Total concept approach Under the total concept approach, a developer may undertake the entire responsibility for planning, programing, designing, financing, constructing, and equipping a hospital under one contract with the owner. This differs from the conventional approach in which the owner usually hires a hospital consultant, an architect, and a general contractor under separate contracts. The total concept approach is popularly referred to as "turnkey" and, to a lesser extent, "design-construct," and by other terms, depending on the building firm involved and the services offered. Although this approach is not new, its use in hospital construction appears to have evolved in the last few years. We identified six firms that offer this type of service for hospital construction and a relatively small number of hospital projects completed under the approach; however, the use of this approach appears to be increasing. We also found that architects and general contractors have combined to implement the total concept approach on an individual project basis. Much discussion has concerned the use of the total concept approach on hospitals, especially the larger and more complex ones. Advocates of this method claim significant reductions in project time and costs. Critics claim that quality is sacrificed, which will result in high maintenance and equipment replacement costs. Another issue is whether one firm should be responsible for a project. How much quality should be built into the project is a basic issue in constructing health facilities. One architect has pointed out that health facilities being constructed today are frequently obsolete before they are completed, due to the rapid changes in medicine. He has stated that when permanent structures are built to last 40 to 50 years, so much money is spent that they must be used even if, because of obsolescence, they require high operating costs. One source indicated that a solution to the problem would be to build hospitals with much shorter lifespans. This could be done regardless of the project delivery approach. One hospital that we visited was completed recently under the total concept approach at a contract price of about $2.4 million for design and construction. Officials of the hospital told us they followed a stringent financial budget in constructing the facility. The cost using the total concept approach was significantly less than the cost estimate for using the conventional approach, and the hospital included the same types of services and departments as previously planned. One official stated that he believed that the hospital got its money's worth and that the total concept approach would be used again in the event of future expansion. A study and an inspection report present evaluations of this hospital. Although the study report, prepared by an architectural and a management consultant firm, cited deficiencies, including some pertaining to space and arrangement and expansion capability, it concluded that credit must be given, because adequate health care services appeared to be available and because the project proved that initial economies in hospital construction were possible. Because the total concept approach was used, HEW officials inspected the hospital and concluded in their report that the hospital was of minimal size and that materials used were questionable from a maintenance standpoint. Total concept firms emphasize the cooperative team approach by directly employing various skills and by working very closely with the owner on every step of the project. Critics claim that the project owner is limited to the experience, knowledge, and ability of the firm he is dealing with and that he generally does not have the benefits of a consultant, architect, and engineer operating as independent professionals. (See pp. 56 to 61, enc. A, for additional details.) Construction approaches on federally assisted projects Most hospital projects which have received Federal assistance under the Hill-Burton program have followed the conventional approach. However, the use of the fast-track and total concept approaches is allowed on projects which receive assistance from the program. According to Department officials, HEW cannot require a project owner to use a specific construction approach. Firm information on the number of fast-track projects assisted under the Hill-Burton program was not readily available. However, as of June 1, 1972, 26 projects had been approved which included the use of construction management. An HEW official pointed out that not all of these projects include fast-track scheduling. The Health Care Facilities Service--the HEW agency responsible for administering the Hill-Burton program--has not issued a policy pertaining solely to fast-track scheduling; however, it issued a memorandum on August 6, 1971, giving the proposed interim policy for approving construction management contracts. This policy does not specifically mention fast-track scheduling but does state that no Federal funds will be paid until the final total firm contract price is known for a complete facility. The policy states further that a guaranteed maximum price--which some construction managers give--will not be considered as the final price. Under the fast-track approach a firm price will not be known until the contract for the final construction phase has been awarded. Although a firm price is required before making payments for a fast-track project, Service officials advised us that funds are set aside for such projects when they receive Federal approval, as is done normally for all projects. The firm price, according to Service officials, is required to avoid spending public funds in financing a project which might not be completed. Thus the requirement is a safeguard to protect the financial interest of the Federal Government. However, it essentially transfers any risk that may be involved in proceeding with a project without a total firm price to the private sources of funding, and it could impede more extensive use of fast-track scheduling on future projects assisted under the Hill-Burton program. According to a Service official, the guaranteed maximum price is not considered a firm price because actual cost is expected to be less than the guaranteed amount. The official pointed out that the Hill-Burton program would not be able to use these savings for assistance to other projects if they were realized after expiration of the appropriation. This is because funds approved in each annual appropriation must be obligated within 3 fiscal years, or they must be returned to the Treasury. However, it appears that the reallocation of funds could be handled through administrative adjustment on projects nearing the end of the 3-year cycle. The Service official also informed us that FECA does the actual promotion of construction management. In 1971 FECA issued an information circular on construction management. The agency promotes its use for projects assisted or built by HEW. FECA does not regard fasttrack scheduling as a necessary element of construction management, although it believes a good project development team which includes a construction manager can use fasttrack scheduling. An official of FECA advised us that the small number of, and the few States having, construction management projects assisted under the Hill-Burton program are probably a result of the variance in promotion given by HEW regional offices and State offices which administer the Hill-Burton program. He pointed out that FECA does not have the authority to go beyond suggesting to project owners that they consider the use of construction management. The Service issued a policy memorandum on September 27, 1971, giving requirements for approving projects under the total concept approach. Service officials believe that, although life-cycle costs for projects which use the approach could possibly be high, a place exists in the health facility field for the lower initial cost projects produced under the approach, because many projects have limited construction budgets. As of May 1972 three projects had been approved for construction under the Hill-Burton program using the total concept approach. FECA has not issued a policy on the total concept approach. (See pp. 62 to 68, enc. A, for additional details.) Construction approaches on Federal projects The General Services Administration, VA, and the Army Corps of Engineers have used the fast-track approach on selected projects including hospitals. The General Services Administration recently has taken the general direction of using construction management and fast-track scheduling on major projects, primarily to achieve earlier project completion. The General Services Administration has hired private construction managers, but VA and the Army Corps of Engineers have provided construction management services themselves. These agencies have not used the total concept approach for hospital construction and VA and the General Services Administration have not used it extensively for other types of construction. The Corps has employed the approach in one form or another numerous times in the acquisition of guest houses, family housing, bachelor officers' quarters, industrial plant facilities, and an aircraft maintenance hangar. One future project for which the approach will be used requires the construction of barracks, bachelor officers' quarters, and dispensaries at an antiballistic missile site. (See pp. 68 to 72, enc. A, for additional details.) Conclusions The fast-track approach, used in conjunction with the construction management or the consultant-builder methods, and the total concept approach offer potential reductions in time and costs in health facility construction. These approaches are too new in their application to health facilities to draw firm conclusions on the extent to which they should be used and the types and sizes of health facilities best suited for each approach. Fast-track scheduling requires a special and cooperative effort among members of the project development team. Unless each member carries out his responsibilities as part of the team, the full benefits of fast-track scheduling, in terms of money and time, cannot be realized. When considering the use of fast-track scheduling, project owners should bear in mind the role they intend to play in project development and the capability and attitude of other members to be selected for the development team. Because only a few firms currently offer the total concept approach for hospital construction, competition afforded project owners who decide to use this approach may be limited. Also the important question of costs over the life of a hospital constructed under the total concept approach cannot be evaluated until existing facilities have been in 86-379 072 - 4 |