Bae Automated Systems: Denver International Airport Baggage-Handling System

Table of Contents

Executive Summary 1

Issue Identification 3

Operating Environment 7

Environmental Analysis 7

Root Cause Analysis 10

Recommendations 17

Implementation Plan 19

Monitor and Control 21

References 23

Executive Summary

BAE Automated Systems, Inc. is the world leader in the design and implementation of material handling systems with 365 employees delivering projects across the United States, Europe and Australia. Total revenue of $100 million in 1994 which accounted for 90% of the U.S. baggage sorting equipment sales.1 Between 1972-1994 BAE has successfully designed, manufactured and installed 70 automated baggage-handling systems (worth ~$500 million) at major airports in the United States.1 BAE’s in-house engineering, manufacturing and field support capabilities enabled us to offer a turnkey solution for every project including our ability to prototype handling systems at a 50,000 square foot warehouse located near our Carrollton, Texas manufacturing site.1

BAE’s vision is to be the solution provider of choice to airlines around the world for transporting passenger baggage effectively and efficiently in terms of operating reliability, maintainability and future flexibility. The larger the airport, the more critical the efficient handling of baggage becomes.1 DIA’s remote concourses connected by underground tunnels present special problems and dramatically increases the complexity of the baggage system solution. Hindsight has shown us that our decision to accept the risk tolerance for the DIA airport-wide integrated baggage handling project was flawed. BAE’s initial decision to contract with United Airlines for their baggage handling solution and not submit a bid for the airport-wide integrated system was the right choice. We knew the size and complexity of this system was more than we had provided in the past and that the DIA PMT was more than two years late in making this strategy change to the airport design.

The DIA project was also plagued with many other issues that continued to derail the BAE baggage-handling solution and therefore BAE continued to miss the scheduled project milestones. Some of the areas of concern for the DIA were; underestimation of project complexity, poor decision making, planning errors, communication and cooperation breakdown, leadership changes, baggage system design flaws and failure to perform risk management. The root cause of all of these issues was the absence of proper project management principles from the start. The DIA project neglected to apply the three high-level phases in project management which are 1) Define and organize the project, 2) Plan the project and 3) Track and manage the project.3 If the DIA PMT had followed a proper project management framework many of the issues that impacted the schedule and budget could have been avoided.

Following the mediation meetings between United, City of Denver and BAE we are now realizing important progress on our contract with United Airlines in Concourse B and part of Concourse C. Based on my evaluation, I am recommending that BAE move forward with Option #2 and negotiate the second phase of the contract with the City of Denver to include only an automated baggage handling system only in Concourse A. BAE should not pursue the backup system in Concourse C and instead allow Rapistan Demag to take over implementing the manual system. 

Issue Identification

The Denver International Airport (DIA) Integrated Baggage-Handling System project has been plagued with many issues from the start.

1. Underestimation of Project Complexity

• The final master plan called for the construction of the world’s most efficient and the nation’s largest airport and it was to be created from the ground up with no predetermined limitations. The implementation of the baggage handling system was both extremely large and complex which required more time than the city could accept.1

• Sixty design contracts were awarded by the City of Denver which then generated 110 construction contracts and 88 professional services contracts. There were a total 400 firms involved at one time in the construction phase. The bigger issue was that 4 different firms designed the terminal. This many moving players significantly increase the potential for interface and coordination problems.1

2. Poor Decision Making

• Change in Strategy - Initially the strategy of the PMT was the individual airlines would build their own baggage handling system but almost two years prior to the Airport opening date, the PMT changed their strategy and took on the responsibility to build an airport-wide integrated baggage system.1

• Decision to proceed with the full scale integrated project despite clear indications that there was insufficient time left for the project to be completed successfully. BAE stated it would take at least 2 years and the technical advisers to the City of Denver from the Franz Josef Airport in Munich were also giving the same advice.1 Both the DIA and the BAE Executive Management misjudged the complication of this project and made an imprudent decision to proceed.

• Acceptance of change requests from the airlines after the mechanical and software designs were to be frozen.1 Although in the original negotiations, BAE had made it a condition that no changes would be made, the pressure to meet stakeholder needs proved to be too strong and BAE and the DIA Project Management Team were forced into accepting them.

• Decisions were delayed due to the many financial stakeholders in the project and because this was a public works program. The project administrator took more time in order to balance administrative, political and social constraints.1

3. Planning Errors

• Excessive Schedule Pressure – This began with the early determination of the Date of Beneficial Occupancy (DBO) which only allowed 6 months of schedule slippage. The DBO on January 1, 1994 triggered bond repayments to begin which caused the PMT to push the DIA project ahead at all cost.1

• The prolonged period of assessment and negotiation at the start of the project forced the design phase to be compressed and construction phase to be accelerated to the point that they were building the airport while