by Rick Dana Barlow

Conventional wisdom notes that construction projects can make or break a hospital. Sure, they’re designed and intended to help a hospital grow because the finished product, or outcome, should improve patient care and generate revenue. However, the process on the way to that outcome can be painful because it can be so disruptive to clinical, financial and administrative operations – even with careful planning. But when a hospital expands or renovates its facility how should materials management be contributing to this detailed process that certainly impacts ongoing operations? What steps should materials management take to ensure that the design, layout and equipment selections prepare the facility for future growth?

Whether they’re adding a new building or simply renovating an existing structure, hospitals are engaged in a construction boom right now that stretches into the billions of dollars nationwide.

So where’s materials management in all of this? Good question. Typically, most construction projects are planned and managed by a committee or task force comprising external contractors and internal administrative directors.

Unfortunately, when a project requires such a large number of people to manage it, then the process also has to account for managing that large number of people managing the project so that everyone, via communication, is on the same page. No mixed messages. That can be easier said than done.

Among the myriad participants in a construction project is – or at least should be – materials management.

More often than not, however, materials management isn’t as involved as it should be – at least not until it’s way too late in the overall process to make an economic difference.

"Most construction projects are not a ‘turnkey’ approach," said William Stitt, CMRP, FAHRMM, CHL, CRCST, corporate director, materials management, University Community Health, Tampa, FL. "Because of that, I am a real believer in having an internal contact have project accountability. For example, materials management needs to facilitate discussions related to logistics and supply chain flow because that is what we do every day and we are the experts. What works for one organization does not work for another and it is difficult to bring about accountability if there is not responsibility at the organizational level.

"In my experience, not having materials management involved can cause delays in various facets of the project," he continued. "Those delays can cost significant dollars. The worst thing that can happen is oversight of an important consideration that materials management has to fix after the fact – and those things happen routinely. That is not to say that a construction project needs to have materials involvement, because I am sure many projects have been completed without them, but you have to wonder what those organizations could have avoided with a materials professional involved. Administration should want the absolute best outcome and that comes from having the right people involved in the process. I view it as a return on investment from an administrative perspective, by having your experts aligned to a common goal."

Construction projects typically don’t have a single expert on everything. Rather, projects progress through a collaborative team effort, indicated Niklaus Fincher, senior director, capital asset services, VHA Inc., Irving, TX, who has considerable experience in construction planning.

In fact, a project manager bears the ultimate responsibility but each team member sharing in the accountability, according to Ric Goodhue, CMRP, project manager (capital equipment), NH Facility Planning & Construction (SPR), Charlotte, NC. "After all, you can build the best looking facility ever, but unless it’s equipped and functions according to the design, then all you have is a good looking facility," Goodhue noted.

Role playing

The role that materials management does play versus what it should play may be distinctly different and that can be a costly mistake for a facility.

Materials management’s most obvious role is in equipment planning, Stitt said, but it doesn’t have to be limited to that area. "Most materials professionals wouldn’t know how to read a blueprint or wouldn’t know what a reasonable construction estimate is, but they are aware of the conditions and terminology in service based agreements and estimates and would be able to offer insight in that process," he said. "Facilitating with key players, especially clinicians, is something we do every day and having a player on the team whose strength is those areas would be an absolute benefit."

But timing is key.

"In many of the projects I’ve been a part of, materials has played a minimal role, or by the time they were involved it was too late for them to have a positive impact on the project," Fincher said. "Basically, they were relegated to issuing POs on equipment that was selected by the external consultants and clinicians. At some point in the project timeline changes become cost-prohibitive and can no longer be justified.

"But every project is different," he continued. "If the external contractors view materials management as a valuable contributing member of the team, who can increase efficiency, minimize mistakes and control costs, then they’ll definitely get them involved."

Goodhue concurred, noting that historically, materials management wasn’t brought into a project "until long after the project has been established, funded and construction well on the road to completion." But he believes that mindset is slowly changing for two reasons.

"The first is that materials management traditionally has been seen as only having an interest in the cost and not the clinical application of a piece of equipment, therefore the perception is they didn’t need to be involved until the equipment had already been selected. This left materials management holding the bag, being responsible for dealing with contractual issues and reducing the total cost of ownership, including maintenance, accessories, consumables, etc., with their hands tied behind their back because the suppliers knew the equipment selection had already been made and weren’t willing to negotiate," he said.

"The second is that because materials management became frustrated with being left out of the negotiations associated with capital purchases, they have essentially been forced to abdicate their role in contract negotiations because they were ‘not going to tell the [clinicians] what they needed to treat patients,’" he continued. "This is not to say that materials management wasn’t interested in doing the best for their organizations. In fact, the profession as a whole over the past few years have stood up and called attention to themselves by ‘educating the C-suite’ as to their true value to the organization. As a result, materials managers are now being considered part of the leadership team with many actually having a seat at the ‘big table’ when there are discussion about new projects. Their input is valuable as it’s better to lock in the price for a piece of equipment today (using the right contractual language regarding technology upgrades) than it is to try and do it tomorrow."

