[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
VA CONSTRUCTION POLICY: FAILED PLANS RESULT IN PLANS THAT FAIL
=======================================================================
HEARING
before the
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
of the
COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
TUESDAY, MAY 7, 2013
__________
Serial No. 113-18
__________
Printed for the use of the Committee on Veterans' Affairs
______
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82-234 WASHINGTON : 2014
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COMMITTEE ON VETERANS' AFFAIRS
JEFF MILLER, Florida, Chairman
DOUG LAMBORN, Colorado MICHAEL H. MICHAUD, Maine, Ranking
GUS M. BILIRAKIS, Florida Minority Member
DAVID P. ROE, Tennessee CORRINE BROWN, Florida
BILL FLORES, Texas MARK TAKANO, California
JEFF DENHAM, California JULIA BROWNLEY, California
JON RUNYAN, New Jersey DINA TITUS, Nevada
DAN BENISHEK, Michigan ANN KIRKPATRICK, Arizona
TIM HUELSKAMP, Kansas RAUL RUIZ, California
MARK E. AMODEI, Nevada GLORIA NEGRETE MCLEOD, California
MIKE COFFMAN, Colorado ANN M. KUSTER, New Hampshire
BRAD R. WENSTRUP, Ohio BETO O'ROURKE, Texas
PAUL COOK, California TIMOTHY J. WALZ, Minnesota
JACKIE WALORSKI, Indiana
Helen W. Tolar, Staff Director and Chief Counsel
______
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
MIKE COFFMAN, Colorado, Chairman
DOUG LAMBORN, Colorado ANN KIRKPATRICK, Arizona, Ranking
DAVID P. ROE, Tennessee Minority Member
TIM HUELSKAMP, Kansas MARK TAKANO, California
DAN BENISHEK, Michigan ANN M. KUSTER, New Hampshire
JACKIE WALORSKI, Indiana BETO O'ROURKE, Texas
TIMOTHY J. WALZ, Minnesota
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Veterans' Affairs are also
published in electronic form. The printed hearing record remains the
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of converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
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C O N T E N T S
__________
May 7, 2013
Page
VA Construction Policy: Failed Plans Result In Plans That Fail... 1
OPENING STATEMENTS
Hon. Mike Coffman, Chairman, Subcommittee on Oversight and
Investigations................................................. 1
Prepared Statement of Hon. Coffman........................... 26
Hon. Ann Kirkpatrick, Ranking Minority Member, Subcommittee on
Oversight and Investigations................................... 2
Hon. Jackie Walorski, Member, Committee on Veterans' Affairs,
U.S. House of Representatives, Prepared Statement only......... 26
WITNESSES
Lorelei St. James, Director of Physical Infrastructure Issues,
Government Accountability Office............................... 3
Prepared Statement of Ms. St. James.......................... 27
Raymond Kelley, Director of Legislative Service, Veterans of
Foreign Wars................................................... 5
Prepared Statement of Mr. Kelley............................. 32
Glenn D. Haggstrom, Principal Executive Director, Office of
Acquisition, Logistics, and Construction, U.S. Department of
Veterans Affairs............................................... 6
Prepared Statement of Mr. Haggstrom.......................... 34
Accompanied by:
Ms. Stella Fiotes, Executive Director, Construction and
Facilities Management, Office of Acquisition,
Logistics, and Construction, U.S. Department of
Veterans Affairs
QUESTIONS FOR THE RECORD
Letter and Question Submitted by Rep. Beto O'Rourke, To: VA...... 36
VA Response to Questions Submitted by Rep. Beto O'Rourke......... 36
Additional Questions & Answers to VA from the Committee Members.. 37
VA CONSTRUCTION POLICY: FAILED PLANS RESULT IN PLANS THAT FAIL
Tuesday, May 7, 2013
U.S. House of Representatives,
Committee on Veterans' Affairs,
Subcommittee on Oversight and Investigations,
Washington, D.C.
The Subcommittee met, pursuant to notice, at 2:00 p.m., in
Room 334, Cannon House Office Building, Hon. Mike Coffman
[Chairman of the Subcommittee] presiding.
Present: Representatives Coffman, Huelskamp, Benishek,
Walorski, Kirkpatrick, Kuster, and O'Rourke.
