items required by regulated building
codes. The actual building
materials such as steel structural
beams, doors, stairs, interior walls,
ceilings and flooring, glazing, exterior
cladding, and other building
supplies are determined by
the project planning teams under
the direction of the architect
and contractor. Different building
materials, specific design features,
and the total projected gross
square footage directly affect the
building cost. Other items included
in the building cost include fire
alarm and management systems
and other items normally found
in public and/or healthcare buildings
such as drinking fountains
and public telephones.
The cost per square foot
varies significantly in different
geographical regions and is estimated
based on the history of
other similar completed projects
in the region. The cost per square
footage for an inpatient facility
(type I) can vary from $250 to
$600 in most other regions of
the United States. This cost is affected
by labor availability andlabor costs and the market price
for construction materials. Most
recently, the escalating costs of
steel, concrete, and petroleum
have been major factors affecting
the increasing construction costs
of new hospital projects. Construction
regulatory requirements
specific to each state to ensure
building integrity and public
safety in the event of a natural
disaster (seismic activity, flooding,
hurricanes, or tornados) can
significantly affect the cost of
construction and the building cost
per square footage. California has
one of the highest cost per square
foot projections because of stringent
seismic requirements for
stronger structural designs and
an escalating cost of steel.1
Site Development
Line item B reflects all the costs
associated within the designated
building site and 5 ft from the
perimeter of the building itself.
This line item would include
costs associated with grading and
fill of the site, pedestrian walkways
and paved roads within the
boundaries of the site, parking
areas, utilities from the street
source to the building, signage and
graphics, exterior seating benches,
site lighting, landscaping, and
exterior fencing or walls. Environmental
impact factors can
also increase costs in this line
item. Site development costs typically
range from 5% to 15% of
the building cost (line item A in
Figure 1).Fixed Equipment
This line item reflects all equipment
attached to walls, ceilings, or
floors of the building. This category
would include floor, ceiling
or wall-mounted medical equipment,
head wall systems, security
and surveillance systems, food
service equipment, lighting systems,
and other items that are
attached to the building. The fixed
equipment costs (line item C in
Figure 1) can be estimated to be
approximately 17% to 20% of
the building cost (line item A in
Figure 1).
Construction Contingency
Line itemDis optional but strongly
recommend by most architectural
and contracting firms. The construction
contingency is approximately
10% of the building cost
and reflects a set-aside fund for
any unforeseen situations that
may arise during construction
such as escalating costs of materials
including steel, concrete, or
other building materials. Other
costs subject to escalation include
contractor costs associated with
staging areas for building or storage
of equipment, cost of petroleum
for trucks and equipment,
shipping costs for materials or
fixed equipment, increased labor
costs due to labor shortages or
new labor contracts, or delays
due to extreme weather conditions.
2 This contingency is particularly
important in renovation
projects where drawings of the
existing facility may not be available
or accurately reflect existing
conditions.
Calculating the Total
Construction Cost
The total construction cost of the
hospital project is the sum of line
items A to D as noted in Figure 1
and is labeled as line item E. This
cost is a critical determinant of
other values that comprise the
total project cost. One can readily
see that only reporting the
total construction cost to the
board of directors, financial partners,
or other decision makers
can be a disastrous underrepresentation
of the total cost of a
project. If the cost of construction
figure is used to acquire
financial sources to fund the
project, the project could be
seriously underfunded requiring
new sources of funding or serious
downsizing of the original plans.
Determining the Project Cost
Project cost is based on the estimation
of the construction cost
plus the addition of costs associated
with moveable equipment,
professional fees, administrative
costs, and the owners’ reserve.
Each of these costs must be understood
by the nurse executive
because decisions made by the
clinical planning teams directly
affect these costs. If the hospital
must also acquire new land
for the building to be completed,
this cost is also included in the
calculation of the total project
cost. Site acquisition cost (line
item F) is a fixed cost and is
simply added to the construction
cost in determining the total
project cost.
Moveable Equipment or
Furniture, Fixture, or Equipment
Fixed equipment was previously
described as any equipment or
furnishing attached to the building
itself, whereas line item G
relates to any furniture, fixtures,
or equipment that is not permanently
fixed to the building. One
architect described it this way. ‘‘If
you turn the building upside
down and shake it, it is all the
things that would fall to the
bottom.’’ Line item G is estimated
to be approximately 22%
to 25% of the construction cost
(line item E). Decisions made
about patient beds, over-bed
tables, side tables, lighting systems,
furniture selection, and
medical equipment all affect the
total project cost. It is critical for
the nursing leadership to identify
what existing equipment and furnishing
will move to the new
building or renovated space or if
all new furniture and equipment
will be ordered. Integrating existing
furniture or equipment can
dramatically affect the total project
cost. Depending on the financial
strength of the hospital, the
nurse executive may opt to purchase
some of the medical equipment
in advance of the new
building’s opening through the
usual capital acquisition process.
Making this decision will also
decrease the total project cost
because the newly purchased
equipment is placed into operation
before the new project is
completed.
Professional Fees
Preliminary budget projections
based on square footage of the
new building often omit line item
H, Professional Fees, and can
underestimate the anticipated
total project cost. The professional
fees category represents
the cost of architectural and
interior design services, engineering
services (electrical, mechanical,
plumbing, structural, and civil),
and other consultants (informational
systems or computer consultants;
relocation consultants;