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Fall 2006 Newsletter

Sue Stewart
“We are in a building boom and in an era of escalating costs and material shortages. Here are a few ways to avoid sticker shock and gain more control over costs when planning your next project.”

— Sue Stewart, senior vice president, Estimating, McCarthy Building Companies, Inc.

The news of escalating material and construction costs isn’t exactly news any longer. Steel prices are increasing at a rate of 4½ to 5% every 30 days. Prices are expected to rise as much as 10% within the next 90 days. Copper and brass rose 81% over a 12 month period. Asphalt leaped 71% for the same period. Concrete rose 11% in 12 months; diesel fuel 33%.

Many owners continue to ponder, “How can my construction project cost this much, and how can I get a better handle on these costs?”

First, realize you have only limited control over cost escalation. For example, the number of surety companies willing to bond contractors, thus the number of contractors (and subs) who can obtain the necessary bonding, has substantially reduced. The cost of labor is going up as well. And, let’s not forget the global economy that is driving up demand for resources. When supply is low and demand is up, prices follow. All of these factors are out of your control.

Five Things to Remember  1.  Establish and frequently re-evaluate the project budget. 2.  Optimize budget confirmation and procurement flexibility  by establishing teams early. 3. Consider non-traditional contracting methods. 4.  Expect teams to offer the latest technology;  i.e. 3-D design, prefabrication. 5. Make timely decisions.  Don’t delay the project!The trickle down effect of pricing volatility affects every aspect of a project. Many subcontractor bids are qualified for commodity volatility – prices are no longer firm to guarantee the cost of a project. There is also a much shorter bid acceptance time because of the rapid rate of cost escalation. The schedule for everything - from choosing a design and construct team to procurement - is key to making a successful end game run around potential design, budget and schedule hurdles.

What can Owners do to affect the cost of their projects?

• Develop a sound preconstruction strategy led by an experienced construction manager. Some clients are engaging teams early …
so they can exert the maximum impact on project outcomes.
• Early integration of the design and build team can foster strategic solutions. Early involvement also allows a contractor to identify where available resources are and what other projects will compete for those resources and when. The sooner a strategy is developed for how and when to procure resources, the more control the team has.
• Frequent reevaluation and adjustment of the budget is necessary in these times of uncertain costs. Strategic use of subcontractor partnerships in the design process can help zero in on the right budget and control further cost fluctuation.
• A project today is often fast tracked to contain cost rather than because it is needed quickly. A sense of urgency must be imposed, and then ensure everyone stays on schedule.
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W Dallas Victory Hotel & Residences Dallas, Texas
“Dallas now has a striking new addition to its cityscape, and much of the credit goes to McCarthy’s perseverance.”

— Nunzio DeSantis, principal, HKS, Inc.

A short four months prior to the grand opening of the 252-room W Hotel-Victory, a piece of equipment belonging to a tenant finish contractor malfunctioned in the middle of the night causing significant water damage to 77 of the already-completed hotel rooms. Within a day of the incident, a plan was developed that called for construction to continue while repairs were completed. This action plan allowed the Hotel grand opening to occur on the date that had been established months in advance. The W Hotel and its accompanying “Bliss” spa and Ghostbar, occupy 18 of the 33 floors of the $90 million, 775,000-square-foot North Tower of the Victory master-planned development in downtown Dallas. The remaining 15 floors will house 56 luxury condominiums and five penthouse units, which are being finished concurrently with the project’s adjacent 15-story South Tower that includes an additional 82 condos, retail space and a 570-car, 6-level parking garage. “McCarthy has had multiple clients to work with and satisfy on this project, and they’ve done it without hesitation,” said HKS’ Nunzio DeSantis. The wedge-shaped North Tower features a cantilevered wing structure extending from the roofline – making it an instant landmark of the Dallas skyline. Architect: HKS, Inc., Dallas.

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University of California-San Diego Biomedical Library LaJolla, California

“McCarthy has yet again proven its ability to provide solutions to unique challenges.”

— Jim Gillie, senior director of construction services, University of California, San Diego

UCSD’s Biomedical Library is the only facility of its kind serving San Diego and Imperial counties – making it a critical information resource for the area’s dynamic biotechnology and life sciences communities. McCarthy recently completed a $17 million expansion and renovation of the 30-year-old facility – with the library now featuring high-density movable shelving, specialized research collaborative areas, networked computer stations and training facilities, as well as an open-air walkway through the building. “This is the fifth project completed by McCarthy at UCSD, and we look forward to working with the firm on many more to come,” commented the university’s Jim Gillie. Constructed of concrete and a steel-braced frame, the three-level addition features a distinctive cast-in-place pitched roof (which protrudes 11 feet and slopes upward at a 20-degree angle) with a steel core that was designed to complement the roof of the existing facility. Despite significant building challenges, the project was delivered six months ahead of schedule. Architect: Pfeiffer Partners, Los Angeles.

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St. John’s Mercy Heart Hospital  Creve Coeur, Missouri
“McCarthy was definitely one of the main reasons this project was completed safely, on time and on budget. I commend McCarthy and its workers for their teamwork on the job and for setting the standards of excellence for this project.”

— John R. Farnen, North Regional director of planning, design and construction, Sisters of Mercy Health System, Capital Management Division

The first wave of patients has moved into private rooms at the new 96-bed St. John’s Mercy Heart Hospital, the first St. Louis-area hospital devoted to cardiovascular medicine and the capstone of St. John’s Mercy Medical Center’s campus master plan. The $140 million, 350,000-square-foot hospital combines all heart-related services under one roof. Universal patient rooms are fully equipped to handle intensive care patients and are designed to comfortably accommodate overnight stays for family members. Having recently completed the 153,000-square-foot Women’s and Children’s Health Center vertical expansion built atop the adjacent main hospital patient tower, McCarthy used its in-depth understanding of the Medical Center’s campus vision to overcome design and schedule challenges to successfully achieve the original project completion date. Architect: Christner, Inc., St. Louis. Program Manager: Northstar Management Company, LLC, St. Louis.

