Cost per square foot 'spin'

April 1, 2011
Now you are really confused. Depending on who you ask, the cost per square foot (SF) you should expect to pay for your new dental office varies. You don't know who or what to believe.

Jeff Carter, DDS, and Pat Carter, IIDA

For more on this topic, go to www.dentaleconomics.com and search using the following key words: dental office design, dental office construction, Dr. Jeff Carter, Pat Carter.

Now you are really confused. Depending on who you ask, the cost per square foot (SF) you should expect to pay for your new dental office varies. You don't know who or what to believe. The only way you will really know how much your project will cost is after it is designed, built, and completed. And with most dental projects "competitively bid" with an additional 20% to 25% in change orders, you decide to hope for the best and fear for the worse.

Cost per SF is the unit price per SF of finished space – a project's actual total construction cost divided by total square footage. However, general contractors use "unit pricing" (e.g., cost per lineal foot of cabinetry) to estimate a project's cost before it is designed. Understanding the difference is significant when deciphering "cost per SF" declarations.

Unit pricing is a legitimate method for assigning costs to easily definable projects (e.g., general office, warehouses, Target store finish-outs) where the level of finish, construction methodology, lighting/HVAC infrastructure is "standard grade" or "repeated." However, applying similar unit prices to dental facilities that have varying complexities – nitrous oxide, multizoned HVAC, multiple lighting needs, differing esthetics within varying square footages – can be deceiving and confusing.

You can't avoid references to cost per SF. You can, however, "qualify" assumptions made to avoid assigning unrealistic cost expectations to your project. In this column, we offer perspective on some assumptions we hear frequently ...

GCs are hungry. With a slugglish economy, you presume project costs (costs per SF) have plummeted. In fact, material costs (lumber, Sheetrock, etc.) have not dropped in any substantial way, leaving the only "costs" a GC can "reduce" as profit, labor, and/or overhead. Lowering profit substantially or eliminating it completely (to maintain cash flow) can range from 4% to 10% of your project's construction cost. Lowering labor and overhead means selecting the cheapest subs and working short-staffed, neither of which is particularly good for your project. That said, GCs are competing for projects, but project cost reductions of 25% to 30% (a recent client's expectation) are not realistic.

Questions to ask:

• What project finished at the "quoted" cost per SF? (a project you don't like and/or completed years ago is not pertinent)

• Is the cost per SF initial (bid) or actual (final) cost? (most "quotes" are initial "bid" prices that do not include change order costs added during construction)

Density factor. Recently, we compared a 2,000 net SF, four-operatory office at $110 per SF with the same function as a $90 per SF office in 2,850 net SF. Notably, total costs were $220,000 and $256,000 respectively. Cost per SF doesn't qualify what function (value) is achieved in a total project.

Question to ask:

• How many operatories were built in how many net square feet for the cost per SF quoted?

Efficiently designed dental offices can cost more per SF but less in total project cost. Wasted square footage, while cheaper, adds to your bottom line total cost.

Verify these items to further clarify a cost per SF declaration:

Cabinetry. Purchasing dental furniture eliminates this cost in construction. Building operatory, sterilization, and lab cabinetry raises the cost per SF for the same dental office. Arguably, the total cost for the equipped dental project is typically higher than that of the built-in dental project.

Plumbed nitrous oxide. Plumbing nitrous oxide can add $15,000 to $ 20,000 in construction costs. The loss of convenience associated with mobile units for some is worth the savings.

HVAC. Most dentists want to solve frustrating heating and cooling issues in their new office. To do so effectively, zoning the distribution of air (static areas – waiting, staff vs. dynamic operative areas) is critical and can add $3 to $5 per SF to a project's cost beyond one-zoned systems.

Cost per SF numbers offered without any qualification are a setup. Realize that a GC or dental supplier does not want to offer a "cost" that dissuades you from a project. Avoid the "spin" assumption that a low number is reality and a high number is inflated. The fact may be that neither is true. Defining a realistic cost for your project up front is paramount to a satisfactory and successful completion. Get to reality by challenging the "spin."

Jeff Carter, DDS, and Pat Carter, IIDA, are owners of PDG- Practice Design Group. Located in Buda, Texas, PDG offers a full range of design and consulting services to dentists nationwide. For information, call (800) 511-7110 or visit www.practicedesigngroup.com.

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