Engineering firms and financiers considering whether to put forth a proposal for a single terminal at KCI are weighing their options and measuring how they would stack up against Burns & McDonnell.
Locally, HNTB, a prominent architecture and engineering firm with a history of work on KCI and other aviation projects, confirmed to The Star it is interested in the KCI project.
Chris Migneron, a vice president with HNTB, said the firm has been courted by groups with access to private capital that are looking for a partner that can design and build a terminal at KCI.
HOK, a St. Louis firm with a sizable presence in Kansas City, has acknowledged it has discussed the possibility of getting involved with KCI but divulged no other details.
AECOM, a large engineering firm that’s considered a leader in aviation engineering projects, prompted the city’s decision to seek competitive proposals when it made its interest in the KCI project known in May. The firm has not confirmed whether it intends to place an offer.
All the possible competitors face the city’s June 20 deadline for submitting a proposal, a three-week span that experts say is a tight timeline for such a complicated project. They also point to the structure of the city’s competitive process, in which Burns & McDonnell has an opportunity to match other offers.
That process, known as a Swiss challenge, is a benefit sometimes given to an unsolicited offer such as Burns & McDonnell’s.
The possible interest in KCI by other companies comes days after the city reversed course and invited competition for the $1 billion project.
The city revealed in May that it had been in discussions since March with Burns & McDonnell over a private financing model for KCI. The initial proposal put Burns & McDonnell and its partner, Americo Life Inc., in the driver’s seat for a no-bid contract to design, build and privately finance the KCI project.
The private finance idea appealed to Kansas City Mayor Sly James and City Manager Troy Schulte, who said the arrangement could get the new terminal built faster and insulate taxpayers from risk. Voters ultimately need to approve any decision to refashion KCI’s three-terminal design into a single structure.
City leaders want to stick to a timeline that puts the question before voters in November. That’s the reason for the June 20 deadline.
HNTB acknowledges that’s a tight time frame.
“I understand the reason why they’re approaching it that way,” HNTB’s Migneron said. “But … it’s a pretty quick turnaround. It’s not precluding the competition they’re looking for. (But) the more time, the more in-depth a response can be.”
Experts said a three-week time frame on a major infrastructure project is more in keeping with a request just for qualifications, essentially a statement that proves whether a company is in a position to offer a bona fide proposal.
Kansas City’s solicitation is a hybrid request for qualifications and proposals, which would include specific information such as financial rates of return, details of private equity involved and a timeline for getting a guaranteed maximum price. It falls short of asking for full-blown proposals.
“Three weeks is extremely short,” said Jill Jamieson, an expert in public private partnership and group managing partner for real estate and investment management firm Jones Lang LaSalle.
Kansas City officials said companies that want to make a serious counterproposal should be able to meet the new three-week deadline.
“Any company that has the ability to fulfill this job has the capacity to turn around (a proposal) in this amount of time,” said Kansas City spokesman Chris Hernandez.
Even so, the city’s decision to open the project up for outside proposals has piqued interest in KCI.
“There is a lot of interest in this, even with this (private financing) model,” Migneron said. “The competitive process the city has put out now has only accelerated that with other interested parties.”
HNTB has experience with working at KCI and several airports in the United States. Migneron said that financing these projects was not part of the firm’s business model, and it may partner with a group that could line up private money.
Rich Golaszewski, executive vice president with aviation consultancy GRA Inc., said insurance companies and pension funds, particularly those in Canada and Australia, often fund aviation projects like KCI.
City officials contend that the so-called Swiss challenge arrangement is justified because Burns & McDonnell came up with the idea to privately finance the airport and presented it to Kansas City.
Schulte said a Swiss challenge was fair, given that Burns & McDonnell spent its own time and energy developing a proposal that the city hadn’t previously considered.
Other offers over the last year from private companies were dismissed, Schulte said, because they were too expensive or asked to privatize operations.
Procurement experts say a Swiss challenge is uncommon in the U.S.
“It’s something I’ve seen more in Europe,” Jamieson said. “What’s not clear to me is where this procedure is coming from in terms of (Kansas City’s) regulations.”
Kansas City’s procurement laws are silent on the idea of a Swiss challenge, and nowhere in the solicitation document does any discussion of the Swiss challenge appear.
Hernandez said city codes authorize the city manager to use specialized procurement methods.
Golaszewski said he sees no problem with the Swiss challenge. He said it could result in the city getting a better deal if a company puts forth an offer that Burns & McDonnell can’t match.
“That’s what you want,” he said.
Jamieson, however, said it could discourage competitors who might not see the benefit of putting forth a proposal that Burns & McDonnell could then match.
“The reality of this is if you know somebody can come in at the end and better your offer, what does that do to incentivize competition?”
The major competitors
If AECOM submits a proposal, it could be a formidable competitor to Burns & McDonnell.
AECOM’s stock is publicly traded on the New York Stock Exchange. In 2016, it reported revenue of $17.4 billion. That compares to the $2 billion in annual revenue that Burns & McDonnell, a privately held company, has reported publicly.
