MGMT 610 Week 3 Case Study Example

A Case Study Risk Profile: A Healthcare General Contractor and Its 72-Bed Behavioral Health Hospital Project

This case study profiles the risks facing a family-owned general contractor in Columbus, Ohio, and one project it is about to begin. The contractor, referred to here as the company, employs about 210 people, completes roughly $280 million in construction each year and earns about 40 percent of that revenue from healthcare work. Its next major project is a 72-bed behavioral health hospital, to be built for about $68 million on the campus of a regional health system and operated through a joint venture between the health system and a national behavioral health company. The profile describes the industry's particulars, its current trends and its characteristic risks, and then identifies the risks most likely to affect this project.

The Organization and Its Projects

The company works mostly as a construction manager at risk, a delivery method in which it joins the project during design, provides cost estimates and guarantees a maximum price before construction begins. It self-performs concrete and some carpentry and subcontracts most other trades, including mechanical, electrical and plumbing work. Its healthcare portfolio includes outpatient centers, surgical suites and renovations inside operating hospitals. The behavioral health hospital will be its first freestanding psychiatric facility, a fact that shapes several of the risks discussed below.

Industry Particulars

Commercial construction is a project-based industry in which every building is in some sense a prototype. General contractors coordinate dozens of specialty subcontractors, carry the risk of a guaranteed price and depend on suppliers whose own schedules they cannot control. Healthcare construction adds a layer of regulation. In Ohio and most states, hospital design follows the Guidelines for Design and Construction of Hospitals (Facility Guidelines Institute, 2022), which set requirements for room sizes, ventilation, infection control and, for psychiatric units, the safety of the environment. Those guidelines call for a safety risk assessment during design, including an assessment of the risks specific to behavioral and mental health patients. Healthcare owners also tend to be demanding clients. Clinical leaders often join design late, after the program is set, and their requests for changes arrive when walls are already framed. Health systems also expect contractors to work around operating facilities without disrupting patient care, which limits hours, routes and noise. Healthcare projects also end differently from other buildings: a hospital cannot open until state licensing inspectors and accreditation surveyors have reviewed it, so the last weeks of a schedule carry unusual weight.

Trends in the Industry

Four trends dominate the industry's current risk picture. The first is the shortage of skilled labor. Elbashbishy and El-adaway (2024), analyzing documentation from 67 construction projects and surveying experts, identified ten key labor-intensive trades and found the highest degrees of skilled labor shortage in plumbing and electrical work. Shiha and El-adaway (2025) add that construction labor moves little between regions, so shortages are local and vary by metropolitan area, and they built a measure of shortage severity from employment and earnings data in nine metropolitan statistical areas. For the company, this means that the electricians and plumbers a hospital needs in quantity may be the hardest workers to find in its own market.

The second trend is volatility in material prices. Jezzini et al. (2025) note that research has focused on forecasting material prices rather than on gauging the overall cost risk that price swings create for a project, and they developed a framework that uses producer price index histories for materials such as steel reinforcement and concrete to estimate the probability distribution of a project's cost exposure. Their work matters for a contractor that guarantees a maximum price months before it buys materials.

The third trend is greater attention to supply chain risk. Baghalzadeh Shishehgarkhaneh et al. (2024), reviewing research on construction supply chain risk management published from 1999 to 2023, found that the field has expanded from identifying and assessing risks to allocating, prioritizing and recovering from them, and that the use of artificial intelligence methods has grown since 2016 alongside traditional techniques. The review reflects an industry that learned during and after the pandemic how quickly late deliveries can spread through a schedule.

The fourth trend, specific to the company's market, is demand for psychiatric beds. Lindenfeld et al. (2025), using federal cost report data for 2011 to 2023, found that the total number of inpatient psychiatric beds did not change while the number in general acute care hospitals fell, and that 1,449 counties had never had any such beds. McBain et al. (2022) estimated shortages of psychiatric beds across the United States. Health systems are responding by building freestanding behavioral health hospitals, often in partnership with specialized operators, which is exactly the kind of project the company is now pursuing.

Risks in the Industry

The industry's characteristic risks can be grouped into five categories, summarized below. The categories follow the PMBOK Guide's suggestion that teams organize risks into a breakdown structure so that none is overlooked (Project Management Institute, 2017).

Wilson (2015) treats risk planning as the foundation for controlling unexpected problems later in a project, and this categorization is the first step: it tells the company where to look on any healthcare job before it turns to the risks of a particular one.

