Originally created 05/26/06

Project costs to increase

Labor unrest in copper mines in Chile and a booming Asian economy sucking up all the available steel and concrete means University Hospital will end up paying millions more for its major renovation, officials said Thursday.

University's board approved a revised $93.6 million price tag for the project, $9.1 million more than it originally budgeted. And that is after looking through 197 different areas of the project for $6.5 million in cost savings said Kyle Howell, the vice president of support and facilities services at University.

"We may have gone to a different grade or model of accenting brick," he said. "We may have done a different structural method behind the wall."

A boom in building worldwide, particularly in Asia, has meant greater demand for those raw materials, and prices could continue to escalate by 8 percent to 10 percent over the next couple of years, said Ken Simonson, a chief economist for the Associated General Contractors of America.

Copper, for instance, has doubled in price since the beginning of the year and increased sixfold over the past four years, he said.

"Copper mining production has been stalled, particularly by labor problems in some of the big mines in Chile and elsewhere," Mr. Simonson said. "Meanwhile demand is growing in the U.S. and worldwide."

University alone will pay $400,000 more for copper pipes and wiring than budgeted, said Jason Moore, the chief operating officer for University. Other items are scarce, too.

"There's actually a shortage of dry wall," he said. And that has prompted some health care organizations to go out and buy what they can of dry wall and copper piping, said J. Larry Read, the CEO of University Health Care System: "There are some organizations that we know of that are buying this stuff and literally putting it in a storehouse and holding it."

For others, it could mean re-evaluating their plans, said Richard Gundling, the vice president of Healthcare Financial Management Association.

"Obviously they'll have to keep doing cost/benefit analysis to figure out when they can no long afford to, you know, put a new inpatient bed tower in and maybe look at other ways, cheaper ways of doing them," such as renovating an existing floor or rooms, he said.

Any state-licensed project that increases more than $1.4 million has to come back for a cost overrun Certificate of Need, said Rob Rozier, the executive director of the Division of Health Planning in the Georgia Department of Community Health.

Reach Tom Corwin at (706) 823-3213 or tom.corwin@augustachronicle.com.


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