While other industries streamline their processes to become more productive over time, the building industry has faced a decrease in productivity, especially during the construction phase. This is especially true with healthcare facilities, which are becoming increasingly more expensive to build. In fact, by some calculations, the quantity of work constituting waste on a typical healthcare project may approach 50% of the total work performed.

These inefficiencies are being absorbed by owners in the form of increasing costs of construction. Given this situation, owners are finding that building the ideal delivery team, by selecting the right design team partners, is a priority in order to minimize costs and maximize productivity for healthcare projects.

The decrease in productivity isn’t the only factor contributing to increased healthcare construction costs. The rules governing construction of healthcare facilities in general create many challenges. In its current state, the highly regulated nature of the healthcare industry is greatly influencing the design and construction of facilities, resulting in haphazard project delivery that lacks flow and ultimately project constructability.

The need to dramatically improve results within the healthcare design and construction industry has pushed companies to closely examine their method for buying design and construction services. A significant portion of the waste generated during a project’s life can be attributed to inefficiencies generated during design. Examining the origin of the project design is an important component to identifying and eliminating waste.

To control waste, many owners have been turning to Lean manufacturing concepts as applied to the construction industry. This approach, derived from manufacturing, is rapidly becoming more prevalent within the construction industry. The Lean Construction Institute (LCI) has even set forth some guidelines for the application of Lean manufacturing. The commercial terms outlined in an integrated form of agreement, combined with the Lean tools used by a collaborating team to integrate design and construction, should be considered for new projects.

To maximize value, owners also should consider ways to collaborate on project cost in addition to implementing Lean tools during project design. The primary objective of the traditional design team is not only to plan the project, but also to predict the project’s cost and promote conformance with the owner’s business case. Designers, working alone, can sometimes have difficulty with cost estimating and value management.

Appropriate construction personnel are needed to complement the designers in order to produce a project that meets the predetermined target value cost set by the owner, as a large majority of total project costs are locked up in the construction phase of a project. Therefore, inviting builders to participate in the design phase can be effective in minimizing or eliminating isolated thinking, from a systems standpoint, that can sometimes occur during traditional design approaches. 

Builder experience can provide significant value and should be considered during this phase of project delivery. The real data brought to the table by the builders allows the design team to make decisions rapidly, as real-time cost data is available to aid in making an appropriate choice.

To ensure the best outcome when implementing this approach, architects, engineers, and primary construction personnel should be invited to help inform the design and create a truly constructible building. Soon after bringing this team together, the initial project total cost estimate (PTCE) should be created. This may differ from the original target value cost identified previously.

The target value is the predetermined value of the work based on the business case. The PTCE represents the builders’ estimate. The goal is to bring the target value cost and PTCE into alignment. Any costs over the stated target value cost will jeopardize the business case and, ultimately, the project itself.

When considering potential partners, it is important to keep in mind that innovation drives better and more valuable building solutions. As such, LCI has identified some key elements responsible for fostering the most collaborative and innovative work environments:

1. Creation of common goals;
2. Co-location of teams in order to promote real-time design decisions and collaborative thinking; and
3. Transparency of cost by each of the contract signers to enable collective buying power of the group.

As a first step to building a collaborative team, appropriate behaviors are encouraged based on the development of common goals. The integrated form of agreement states that risks and rewards shall be shared between the project delivery team.

Next, LCI states that teams shall be co-located in order to promote real-time design decisions. Design should be an ongoing collaborative process. The building should be architecturally designed to allow for the efficient installation of mechanical, electrical, and plumbing (MEP) services. The MEP design and installation shall not be compromised due to the limitations in the architectural design of the building. To do so, the chosen members of the delivery team must:

• Show an eagerness for a collaborative work environment;
• Believe that a collection of design and construction personnel working together can create a better product than a team that works divided, in separate locations;
• Provide experienced personnel who make decisions rapidly, including the cost decisions that are made as deign develops; 
• Evaluate design options quickly to ensure on-time project delivery.

Finally, the cost management aspect of the project is dependent upon transparency of cost by each of the contract signators. With transparency comes trust, promoting optimization of the whole instead of optimization of any selected individual part of the project. Partners are able to discuss and plan for the escalation in material costs. The collective buying power of the group allows for mitigation plans to be developed early. The confidence gained during the design phase will allow for the pre-purchase of materials—an opportunity not often realized during traditional delivery approaches.

As the cost of providing healthcare continues to escalate, the costs of design and construction of healthcare facilities is escalating as well, and must be more tightly managed in order to ensure that projects are delivered in the most efficient manner possible. Traditional project delivery systems create silos, where designers and contractors put personal or company goals ahead of project goals.

