THE UNIVERSITY OF MARYLAND
UNIVERSITY COLLEGE
GRADUATE SCHOOL

A STUDENT RESEARCH REPORT
for
TMAN 640: Project Management

An Analysis of the Problems Associated with
DIA’s Automated Baggage Handling System

Michael J. Mangieri
December 14, 1999

Abstract

Denver International Airport (DIA) was the first airport to be built in the United States in over 20 years. A major part of the new airport was the state of the art automated baggage handling system that was to be one of the largest and most sophisticated systems of its type in the world. It was designed to provide high-speed transfer of baggage to and from aircraft, handling originating, terminating and transfer baggage, thereby facilitating quick turnaround times for aircraft and improved services to passengers.

Significant mechanical and software problems plagued the baggage system during system tests: bags were misloaded, misrouted, or fell out of telecarts, causing the system to jam. The automated baggage handling system that was to provide unified handling of baggage for all airlines contributed to a delay in the opening of the $4.2 billion airport by 16 months. Instead of opening in October of 1993, as planned, the faulty baggage handling system delayed that date until February 28, 1995. The delay cost both airlines and the city of Denver roughly $1 million dollars per day.

System complexity, coupled with a “fast track” completion schedule, was apparently the predominant cause of the baggage system’s failure. A massive redesign of the automated system and construction of an alternative, more conventional baggage handling system was undertaken to get the airport open without further delay.

A New Airport

The city of Denver had determined back in the mid-1970’s that Stapleton International Airport was in need of expansion or replacement. The voters of Denver endorsed a new airport in May 1989. A master plan was developed which concentrated on four elements: site selection; the master plan; environmental assessment; and developing the support of the various stakeholders, mainly the public. Construction began in November 1989 (Montealegre, Nelson, Knoop, & Applegate, 1996a).

The new Denver International Airport (DIA) is spread over 50 square miles and has the capacity to expand to 12 runways. DIA consists of a terminal building and three concourses. The farthest concourse lies about a mile from the terminal building (see Figure 1). Because of the size of the airport, planners decided to build a state-of-the-art automated baggage handling system to move bags much more quickly than the conventional tug-and-cart/conveyor system. Cost estimates for completion of the airport, derived from analysis done in September 1989, totaled about $4.9 billion. The Federal Aviation Administration (FAA) committed $685 million; the rest was to come from revenue bonds issued by the Denver Airport System (“New Denver Airport,”, 1994).

The Automated Baggage Handling System

The long protracted period of assessment and negotiation prior to the final approval for the DIA project led project planners to push the program ahead at all costs. The overall economic and political environment at the time also applied pressures to complete the project within a two year time frame. The bond repayments were to begin the first of January 1994 (Montealegre et al., 1996a). Executed as a “build-design” project (building while designing), this accelerated plan meant that much of the careful analysis normally applied to such a large project as DIA had to proceed in parallel with other activities. The project took on a much more dynamic nature. Communication channels between the city, project management team, and consultants degraded and became disorganized. In fact, communication and debate between the various project managers and among the subcontractors was neither encouraged or facilitated (Montealegre, 1997).

Within the context of the master plan, the initial concept for controlling baggage was that each airline would provide their own baggage-handling system. In 1991, United Airlines agreed to use DIA as its second largest hub. United insisted on an automated baggage-handling system to service the demand for a 30 minute aircraft turnaround time. In December 1991, United commissioned BAE Automatic Systems, Inc., to build their system.

BAE was a very self-centered, integrated company of about 365 employees. They concentrated on two major business lines: manufacturing and engineering. BAE’s facility was capable of producing nearly all the necessary parts for its systems. The engineering department tailored itself to each project, assigning a project manager who reported directly to the company president.

Two years into the construction of the airport, DIA planners decided that an integrated baggage handling system would further improve the efficiency of the airport for all passengers When the other airlines did not plan for their baggage systems DIA sent out requests for bids. Of 16 companies contracted, only three responded. All of these were rejected by the consulting firm hired by DIA on the grounds that their plans would not meet the airport’s needs (Montealegre et al., 1996a).

BAE was not one of the companies that decided to respond. They knew that based upon the size and complexity of the DIA system they would require considerable time to get it up and running, and the time frame remaining in the DIA plan was at least a year short. In essence, the scope of the project had changed considerably, but the schedule did not. Eventually, BAE came aboard and contracted with the city of Denver to design and build an automated baggage handling system that would be integrated among all three concourses. Unfortunately, even though the requirements of the system were expanded to accommodate the added service area, the managerial structures remained the same. There was no redefinition of the system implementation in relation to its new context.

The baggage system was a model of innovation and complexity: 3100 individual carts called Telecars (and 450 larger carts for oversized baggage) moved bags from the terminal check-in area directly to the departing flights. The carts travel over 20 miles of track at 17 miles per hour. Controlling this transportation system underground are 100 computers, 56 laser scanners and 400 radio systems. The anticipated handling capacity was calculated to be over 1,700 bags per minute (Inside PR, 1996). BAE had never created a baggage system this complex before. The risks were enormous. Certainly the choice of 486-based PCs, operating under DOS, and networked together using additional third party software, was a major contributor to the system’s failure. This was one of the first systems to use a distributed network approach rather than the typical mainframe. Consequently, the software was more difficult to develop and test. Where was the managing vendor to sort out the details of how to keep this software collection under control?

