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Capital Project Solutions – October 2011

Integrated Project Delivery – In this market? Steve Higgs, Senior Vice President In 2010, Capital Project Solutions ran a series of articles dedicated to Integrated Project Delivery (IPD). Issues such as project identification, team selection, contracting and incentive development were explored. Throughout the series we shared three IPD case studies that were underway at that time. Given the extreme economic climate facing our nation with the new era of healthcare reform as a backdrop, we felt it was time to revisit IPD and its current standing in the healthcare facility planning marketplace. For healthcare providers who dare to jump into facility planning and expansion, developing strategies for success is paramount. Our current economic challenges offer an additional layer of concern during the most crucial phase of a project. Professional fees, building materials and labor cost are at historic lows and thus the potential to lower costs to complete a capital project have virtually been eliminated. At the same time, volumes are down and providers are experiencing an even more unfavorable payer-mix. Couple all this with an uncertain reimbursement model, a focus on Pay for Performance/Value and less available capital for facility projects, and many providers are finding themselves at a crossroad on how to deliver their projects. In light of the increased pressure, hospital leaders are looking for creative ways to finance and deliver projects. Many of them are embracing an integrated approach as a better route to achieving more certain results in an increasingly uncertain world. Since completing the IPD series in 2010, two additional visionary healthcare providers have chosen to launch their projects based on an IPD or integrated model. While these new projects vary on their exact delivery methodology, both clients were determined to move away from traditional methods and operate in a more integrated fashion. 1


Capital Project Solutions – October 2011

Strengthening Key Drivers in New Reality IPD Key Drivers The key drivers behind selecting and implementing an IPD model have always been a fundamental response to market demands, industry dynamics and a push to exceed project goals. All of these drivers were undergirded by the availability of a strong technology platform. As the market continues to sour, some hospital boards have begun to “smell blood in the water” and the pressure to “bid” some work has increased. Yet, according to all indications, more and more projects are being implemented with IPD or Integrated Process Planning (IPP), IPD without the Integrated Form of Agreement (IFOA). The market is clamoring for more transparency, strong collaboration and demonstrably better project outcomes. Simultaneously, the “Lean” or Six Sigma movement continues to build strong momentum in the healthcare industry. Hospital executives seeking to improve the outcomes in their hospital operations through lean processing, see an integrated project delivery team as an extension of this effort. The leaders at Akron Children’s’ Hospital made this logical connection as they contemplated their new Tower project. With an aging campus in need of improvement, the Administration and Center of Excellence (COE) Team began to explore delivery models that 2


Capital Project Solutions – October 2011

would be an extension of their ongoing lean journey and would incorporate clinical operations early on. From the beginning, the team focused not only the facility itself but also on how it would perform for the next 50 years, recognizing that over the life cycle of a facility, hospital operational costs will count for an overwhelming majority of the expense of “running” the facility.

Change On The Facility Planning Process Leadership at Akron Children’s Hospital made the concerted effort to link operations with the facility project by developing selection criteria that created a truly integrated team. They focused on hiring and delivering their project in an integrated fashion through the alignment of all the stakeholder’s interests. Their clearly articulated Statement of Intent speaks volumes: “This project is intended to ensure effective high quality delivery of the project through elimination of redundancy, errors and waste. The intention will be realized by aligning the interests of owner/user, builder/fabricator and designer/consultants with a mutually agreed definition of project success. This project is also intended to enable the integration of project outcome with the owner’s goals for enterprise performance.” Upon final selection, the Project Delivery Team will be will be bound by an Integrated Form of Agreement (IFOA) and work in a partnership that is undergirded by the mutually agree upon definition of project success.

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Capital Project Solutions – October 2011

Setting and Accomplishing Goals At Children’s Medical Center (CMC) in Dallas, Texas, the client was faced with its own unique and challenging goals. With a looming need to build out and replace 48 inpatient beds, displaced by an ongoing major capital program, CMC leadership new they must be creative to meet the needs of the community they serve. They needed to complete construction prior to the peak census season in the fall of 2012. Additionally, it was important to hospital leadership to deliver the project in a transparent and seamless manner with a clear focus on clinical operations. After evaluating all options, CMC decided to proceed with IPP. This approach provided the collaboration and flexibility that leadership was seeking and allowed for the hospital to maintain their contracting process. The first identifiable change began with team selection that included a Process Planner, Architect of Record, Engineers, Medical Equipment and Technology Planner through an integrated approach. Through a single Request for Proposal (RFP) for the required integrated design and construction services to launch, design, construct and occupy the floors within a 14 month schedule, CMC was on their way to better control the outcome. This was a significant step for CMC as they had always used a traditional linear method for team assembly. Equally, the focus on a distinct Process Planning consultant that worked in parallel with the Architectural Planning team provided the opportunity for additional “creative tension” among the end users and staff during the crucial planning phase. Also, having the technology and medical equipment planning teams on board during this phase improved early discussions around the operational model. With the team working in tandem, awkward hand offs from the planning phase to the design phase should be eliminated. In fact, as the future state operational model is being mapped out, the Architectural team can create conceptual design concepts to facilitate the process. Finally, having the Construction Manager on board provides an opportunity for the design team to benefit from full scale mock ups and receive real time benefit on the cost of design concepts being considered. 4


Capital Project Solutions – October 2011

Understanding all of the implications of the design early in the project will allow for adjustments and changes to be made prior to construction starting which will provide a significant savings in the long run. Dan Carney, Vice President of Facilities Development and Operations was very clear that he wanted to deliver the two new bed floors in a manner that would maximize CMC’s goals and allow for the institution to learn from a new project delivery model. The integrated approach being implemented at CMC will foster a collaborative team environment with a focus on IPD tools and processes that could bring the most improvement during the Project Launch phase. Conclusion Regardless of the name or the methodology, the increased scrutiny on capital project outcomes continues to push healthcare providers toward investigating different project delivery methods. “Insanity: Doing the same thing over and over and expecting a different result” is an often cited quote from Albert Einstein that rings ever so true in the world of project delivery and in particular healthcare.

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