Healthcare Facilities: Some Lessons Learned

The acts of design and construction are never ending learning experiences – and that certainly has been the case with our design-build healthcare project here in Southern California.

Working with the Devenney Group Ltd. as our architectural team member, we are building a $72 million acute care addition to the Glendale Adventist Medical Center here in Glendale, CA. The addition is a six-story structure that will add a new emergency room and 60 acute care beds to the 100-year-old hospital’s capacity.

The structure must be designed and built under the auspices of California’s Office of Statewide Health Planning and Development (OSHPD). OSHPD requirements make healthcare construction in California one of the most intensely regulated types of construction today.

In order to capture our learning experiences, several of our team members have been keeping a list of “lessons learned” as the project progresses. Our goal is to use this information in our effort to constantly improve our performance. We hope that sharing some of these lessons will better the industry’s performance for all members of the project team – owners, general contractors, designers, and subcontractors. While many of these lessons may seem obvious, it is important to remember that in the drive to get contracts signed, budgets set and met, sub-contractors on board, and design criteria satisfied, even the most obvious tasks sometimes get overlooked or brushed aside.

The following is a description of some of our lessons learned to date:

Team Chemistry

The primary foundation for this type of project must be built upon a strong partnership between the owner and the design-build team. This is undoubtedly the most critical factor in our success to date. No form of construction is more team-intensive than design-build. Because we and our architectural partner had teamed up on an earlier project for this same owner, the major team members for this new project had worked together before. Our cultures matched and realistic expectations for performance had been established through the previous project with the same client.

The Contract with the Owner

While this team has a great deal of positive chemistry, the ins and outs of the contractual side of the relationships are of course very important. The foundation for all of the contracts on the project is the contract between the owner and the design-build entity. This contract must be negotiated and executed as quickly as possible, as many of the subcontracts are dependent upon clauses contained within the contract with the owner. Any delay in producing this document telegraphs to many of the other contractual relationships on the project.

Subcontracts

Once the contract with the owner is complete, the subcontracts can be finalized. It is no secret that the selection of major subcontractors has a critical impact on the success of the project. To that end, subcontractor selection must include a great deal of homework on the part of the design-build team. Do the preferred subs have the financial capacity and the resources to perform on this project? Are they experienced in the design-build project delivery method? What are their other commitments that may affect their ability to perform on our project? If sub-bonding is required, can they provide a bond? Can they really commit the people they have proposed?

Reimbursables

A surprising sticking point in our contract with the owner was defining reimbursable costs. How are printing, copying, mailing, and shipping costs to be handled? Are costs in this area that relate to communication between the design-build team members themselves considered “reimbursable,” or are only the costs that relate to communication with the owner considered “reimbursable?” Clear definition of what is considered reimbursable is very important.

Lack of Early Project Definition

One of the first problem areas for this type of construction occurs when the owner first sends out its Request for Proposal (RFP). Typically, at this stage of the game, there is a lack of existing programming and a lack of clarity about project goals. Much of this dilemma is due to the chicken and the egg nature of design-build. Owners can’t define their program until they know what the building is going to cost. The design-build team can’t tender a legitimate estimate until the programming is well defined. On our project, because we were proposing through a competitive RFP process, we could not always fully support or fairly challenge the owner’s expectations without weakening our competitive position.

Early Budgeting

The owner needs to be aware that budgeting at the RFP stage is dangerously nebulous. The inadequacies of early programming and the lack of project definition mean that the owner cannot award the project to a design-build team based on fixed dollars alone.

This lack of definition is magnified in the owner’s conceptual budgeting. The design-build team needs to investigate how the owner’s original budget was determined. Was there any architect, engineer, or contractor input? What was the program the budget was based upon? These owner-generated numbers must be validated as soon as possible so as to avoid trouble later on. In a heavily regulated construction environment with rapidly escalating costs, owner budgets based upon historical square-foot costs are very dangerous. One of our team members put it this way, “construction and design are inexact forms of science, and every new building, no matter how much like another, is being built for the first time.”

