In a presentation to the Denver City Council's Business, Arts, Workforce & Aviation Services Committee, Kim Day, CEO at Denver International Airport (DEN), gave an update on the termination of Great Hall Partners' (GHP) $1.8 billion public-private partnership (P3) contract and the future of the Jeppesen Terminal renovation, which now has a budget of $770 million. This amount is $120 million higher than the original project estimate of $650 million and includes $120 million of contingency funds.
When GHP vacates the property on Nov. 12, Day said, the airport will have full access to the facility. In the meantime, subcommittees and steering groups will begin the process of closing out GHP's contract and settling associated claims; procuring a new program manager, contractor and designers; working with airlines to fine-tune the design, a process that will likely see the elimination of some concessions and other features "without taking away from the passenger experience." A 34-year concession deal was included in GHP's contract, but Day said the airport will run that component itself after the renovation is complete.
Day said she expects to have contracts for the replacement construction and design teams ready this fall. In response to the committee chair's question, she said DEN has not committed to a specific project delivery method yet. All stakeholders at the airport — concessionaires, tenants, airlines — will have input into the final project features.
Day did not reveal any details of why the deal with GHP went bad but did say she is confident that DEN can get the project finished for less money and in less time than the airport's former P3 partner estimated. Soon after GHP's termination last month, the group said it would cost approximately $1 billion to finish the Great Hall project and that it would not be complete until February 2024, three years beyond the original completion date. The possibility of a bridge contract to keep some work going until the new team can start — probably early next year — is also on the table.
In addition, Day said that although this particular P3 did not work out, she was still a fan of the delivery method itself. In retrospect, she said, the airport did two things well in setting up the contract with GHP — writing in a termination clause and an audit clause, which gave the airport the right to look at GHP's books. If she had it to do over, Day said she would also make sure the contract had penalties and bonuses attached to project milestones, which would have given the airport more control.
The $770 million does not include fees related to GHP's termination, but, according to a recent report from Moody's, the airport is in a good financial position to absorb those costs.
Echoing Day, Stephen Moulton, engineer, aviation expert and vice president at JLL, said that the P3 arrangement DEN had could have been a case of the right method but the wrong teams. But no matter the delivery method, he said, the very public issue of weaker-than-expected concrete in spots throughout the terminal would have emerged. Moulton said construction teams face these kinds of structural issues regularly, so, without knowing the specifics, this leads him to believe there may be other problems that have been kept private.
No matter the dispute, Moulton said, contractors that stand to make a good deal of money on a project usually try to work out any disagreements before the situation reaches the point of termination, some successfully and others unsuccessfully. "It's a matter of how you handle it," he said.
Also an unknown for this project, at least publicly, is what financial claims GHP might present. Attorney James Carney with law firm Carlton Fields said there are sometimes preexisting pay schedules written into such P3 contracts but that claims for amounts owed are certainly evaluated carefully in cases similar to the airport’s.
Moving forward, said construction attorney Daniel Felsen, also at Carlton Fields, owners in a situation like DEN finds itself in now, would probably have a roster of potential replacement candidates from which they can choose, some likely already familiar to the airport and some introduced during the original procurement process.
Making a deal directly with the contractors already working on the project, Carney said, might be an advantage in terms of efficiency, but it depends on what the existing relationship looks like and whether the current construction teams are part of the dispute that led to termination.
An owner like DEN is at an advantage now, Felsen said, because they already have experience in the project and will encounter fewer unknowns. "In terms of scheduling," he said, "things can be done, but the question is at what cost."