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County supervisors Tuesday awarded an $8.7-million contract to build a a psychiatric hospital on Rosecrans Street.

The contract was awarded to Blake Construction Co., the firm that is building the Navy Hospital in Balboa Park.

Construction on the 111-bed mental hospital is to begin in January and be completed within 18 months.

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The hospital is part of a broader $39.7-million project to remodel the former FedMart Co. headquarters building into the central administrative offices for the county’s Department of Health Services. The building and land have already been purchased, and the warehouse-style structure on the site is being remodeled for offices.

The psychiatric hospital will be next to the remodeled headquarters building. It will replace the county’s mental hospital in Hillcrest, which is in a building formerly owned by the county but now leased from UC San Diego.

Construction of the hospital is being funded by proceeds of the sale of the former County/University Hospital to the University of California.

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