Erroneous cost estimates can be introduced into a hospital construction project in many different ways. However, most estimating errors are the result of a fundamental lack of understanding about the construction process; the estimator’s insufficient knowledge of the 24/7 nature of hospital operations; or a failure to consider all costs associated with the construction, startup and connection to mechanical, electrical and medical systems.
Health care facilities managers and construction professionals are advised to watch out for the following common errors that can result from a poor or inadequate analysis of the hospital’s operational conditions during a renovation or addition project.
Unique nature
Understanding the construction process means more than understanding the relationship between the owner and contractor. It requires an understanding of the construction process and relationships between the construction trades and all the phases of construction. Properly estimating the cost of a project involves understanding how the work will be accomplished.
The general contractor’s direct payroll organization consists of supervisory personnel who work directly for the general contractor, such as a project manager, general superintendent, trade superintendents on large projects and direct labor personnel who may perform portions of the work. In addition to direct personnel, the general contractor will have subcontractors performing portions of the work, inspection organizations performing testing and balancing, and suppliers providing material and equipment for the project. In addition, there may be additional field personnel on large projects, such as clerks, surveyors, field engineers and quality control inspectors.
The general contractor’s field expenses cover items such as trailers, temporary power, temporary water, temporary fire protection, temporary heat, safety provisions, hoisting equipment, material handling equipment, scaffolding, testing of completed work, inspection of completed work, signage, temporary fencing, final cleaning and many other processes that the estimator may neglect to include in an estimate.
Many estimators fall into the trap of using percentages for field expenses without knowing what they cover. The percentages could be too high on a large project and too low on a small one. Using percentages for the general contractor’s home office expenses and profit can be effective, but a contractor’s field expenses should be line-item estimated. Line-item estimates help explain the project scope better and are essential for negotiating the project field costs and expenses. Even in lump sum proposals, understanding the field expenses will make a better estimate. Checklists are available from various sources to help an estimator consider all the field overhead costs.
Another shortfall in estimates is failing to consider mobilization and demobilization costs. Often, the estimator erroneously starts an estimate as if the contractors are already there to start the work. However, most projects require a startup phase known as mobilization and a completion phase known as demobilization. On a small job, mobilization and demobilization time may be short, but expenses such as equipment mobilization and demobilization are not insignificant.
Finally, the closeout construction phase is often overlooked, with costs for final cleanup expenses, maintenance manuals, punch lists and “as-builts” not included in the estimate. In addition to these, many owners want spare parts, extended warranties and extended services on equipment that many estimators fail to include in the overall estimate.
Special cost considerations
Hospitals are unique because of their patient safety requirements and specialized systems, which are not found in other buildings. The interruption of any service to the health care facility can be life-threatening to some patients. Moreover, blocking main and even secondary entrances can severely impact the hospital’s normal operation.
Protecting patients from physical harm has to be considered in all operations performed in or around a hospital. Working on hospital construction is much more difficult than in most construction projects because the contractor is dealing with individuals who are quite often elderly, physically impaired or not completely alert to their physical surroundings. Due to the issues raised by these individuals, the contractor must take extra precautions and incur additional expenses to ensure that patients do not come near any construction work.
The difficulty for the estimator is to take these issues into consideration and understand the costs that will result from these extra measures. The most obvious is to provide physical barriers to prevent any patient from getting in harm’s way. This may be impossible during outpatient clinic hours and may require shift work, or weekend or holiday work to achieve the least amount of patient contact possible. The estimator must include the extra expense of providing not only the direct labor cost at premium rates, but a night superintendent to oversee the work. If the project requires both normal daytime work and after-hours work, additional general provisions for a second superintendent must be included in the cost.
Additional security costs may also need to be added if work is in sensitive areas that are normally controlled during regular working hours. These include pharmacy areas, operating rooms and other areas where expensive equipment or prescription drugs could be stolen if security is not provided.
Utilities issues
Working on normal or emergency power systems must proceed with great planning and coordination in cooperation with the hospital’s clinical staff. Any interruption of power to critical areas could be fatal to patients. When estimating costs on a project that involves hospital power systems, extra expenses may be required, including portable backup power systems and battery powered systems to temporarily support patients during a service disruption.
Other utilities requiring special consideration include the gas systems. Work on the oxygen system is probably the most difficult, also requiring careful coordination with clinical staff. Work on the oxygen system is usually performed on Sundays and holidays to create the least impact to the hospital’s patients. Any addition to the oxygen system requires a recertification process by an independent testing agency, before the oxygen system can be used by patients. The full costs of double-time work, special backup systems and recertification costs should be included.
In addition to oxygen systems, many hospital projects require the interconnection of existing utilities with new buildings. These can involve either connecting existing utilities to new buildings or providing new utilities to existing buildings. Either way, an understanding of the operation of the existing or new system is essential to provide an accurate estimate.
Several items must be part of the cost estimate to make it accurate. Temporary generators may have to be provided if the emergency power system is part of the project. Shutting down the chill water system may require the partial drain of the existing system, before the connection can be made. This shutdown will affect the comfort of the staff and patients and will disrupt hospital services, including operating suites. When a new water-based utility is part of the project, the chemical cleaning, flushing, treatment and possible disinfection may be required as part of the construction project. These items must be included as part of the overall cost estimate.
Another area that is frequently overlooked is the connection of a new or renovated area with existing utilities that do not meet current codes. The local inspection authority will usually require the contractor to upgrade the connections to meet code. This means replacement of conduit, duct or other utilities to comply with the current building code. This often requires that the connecting utilities be brought up to code to the nearest connection point. Ductwork must meet code requirements back to the nearest main duct, electrical must meet code to the nearest panel and wet utilities must meet code to the nearest main.
In radiology areas, great care should be exercised to ensure the lead shielding is sufficient for the new equipment. Only a physicist report certifying the room’s lead shielding is acceptable for the equipment should be relied upon.
An analytic understanding
Cost estimates for hospital renovations and additions can be complicated, but their accuracy can be improved if health facilities managers make sure the above considerations are incorporated.
Estimates will be more accurate if there is an understanding of field overhead costs, the costs associated with the unique environment of hospitals and costs for all expenses associated with the mechanical, electrical and medical systems.
Eugene Spencer is senior engineer at Reed Construction Data/RS Means, Kingston, Mass., which offers cost estimating, life-cycle cost analysis and third-party validation services as well as predictive cost modeling for capital budgeting projects and processes. He can be reached at espencer@reedbusiness.com.
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