The Company's Risk Position

The company's contract position shapes how these industry risks reach it. Under a guaranteed maximum price, the company absorbs cost increases that are not caused by owner changes, so material escalation and labor premiums fall largely on its own margin. It can protect itself in part through contingency, escalation clauses for specific materials, and early purchase of long-lead items, but each of these must be negotiated with the owners before the price is signed. The company's balance sheet can absorb a modest overrun on a $68 million project, but a loss on its first freestanding psychiatric hospital would also cost it the reputation it hopes to build in a growing market. Its risk tolerance on this project is therefore lower than its size alone would suggest.

Likely Risks for the Behavioral Health Hospital Project

Applying the categories to the 72-bed hospital produces eight likely risks. First, ligature-resistant hardware, door assemblies and specialty glazing have long lead times and few suppliers, and any change to the safety risk assessment late in design could reopen orders already placed. Second, the project needs a large electrical crew for nurse call, security, access control and camera systems, the trade the research identifies as among the scarcest. Third, plumbing fixtures designed to resist self-harm are specialized and must be installed precisely. Fourth, material prices for concrete and steel could rise between the guaranteed price and procurement. Fifth, the joint venture structure means two owners must approve design changes, which can slow decisions. Sixth, the hospital must pass state licensing and accreditation surveys before it admits a patient, so any deficiency in the final weeks delays revenue for the owners. Seventh, because the site is on an active hospital campus connected by a corridor, an infection control risk assessment will govern dust, noise and access, limiting work hours near the connection. Eighth, as the company's first freestanding psychiatric facility, the project carries a learning-curve risk in estimating and sequencing work it has not done before.

Of these, three stand out: the ligature-resistant hardware supply, the electrical labor shortage and the final licensing inspections, because each falls on the schedule's critical path. The first and third are linked, since a late hardware delivery would compress the time available to correct inspection findings. Together they suggest that the company's risk management plan should begin with early procurement, a committed electrical subcontractor and a mock licensing walk-through months before substantial completion.

Conclusion

The company enters this project from a position of strength in healthcare construction but with limited experience in behavioral health. The industry's current trends, scarce skilled trades, volatile prices and fragile supply chains, meet a project type with specialized products and an unforgiving regulatory finish. Identifying those risks now, while design is still underway, gives the company the chance to address them through procurement, contracts and scheduling rather than through change orders and delays later. The analysis also suggests that the company's advantage in this market will come less from price than from reliability. Health systems building behavioral health capacity need hospitals that open on the date they promised to regulators, staff and patients, and a contractor that can show it has identified and planned for these risks will be better placed to win the next one.

References

Baghalzadeh Shishehgarkhaneh, M., Moehler, R. C., Fang, Y., Aboutorab, H., & Hijazi, A. A. (2024). Construction supply chain risk management. Automation in Construction, 162, Article 105396. https://doi.org/10.1016/j.autcon.2024.105396

Elbashbishy, T., & El-adaway, I. H. (2024). Skilled worker shortage across key labor-intensive construction trades in union versus nonunion environments. Journal of Management in Engineering, 40(1), Article 04023063. https://doi.org/10.1061/JMENEA.MEENG-5649

Facility Guidelines Institute. (2022). Guidelines for design and construction of hospitals (2022 ed.).

Jezzini, Y., Assaad, R. H., & El-adaway, I. H. (2025). Modeling framework to quantify and gauge project cost risks due to construction material price volatilities using predictive probabilistic deep-learning algorithms and stochastic risk modeling. Journal of Construction Engineering and Management, 151(7), Article 04025071. https://doi.org/10.1061/JCEMD4.COENG-16055

Lindenfeld, Z., Cantor, J. H., McCullough, C. M., Bather, J. R., & McBain, R. K. (2025). Inpatient psychiatric bed capacity within CMS-certified U.S. hospitals, 2011-2023: A cross-sectional study. PLOS Medicine, 22(7), Article e1004682. https://doi.org/10.1371/journal.pmed.1004682

McBain, R. K., Cantor, J. H., & Eberhart, N. K. (2022). Estimating psychiatric bed shortages in the US. JAMA Psychiatry, 79(4), 279-280. https://doi.org/10.1001/jamapsychiatry.2021.4462

Project Management Institute. (2017). A guide to the project management body of knowledge (PMBOK guide) (6th ed.).

Shiha, A., & El-adaway, I. H. (2025). Localized multivariate statistical assessment of United States construction labor shortages. Journal of Construction Engineering and Management, 151(8), Article 04025097. https://doi.org/10.1061/JCEMD4.COENG-15702

Wilson, R. (2015). Mastering risk and procurement in project management: A guide to planning, controlling, and resolving unexpected problems. Pearson FT Press.