The firm managed the modernization of Los Angeles International Airport, a project that included the $1.5 billion expansion of the Tom Bradley International Terminal and the $333 million relocation of a south runway.
Other airport projects include a terminal renovation at Logan International Airport in Boston and a terminal planning project at the Sydney International Airport.
AECOM has received small contracts for work at KCI, including a six-figure deal to install a closed-circuit television system.
The KCI solicitation document asks that interested parties detail prior work at KCI and relationships with local contractors and labor organizations.
Golaszewski said that “if AECOM comes in, it will be serious.”
A big competitor to AECOM would be Jacobs Engineering Group Inc.
It ranks ahead of Burns & McDonnell but behind AECOM when it comes to revenues from airport design work nationwide.
Jacobs’ revenues topped $10 billion in the last 12 months, though that total has been falling in recent years. It employs about 43,800 people and counts an additional 11,100 in the field working on specific projects.
One of Jacobs’ repeat customers is the Dallas/Fort Worth International Airport, which uses the same horseshoe-shaped terminals that define KCI. Jacobs was part of the DFW groundbreaking in 1969 and is doing work on a seven-year, $2.3 billion modernization of the terminals.
Last month Jacobs’ executives told investment analysts they’ve been on a “winning streak.” Recent projects include “a key award for major expansions at the Denver International Airport” and support for runway expansion at London’s Heathrow airport, according to a conference call with analysts.
The company is based in Dallas. A Jacobs spokeswoman said the company was not in a position to comment.
Those out-of-town companies will have to stack up against Burns & McDonnell, a firm with a long history of working at KCI.
In 2017, Burns & McDonnell expects to exceed $100 million in revenues from airport projects, said Bret Pilney, vice president in charge of aviation.
The company ranks as the No. 2 airport terminal engineer, with $71.3 million in revenue in 2015, according to Building Design + Construction, a trade publication.
According to documents provided by Burns & McDonnell, it has selected Corgan, a Dallas-based firm, to serve as architect for the KCI project. Corgan is ranked No. 1 for airport terminal architecture in the country, according to Building Design + Construction.
It was the engineer for KCI when it was built in 1972. And it was a project manager for the airport’s upgrades in the early 2000s. That project included overseeing the major renovation of all three terminals from 2001 to 2004 with the hope of extending the life of the airport for up to another 30 years.
In May 2004, then-city auditor Mark Funkhouser wrote a performance audit on the KCI terminal improvement project.
While the audit found no specific violation of city procedures in the selection of Burns & McDonnell as project manager, the timing of the city’s Requests for Qualification “limited competition” by requiring firms to respond by Jan. 5, 1999, giving firms two weeks to respond over Christmas and New Year’s holidays.
The terminal improvement project began in the late 1990s as a small renovation with a budget of about $75 million. Additions requested by the airlines, plus new security measures after the 9/11 attacks, caused it to balloon to $258 million. Burns & McDonnell’s cut was $25.9 million.
The auditor could not determine whether the company’s 10.4 percent cut was reasonable for project management at the time, saying “the lack of guidelines on project management costs, the project’s complexity, and the inclusion of non-project management responsibilities prevents us from assessing whether these costs were reasonable.”
Phil Muncy, deputy aviation director and manager of airport planning and engineering at KCI, praised Burns & McDonnell’s oversight of the project — a complex construction phasing job that was made even more difficult because the 9/11 attacks occurred after much of the design was done and construction was underway.
“The FAA was doing security. Nobody knew what the rules were going to be,” Muncy said. “We had to make some assumptions. Burns & McDonnell helped with that.”
Since 1998, the company has been paid $46.5 million for work at KCI, more than any other single firm has been paid for design, engineering or program management services in that time.
“They’re the top earner,” Muncy said. “They do excellent work.”
Muncy, who has been at KCI for 17 years, said Burns & McDonnell has always gotten its airport contracts through a competitive selection process — often winning but not always. The airport now has 11 design companies under contract, and Burns & McDonnell is just one.
Still, Muncy said, the company often wins bids at the airport because of its good track record, and it does a good job of bringing projects in on time and under budget.
“They are good estimators,” he said.
In recent years, the majority of Burns & McDonnell’s work at the airport has been on design and construction phase services for reconstructing runways and other airfield projects. It has also worked on the overhaul base and on the airport’s building maintenance shop.
Burns & McDonnell officials say the company has worked on more than 350 airports across the world.
One of its current projects is at LaGuardia Airport in New York, where the company is the lead architect and engineer for design on a project that replaces Delta’s Terminals C and D with one new terminal.
According to documents provided by Burns & McDonnell, the project includes “37 gates on four concourses with a centralized lobby, security checkpoint and baggage claims. … Additional improvements include large Delta Sky Clubs, direct garage access, roadways, curbside check-in, and drop-off and pick-up area.”
It’s a multibillion-dollar project, Pilney said.
“Very, very complicated project with a five or six year duration, and we’ve been working on it for about two years now,” he said. “They’re knocking them down in parts. The challenge you have there is LaGuardia is one of the biggest, busiest airports (Delta has) in the region, and so they have to keep operations going.”