Project Organization and Management

When BAE was awarded the $175.6 million contract for the integrated baggage system, BAE president Gene DiFonso, acting as the project manager, put a number of conditions on accepting the job. The overall design was not to be changed after a certain date and there were to be freeze dates for mechanical design, software design, permanent power requirements, etc. These elements were delineated as milestones within the project schedule.

No organizational changes were deemed necessary, although BAE had to change its working structure to accommodate DIA’s management structure. There was a senior manager for each of the concourses, and a manager at the main terminal. DiFonso coordinated with all four managers since the baggage system traversed all these functional areas. Because activities were occuring at a fast pace, there wasn’t sufficient time to coordinate properly the right-of-ways and construction details at each of the areas. DiFonso found himself agreeing to designs at concourse A only to find out that concourse B was doing things a different way. What was obviously missing was a manager who would have authority over all the major construction sites. This manager could then coordinate the activities of all area managers and schedule the time and resources appropriately.

Additional complications arose due to the fact that at the time of the signing of the contract with BAE, construction of the terminal and the concourses had already started. Substantial changes had to made to the overall design of the terminal and some construction already completed needed to be removed to accommodate the new designs—another example of scope change impacting project development.

In October 1992 the death of Chief Airport Engineer Walter Slinger further complicated the DIA project from a managerial focus. Gail Edmond was chosen to replace him, but she didn’t know much about airport construction. In addition, whereas Slinger was a real problem solver and given much freedom of decision, Gail was too junior to get the autonomy and authority that Slinger had acquired. She needed to get approval on just about all decisions. These delays caused considerable roadblocks in the efforts of DiFonso to keep the system on schedule. Soon, not only was he not getting the unrestricted access needed to complete the baggage rail system and control rooms, he wasn’t even getting reasonable access. Without the unrestricted access to all construction sites, the chance of keeping the project on its tight schedule was all but nil. On top of all of this, the airlines began requesting changes to the system’s design, even though the designs were supposed to be frozen.

Finally, the city’s inability to provide “clean” electricity to the system caused circuit breakers on the motors to trip. A BAE engineer designed filters to prevent the problem and an order to buy sufficient quantities was placed, but a city worker cancelled a contract without realizing that the filters were part of it. The filters arrived months later.

In April 1994, the City of Denver invited reporters to view the first test of the new baggage handling system. BAE was not notified of this event; a critical lack of judgement. The ensuing failure of the test did nothing to help bolster stakeholder’s confidence in the system or of BAE. In May 1994, a consulting firm was contracted to assess the state of the baggage system, and in August 1994 construction of a backup system was announced. The alternate system cost $10.5 million, but additional electrical upgrades and major building modifications brought the total to over $60 million (Montealegre et al., 1996a).

Summary

There are many documented problems associated with the baggage system at DIA, but most have root causes that centered on five key points: the complexity of the system; major scope changes; newness of the technology; high degree of project definition uncertainty; and the short time span for completion.

Clearly, management failed to create a reasonable and consistent level of communication between all the stakeholders involved. There was no evidence that management even attempted to understand the magnitude of their problem until the postponed opening of the airport.

When the airport finally opened in February 1995, it was close to $2 billion over budget. Concourse B used the automated baggage system with the other two concourses using a conventional system. United’s system, costing $300 million, included 22 miles of track, 3,500 cars, and 55 computers. It could handle 30,000 pieces of luggage per day (Montealegre et al., 1996b).

On a positive note, it should be recognized that when the new system implementation management team used a more formal process of change management, encouraged extensive dialogue among the parties involved, and consistently monitored future development, a scaled-down working version of the original design emerged in only 6 months (Montealegre, 1997).

References

Government Accounting Office. (1994). New Denver Airport: Impact of the Delayed Baggage System (GAO Report GAO/RCED-95-35BR). Gaithersburg, MD: U. S. General Accounting Office

Inside PR (1996). Case: Turning Around The Great Denver Airport Fiasco
Available: http://www.prcentral.com/ipraug19bae.htm
[1996, August 19].

Montealegre, R., Nelson, H., Knoop, C. & Applegate, L. (1996a). BAE Automated Systems (A): Denver International Airport Baggage-Handling System (Case Study: 9-396-311). Harvard Business School

Montealegre, R., Nelson, H., Knoop, C. & Applegate, L. (1996b). BAE Automated Systems (A): Implementing the Denver International Airport Baggage-Handling System (Case Study: 9-396-312). Harvard Business School

Montealegre, R. (1997, September). What Can We Learn from the Implementation of the Automated Baggage-Handling System at the Denver International Airport?. Paper presented at the Association for Information Systems 1996 Americas Conference [Online].
Available: http://hsb.baylor.edu/ramsower/ais.ac.96/papers/monteal.htm
[1997, September 24].