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Published on June 19, 2015

Health care projects give commercial construction a shot in the arm in Jacksonville

By Robert Ward, Jacksonville Business Journal

Health care projects are leading the way for commercial construction in Jacksonville and giving local contractors a shot in the arm.

In the first five months of this year, the city of Jacksonville issued building permits for $87.7 million of health care construction — the top category of commercial construction for permits of $50,000 and above, accounting for 27.6 percent of all permits. That figure includes assisted/senior living facilities.

Local contractors who are big players in health care construction have noticed an increase this year, in a sector that stayed strong throughout the recession.

“It was a constant that we could rely on through the last six, seven years,” Steve Betz, president of Danis Construction LLC in Jacksonville, said.

That steadiness has been a boon for local companies, who have developed and retained a workforce specializing in the sector. Now, as the economy continues to improve, the companies stand poised to get even more work, with population growth and technological changes spurring the need for more construction.

“The demands of the industry probably keep it higher because there’s always more innovation,” said Carson McCall, the general counsel of Perry-McCall Construction Inc. who also works in project development, “and, let’s face it, people are always in need of health care. You can go without building a new school, but you can’t go without having a place for people to get treated.”

Steady business

Jacksonville seems to be defying national figures: Ken Simonson, the chief economist of Associated General Contractors of America, said that, according to data the U.S. Census Bureau posted June 1, health care construction spending nationally in the first four months of 2015 slipped 0.5 percent from January to April 2014.

It’s not surprising that there’s so much opportunity for health care construction in a metro that has four major health care systems — Baptist Health, St. Vincent’s HealthCare, UF Health Jacksonville and Mayo Clinic, which all have satellite campuses and outpatient centers all over the city.

And what’s been a boon for local contractors in the health care market is that those opportunities continued through the recession.

The consistency of health care work also meant local contractors could keep staff specialized in health care construction busy and they could stay in that market — not to mention the cohorts of subcontractors in all the trades required for health care projects.

Complex projects

As well as its consistency locally, health care construction is marked by its complexity in hospital projects. Perry-McCall is doing a lot of build-outs of doctor’s offices at UF Health North’s $106.5 million outpatient medical tower, which Perry-McCall built. But as Carson McCall, Perry-McCall’s general counsel, says, a medical office building is just that, an office building.

When you’re doing construction inside a hospital, in an operational operating room, say, the stakes and the complexity are raised exponentially. For a start, there are the extra regulations. Betz said Florida is unique among the states in having a state regulator, the Agency for Health Care Administration, oversee any health care construction that involves patient care.

“There are specialized mechanical, electrical, plumbing systems such as medical gases that you really need to understand,” Betz said. “And the big thing about health care construction is infection control — you have got to contain dust within your construction zone because dust carries contaminants, and if contaminants get to your patients, we’re all in a lot of trouble. So it is a big deal and it takes a lot of focus and it takes the right people to make sure it’s done right.”

Auld & White Constructors LLC has a workforce that specializes only in health care; “we do not put them on other projects,” Teresa Durand-Stuebben, vice president of business development for the company, said. Perry-McCall has project managers and field supervisors who have had so much experience that “they know the facilities and they know the inspectors and they know the tradesmen that they see all the time,” McCall said, so they stay in health care work.

“You can’t put a guy that’s inexperienced on a hospital, especially an occupied hospital,” McCall added. He has to know construction, he has to know infection control and he also has to have the communication skills to deal with hospital staff and understand their needs.

Forging relationships

All the contractors mentioned in this story compete against each other for local health care projects.

If a contractor secures a health care project and shows the owner it has the right people to do that kind of work and can ensure the high quality standards required, it can get on a preferred contractor list for that facility. “Most hospitals will stick to three or four contractors they know have the right people,” said Evender Spradlin, senior vice president and general manager of Batson-Cook Co.’s Jacksonville office. “It changes, but we typically see four or five contractors in the clinical areas that we compete against on a regular basis.”

Health care providers “want a group of proven companies that they can depend on and ensure quality,” McCall said. “You can’t sacrifice quality in a health care environment because it won’t meet standards, No. 1, and, let’s face it, this is important. You can’t mess up one of these facilities because that could directly risk someone’s health, and that can absolutely not be sacrificed. And so the owner depends on the contractor who they’ve had a record with to ensure the quality. And so, yes, there are selective lists. And they’re hard to get on, quite honestly. And they should be because owners are not in a position to take chances on unknowns.”

Getting on a list of preferred contractors doesn’t necessarily make it easier to secure contracts, McCall said, “because the field is narrowed and a lot of times the subcontractor market is also narrowed. I would say that it’s probably a little more competitive because there’s not as many risks that can be taken and so it ends up keeping the competition fairly tight and honest with one another. As a matter of fact, I think it gives the owners better pricing.”

On the horizon

The contractors are all sanguine about prospects for health care construction in Jacksonville in the next few years. “I think it’s going to be good,” McCall said. “I don’t think it’ll go up exponentially, but there’s work available and we’re hearing of work that’s out there, and people that have new projects, and so we’re very hopeful and we’re looking forward to the new projects that are coming out.”

UF Health North got state approval last year for a new patient tower at the Northside hospital, St. Vincent’s Clay County said in March that it will double in size with the addition of a $33 million patient tower, and McCall said Baptist Health’s partnership with the M.D. Anderson Cancer Center will result in another big tower — “I’m sure it’s a couple of years out, but that will be the next big one probably.”

Betz is equally bullish: “I can see continued growth in health care. I think there’s going to continue to be population growth, there is going to be competition for services, and technology will continue to evolve, which will continue to drive new construction projects.

“We would predict health care to be a big part of our business in the next 10 to 15 years.”

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