Delivering Results: A Breakdown Of Healthcare Construction Delivery Methods
You’re a healthcare project manager responsible for constructing a new building in your system. To date, you’ve followed the strategic plan and the master plan and have developed a conceptual project budget. You’ve secured board approval, too. Now it’s time to review and make recommendations to your leadership on the project delivery approach.
This is the legal/contractual arrangement that will define the relationships that the hospital will have with the project delivery team, including the design team and consultants, and the construction team and its subcontractors.
What are your project delivery options and how do they vary?
Contracting methods are evolving in response to the challenges of delivering a successful, large-scale healthcare project. Meanwhile, as the Affordable Care Act is more clearly understood, most hospitals are learning to work with the regulations and are motivated by new reimbursement models to pursue outpatient or ambulatory care sites. This trend moves patient care away from the inpatient environment and into smaller, less complex facilities.
Depending upon the type, scope, and scale of a project, the delivery method of choice will vary. Further complicating the picture, there are a variety of pros and cons to consider within even the most successful delivery methods.
Design-bid-build is the traditional approach: The client hires the architecture firm, which prepares design and construction documents. Once the design and construction documents are complete, the contractors bid on the work based on the documents.
It’s good practice to prequalify the contractors, using a request-for-proposal process similar to that used for architectural selection. Major subcontractors can also be prequalified, which is wise given that MEP systems can cost as much as 40 to 50 percent of the construction budget.
- It’s the industry’s most familiar delivery method
- Roles and responsibilities for the team are well defined
- More firms can bid on a project
- The owner can benefit from lower market pricing in a competitive environment, and the low bid may be the deciding factor in a selection.
- The lowest bid leaves little or no room for the changes (and potential conflicts) that can be expected on complex projects of long duration, such as a hospital
- The owner is often required to act as an issues resolution agent when architectural documents and construction conflict
- Relationships can be adversarial
- Owner control over the general contractor team is limited
- Bids can be high in a tight construction market.
Construction manager at-risk
In the construction manager at-risk model, the owner hires both the architect and construction manager (CM), which is brought onto the project team during the early design phases to assist with constructability, logistics, and estimating, providing an early opportunity for collaboration. Under this method, the CM will define a scope of work, construction duration, and a guaranteed price and, by doing so, takes on the risk of the project.
With comprehensive and complete estimating, a CM can help the team keep the project within the budget. This requires transparency and effective communication between the design and construction partners to be sure that as the planning and design evolves, the CM is responding with cost information that accurately reflects any changes.
This method is the most common delivery method for large-scale healthcare projects, and is especially helpful in renovations because the CM is part of the team and can better watch the budget and schedule goals as well as allocate resources for unknowns that often arise.
- Cost and change risks are more easily mitigated
- There are more opportunities for a faster construction schedule with less risk than other methods
- Tension between project team members is reduced
- Work from project team members, excluding the CM and architect, can be competitively bid.
- The construction team is required to play a larger role in the design phase than it traditionally does under a design-bid-build contract, which can be a drawback if it isn’t yet fully engaged or focused on the project
- The team relies on the CM for estimating, and occasionally the pricing may not reflect design evolution or intent.
The design-build model creates a single entity; there is just one contract. The client provides the goals and program for the project and works with a design-build team (contractor and architect) that’s fully responsible for delivery of the project. It’s more often utilized for simpler building types, such as medical office buildings or parking garages, rather than hospital projects.
In more complex project types, such as a significant healthcare expansion or renovation, the design professional can better serve the client if they’re contracted directly to them rather than working for the builder.
- There’s a single contract for design and construction
- Schedules can be expedited
- Decisions happen more quickly
- Costs are established early and client risk is controlled
- The design team is generally contracted through the general contractor, which simplifies the client interface by having just one party to work through.
- There’s a loss of checks and balances in the architect/general contractor relationship
- The owner’s involvement is limited
- The process may not bring the best designer and best builder together.
Integrated project delivery
The integrated project delivery (IPD) model creates a new contractual business structure that includes the owner, the architect, and the CM, which are brought together in a limited partnership. The American Institute of Architects currently defines IPD as “a project delivery method that integrates people, systems, business structures, and practices into a process that collaboratively harnesses the talents and insights of all participants to reduce waste and optimize efficiency through all phases of design, fabrication, and construction.”
- The tripartite team is contractually bound together under a true IPD contract
- Multilateral collaboration is encouraged
- It’s a high-efficiency delivery model
- Owner risk is limited by a team approach to risk and reward incentives
- Teams are better able to deliver projects within budget and schedule.
- It requires a sophisticated owner that’s willing to be highly involved in the project delivery
- Contractual issues will often have to be addressed
- Additional risk is created for the design and construction entities, in exchange for incentives that may or may not be achieved.
Design-assist is a relatively new delivery method that isn’t a true contractual arrangement like the other examples and requires early involvement of subcontractors. This delivery approach can be used with almost any of the contract approaches described above and is always used with another method.
Design-assist is especially valuable when there’s need to save design and construction time or secure time-sensitive materials, or if there’s an unusual requirement of some kind. Specialty contractors (MEP, glazing, structural steel, elevators, waterproofing) join the team early to assist in the design.
It’s possible to create a more efficient process by having the subcontractor that will be building the project assist the design team in developing layouts, details, and even systems to maintain a certain price and/or schedule. To be most effective, the design-assist team members should be brought onto the team at the end of schematic design or the first portion of the design development phase.
- Approval time is reduced, since the subcontractor has been engaged in the design process
- There’s potential for fewer changes in the field
- Overall scheduling (by securing manufacturing production slots to ensure timely delivery) is improved
- Prefabrication of building components—which supports the schedule, project quality, and job site safety—works well with this method.
- Competition is reduced because the team commits to a certain subcontractor with an agreed upon price and doesn’t have the option to not use that subcontractor for construction if not satisfied with pricing during the design-assist phase
- The level of detail required for the documents and task responsibility can lead to confusion and inefficiency
- A subcontractor is required to participate in the design phase, with which they may not be familiar, resulting in challenges for the design and construction team
- It reinforces the need for establishing goals and expectations.
What matters most?
Each of the methods discussed has advantages and disadvantages, and an informed decision must be linked to the goals and priorities of the institution. What matters most: reduced cost, speed to market, risk mitigation, or owner control? How comfortable is the owner with change and innovation in the contract approach?
With any large, complex healthcare project, whether new or renovation, the CM at-risk model is likely to retain appeal as the delivery method of choice, as it provides the owner with great latitude and minimal risk.
While IPD is becoming more accepted, it requires a sophisticated project team to manage its inherent contract challenges. Meanwhile, expect to see design-assist increasingly used in conjunction with most of the other project delivery methods because of the added value that the approach brings to a construction project, such as locking in pricing early and reducing some cost uncertainty.
Aiding in the success of both IPD and design-assist has been building information modeling, which helps reduce documentation and coordination conflicts in design documents and enables the development of these alternative approaches.
For additional information on project delivery methods, refer to the Primer on Project Delivery, published jointly by the American Institute of Architects and the Associated General Contractors of America. Planning, Design, and Construction of Health Care Facilities published by the Joint Commission Resources also has an excellent chapter on “Alternative Facility Delivery Models.”
One size does not fit all. The right choice is the one best suited to the project at hand and the culture of the healthcare institution.