Engineering for the Big H
December 1, 2007
By John Leckie
As October drew to a close, Ontario had 10 major healthcare projects under way, with 21 more waiting in the wings. From now until 2010, Ontario expects to spend $5.3 billion for new healthcare facilit...
As October drew to a close, Ontario had 10 major healthcare projects under way, with 21 more waiting in the wings. From now until 2010, Ontario expects to spend $5.3 billion for new healthcare facilities and equipment.
Alberta is following closely behind. The list of healthcare projects coming on line in that province is extensive. The largest in a string of projects are Calgary’s $300-million Foothills Medical Centre McCaig Tower, Edmonton’s $194-million Mazankowski Alberta Heart Institute and the $168-million Health Research Innovation Facility at the University of Alberta. They should be completed this year, while the $190-million Robbins Pavilion at the Royal Alexandra Hospital in Edmonton is scheduled for completion in 2008. All told, the province’s capital budget calls for $3 billion in healthcare spending between 2007 and 2010. Similarly, British Columbia plans to spend $2.3 billion over the next three years, and Quebec has plans for spending at least $2.5 billion between now and 2012.
Even those numbers are deceivingly low because, with several provinces moving into the public-private partnership (PPP or P3) mode of providing new healthcare facilities, the private sector is providing the up-front financing while the public contribution will be spread out over 25 or more years, depending on the contract.
Whether public or private money is involved, activity in the healthcare sector is booming, creating lots of business for consulting engineers specializing in the healthcare field.
Most of Ontario’s hospital projects are being put in place by Infrastructure Ontario, a crown corporation, through what’s called the “Alternative Financing and Procurement (AFP) process.” This process attempts to apply the most suitable P3 model to any particular project. According to Infrastructure Ontario’s website, while hospitals will remain publicly owned, “depending on the specific project, private sector organizations may be asked to provide proposals to design, build, finance or even maintain the building.”
Two superhospitals in Montreal have been in the planning stages for a decade or more. Both will be built as P3s. Expected to cost together more than $2.6 billion, they are being spearheaded by McGill University and the University of Montreal.
In British Columbia, the Abbotsford Regional Hospital and Cancer Centre was recently completed as a P3 and the province intends to use the approach on future healthcare projects.
David Bannister, P.Eng., vice-president of structural engineering at the MMM Group in Toronto, explains the boom in hospital construction: “In Ontario, and probably elsewhere, there have not been significant or adequate investments in healthcare for decades. The situation has caught up with everyone and that is the reason there is a lot of projects.”
Pierre Anctil, who is executive vice-president at SNC-Lavalin in Montreal, says the neglect of infrastructure, including hospitals, has been a fact of life in Canada and other countries for years. “It has been a while here in Quebec since a major hospital has been built so I think it is a good idea for the government to proceed [with the superhospitals].”
But, what does all this activity mean for consulting engineers? The impact can be quite different for a massive firm like SNC-Lavalin, which employs thousands of people in Canada, compared to the 20-person consulting engineering firm working primarily in the local marketplace.
SNC-Lavalin has the size and financial resources to take part in almost any type of project, but even with the resources at its disposal, the firm has to pick and choose the projects it goes after. Too many eggs in one basket is rarely a good plan for survival.
While, a number of P3 projects now offer honoraria for shortlisted bidders, the honoraria come nowhere near covering costs. Anctil recalls a transportation project in Manchester, England where the consortium of which SNC-Lavalin was a part invested three years and close to 10 million in their bid. Unfortunately, funding was not forthcoming and they had to settle for the honorarium — 1.5 million.
While SNC-Lavalin will often be the lead or, at least, a major component of the consortium on most P3 bids, smaller consultants are also being asked to participate on an “at risk” basis, meaning they have to invest time and labour without a guarantee of eventually being able to recover their investment through fees.
“It costs quite a bit of money in some cases, and if you are not successful you have to be large enough to take the hit,” says Phil Bastow, P.Eng., vice-president and partner of The Mitchell Partnership, mechanical and electrical engineers in Toronto. At the same time, Bastow adds, there are substantial rewards if you are part of the winning team.
It isn’t just the financial risk that determines the size of the firms taking part in P3 consortia. The availability of people to work exclusively for one project without jeopardizing the overall health of the firm is crucial. With an average staff level of close to 100 people, the Mitchell Partnership can handle it. For a smaller firm, however, it could be a problem.
There are other tough decisions to be made. Because many of these projects involve the long-term maintenance of the facility, the ability to find ways to reduce the building’s long-term costs or to trim the mortgage costs become far more important to the P3 teams’ success than shaving capital costs during construction. Thus, in a P3 competitition, a brilliant architectural concept can lose out to an even more brilliant financial arrangement, making it difficult for the consulting engineer, who is not involved in either process, to decide which team to join.
Over a 25 or 30 year contract, a fraction of a per cent advantage for one of the potential proponents in financing costs means they can put more into the capital cost and deliver a better building than their competition. Getting that fraction of a per cent, however, depends on the financial partner in the team. Sometimes, consultants — even those as large as SNC-Lavalin — will decide it is better to become an adviser to the owner rather than be part of the P3 consortium. For the Montreal superhospitals, for example, SNC-Lavalin is part of a P3 consortium for one, and is an adviser for the owners on the other.
For the future, both government plans and the expectations of those in the industry indicate that the healthcare market will continue to expand in the coming decade. Besides making up for their past neglect of this sector, governments will need to serve an aging population, ensuring a strong market for years to come.
John Leckie is a freelance writer based in Toronto.
New Credentials and Support Tools for Healthcare Professionals
There are few building projects as complex as healthcare facilities, so it’s not surprising that organizations are developing ways to recognize the special skills that engineers need to work in this sector.
The American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) recently launched a Healthcare Facility Design Professional certification program. This program is an important watershed for the venerable organization, since it is the first time Ashrae has ventured into specialist certifications.
In September, Ashrae announced that the first 29 people had qualified in the U.S. and it has since announced the examination can be taken in 22 other countries, including Canada.
The Canadian Healthcare Engineering Society (CHES) has been in existence for 27 years. Though the bulk of the society’s 800 members are hospital employees, consulting engineers are also represented. Engineers from Stantec, for example, gave several presentations at the national conference in September in Calgary.
The society has a Healthcare Construction Certification program that it offers to construction professionals. It addresses fire codes, infection control, mechanical and plumbing systems, etc. The CHES volunte
er board also recently worked with Ashrae on formulating a course for contractors in healthcare; contractors have to deal with a growing set of rules to control pollutants such as dust and mould that can do serious harm to patients.
Another development is in design tools to make healthcare buildings more sustainable. The “Green Guide for Health Care” was developed in 2003 and is meant as a self-guiding tool for hospitals and their designers. It can be downloaded free at www.gghc.org.
Meanwhile the U.S. Green Building Council is currently developing a special “LEED for Healthcare” benchmark that it will use to certify hospital buildings for environmental design. — BP