Thankfully, most healthcare general contractors, construction managers and program managers would recognize the need for materials management’s involvement because they need certain answers and input to facilitate a project in a timely manner, according to Stitt. If they somehow lose sight of materials management’s expertise then hospital administration should step in. "For example, contractors only have a 30,000-foot view of the equipment needed, and this equipment will have an impact on construction planning and design, so specific details are needed and planning needs to take place proactively," he said. "Another example would be the flow of materials throughout a building–since logistics is a primary materials function, most construction planners would see a need for insight from the operational side, and that comes from the people that are performing the task."

Materials management should be involved in the logistics aspect of the project, especially if departments are being moved because clinical and operational functions need to continue, Stitt said. "Historically, your best negotiators are your materials managers, so it is a disservice to the organization when they are left out of that process," he said. "Finally, materials management can definitely support the operational questions that are going to come out in the construction management process, especially in the areas of supply movement, workflow and storage."

In addition to selecting and procuring capital equipment and other products and services – including maintenance contracts – that satisfy annual budgets, GPO contracts and hospital standardization programs, materials managers can play a vital role in controlling vendor interaction during the project, Fincher said. "For many vendors a major project is in their view equivalent to ‘X-mas in July.’ Consultants and clinicians can be under siege from vendors who are competing for their piece of the project pie. The materials manager can control this sales frenzy and eliminate tons of wasted time on the part of their staff engaging vendors prematurely or those who don’t have a chance of selling their goods."

Without these checks and balances in place, hospitals should expect cost overruns. "You could lose efficiency and end up with mistakes at the end of a project when they are more costly to correct," Fincher said. "Also, the various sales reps attempting to promote their products for the project could cause unnecessary chaos as they try to gain the business. A shrewd consultant should quickly assess the materials manager’s ability to support their efforts and minimize interference."

Omitting materials management

In short, a construction project that doesn’t involve materials management in some way will lead to severe – and needless – economic burdens, experts insisted. They include expensive delays and costly after-the-fact fixes.

Stitt offered two examples from personal experience. One involved equipment planning and the other workflow. "In the equipment example, the facility specified a piece of equipment, which the using department subsequently changed its mind in order to comply with a GPO contract. The drain on the new equipment had already been included in the plan, so if this change was not caught early enough in the process, the concrete floor would have been poured incorrectly, necessitating having to jackhammer the floor to fix," he said. "Secondly was the plan for a supply room that only had an entrance from the nurse’s station. In this case the pathway was not laid out in order for the cart used for restocking to make it to the room. This would have required the supplies to be hand carried from the hallway, which would have been extremely inconvenient and would cause an increase in labor resources and replenishment time."

Among the litany of ensuing problems, according to Fincher, Goodhue and Stitt:

• Cost overruns on equipment due to ineffective negotiations.

• Materials not available when the facility is.

• Staff frustration because they don’t have what they need to provide patient care.

• Items could be specified that aren’t part of the facility standardization process.

• Budget projections could be inaccurate, causing items to be cut from the budget.

• Credit for purchases, via GPO contracts, could be lost, which would affect the amount of cooperative return from the GPO to the facility.

• External consultants may not be aware of hospital purchasing contracts, which could increase the cost.

• Logistics affecting product delivery could be negatively affected. 

• Clinical staff time can be wasted by suppliers trying to sell their goods.

• Opportunities to aggregate like products, for the project and potentially those purchased through the replacement budget process, could be missed. 

Common misunderstandings

Materials management’s lack of participation in construction projects stems from a number of misunderstandings that assign most responsibilities to others. They erroneously believe that many decisions are determined by others, according to Goodhue. "MMs [feel they] only serve as paper pushers," he said, "and they cannot influence the construction process."

That’s because materials managers may only be looking at one aspect of the entire process that may be outside their comfort zone. "It happens on both sides, meaning that the other players in the construction projects don’t see the benefit materials management can bring, and the materials professionals themselves who view themselves as ‘out of the loop’ because of the nature of the project," Stitt noted. "I also think at times that materials managers do not consider themselves a part of the process because they view the brick and mortar aspect of construction outside their scope of expertise, when in reality that is just one part of the total project."

But materials management can enlighten the external participants in the construction process to the facility’s business relationships with suppliers, as well as the variety of internal operational programs in place with clinicians, according to Fincher.

"Materials managers may make the mistake of assuming that the external consultants, such as architects and equipment planners, fully understand their client’s existing purchasing relationships with suppliers and GPOs. They may also mistakenly assume that the consultants automatically endorse facility standardization efforts and will specify only those products that conform to the standards. Chances are the consultants may have more interaction with various clinical staff affected by a project than they will with materials, and subsequently whatever the clinicians are asking for is what makes it in the project budget," he said. "At a certain point in the project it may be too late for the materials manager to correct these assumptions/mistakes without the facility incurring the cost of a change order." The industry average cost per change order is $1,500, he added.

