IU Health aims to award 30% of downtown hospital project to diverse contractors

It’s the largest construction project in Indiana by far, worth about $4.3 billion. And dozens of contractors are lining up to get a piece of the action, from steel and concrete to electrical and plumbing work.

When it’s completed, Indiana University Health’s new downtown hospital complex will spread out for eight blocks, or 44 acres. The patient towers will rise 16 stories in the air.

And IU Health is pushing for one more big number on the project: It is aiming to give 30% of the construction and design work to certified minority-, women- and veteran-owned companies.

It’s a challenging goal as the hospital system competes for diverse contractors in one of the busiest construction seasons in years, along with a statewide and national shortage of workers in the building trades.

“It’s a stretch goal,” said Jim Mladucky, IU Health vice president of design and construction. “Our typical target is 25%. But we’re feeling good about it at this point.”

The bottom line: IU Health expects to give about $690 million worth of work to diversity contractors. That’s 30% of $2.3 billion—the amount the hospital system says the project is worth after subtracting the cost of expensive medical equipment, such as imaging scanners, that are already counted in diversity figures from the equipment suppliers.

Nationally, the typical percentage of work done by diverse contractors on large construction projects is still relatively low.

Of the nearly $560 billion in federal contracts eligible to be awarded to small businesses in 2020, just 9.4% went to minority-owned businesses and 4.9% went to women-owned enterprises, according to Third Way, a national think tank.

Some contracting experts applauded IU Health’s ambitious goal but said it should be prepared to open its books at the end of the project to show whether it met its goals.

“These large numbers show a commitment to diversity, equity and inclusion, and a commitment to diverse spending,” said Lesley Crane, former commissioner of the Indiana Department of Administration, the agency responsible for managing billions of dollars’ worth of state purchasing. “But that does make contract compliance and verification even more important.”

Diversity matters in business because it helps companies identify opportunities and tap the strength of people from various backgrounds to solve problems, according to a series of studies by consulting giant McKinsey & Co.

“Moreover, we found the greater the representation, the higher the likelihood of outperformance,” said the firm’s latest report on the subject, which was published earlier this year.

Finding contractors

To reach its goal, IU Health, the largest hospital system in the state, is reaching out to its elaborate network of suppliers and contractors it has built over the years, as well as trying to build new connections.

So far, IU Health has awarded contracts to more than 50 diversity vendors and said it expects to bring more into the picture.

“We’re bringing them to the table to have conversations,” said Akilah Darden, director of diversity and inclusion for IU Health Design & Construction. “We’re doing relationship-building. We’re doing capacity-building.”

IU Health has set up a series of “matchmaking” sessions to give opportunities to vendors in the architecture, construction and engineering fields to introduce themselves and learn about upcoming bid opportunities.

The hospital system is also pairing up small vendors that are just starting out with larger, more experienced contractors that can act as mentors. In the process, the larger companies can subcontract work to the smaller companies and help them grow.

“We go in our matchmaking sessions, and we will take all the subcontractors and the tier one or big suppliers and vendors, and we match them up with our small diverse businesses,” said Darden. “We will make sure that all of our partners know who’s available, and at what capacity.”

It’s a huge logistical challenge for Darden, who joined IU Health in 2021 after setting up her own firm, The Darden Group LLC, a construction management company, a few years earlier.

Her company helped achieve 100% diverse participation in the construction of the recently opened, $15 million manufacturing facility in Indianapolis that is a partnership of Bloomington-based Cook Medical and Goodwill of Central and Southern Indiana.

“When we saw that, we stole her,” said Mladucky, her new boss at IU Health.

That effort, along with Darden’s use of technology to achieve it, earned her the Community Impact Award for an individual at last year’s TechPoint Mira Awards.

Darden is tapping into a large network of diversity vendors that she has built up over more than two decades in the design and construction industry.

Now her goal is to keep all the information flowing to vendors and suppliersas IU Health continues to bid out pieces of the huge construction project.

The project, located near the intersection of Capital Avenue and 16th Street, includes not only the new hospital, which will consolidate the existing Methodist and University hospitals but also support buildings, garages, a utility plant, the relocated classrooms from the IU School of Medicine and medical offices.

It will take scores of vendors and suppliers to handle all the work and get the project completed by fourth quarter of  2027, when the first patients are scheduled to move in.

Long-time relationships

Some of the diversity vendors have been with IU Health for years, as the system built or expanded a huge array of projects, from replacement hospitals and urgent care centers to ambulatory surgical centers and medical clinics.

John Thompson, who is CEO of four design and construction companies in Indianapolis, has worked on multiple IU Health projects, including the Simon Cancer Center, Bloomington Hospital and North Hospital in Carmel.

He said he has worked on every hospital that IU Health has built or expanded since he started his companies in 2001. So far, he has won more than $20 million in bids at the downtown hospital.

His companies are Thompson Distribution Co., a supplier of steel, concrete, plumbing equipment and other supplies; First Electrical Supply Co., a distributor of electrical supplies and equipment; CMID, an engineering design firm; and Beyond Countertops, a millwork company.

Together, they rang up sales of more than $50 million last year.

Thompson applauded IU Health’s diversity goals as a way to help workers and company owners alike get income and build wealth after years of struggling to get a seat at the business table.

“There’s a significant wealth and income gap in this country, and African Americans continue to be at the bottom of most of those gaps, said Thompson, who is Black. “And so I think there is an effort broadly across this country to close those gaps.”

He said such a cumulative effort would help the overall economy.

Another longtime IU Health contractor is the Harmon Group—the parent of North Vernon-based Harmon Construction, Indianapolis-based Harmon Steel and Columbus-based Taylor Brothers Construction Co.—which has provided structural steel, rebar ties and construction work on the current project.

Vice President William B. Harmon says the hospital system has been “pretty instrumental” to the company’s growth over the past three decades.

“It all starts with opportunity,” said Harmon, who is Black and whose grandfather, William D. Harmon, started the company. His father, William A. Harmon, is CEO.

William B. Harmon said IU Health gave the company “an opportunity 30 years ago, doing small jobs here and there at various sites,” and it has grown with the hospital system since.

The architect for the hospital is Indianapolis-based Curis Design, a collaboration of BSA LifeStructures, RATIO Design and CSO Architects. HOK serves as the executive architect.

The construction manager is a joint venture of locally based Wilhelm Construction and Gilbane Building Co. of Providence, Rhode Island.

IU Health said it is still crunching the numbers, but it expects to be able to reach its 30% goal when the project is finished.

In the process, it hopes that it will inspire small companies to form and get a piece of the action in what is expected to be a robust climate for design and construction companies in coming years.

“If you look at some of the studies that were done by the city and county in 2019, the labor force and the businesses aren’t necessarily out there,” Mladucky said. “So this will strengthen those businesses that are here, and hopefully offer an opportunity for others to be entrepreneurial and go into business for themselves because of this.”•