The steel contractor for Sutter Medical Center, Castro Valley, was not invited to join the 11-party relational contract as a partner. But Herrick Corp. did sign on for preconstruction services and a negotiated contract, in support of the $320-million hospital's integrated form of agreement.
And like the partners, Herrick opened its books. “We also established a target price,” which included profit and changed as the scope increased, says Robert Hazleton, vice president of the Stockton, Calif.-based Herrick.
“If we under-ran the budget, the under-run would go to the owner,” he adds. Herrick ended up returning $1.5 million to Sutter on its $15-million contract.
Hazleton supports the collaborative Sutter model. “It's beneficial to all members of the team and particularly the owner,” he says. In good economic times, contractors put in “fear money” on high-risk hospitals, he adds. The relational contract eliminates the fear money.
For Sutter jobs, Herrick is fine as a signatory or as a subcontractor. The firm is a partner on Sutter's 250,000-sq-ft Patient Care Pavilion at the Alta Bates Summit Medical Center and also will be a signatory on Sutter's $1.5-billion Cathedral Hill Hospital project in San Francisco.
“You don't need to take on more risk to collaborate,” Hazleton says. On the other hand, the partners have opportunity to mitigate risk on behalf of the entire team and can wind up as beneficiaries of the process, he adds.