The HEPACART Blog

Negotiating Hospital Construction Contracts: What to Include

Whether you are a contractor or a hospital stakeholder, you will likely come across a healthcare or hospital construction project in the course of your career. While construction projects have similar contract processes across different industries, a hospital renovation or contruction contract can be a particularly difficult thing to negotiate with the ultimate goal of finding harmony between the contractor, hospital building owner, and any architects or designers. In finding that harmony, a number of different factors must be addressed for the contract to be complete at sturdy.

Be advised that while this blog post is intended to be helpful it is not a substitute for professional legal advice, which should always be sought when negotiating a legal contract. 

What a Hospital Construction Contract Needs to Address

A comprehensive hospital construction contract is essential for even a small renovation project. This is because there are many risks inherent in a hospital construction project that must be accounted for in the contract, including both physical and financial risks, as well as feasibility issues concerning scheduling, equipment, and design. Every item that a contract does not address represents a potential problem at some point during the construction process. It is never a good idea to ignore a potential risk in the hopes that it will not be an issue. Problems like physical injury - to workers or even to patients - and unpaid subcontractors can be a huge legal liability that can cause irreparable harm to the facility and its reputation.

Determining What to Include in a Hospital Construction Contract

There are a few key items that should be included in hospital construction contracts. Broadly speaking, these include:

  • schedule
  • scope
  • budget
  • legal compliance 

The schedule of the project is important for obvious reasons, since both contractor and facility will want to know when the construction will be done. The scope of the work is also essential to get in writing. Assuming that both parties are on the same page about this can lead to contractors expecting additional pay while the facility expects additional work -- which can ultimately lead to huge delays. The budget of the project is related to but not the same as the scope. If there is a budgetary constraint that is non-negotiable, then the contractor should know upfront so as not to cause any issues further into the project.

Legal compliance is a particularly important issue to be explicit about in a hospital construction contract. While nearly every construction or renovation project comes with a set of compliance regulations, hospital construction is even more regulated. Local government may need additional permitting or paperwork and dust containment as well as patient safety can also be an issue in hospital construction.

Specification

Including specification language can also be a good idea in hospital construction projects. When specific materials, furniture, or other items are not specified in a contract, it can become an easy place for contractors to find savings without going against the contract. However, it is ultimately best for both parties to include this language initially since the price of an unhappy client can be much worse for a contractor than the price of the expected materials.

Common Sticking Points

Of course, nearly anything could act as a roadblock to finding a hospital construction contract that works for everyone involved but some are more common than others.

The schedule of a construction project acts as the outline of the entire project, which means it is critical for all parties to agree on what is realistic while also remaining ambitious in a way that allows the facility to meet its goals. Further, a schedule built into a contract means that delays caused by the contractor can lead to penalties, which means it is important that the contractor actually give reasonable estimates. Scope of work and budget issues can also be big problems that should be addressed up front.

Finally, insurance expectations, meaning who is ultimately liable in case of certain damages, delays, or other problems, can also be difficult to negotiate when neither party wants to be left responsible for costs incurred because of the other party's oversight or carelessness. The more thoroughly a contract outlines these liabilities, the better.

Negotiating hospital renovations or construction project is like most things -- it becomes easier over time. But with a big project and a facility responsible for the health and well being of its patients, it is important to strive to the best for every project and create a contract that has construction done on time and within budget. 

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