OPENING STATEMENT OF CHAIRMAN COFFMAN
Mr. Coffman. Good afternoon. I would like to welcome
everyone to today's hearing titled ``VA Construction Policy:
Failed Plans Result in Plans That Fail.''
I ask unanimous consent that several of our colleagues from
the Committee join us at the dais today to hear about
construction developments affecting facilities that serve their
constituents. Hearing no objection, so ordered.
Providing veterans medical care is a core function of the
VA. When the VA does health care right, it can be second to
none. However, the process VA employs to build its health care
facilities is abysmal and the results lead to delays for much-
needed care to veterans.
The Government Accountability Office's recent report noted
that VA's four largest medical center construction projects
have had an average of cost increase of $366 million and an
average delay of 35 months. One of the most distressing items
in the VA report is that VA failed to learn from its mistakes
as it went from project to project. I must add that many of
these same issues have been identified by GAO in the past, and
we seem to be no closer to a better result.
Ultimately, it is not just major facilities that epitomize
why VA's construction policy is a debacle. A little more than a
year, ago this Subcommittee held a hearing on VA's failure to
perform due diligence and failure to inform Congress of project
increases regarding the proposed clinic in Savannah, Georgia.
Based on subsequent correspondence with VA over the past year,
I am not quite certain VA is getting the message that its
construction program is dysfunctional and not in keeping with
industry best practices or veterans' expectations.
Not only is VA building facilities over budget and late,
but it is also failing to pay the contractors for the work in a
timely manner. While ensuring taxpayer dollars are properly
spent is of utmost importance, VA must pay its bills on time.
Last week, I visited the Denver project and spoke directly with
VA about prompt payment to contractors and subcontractors and
was alarmed by VA's response in the issue, and I will monitor
their commitment to improving the process.
Under the Prompt Payment Act and OMB's guidance, a Federal
agency is expected to, quote, ``to ensure that prime
contractors disburse the funds that they receive from the
Federal Government to their small business subcontractors in a
prompt manner,'' unquote. The Prompt Payment Act also requires
that the contractor certify that his or her subcontractors are
receiving payment commensurate with the work performed. But as
evidence shows, some contractors and subcontractors in these
four projects have been waiting for months to be paid.
Moreover, the Small Business Act explains that it is,
quote, ``the policy of the United States that prime contractors
establish procedures to ensure the timely payment of amounts
due pursuant to the terms of their subcontracts with small
business concerns,'' unquote. VA's failure to abide by the laws
governing payment to its contractors is unacceptable and is a
problem in need of an immediate fix.
Given the number and variety of facilities VA has built
over the last several years, it is disturbing to me that VA
continues to employ policies and techniques that have
repeatedly fallen short. I look forward to hearing from today's
witnesses regarding VA's construction policies and how we can
move forward to effectively and efficiently build medical
facilities for our veterans.
Mr. Coffman. I now yield to Ranking Member Kirkpatrick for
her opening statement.
[The prepared statement of Chairman Coffman appears in the
Appendix]
OPENING STATEMENT OF HON. ANN KIRKPATRICK
Mrs. Kirkpatrick. Thank you, Mr. Chairman, for holding this
hearing.
The focus on the construction program of the Department of
Veterans Affairs is one that needs to remain a top priority for
this Subcommittee and necessary to ensure that veterans' needs
are being met. Hundreds of millions of dollars are authorized
and appropriated every fiscal year to ensure that veterans are
cared for in the safest, most state-of-the-art buildings to be
built. The other priority, of course, is that, along with the
building, there is in place quality and timely health care
delivery to those who have earned it.
Today's hearing focuses on a recently released Government
Accountability report on construction that is very concerning.
GAO reports that some of the biggest construction projects have
increased in cost by over 140 percent, while others have
experienced delays in construction for up to 74 months. While I
may understand the reasons for some of this, clearly there is a
need for VA to scrutinize their construction program processes
and make improvements where it may be necessary to do so.
I understand that just a few years ago, the VA put in place
the Strategic Capital Investment Process, or SCIP. I look
forward to hearing from the VA about how this process is
working. Additionally, the Subcommittee has been informed that
the Secretary, in an effort to improve the construction
process, created a Construction Review Council to serve as the
single point of oversight and performance accountability for
the planning, budgeting, execution, and delivery of the VA real
property capital-asset program. I look forward to hearing from
the VA on how this Council's report has been beneficial to the
VA.