Design and Engineering Budgets

In these early owner-developed budgets, design and engineering costs may have been based upon “rule of thumb” factors like a percentage of the overall construction budget. The design-build team must quickly develop design and engineering budgets based upon actual anticipated costs for this particular project. To accomplish this goal, input from design and engineering firms familiar with the design-build process is required.

Early Definition of “Great Performance”

The expectations brought to the project by each team member must be shared with the group as a whole. There needs to be buy-in from each team member as to supporting the other team member’s goals. Early on in the project, we met with our architectural partners and defined “Great Performance” for each of us — as companies and as individuals — and for the project. It was an eye-opening experience and helped to strengthen some bonds that were already well formed.

Monitoring “Great Performance”

Outlining the goals at the beginning, however, is not nearly enough. There must be a review of the progress towards those goals at regular intervals. The entire team should be involved and an open and honest exchange needs to occur about hindrances and successes. This is not intended to be a gripe session — while concerns must be shared and problems solved, achievements should be celebrated as well.

On our project, a more formal benchmarking process would have made this easier to monitor for all involved.

Owner Sophistication

Our owner on this project is not “construction wise.” They have no formal construction department within their organization. As such, they put great faith in us as a team to guide them through the process. Despite our awareness regarding the owner’s lack of sophistication, we often have assumed that they understood things they didn’t really understand. For instance, it would have been good to outline some expectations up front about what they should expect in terms of early work product — the number of estimates to be produced and at what stage of design. We also could have tracked that evolution of this process more efficiently so as to build a more clearly defined historical record of the progression of design, budget, and schedule.

Missing Elements in the Owner’s Budget

The owner’s budget needs a great deal of scrutiny. Does the owner differentiate between overall “project cost” and “construction cost?” Have any contingencies been included? Other costs that are often underestimated or overlooked by the owner include:

• Land and real estate costs
• Costs of city planning processes (such as zoning and design review board fees)
• Medical equipment costs
• Commissioning costs
• Costs of testing and inspections
• Costs of relocating existing utilities
• Costs of reasonable price escalations over the life of the project

Once these discrepancies are identified, the team needs to decide how these costs are going to be handled and who will be responsible for them. Decisions then must be communicated in a clear and concise fashion so that even a “non-construction wise” owner has a solid understanding of how these items will be handled.

Escalation Factors

In today’s construction market costs can escalate at unpredictable rates (take the cost of steel and steel products over the past year, for example). It is important to establish up-front how these costs will be handled as the project design progresses and as supplementary budgets are developed. Do predetermined percentages adequately protect the owner, the design-builder, and the sub-contractors? If “reasonable” escalation is included, who defines “reasonable” and under what criteria? Clear and concise contract language is always important — and the clauses that deal with escalation are no exception.

Contingencies

As the design-build team continues to refine the design and the budget, contingencies must be included and carried by all parties. The use and reporting of these contingencies must be well defined and clearly understood by the team members. There undoubtedly will be unanticipated price increases (not related to scope change) as drawings progress and pricing is updated. The contingencies on the design-build team’s side of the table can then be reduced to cover these increases without impacting the owner’s budget.

Selling the Design

Throughout the design process input is received from numerous user groups. Often these groups have divergent goals and strategies and, with a limited budget, not everyone can have everything they are looking for.

It is imperative to get these groups comfortable with the design of the building even it they don’t get everything they asked for. The design-build team must be prepared to explain the design as a holistic solution to many different and often conflicting sets of criteria. Most departments are going to get somewhat less than they dreamt of, but that is to the benefit of the building as a whole. Selling this approach is important if the users of the building are going to be satisfied with the end result.