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Sigma-Aldrich Corporatyion Cold Room  St. Louis, Missouri
“For some time, we have used your services to guide, direct and support us through construction projects. We have learned to expect the professional services you deliver. This time your team exceeded our expectations.”

— Roger L. Naney, senior project manager, Sigma-Aldrich Corporation

“High impact” is the defining characteristic of the $9 million cold room project for Sigma-Aldrich Corporation. McCarthy renovated process equipment and associated piping and controls used for production of aqueous chemicals and replaced two, 200HP boilers in 120 days within an operating plant and around various other processes. Self performance of critical work such as steel and concrete enabled McCarthy crews to complete the project under budget and five days earlier than planned. To contain costs and maintain the schedule, McCarthy led daily “issue” review meetings with Sigma’s operations and engineering forces to insure proper installation for successful use and to eliminate punch list/rework. A site specific quality plan included several innovations such as mock-ups of pipe welds, connections, and transfer racks, and weekly formal, documented, quality walk-downs with the owner and subcontractors. Overall, the project logged 40,000 man hours and achieved zero recordables and zero injuries. Site specific safety orientation and training kept workers safe each day. Architect/Engineer: Lockwood Greene Engineers, Inc., St. Louis.

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Fresno Convention & Entertainment  Center Parking Structure Fresno, California
“The professionalism of McCarthy’s staff, together with their ability to manage the schedule and coordinate with the subs, impressed me on this project.”

— Scott Krauter, design services manager, city of Fresno

With downtown businesses continuing to flourish, the Fresno Convention & Entertainment Center prospering, and a new federal courthouse scheduled to come on line, the infusion of new parking spots in Fresno, Calif., was anxiously anticipated. To help meet demand, McCarthy recently completed construction on a five-story, 568,000-square-foot parking structure, adding 1,573 parking spaces to the downtown mix. Though unforeseen utilities and variations in floor-to-floor templates on the poured-in-place concrete structure presented project challenges, McCarthy’s ability to self-perform the concrete form work helped keep this project on schedule in time for the courthouse opening. Architect: Watry Design, Inc., Redwood City, Calif.

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Burkholder Middle School Henderson, Nevada
“Burkholder holds special memories for many in our community. McCarthy has been very sensitive to this and is working closely with us to help preserve the character of the campus.”

— James B. Gibson, mayor, city of Henderson

For 50 years, Clark County School District’s Burkholder Middle School has served as an educational landmark for the city of Henderson, Nev. Originally built as Basic High School, Burkholder has a rich history and boasts a long list of notable graduates including U.S. Senator Harry Reid and Henderson Mayor James Gibson. The $36 million rebuild project will feature five new campus structures providing separate buildings for each grade level, a new gym and an art/administration office. McCarthy, as general contractor, has begun site work and demolished all but the original gym, which will become the new multi-purpose room, serving as a cafeteria, theater and school meeting space. To maximize energy efficiency, the 111,150-square-foot campus design incorporates an increased use of natural light and features a geo-thermal heat exchanger and air conditioning system that will draw cool air from the ground through 350 holes drilled about 450 feet deep under the building. Architect: SH Architecture, Las Vegas.

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City of santa barbara  Granada Parking Structure  Santa Barbara, California
“Simply put, we wouldn’t have come close to meeting our deadlines were it not for McCarthy.”

— John Schoof, chief civil engineer,
city of Santa Barbara

Local merchants had been made promises, and their customers would be arriving for holiday shopping whether adequate parking was ready or not. Located in the heart of the busy and very high-end central business district of Santa Barbara, the on-time delivery of the $19.8 million Granada parking structure was a critical civic undertaking. The project’s tight schedule was a concern from the outset; that concern mounting when a much-more-than expected 2,700 cubic yards of contaminated dirt had to be safely removed. Almost immediately after this initial challenge, Santa Barbara experienced three months of record rainfall. “We were really behind the eight ball, but McCarthy’s team figured out a way to re-sequence the work and deliver it in phases,” said the city’s John Schoof. The 214,000-square-foot, 6-level structure (holding 572 cars) blends in with the city’s Spanish Mediterranean décor – complete with a stucco/plaster exterior finish, clay tile roofs, elaborate metal work and colored concrete paving. “The old adage: ‘pick two of schedule, budget and quality’ didn’t apply with Granada – we got all three,” commented Schoof. The facility also includes 9,900 square feet of city transportation office space. Architect: Watry Design Inc., Redwood City, Calif.

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The Bancroft Library Berkeley, California
“We have experienced an excellent working relationship with McCarthy, teaming during preconstruction services on the project.”

– William Blessing, associate principal, Ratcliff

The Bancroft Library at University of California, Berkeley, is celebrated as one of the nation’s largest and most heavily used libraries of manuscripts, rare books and unique materials. Celebrating 100 years on the Berkeley campus and more than 50 years in the Doe Annex building, the Bancroft treasures are now in nine temporary locations as McCarthy works to complete a $39 million seismic upgrade and complete interior renovation of the Doe Annex. Upon completion in spring 2008, the 130,000-square-foot, 6-level library will include: new interior shear walls and foundations, state-of-the-art MEP systems, including fire and life safety systems; extensive security and HVAC systems to protect all materials; fixed and movable high density shelving units for manuscript storage; and a new rotunda entrance. “We continue to rely on McCarthy’s expertise, especially in the current construction market and on a project such as this with its challenging MEP requirements,” commented William Blessing. Architect: Ratcliff, Emeryville, Calif.

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