This Committee has held numerous hearings on the VA's
construction process, and efforts have been made to improve and
streamline construction projects. Having said that, I also
believe the VA still struggles to effectively manage the
program. From the Capital Asset Realignment for Enhanced
Services to the recently implemented SCIP, problems and
challenges remain.
Mr. Chairman, I stand ready to work with my colleagues and
with the VA as we tackle these issues in front of us today.
Thank you, and I yield back.
Mr. Coffman. Thank you, Ranking Member Kirkpatrick.
I would now like to welcome the panel to the witness table,
which you are there. On this panel we will hear from Lorelei,
did I say that right, St. James, Director of Physical
Infrastructure Issues for the Government Accountability Office;
Raymond Kelley, Director of Legislative Services for the
Veterans of Foreign Wars; Mr. Glenn Haggstrom, Principal
Executive Director, Office of Acquisition, Logistics, and
Construction for the Department of Veterans Affairs; and
accompanying Mr. Haggstrom, Ms. Stella Fiotes, Executive
Director, Construction and Facilities Management, Office of
Acquisition, Logistics, and Construction, for the Department of
Veterans Affairs.
Ms. St. James, you are now recognized for 5 minutes.
STATEMENTS OF LORELEI ST. JAMES, DIRECTOR OF PHYSICAL
INFRASTRUCTURE ISSUES, GOVERNMENT ACCOUNTABILITY OFFICE;
RAYMOND KELLEY, DIRECTOR OF LEGISLATIVE SERVICE, VETERANS OF
FOREIGN WARS; AND GLENN D. HAGGSTROM, PRINCIPAL EXECUTIVE
DIRECTOR, OFFICE OF ACQUISITION, LOGISTICS, AND CONSTRUCTION,
U.S. DEPARTMENT OF VETERANS AFFAIRS, ACCOMPANIED BY STELLA
FIOTES, EXECUTIVE DIRECTOR, CONSTRUCTION AND FACILITIES
MANAGEMENT, OFFICE OF ACQUISITION, LOGISTICS, AND CONSTRUCTION,
U.S. DEPARTMENT OF VETERANS AFFAIRS
STATEMENT OF LORELEI ST. JAMES
Ms. St. James. Chairman Coffman, Ranking Member
Kirkpatrick, and Members of the Subcommittee, I am pleased to
be here today to discuss VA's construction of major medical
facilities and actions it should take to decrease the time and
cost of these projects. My testimony today is based on our
report published a few days ago.
VA has an important mission of caring for over 6 million
veterans. Right now, VA has 50 major medical facilities that it
is either building or renovating, at a cost of more than $12
billion. This is a huge undertaking. Since before the Las Vegas
facility was constructed, VA had not built a project of this
size in over 15 years.
GAO has reviewed VA's approach to planning and building
major medical facilities. These are facilities that cost over
$10 million. VA, however, has struggled to match its aging
infrastructure with the changing needs of veterans. It must
also contend with a wide array of stakeholders, including
Congress and veterans organizations.
In our report, we found problems around two fundamental
construction issues: time and money. But to be fair, most
construction projects, private or public, change from design to
opening day, and events, sometimes beyond anyone's control, can
easily add time and money. Even given this, for the VA
facilities we reviewed, we remain concerned about the amount of
time and the amount of cost increases from the time projects
are to be finished and the time they are expected to be
completed. Why is it taking so long to complete these
facilities and why have costs increased so much?
These answers are important. Over the next 10 years, VA
plans to construct or renovate projects that have an estimated
value of over $21 billion.
Of the 50 projects in our review, we reviewed in detail
four major medical facilities, in Denver, Orlando, New Orleans,
and Las Vegas. So far, Denver is 18 percent complete, but it
has taken 10-1/2 years from the selection of the design firm to
VA's recent estimated completion date. It also experienced a
144 percent cost increase from the initial cost estimate. In
Las Vegas, the project took slightly more than 10 years. In
contrast to VA, we found that the Naval Facilities Engineering
Command, who builds similar medical facilities under similar
regulations, designs and builds such facilities in about 4
years. Similar to Denver, Orlando has experienced a 143 percent
cost increase, and New Orleans a 59 percent increase.
