Store-Brands of Project Delivery

Posted on May 11, 2012


These soups have soft, almost mushy noodles.  Food Lion’s flavors are a little more intense, the dehydrated spice taste is not as pronounced, and the soup doesn’t leave as much of a fatty feeling in the mouth.  The Campbell’s broth is oily, with fatty pieces of chicken, and it leaves a lingering taste of garlic powder.

This excerpt was from an old Consumer Reports (CR) issue I came across, comparing name-brands with store-brands, in this case canned chicken soup.  Various store-brands of all types—fresh, frozen, canned—were pitted against name-brands in 21 blind tests.  The results?

National brands won seven times; store brands, three.  There were 11 ties.  Prices are based on an average of what we found.  The store brands cost 7 to 60 percent less.

I find this a very appropriate analogy for healthcare project delivery.  A Mortenson study of the healthcare market from a couple years ago shows a majority of hospitals (56%) choose design-bid-build (DBB) or CM-at-Risk (CM) as their project delivery method; they are the tried-and-true, the name brand, the default choice.  Design-build (DB) is the intriguing unknown, the private label, the bolder choice—chosen a mere 22% of the time.

For healthcare design and construction solutions, DB is the lesser-known and trusted but much more affordable method, while DBB and CM are more familiar but with known flaws and higher prices.

What is most telling in the CR test is there was no clear evidence that the name-brand was superior, and when price was figured in, the more unfamiliar store-brand was the obvious value choice.

And so it goes:  healthcare customers continue to back the name-brand, eschewing value for predictability—even when the name-brand provides only a marginally acceptable product.

The same argument could be made for team selection as well:  hospitals love to rely on the top-ranked healthcare architects and contractors because CEOs can defend their pick to their Boards with the old saw ‘nobody ever got fired for buying IBM’.

As budgets get slashed and capital gets tighter, store-brands start to look more appealing. In this economy, can a hospital afford to not at least talk to a design-builder?  The general population is moving that way with their food budgets.  84% of Americans have bought store brands in the past year, based on a 2010 CR study. 93 percent said they would keep buying store brands after the economy recovers.

Hospitals say they need to adopt a more retail mindset for future success. It is time they take their capital project procurement cues from retail customers, and become smart shoppers with a keen eye for a good deal.