In five years, USC medical campus’ projected cost increased by $100M. Here’s why

In five years, the projected cost of the University of South Carolina’s planned medical campus in the BullStreet District increased from $200 million to $300 million.

In 2016, The State and other news media reported the medical campus was projected to cost $200 million.

In 2019, USC spokesman Jeff Stensland said the cost of the medical teaching facility was projected at $125 million and the science and laboratory building was projected at $160 million. That’s a total of $285 million.

In March 2021, The Post & Courier of Charleston reported the projected cost at $300 million. When USC asked potential contractors to submit their qualifications in September, the cost was still projected at $300 million.

So how did the medical campus — which will be funded with state and federal dollars, not tuition — increase in projected cost by 50%?

“The original 2016 estimate was just that: a best guess at the time and more of a placeholder figure,” Jeff Stensland said. “The 2018 estimate included input from the school of medicine on the specific needs of the facility. That’s the main reason for the cost adjustment.”

While building costs have also driven up the projection, it’s not uncommon for cost projections to change as more details become available for a project, an expert told The State.

“It is likely that part of the increase is attributable to design changes and more detailed design information that weren’t available to estimators in 2016,” Ken Simonson, the chief economist for The Associated General Contractors of America, told The State.

Building costs

Since 2016, erecting new buildings has become more expensive for many reasons.

The producer price index, which measures the average selling price of an item or service, for building a health care facility increased by 19.3% between 2016 and 2021, according to the U.S Bureau of Labor Statistics.

In that same time frame, the producer price index for ready-mix concrete manufacturing increased 21.5%, roofing contractors increased by 17.7%, electric contractors increased by 17.8% and plumbing, heating and air conditioning increased 17.5%, according to the Bureau of Labor Statistics.

Applying the 19.3% increase in producer price index for a health care facility, a $200 million project in 2016 would cost $238.6 million in 2021.

Rising costs of construction materials has turned contract bids into a “gamble,” according to a July article in the Wall Street Journal.

COVID-19 has added fuel onto an ongoing fire. Since the beginning of the pandemic, production and delivery of construction materials has decreased, according to a March 2021 alert from The Associated General Contractors of America. Though many companies have ramped up production, factors such as increased traffic at ports and strained trucking capacity have created a “bottleneck” in the supply chain, according to the contractors association.

Costs have increased so much recently that the government-estimated $38.6 million in projected cost increase — the difference between the original $200 million estimate and the $238 million expected because of equipment cost increases — is likely an understatement, Simonson said.

“The mix of materials needed for this project may have risen more in cost than the national average for the range of health care structures that comprise the (producer price index),” Simonson said. “For instance, there have been extreme price increases for steel, which is probably a larger component of a large, complex project like this than it is for a one- or two-story clinic or medical office building.”

This story was originally published October 7, 2021 at 1:38 PM.