While each facility has unique circumstances, we found
several reasons for these increases, including some that were
beyond VA's control. For example, due to Hurricane Katrina,
construction costs in Las Vegas skyrocketed. In Denver and New
Orleans, political pressure, including pressure from some
veterans groups, moved VA to change from shared facilities to
stand-alone facilities. In Orlando, the site changed three
times from 2004 to 2010, once because VA didn't move quick
enough to secure needed land. Lastly, unanticipated events,
such as undetected underground storage tanks, as we saw in New
Orleans, can impact estimates.
In VA's November 2012 Construction Review Council report it
acknowledged several management problems and stated that, among
other actions, it would submit initial designs to Congress that
were 35 percent complete, beginning with its 2014 budget
submission. These estimates are important. Congress uses them
to make funding decisions and veterans use them to measure when
medical services will be available.
Lastly, in VA's management of all major facilities, we
recommended that VA issue guidance on when to use medical
equipment planners and they should issue procedures to clarify
to contractors the roles and responsibilities of all VA
personnel involved in projects. They should also streamline its
change order process. VA and contractor officials all cited
this as a fundamental management problem. VA agreed with our
recommendations, and we are encouraged by its planned actions,
but believe these actions should be implemented and monitored
to ensure that real change occurs.
Mr. Chairman, this concludes my statement. I am happy to
answer any questions that you have.
[The prepared statement of Lorelei St. James appears in the
Appendix]
Mr. Coffman. Ms. St. James, thank you so much for your
testimony.
And I am going to go ahead and recess the Committee for
votes and then we will reconvene right after voting.
[Recess]
Mr. Coffman. The Committee is called to order.
Mr. Kelley, you are now recognized for 5 minutes.
STATEMENT OF RAYMOND KELLEY
Mr. Kelley. Mr. Chairman, Ranking Member, Members of the
Subcommittee, on behalf of the 2 million members of the
Veterans of Foreign Wars and our auxiliaries, thank you for the
opportunity to testify today.
I know everyone has heard these statistics, but they are
worth repeating. VA's infrastructure is, on average, 60 years
old. Utilization has risen from 80 percent to 121 percent in a
matter of 6 years. In that same time period, the facilities
have eroded, the conditions of those facilities have eroded
from 81 percent to 71 percent. The VA currently holds 50 major
construction contracts and has identified a total of 130 major
construction projects that need to be addressed, all at a cost
of about $25 billion. VA has a monumental task of expanding and
replacing its medical facilities, and they must maximize every
dollar and implement processes that will expedite the
construction process.
The VFW has identified four major areas that need to be
addressed to ensure the construction projects are done in a
more efficient and cost-effective manner. First, VA must fully
integrate the Electronic Contracts Management System. Second,
VA needs to stop using the design-bid-build contracting
practice. Third, VA must adopt a comprehensive facility master
plan. And fourth, they should use medical equipment planners
during the construction of all medical facilities.
Due to time constraints, I will limit my remarks to just
two of these areas of concern.
VA has historically relied on the design-bid-build project
delivery system when entering into contracts to build major
facility projects. Of the 50 current VA major facility
projects, 43 of them are design-bid-build. With this model, an
architect is selected to design the facility, the design
documents are used to secure the bid, and then the successful
contract bid-holder builds the facility. Design-bid-build
projects often encounter disputes between the consumer--in this
case VA--and the construction contractor. Because these
contracts are generally firm fixed price based on the completed
design, the construction contractor is usually responsible for
cost overruns unless VA and the contractor agree on any needed
or proposed changes that occur with change of scope, unforeseen
site condition changes, or design error. VA and the contractor
negotiate these changes through change orders. This process can
become adversarial because neither party wants to absorb the
costs associated with the change and each change order can add
months to the project completion date.
The flaws of design-bid-build projects have become
apparent, highlighted by the delays in Orlando, Florida, with
the new medical facility that has been delayed 39 months, due
in part to change order disputes. This contract must be
followed through to completion, but VA must use this as a
lessons learned and change their contracting model to an
architect-led design build model. A design-build project teams
the architect and the construction contractor under one
contract. This method can save VA up to 6 months of time by
putting the design phase of the construction and the
construction performance metric together. Placing the architect
as the lead from the start to finish and having the
construction contractor work side by side with the architect,
allows the architect to be an advocate for VA. Also, the
architect and the construction contractor can work together
early on the design phase to reduce the number of design
errors, and it also allows them to identify and modify the
building plans throughout the project.