To avoid this, owners should consider the establishment of an ideal design team as a key component in the overall successful delivery of a project. The combination of collaborative thinking, co-location, and transparency of costs are the key elements for establishing a successful team.

The productive tension necessary to drive innovation created during the collaborative approach, outlined by LCI, becomes possible due to the owner’s trust in the partners selected to perform the work. This environment encourages innovation and allows partners to learn from both successes and failures. Once an ideal design team has been established, a commitment to common goals and conditions of satisfaction allow for a productive spirit to thrive.

Corona Regional Medical Center

In the case of Universal Health Service’s (UHS) Corona Regional Medical Center (CRMC, Corona, California) project, UHS initiated the selection of an ideal design team early in the process. The CRMC project involved a building in need of structural remediation. Faced with the challenge of meeting Senate Bill 1953 deadline by 2013 and the ever challenging healthcare cost reimbursement conditions, UHS determined that the business case did not support the investment in a new hospital building.

An investment threshold of $20 million was established to meet the statute and improve infrastructure to extend the building life through the year 2030. Armed with this information, UHS set out to find a collaborative team that could deliver the project for the set target value.

At the onset of the project, the team was convinced that the $20 million target cost value would be used in its entirety for structural upgrades. However, UHS wanted to consider infrastructure upgrades to the facility, as a structurally sound hospital with poor infrastructure would be of little value moving forward.   

The common goal of additionally upgrading the infrastructure was established, and the team was able to collaborate to find a way to successfully meet this goal. For instance, eight different solutions to expand chilled water capacity were evaluated. The solution chosen not only met the conditions of satisfaction, as they related to CRMC’s chilled water capacity issue, but also allowed the team to remove 10,000 pounds of existing equipment from the roof. This eliminated structural upgrades valued at nearly $1 million to be eliminated from the scope of work.

Through this new model of project delivery, the team reduced the structural upgrades required to a cost of less than $3 million. The remainder of the $20 million is currently being applied to much needed infrastructure improvements, including an emergency generator upgrade, a chiller replacement, a steam boiler replacement, as well the replacement of three large multi-zone air handling units.

In reducing the required expenditure (structural), the team was able to apply more funds to improving the environmental comfort of the facility. Without a collaborative team environment, upgrading the infrastructure would not have been possible and an opportunity to increase the value of the project for the owner would have been missed.

Temecula Hospital

Building the ideal design team was critical in constructing the 180,000-square-foot greenfield Temecula Hospital in Temecula, California. Soon after the lead architect, HMC, was awarded the contract, DPR Construction and Turner Construction were selected as the general contractors. Together, this team began to design the facility. Two months later, design-builders Southland Industries, Bergelectric, and Southwest Fire Protection were selected to partner with the existing team to handle the delivery of the MEP portion of the scope and contribute to the design process. Partners were selectively chosen for the project in order to maximize collaboration and to create a better overall product.

UHS set the target cost for the project, and the hospital would only conform to the business case if it contained at least 140 beds and could be designed and built for $144 million dollars. Other key services were identified as required for the facility, and the final target value cost and scope were formalized. The delivery team began work designing a building that would conform to those parameters.

Similar to above, based on reimbursement rates, market demographics, use patterns, and the significant slowdown in growth, the overall business case indicated that the delivery of 140 beds for $144 million made the business worth entering.

The contract executed at Temecula required the full commitment of UHS, Turner, DPR, HMC, Southland, Bergelectric, Southwest Fire Protection, and DPR Framing personnel as signators to a single project contract. The designers and constructors were protected in that they would be reimbursed for all project costs and could not lose money by taking on the challenging project.

In turn, UHS was protected by language stating that all costs in excess of the target cost value would initially be absorbed by the team’s collectively stated profit for the project. On the other hand, should the project perform better than cost estimates, the delivery team would be rewarded by a shared savings clause.

The collaborative nature of the project expanded to the regulatory authorities, as well. Both plan check and inspection personnel have been invited to participate during the design phase of the project.

With design, construction, and even regulatory stakeholders working together under one contract, it was essential that the costs remained transparent. The collaborative team was able to gain the trust of each partner to ensure that costs were minimized and the productive spirit was maintained.

William R. Seed is Staff VP of Design & Construction at UHS Inc. He can be reached at williamseed@UHSinc.com. Kenneth Lindsey is Senior Project Manager at Southland Industries. He can be reached at klindsey@southlandind.com.