Pay Now or Pay Later

Posted on March 2, 2012

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Last month I met with a Director of Planning and Design at a four-hospital health system. We were having a philosophical debate on the role of design-build in healthcare. He argued it was not wise on large projects. I questioned why, and he related from painful experience how he inherited some facilities within his system that had very poor systems designs (HVAC, electrical, plumbing) from design-build delivery.

Two facts were clear:  two of his hospitals had failing systems before they should have, and the projects were delivered design-build before he arrived on campus.

It is difficult to forensically determine how any hospital gets into its current state of disrepair. Was it poor design? Was it wreckless value-engineering (VE)? Was it fiscally mismanaged? Was it poor maintenance?

More often than not, the trail leads to first cost. First cost is mostly discussed as a foil in life cycle cost analysis (LCA), where a project’s functional performance is looked at over its intended life cycle. LCA is a holistic view, like commissioning, and takes into account not only what a project costs intially when it opens, its first cost, but what it also costs to operate the facility; this includes utility costs, maintenance and staffing among other things.

Floor finishes have been marketed on first cost vs. life cycle cost for some time because it is a fairly measurable and convincing argument.  For example, VCT has a low first cost but a relatively short product life cycle; it needs to be replaced more often than other more durable and expensive materials. VCT also needs more labor and maintenance (cleaning, sealing, waxing) than other materials. When a floor finish choice is made in design, a wise comparison would account for multiple installations and the maintenance costs associated with VCT—the life cycle costs—when comparing it to other floor finish choices. The first cost may be very low, yet the life cycle cost may be very high. A wise consumer would make these comparisons with everything.

Unsophisticated buyers are smitten by a low first cost, which is easy to sell to a CEO, District Authority or Board of Directors. But, shopping by first cost becomes riskier the more complicated and expensive the item being purchased becomes. And a hospital’s systems—HVAC, electrical, plumbing—are the power plant and guts of the whole healthcare effort. For unscrupulous engineers and contractors, they are easy VE targets because many hospital administrators are unsophisticated in regards to design and construction, let alone systems design, and take the ‘invisible’ parts of the building for granted. Aren’t all boilers the same?

I am participating in an Issue Forum with a community organization called JCCI Forward. The Issue Forum is a multi-week study on a topic of interest to the Jacksonville community and the current topic is Slow Food. I have learned a great deal already, and one of the concepts hammered home early was the fact that what we eat determines a great deal of our performance; it runs our systems. If we eat processed foods and inexpensive fast food (low first cost), it will catch up with us later in life in the form of poor health and increased health care costs (high life cycle cost). If we take some time now and pay for quality up front (local whole food), we significantly lessen the risk of expensive complications later. It takes a little more time and money, though, up front.

I know:  money is tight, and time is precious so the temptation to go ‘quick and cheap’ is great. Don’t fall for it. Pay now or pay later. Much like the food you put in your body should be a premium product, building systems are the last place to cut corners. Systems design for healthcare requires a delicate balance of components, current and future growth capacity, redundancy, quality, and energy efficiency that is difficult to design for without knowing the client’s business goals well, and without having in depth discussions about facility use.

Think long-term and employ the wiser purchasing method of life cycle cost analysis, and smartly determine what you are buying now and more importantly, why.

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Posted in: Project Cost