewed with the BOD
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Talking points slides 3/4
 Over 90% of the projects in any given year will be under
$10M
 The majority of the capital dollars spent in any given year
will be spent at our “corner posts”…..
– DFW….MIA….ORD…..New York…..LAX
 This list reflects a projected CRE capital spending of $65M
in 2010 and $42M in 2011
 In comparison we spent in:
– 2005….$275M
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A&E Selection Process

RFP’s are issued by the responsible project manager

Proposals are requested by invitation only and are evaluated and
rated based upon a number of subjective as well as a number of
quantitative measures:
– People & related experience
– Consultants & related experience
– Hourly rates and total fee must be competitive
– DMWBE participation with a goal of 22%
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CRE Departmental Guidelines

Bid Threshold
– Less than $25K…..local project (CRE not required)
– $25k to $50K……CRE managed & can sole source the work
– Excess of $50K……CRE managed and competitively bid

AMR uses Standard Contracts for professional services and
construction
*
Stipulated Sum
*
Time and Material (GMAX, Cost Plus, Unit Price)
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CRE Contractor Selection Process

AA Project Manager responsible for establishing list of contractors
to be invited to bid.
– All firms must have been prequalified
* Previous experience with:
– American
– work on airport
– projects of similar type and size
– References: Firm and staff
– Financial strength
– Willingness to sign standard contract
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