Furthermore, the external participants typically develop very close working relationships with senior management and the clinical staff that they will seek to protect from outside influence, including materials management, Fincher noted.

"The key thing for [materials managers] is to make sure they let the external forces know that they can make things more efficient for them and minimize the risk of mistakes or change orders that could occur later in the project," he said. "Most consultants are compensated on a per-hour or per project fee, which is based on the total number of hours anticipated for the project. Efficiency can increase the profitability of the engagement."

Overcoming hurdles

When a materials manager learns that administration is mulling a construction project he or she should carefully and strategically obtain a seat at the table – particularly if one isn’t offered initially. Forcing your presence on a project team or doing end runs around selected executives to finagle your participation are never good strategies or tactics. Instead, the materials manager just needs to do some homework and sow the seed.

That means simply asking for a seat at the table, gather as much information as possible and in the beginning, just listen to the discussion, according to Stitt. "As you learn more about the scope of the project, then ask questions that lead the other parties to see that you do have expertise to offer that is appropriate to the process," he said.

"Contact colleagues who have been successful in getting a seat at the table and follow their example," he continued. "Another way to get a seat at the table is to be proactive – once a project is even a glimmer in an executive’s eye, do some research on similar projects, contact materials management colleagues at those projects, get lessons learned, etc." Furthermore, Stitt encouraged materials managers to show the executives the project case study research gathered that details how materials management’s involvement assisted in the project’s success. Finally, he recommended that the materials manager establish a good relationship with the facilities director because this person plays an integral role in the overall process.

"Taking a passive approach is not going to get you included," he added. "It’s actually as simple as that."

Fincher urged the importance of materials management being involved at the earliest stages of a project because they can offer feedback on purchasing policies, GPO relationships, standardization programs and logistics issues that could affect the project timeline.

"Materials managers should treat a construction project as they would any other major project that falls in their realm of responsibility," he said. "As an example, clinical staff generally won’t make a product conversion just because materials management wants them to. The materials manager has to convince the staff the change is good for them, as well as for the facility. In the case of a construction project, the materials manager may have to do a little selling to convince the project team of the value they can bring to a project."

Materials managers must increase their visibility to the "C-suite" by showing the value of their negotiating project requirements language into existing product and service contracts, which should result in better pricing, as well as emphasizing cost-reducing standardization efforts, Goodhue noted.

Relevant contributions

Because so many players participate in a construction process it might be easy for any one person’s contributions to get lost. So how can materials managers make their contributions to a construction project relevant?

"All the parties are experts in their fields, and materials managers are no different," Stitt emphasized. "We are experts in equipment, contracts, negotiation, purchasing and logistics. The fundamental skills that we have directly translate into a construction project. No area of a project should happen in a vacuum, and the most successful projects have a collaborative team approach. I am not saying that materials managers should lead the project, but if you break a construction project down to all of the various factors, I think there are areas that stand out as clear opportunities for us to play a very prevalent role."

Materials managers need to remember that they have "inside" knowledge of their organization, particularly its supply and service contracts, standards and standardization programs and other operations, which is valuable to a project, Goodhue noted. So "they can’t afford to wait to be ‘led’ to being involved in construction projects," he said. External participants, such as third-party consultants and planners may provide a valuable service but they cost money and "materials management has the long-term buy-in after the third-party folks leave for other projects," he added.

At best, materials management should contribute to the team that makes the overall strategic decisions for the project, which may represent 95 percent of total expenses, according to Fincher. Materials management specifically should play a major role in the selection and procurement of medical capital equipment, which can account for 15 percent of a project budget. The bricks and mortar construction costs may comprise approximately 60 percent of the budget, which in most cases is controlled by the construction manager, general contractor or subcontractors, but materials management may have existing or previous relationships with suppliers in this area so they can impact the flow of dollars, he added.

The one place materials management can positively affect change is in reducing change orders, provided they are engaged early enough in the process, Stitt said. "Usually change orders come from ‘unknowns’ in the planning process, so by taking a proactive stance in managing each facet (and the associated ongoing review) typically results in a reduction in last minute changes," he said. "I believe materials management can contribute to reducing these ‘building costs’ by assisting in the negotiations of early material product purchasing, possibly establishing relationships with building materials vendors in the early planning/design process of the project prior to additional material cost escalation."

But materials management may wield more control and power than it realizes because a single decision could impact a project – even with minimal involvement, according to Fincher. How? "Materials management controls the issuing and approval of POs, and they control the loading dock and receiving," he noted. "A materials manager who is feeling left out or not appreciated can definitely affect a project timeline." Of course, Fincher doesn’t recommend such tactics as being good for business, good for patients or good for that materials manager. HPN