Price spikes for diesel, fuel, steel and other construction materials won’t derail state plans to tear down the crumbling Oregon State Hospital in Salem and replace it with two new psychiatric facilities, officials say.
However, hospital replacement planners are keeping a concerned eye on rising costs for raw materials, which have climbed 10 percent nationally during the past year.

“Cost escalation is going to be a significant challenge for the project,” said Linda Hammond, the hospital replacement administrator for the state Department of Human Services.

Hammond will deliver a report this month to a state legislative panel providing a fresh look at the cost-escalation issues and how to reconcile them with the hospital-construction budget.

“It’s going to be extremely challenging,” she said. “I mean, we can get to budget. But the question is, do you want to make the compromises that you need to make to get to budget? We’re still committed to state-of-the-art and the best facility that’s going to last a long time. We want to make sure that to get us to that budget we’re not compromising something that’s going to cost the state in the long run.”

State plans call for opening a 620-bed facility in Salem by 2011 and a 360-bed facility in Junction City by 2013. Both facilities are intended to replace the 125-year-old psychiatric hospital in Salem — the oldest facility of its kind still being used for patient care on the West Coast. The 2007 Legislature authorized spending $458 million to build the facilities.

Construction of the Salem psychiatric facility is set to start next spring. Pre-construction demolition work is targeted to get under way in January or February.

Plans call for tearing down more than a dozen obsolete hospital buildings to clear the way for construction of what officials have described as a “world-class” psychiatric facility.

A groundbreaking ceremony for the Salem project is scheduled for 10:30 a.m. Wednesday September 3. Featured speakers include Gov. Ted Kulongoski, Senate President Peter Courtney, Human Services Director Bruce Goldberg and Salem Mayor Janet Taylor.

Architectural sketches of the planned facility will be unveiled at the ceremony.

Although construction won’t get under way for months, officials describe the groundbreaking event as a symbolic milestone.

“It’s just an official way of saying, ‘We’re full blown going after it and building a new facility,” Courtney said. “You stop talking from pages and blueprints and you get ready to dig ground.”

The longtime legislator has been a leading proponent of the state’s push for modern psychiatric facilities to replace the notoriously outdated and flawed existing institution.

Courtney’s steadfast in his desire to keep the hospital replacement project on track.

“My biggest concern is that we stay on time, that we get it built when we said we were going to get it built,” he said.

In a message posted Friday on the DHS Web site, Goldberg wrote this about the groundbreaking ceremony: “This exciting event marks the shift from preparation to construction, from planning to action, as we continue to strengthen the state’s mental health treatment system.”

The hospital replacement project moves forward amid rising costs for building materials. Nationally, those costs rose 10.4 percent during the past year, according to U.S. Bureau of Labor Statistics.

Paradoxically, government spending on construction is booming, despite rising costs for labor and materials.

Federal, state and local governments are on pace to spend a record $300 billion this year on bridges, roads, schools and other public projects, the Census Bureau reports. Many projects now under way were authorized before the economy weakened.

In Oregon, state financing for the new psychiatric hospitals will come through the sale of certificates of participation. COPs are sold to investors whose interest income is exempt from state and federal taxes.

COPs are commonly used in Oregon to pay for new public buildings. A lawsuit challenging the state’s authority to use COP financing was shot down years ago by the Oregon Supreme Court.

Cost of the new Salem facility has been estimated at $250 million. That likely will be revised early next year, when potential subcontractors submit bids to perform construction-related work.

State planners and consultants will perform a rigorous cost-analysis to determine the “Guaranteed Maximum Price,” or GMP.

“To get to a GMP, two separate and independent cost estimates are reconciled within a variance of three percent,” Hammond wrote in a recent report. “These estimates are based on actual buyout (subcontracts) of early work and very detailed line items covering everything from specified large equipment to individual light bulbs. At that point, we would also have a cost model applicable to Junction City assuming we are dealing with the same type of structures.”

Hospital replacement planners are considering accelerated construction of the Junction City facility, possibly hastening its completion by about a year.

That could save money in the long run, assuming construction costs continue to climb, and provide a faster infusion of much-needed psychiatric beds, officials said.

Source: By Alan Gustafson • Statesman Journal

Note: Historic preservationists involved with the preservation of parts of the historic J Building are monitoring the budget process closely to make sure that cost estimates associated with preservation are accurately derived and that changes in the budget do not affect the State’s current plans to preservation and rehabilitation of some of the older structures and artwork.

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