HCC Healthcare Construction Cost Estimating & Budget Management 1 — Questions and Answers
Question 1: During the design development phase of a healthcare facility project, what is the typical range for owner's contingency as a percentage of total construction cost?
- 2–5%
- 5–8%
- 10–15% (Correct answer)
- 20–25%
Correct answer: 10–15%
During design development, an owner's contingency of 10–15% is standard to account for scope refinements and unforeseen conditions before construction documents are finalized.
Question 2: In healthcare construction budgeting, which of the following is classified as a 'soft cost'?
- Structural steel fabrication
- Mechanical system installation
- Architectural and engineering fees (Correct answer)
- Exterior cladding materials
Correct answer: Architectural and engineering fees
Soft costs are non-construction expenses such as design fees, permits, and financing costs, whereas hard costs are direct physical construction expenses.
Question 3: What is 'value engineering' in the context of healthcare construction?
- Reducing project scope without evaluating function
- A systematic approach to achieve required functions at the lowest cost (Correct answer)
- Adding premium materials to increase resale value
- Appraising the completed facility for insurance purposes
Correct answer: A systematic approach to achieve required functions at the lowest cost
Value engineering is a systematic, organized process that seeks to provide necessary project functions at the lowest possible cost while maintaining quality and performance requirements.
Question 4: Which type of cost estimate is typically prepared when only basic program information such as square footage and building type is available?
- Definitive estimate
- Design development estimate
- Conceptual (order-of-magnitude) estimate (Correct answer)
- Bid estimate
Correct answer: Conceptual (order-of-magnitude) estimate
A conceptual or order-of-magnitude estimate is prepared using minimal information and typically carries an accuracy range of ±25–50%, making it appropriate for early planning and feasibility studies.
Question 5: In a Guaranteed Maximum Price (GMP) contract for healthcare construction, if actual costs come in below the GMP, the savings typically:
- Are retained entirely by the owner
- Are retained entirely by the contractor
- Are shared between owner and contractor per contract terms (Correct answer)
- Are placed into a reserve fund for future facility maintenance
Correct answer: Are shared between owner and contractor per contract terms
Most GMP contracts include a shared savings clause in which cost savings below the GMP are split between the owner and contractor according to pre-negotiated percentages, incentivizing cost control.
Question 6: What does 'escalation' refer to in healthcare construction cost estimating?
- The process of adding complexity to a design
- The adjustment of costs to account for inflation over the project timeline (Correct answer)
- The increase in regulatory requirements during a project
- The accumulation of change orders to the contract sum
Correct answer: The adjustment of costs to account for inflation over the project timeline
Escalation adjusts estimated costs for anticipated increases in material and labor prices due to inflation between the estimate date and when the work will actually be performed.
Question 7: Life cycle cost analysis in healthcare facility planning considers which of the following?
- Only initial construction costs
- Annual operating and maintenance costs only
- Total costs of ownership including construction, operations, and end-of-life (Correct answer)
- Cost per patient served over the facility's useful life
Correct answer: Total costs of ownership including construction, operations, and end-of-life
Life cycle cost analysis evaluates the total cost of ownership over the facility's useful life, encompassing initial construction, maintenance, operations, and eventual decommissioning or renovation.
HCC Healthcare Construction Cost Estimating & Budget Management 1
During the design development phase of a healthcare facility project, what is the typical range for owner's contingency as a percentage of total construction cost?