By {{Article.AuthorName}} | {{Article.PublicationDate.slice(6, -2) | date:'EEEE, MMMM d, y'}}
Change is never easy, especially when it involves a $1.7 trillion industry. With the changes enacted by the Patient Protection and Affordable Care Act (PPACA), budgets are tighter than ever and health care facilities must handle new technological demands and an expanding patient population. In this new paradigm, it’s not just a low bid that wins business for health care contractors. It’s the promise that their services will save money while adding value.

As the construction industry continues to adapt to changing economic needs, a third-party construction manager can have a positive impact on reducing costs and saving time on health care projects of any scale.

Respondents to the 2011 FMI/CMAA Survey of Owners claimed to take advantage of low bids to complete projects at the lowest possible price, though more than 90 percent of those surveyed remain committed to a best-value procurement strategy, which suggests quality continues to be as important as cost for most owners.

Owner respondents also reported they have heightened expectations for construction managers to handle the transitions for “ongoing operations and maintenance,” as well as serving as the “go to” representatives responsible for dispute claims resolution and mediation of document quality. Within health care, ongoing operations and the assurance of smooth project transitions are essential for effective and comprehensive project delivery. Owners’ other expectations of construction managers include leading project team communications and IPD efforts, optimizing results from new technologies and forms of IT implementation, and assuring an adequate supply of skilled craft workers.

This research complements a 2006 report from the civil engineering departments at the University of Southern California and California State University, Long Beach showing a comparative analysis of total project costs for projects with and without a construction manager. Although comparative research of two identical projects is difficult to attain, the researchers were able to quantify “the project cost savings (measured through either lower change order amounts and/or a lower project total cost) by comparing projects that have varying amounts of management services.”

The research revealed management costs are, on average, lower for projects using third-party construction managers than for projects using in-house managers, though non-construction and construction costs remain relatively the same. Alternately, the change order value (reflected as a percentage of construction contract value) is much higher for projects managed by in-house managers (10.9 percent) than for projects with outside managers (6.2 percent). Additionally, the data shows that as the percentage of the management costs go up, change order costs will go down 0.89 percent. This means the management costs of the total project costs must be between 3 percent and 4 percent in order to “control changes.”

Though there is room for more research on the subject, utilizing a third-party construction manager is particularly valuable on larger projects—something the health care industry is likely to see more of in the near future. The Commonwealth Fund Biennial Health Insurance Survey of 2012 suggests 46 percent of adults ages 19 to 64 (roughly 84 million people) were uninsured or underinsured prior to the implementation of the PPACA. Health care providers are feeling the pressure from new insurance coverage provisions that took effect at the beginning of the year—in addition to other expectations for IT, payment and accountable care upgrades. Plus, providers must negotiate expanding facility needs amidst roughly $250 billion in federal health program spending cuts since 2010.

The PPACA already is affecting how the design and construction industry does business with health care providers. Employing third-party construction management is one way the construction industry can confront these health care changes and continue to deliver innovative services. 

Robert J.Klasek is vice president of healthcare for Cotter Consulting, Inc. For more information, call (312) 696-1200, email r.klasek@cotterconsulting.com or visit www.cotterconsulting.com

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