By BENNETT HALL
Corvallis Gazette-Times | Posted: Sunday, November 23, 2008 12:00 am
Different approach defends hospital against sharply higher prices of materials
With a sticker price of $40 million, the west tower addition to Good Samaritan Regional Medical Center is one of the most expensive construction jobs currently under way in the mid-valley.
That's a lot of money. But a year into the 2½-year project, the real shocker is that the price has not climbed higher.
"We're on budget," said Joseph Shumate, construction project manager for the Corvallis hospital.
That's quite an accomplishment these days, when rapid increases in materials costs can wreak havoc on construction budgets, a factor Shumate was acutely conscious of going into the project.
"We were really worried, with last summer's price spirals," Shumate said. "Copper basically was priced by the hour. Steel was the same way, but not quite as volatile."
To protect themselves against cost overruns, hospital officials worked closely with Andersen Construction, the Portland-based general contractor on the west tower job. Andersen, in turn, teamed up with subcontractors and suppliers to keep costs down.
"We contracted with everybody, and then they were able to go lock in their prices - for steel and for copper and for everything else," said Brad Barcroft, a project manager with Andersen.
In the last several years, the cost of construction materials has rocketed upward at a dizzying rate. Since the end of 2003, the cost of construction inputs (including diesel fuel) has jumped 45 percent, according to data from the Associated General Contractors of America.
The price of copper is up 143 percent over that five-year span, while steel is up 122 percent and concrete 38 percent, the national trade group reports.
Since the West Tower addition broke ground last November, the price of copper has slipped 2.9 percent and concrete has climbed a modest 4.3 percent.
Steel, however, continues to shoot up in price, rising 38.2 percent over the last 12 months. With nearly 900 tons of steel in its six-story frame, the west tower would have been considerably more costly without fixed materials costs in the contract.
"We used a consultant that has been involved in large projects across the nation," said Good Sam CEO Steve Jasperson. "Their goal was to try and make as specific a contract as we possibly could."
The contract included detailed estimates of all materials that would be needed for the work, which made it possible to place orders with suppliers well before excavation began last fall, locking in the price before it could spiral any higher.
"We purchased steel early on in the process," Jasperson said. "We knew approximately how much we were going to need, so we bought it early and then had it fabricated according to our specifications."
Andreas Aalhus of Ritter Construction Management, the consultant on the project, said the approach - known in the trade as construction manager/general contractor, or CMGC - differs from the traditional design-bid-build approach in several important ways.
Instead of awarding the job to the lowest bidder, Good Samaritan started out by asking contractors to submit their qualifications. The best-qualified firms were then asked to make proposals.
"You're not choosing a firm based on low price, you're choosing a firm based on who you think will deliver the best value for the project and who you think will be a good partner," Aalhus explained. "The low-cost mentality, I think everybody realizes, doesn't always deliver the best value."
Under traditional design-bid-build deals, the general contractor is paid a percentage of the overall construction costs. For the west tower job, Andersen Construction negotiated a guaranteed maximum price.
"What this does is it removes any financial incentive for the contractor to inflate the price of the project," Aalhus said.
Those price increases often stem from change orders during the course of the project as the contractor determines that one element or another needs to be redesigned or that more or better building materials are needed.
"It's an adversarial delivery structure," Aalhus said. "It's set up that way, so the owner generally needs to be prepared to foot the bill for any cost overruns."
To avoid that possibility, Good Sam officials worked extensively with Andersen and its subcontractors before breaking ground, fine-tuning the design, construction schedule and material specs to make sure there would be as few surprises as possible once the job began.
"It's a very detailed and laborious process, but it's really paying off for us," Jasperson said.
"In the end I think it saves us a lot of money."
Expansion keeps pace with patient volume
The west tower addition is the biggest expansion of Good Samaritan Regional Medical Center since the 35,000-square-foot Ralph Hull Regional Heart Center opened in 2002.
Most of the financing for the $40 million project will be provided by bank loans, which Good Sam plans to pay off from operating revenues over time.
As with the heart center, however, community donations are offsetting some of the cost. The hospital's foundation is wrapping up a $2 million fundraising drive.
Hospital officials say the expansion is long overdue.
As Good Samaritan has grown from a community hospital to the flagship of Samaritan Health Services' five-hospital network, patient volume from referrals has surged. The Corvallis hospital's designation as a Level 2 trauma center made it even more of a regional magnet.
The west tower will triple the size of Good Sam's emergency department from 5,000 to 17,000 square feet, with an expanded waiting room and a reconfigured entrance to provide better access for ambulances and walk-in patients.
The number of treatment rooms will grow from 11 to 21. The rooms themselves will grow as well, with additional square footage to accommodate new-generation medical technology that includes boom-mounted ultrasound equipment and defibrillators.
Several of the treatment rooms will be extra-large for handling trauma cases, and the ER will get a dedicated CT scanner for on-the-spot diagnostics.
Intensive care will also see a growth spurt, from 12 beds to 20, with larger floor plans to make room for boom-mounted equipment ranging from cardiac montiors and IV pumps to computers for accessing patient data.
Good Sam will gain seven medical/surgical beds as well for a total of 49, with the number of private rooms swelling from 10 to 25. All of the rooms will get new beds and patient lifts.
The new tower's basement, one floor below the emergency department, will house respiratory-therapy rooms and kitchens for the hospital food-service operation. The ground floor, one flight up from the ER, will get some additional administrative offices.
The highest level will remain unfinished for now, until hospital officials determine the best use for it. One possibility under consideration: an expanded maternity ward.
"The fourth floor is still listed as shell space," said Joseph Shumate, construction project manager for the hospital. "Those calls will be made as we go along."
Ultimately, the Corvallis hospital's total patient capacity will increase from 188 beds to somewhere between 204 and 212, depending on the final interior configuration.
"When all of the moving parts are completed, we'll be about 205, but that's several iterations away," CEO Steve Jasperson said.
Exterior work on the new tower should be finished shortly after the first of the year, with tinted windows and brick veneer giving it the same look as the rest of the hospital. Then workers can finish the interior out of the weather, with occupancy of the new emergency, intensive care and medical/surgical floors expected in May.
But that's just phase one of the two-part project, which also includes plans for a complete renovation of the existing ER, intensive care and medical/surgical areas. Phase two is slated for completion in May 2010.
"There's adjacent spaces that we can't do until they're vacated," explained Joseph Shumate, the hospital's construction project manager. "So the first thing we've got to do is get the emergency department, ICU and med/surg finished. Then we can move over and work on those spaces."
Bennett Hall can be reached at 758-9529 or bennett.hall@lee.net.