Thorough Preconstruction Work

Many of our lessons learned have to do with the need for rigorous preconstruction. It seems as if every dollar wisely spent at this stage gives an exponential return, and owners don’t always immediately see the benefit to spending the money up-front. Spending money on good civil engineering, geotech reports, and utility verification can avoid change orders for those “unforeseen conditions” that haunt a project. Additionally, spending good money (and appropriate time) on thorough mechanical, electrical, and plumbing design pays enormous dividends. Resolving conflicts between these systems is much cheaper when done on paper instead of in the field. Our superintendent and our MEP coordinator have used CAD modeling for much of this sort of work and it has saved countless field hours.

Medical Equipment Planning

Medical equipment planning is another potential hazard in healthcare construction. Often, the owner will be negotiating equipment purchases quite late in the game as they attempt to get the latest technology for the best price possible. Designing the building’s infrastructure to support this equipment is a critical step in the design-build process. If the information on the requirements for the medical equipment arrives too late, expensive change orders will surely result. This is complicated in California by the requirement for OSHPD approval of equipment seismic anchorage. The OSHPD approval process alone can take months, so submittal of this information must occur as early as possible. On our particular project the owner has been great about working to attain this information in a timely fashion, but they have at times struggled with making an equipment purchase decision due to intense competition for their equipment business.

Transitional Planning

Our project is on an existing campus, and therefore there is a great deal of transitional planning that needs to occur. For example, some equipment in existing buildings will need to be relocated to the new building. How this existing equipment ties into the infrastructure of the new building is just as critical as how any new equipment will tie in. Plus, existing equipment has the added encumbrance of having to be pulled out of service during the transition period. Pulling equipment out of service affects the facility’s revenue flow and can complicate the delivery of other services down stream.

The hiring of a capable medical equipment planner can facilitate equipment planning and transition. Clear definition amongst the team members about what services and work product the medical equipment planner will provide is critical. For example, will the medical equipment planner provide the engineering for the seismic anchorage of the equipment? How will space planning, typically an architectural function, be incorporated with the medical equipment planner’s space requirements?

Proactive Relationships with Regulatory Agencies

The relationship with a regulatory agency such as OSHPD can become very adversarial. We took an approach early on that instead of expecting OSHPD to be reactive we were going to expect them to be interactive. That is often tough for a government agency to do just by its very nature. We were told by several people that it couldn’t be done, yet we found that having OSHPD as involved as possible as early as possible helped the process greatly. We have found the people there to be hardworking and earnest, and willing to help us meet their expectations.

Commissioning

If commissioning is to be part of the process, it would be wise to get the commissioning agent on board before the drawings and specifications move into the construction document phase. Having the commissioning agent buy into the design, and have input into the design, helps to make the actual commissioning process move along much more efficiently.

The actual selection of the commissioning agent can also take a fair amount of time. The owner may have someone in mind, and if you are using design-build subs for MEP issues they may have someone they prefer as well. The point is that there is probably a large pool of commissioning agents that will be suggested, and each will have his/her own allegiances, benefits, and drawbacks. Getting the team to select a mutually acceptable commissioning agent will take time.

Summary

In conclusion, our team has learned a lot from this process, and continues to learn more everyday. Design and construction will always be an intricate and delicate process and they are both performed best when all team members support the success of all the others. Luckily, our team is made up of a very talented group of people who respect each other, and we have a great owner. As long as we communicate clearly with each other, things seem to move along in an orderly fashion.

Healthcare construction is not just about bricks and sticks, and that is why we enjoy it. Our talented project architect, Gary Goldberg, said it best, “We have always viewed our role in designing and building hospitals as more than that of producing a product. We value the importance of the activities that these structures support: LIFESAVING! We think of our collaboration with hospital administration, clinical staff, and support services as an effort that produces a source of pride on many levels.” The partnership and teamwork involved in design-build healthcare projects amplify these feelings tenfold.

Some material for this article was contributed by Anthony J. Loscavio and Gary Goldberg, AIA, principals of PDR and Devenney Group Ltd., and Brannon Shalley, Group Leader for Healthcare for J.R. Abbott Construction.