While construction projects are affected by the rising prices in supplies, it will lead to engineers and architects finding more efficient building techniques. This applies especially to healthcare construction projects.
Due to long-term capital planning, hospitals -- more so than other building types -- are under continuous pressure. Hospital executives are expecting a certain bid, and with an increase in the price of materials, such as steel up 5-7% this year according to different sources, bids can increase prices in the millions. Restructuring a strategic plan is often hard to manage considering initial project designs encompass all aspects required for the hospital to succeed well into the future. However, situations like this have occurred before and hospitals adapt to their continually squeezing budget by improving efficiency.
Method 1 - Buy Early:
From the middle of 2005 to the middle of 2006 copper and asphalt prices soared, increasing 87% and 48% respectively. In order to be less impacted by the market one community hospital vice president, Ken King, had a different approach and bought early. Throughout the project’s approval process, Mr. King saw prices rising so he began working with his subcontractor, and purchased materials 9 months in advance saving the hospital a significant amount.
Method 2 – Use Alternative Materials:
A substitute to buying early is to select alternative materials. Architects and engineers need to weigh their options, deciding whether it is beneficial to switch say from copper piping to stainless steel or other equally effective materials. Specifically using “green” materials can diminish a hospitals’ carbon footprint and increase cost savings for the long term. A 2007 survey in Building Design + Construction indicated an expected 3-15% premium for operationally beneficial "green" building materials and systems. From my experience I find this to be true. However, factoring for inducements, incentives, abatements, tax credits and energy savings an educated team can construct near par and save millions for the future
The ability to recognize market trends early in the project’s life cycle is key in finding the most cost effective solutions. As prices of materials and level of competition rise, efficiency in implementation and design will follow suite.
James Ellis, CEO, Health Care Realty Development Company, is a nationally recognized successful real estate investor and developer of medical office properties with a comprehensive knowledge of sophisticated real estate transactions, cost effective designs, and efficient property management.
Aaron Razavi is Associate Marketing Director at Health Care Realty Development.
Visit their blog at http://www.hcrealty.com/medicalrealestatedevelopment/