Carle Foundation Hospital
Case Study: Maximize the value of Premier vendor contracts in new construction
Some might call it the last frontier.
How do you maximize the value of Premier contracts on a new construction project while still maintaining valuable relationships with local suppliers and sub-contractors? Further still, how do you bring as many Premier contracts to bear as possible when local contractors and suppliers are not familiar with those contracts and are concerned that their profits might suffer?
That was the challenge Von Lambert, Director of Facilities at Carle Foundation Hospital, accepted when he decided to involve Premier contracts in the hospital’s $48.7 million construction project.
Carle Foundation Hospital is a 295-bed regional medical center located in Urbana, IL. The primary teaching hospital for the University of Illinois College of Medicine at Urbana Champaign, it serves East Central Illinois. It has the area’s only Level I Trauma Center and the only independent Level III Perinatal Service.
Propitiously for Lambert, his hospital’s Premier Senior Regional Director Kevin Campbell had already tested the concept with another Premier member - Alegent Health in Omaha, NE - and the same general contractor, McCarthy Building Companies.
“We’ve been a Premier hospital for several years and we’ve always used Premier for major hospital buys, but we’ve never used Premier contracts for major bid construction projects,” Lambert said. “We were never sure how to get the subs access to the Premier purchasing contracts or how to get credit for the purchases. To be honest, it seemed insurmountable.”
Lambert said this is where McCarthy stepped in.
“They took it on, pulled it together and managed it for us,” Lambert said. “Having the general contractor involved is really what did it for us. McCarthy took the lead role in coordination and communication. And better still, we didn’t have to invest additional FTE support.”
The Building for Better Care project includes a five-level addition to the hospital’s North Tower that will provide enlarged and updated space for obstetrics and gynecology, pediatrics, neonatal care and replacement general medical-surgical beds. Another three-level structure will expand surgery and its support services. The hospital recently completed major expansion and renovation of the Emergency Department.
Working with McCarthy, especially in later stages of the construction project, the project team was able to identify some $1.2 million in purchase items. By utilizing eight of 12 applicable Premier contracts the hospital saved nearly $500,000. Among items purchased under Premier contracts were heating and air conditioning equipment, paint, flooring, security systems and office equipment.
Importantly, Lambert said, “We were able to do this without hurting relations with local subcontractors.” The fear had been that the subs would have to sacrifice already thin margins to provide the savings. But the discounts actually came from the Premier contracted suppliers. McCarthy also had a system for tracking the purchases so Carle Foundation Hospital got credit toward their Premier ownership distribution at the end of the year.
“We cut our teeth on the Alegent project so we were able to optimize our portfolio,” said Premier’s Campbell. “We now have the template. It’s been debugged and duplicated. We know how the process works.”
Lambert said the hospital is planning two more construction projects totaling some $30 million in the near future and is looking forward to even more savings by employing Premier contracts.
“The whole process exceeded our exceptions,” Lambert said. “But if there’s one thing I’ve learned, it’s to get Premier involved in the process early in the planning stages.”
He said savings could have been even greater had facility management, materials management, architects, engineers and contractors been involved with Premier early on.
“The specs could have been written to take full advantage of Premier contracts,” Lambert said. “That’s what we will do in the next projects.”