Education

After Children's Hospital mismanagement, University of Iowa will oversee health care building projects

Faculty report: 'There is widespread confusion' about delays and cost overruns

Workers wash the windows Dec. 23, 2016, of the University of Iowa Stead Family Children’s Hospital in Iowa City. (Rebecca F. Miller/The Gazette)
Workers wash the windows Dec. 23, 2016, of the University of Iowa Stead Family Children’s Hospital in Iowa City. (Rebecca F. Miller/The Gazette)

IOWA CITY — Following the University of Iowa Health Care’s troubled construction of a new Children’s Hospital — plagued by thousands of design changes, cost overruns, rampant mismanagement and delays that spurred years of legal challenges — UI Facilities Management now will oversee all UI hospital building projects going forward.

A faculty committee charged with reviewing the UI Office of the Senior Vice President for Finance and Operations — which includes the Facilities Management operation — praised that change in a report it made earlier this year.

“The committee was pleased to learn that all future UIHC building projects will now be overseen by (Finance and Operations), rather than solely within UIHC’s administration,” according to the report. “F & O’s broader institutional expertise with large construction projects may help mitigate any future challenges, such as those experienced by UIHC during the completion of the Children’s Hospital.”

UI spokeswoman Jeneane Beck told The Gazette that Facilities Management has taken over management of UIHC projects “to centralize the university’s management of capital projects.”

“The university continues to look for opportunities to be more efficient and effective with how it conducts business,” she said in an email. “Review of procedures between the different units managing capital projects on the university’s campus found opportunities existed to bring this under one office’s management.”

The change, which Beck said mirrors other joint structures on campus, has moved two project managers from UIHC Capital Management to UI Facilities Management, which manages all capital projects on campus over $100,000.

UIHC has extensive ongoing projects that fit that description — including at least 17 since June, like a $7 million inpatient psychiatry expansion and renovation, according to the UI facilities bid website.

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Campus officials surveyed and interviewed as part of the faculty review expressed “communication” concerns involving litigation that resulted from the 2013-2017 construction of the 563,250-square-foot, 14-story Stead Family Children’s Hospital.

“Interviewees report that there is widespread confusion throughout campus about why the Children’s Hospital project experienced design problems and delays, as well as why an arbitration panel ordered the university to pay $21.5 million to one of the project’s contractors,” according to the report.

That contractor, Modern Piping of Cedar Rapids, in April finally secured the tens of millions in outstanding UIHC payments it had been seeking for its work on both the Children’s Hospital and Hancher Auditorium, where the dispute started in 2015.

The fight dragged on for years and involved multiple cases elevated to the state’s Supreme and appellate courts, which repeatedly ruled in Modern Piping’s favor. UI leadership still refused full payment to Modern Piping, insisting the contractor hadn’t fulfilled its obligations — and the dispute spilled over into regent meetings and media coverage until the university in the spring settled with both Modern Piping and another contractor on the Children’s Hospital — Merit Construction, also of Cedar Rapids.

To settle, however, the UI had to — once again — ask for Board of Regents permission to increase its Children’s Hospital construction budget, which started at $270.8 million with a planned 2015 open date and ended at $392.7 million with a February 2017 debut.

“Interviewees note that the adverse media attention generated by the arbitration award has led many alumni and legislators to express concerns about whether the university is able to prudently manage construction projects and prevent waste,” according to the faculty report.

Due to that confusion around why the Children’s Hospital project experienced design problems and delays — as reported in July 2018 by The Gazette — faculty reviewers suggested administrators “consider formally communicating the challenges that arose and the lessons learned.”

That communication, according to the report, should clarify the nature of the construction challenges, “how the university responded, and what lessons were learned — and changes made — to ensure that a similar situation does not happen again.”

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“We say this even though (Finance and Operations) did not manage the Children’s Hospital construction project because we believe that (Finance and Operations) is uniquely qualified to address any remaining confusion about it,” according to the report.

Although the primary dispute over construction-related payment on the projects has been resolved, Modern Piping and the UI remain locked in litigation over, among other things, the years of court costs the contractor accrued fighting UI.

Modern Piping over the summer demanded a jury trial, stating in court documents that it “incurred damages, attorneys’ fees, expenses, and other economic harms” from university actions. The contractor, specifically, is seeking another $3.125 million for time and money it spent fighting an injunction the UI sought to halt combined arbitration of the Hancher and Children’s Hospital projects.

UI attorneys asked for that new claim to be dismissed, arguing — among other things — that Modern Piping’s claims are past the statute of limitations and that the court doesn’t have jurisdiction.

The university also argued it can’t be held liable because it’s a government entity and has “sovereign immunity.” But a judge has declined to dismiss the case and a trial is scheduled for June 2, 2021.

Comments: (319) 339-3158; vanessa.miller@thegazette.com

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