The VFW also believes VA would benefit from the use of
medical equipment planners. Using these planners, which is an
industry practice used by the Army Corps of Engineers and other
Federal agencies, places an experienced medical equipment
expert at the disposal of the architect and the construction
contractor. When used properly, the medical equipment planner
can work with the architect during the design phase and then
the construction contractor during the build phase to ensure
that needed space, physical structure, and electrical support
are adequate for the purchased medical equipment, reducing
change orders, work stoppages, and the demolition of newly
built sections of a facility. Using the Orlando facility as an
example again, issues with the purchase of medical equipment
caused cost overruns of more than $10 million and construction
had to be suspended until these issues were resolved.
Mr. Chairman, this concludes my remarks, and I look forward
to any questions you or the Committee may have.
[The prepared statement of Raymond Kelley appears in the
Appendix]
Mr. Coffman. Thank you, Mr. Kelley.
Mr. Haggstrom, you are now recognized and have 5 minutes,
please.
STATEMENT OF GLENN D. HAGGSTROM
Mr. Haggstrom. Thank you, Mr. Chairman.
Chairman Coffman, Ranking Member Kirkpatrick, distinguished
Members of the Committee, I am pleased to appear here this
afternoon to update the Committee on the Department of Veterans
Affairs' continuing efforts to improve construction procedures
and planning processes to ensure timely execution of major
construction projects. Joining me this afternoon from the
Office of Acquisition, Logistics, and Construction's Office of
Construction and Facilities Management is Ms. Stella Fiotes,
the Executive Director. I will provide a brief oral statement
and request that my full statement be included in the record.
Through the Department's capital-asset programs, which
include major and minor construction, nonrecurring maintenance,
and leasing, we are delivering the infrastructures necessary to
fulfill our mission to care for and memorialize our Nation's
veterans. Our continuing goal in the Office of Acquisition,
Logistics, and Construction is to improve construction
procedures and planning processes to ensure timely execution of
major construction and leasing projects to provide state-of-
the-art facilities for our veterans.
VA continues to make significant improvements in its real
property capital-asset portfolio. Implemented with the fiscal
year 2012 budget, the Strategic Capital Investment Planning
process, or SCIP, is a Department-wide planning process to
track and prioritize the Department's capital investment needs.
Using this approach, VA has visibility across its entire
property portfolio and is able to synchronize the projects we
undertake in our major infrastructure programs to address our
most critical needs.
Some of the steps that we have taken to improve the
management and oversight of major construction projects include
implementing the recommendations of the 2009 GAO report and
undertaking the VA Facilities Management transformation
initiative, or VAFM, which works to improve planning processes,
integrate construction and facility operations, and standardize
the construction process.
Last April, as a follow-on to the VAFM, Secretary Shinseki
established a Construction Review Council to serve as the
single point of oversight and performance accountability for
the planning, budgeting, execution, and management of the
Department's real property capital-asset program. Chaired by
the Secretary, the Construction Review Council identified four
major findings to improve performance. Actions have been
identified and are currently being implemented to address these
findings.
Finally, we are in the process of reviewing the GAO final
report, which was released on May 3, 2013, and plan to take
immediate actions to implement their recommendations.
In the past 5 years, VA has also accomplished and delivered
a significant number of projects for veterans. Most recently,
in fiscal year 2012 and 2013 to date, VA has delivered nearly
$1 billion worth of facilities. This includes 16 medical
facilities, including the new Las Vegas hospital, and five new
cemeteries or cemetery expansions, the vast majority of which
were delivered without construction delay and within the
appropriated funds. VA continues to work to complete 52 major
construction projects to provide the much-needed facilities for
our veterans and their families.
I am pleased to update you that since I last appeared
before the Committee to brief you on the construction of the
new VA medical center in Orlando, the project has advanced from
approximately 50 percent completion to approximately 80 percent
completion today. After issuing Brasfield & Gorrie a show cause
notice in February of 2013, the Department has notified them
that they will continue as the contractor on the project. They
have provided to VA a completion date of April 2014. We will
continue to work closely with Brasfield & Gorrie to ensure they
adhere to their projected timeline.
The lessons we have learned from Orlando and other past
major construction projects is guiding us in our management of
the Denver and New Orleans replacement hospitals and future
projects.
In closing, VA has a strong history of delivering
facilities to accomplish our mission to serve veterans, and we
are committed to meeting our responsibility to design, build,
and deliver quality facilities to meet the demand for access to
health care and benefits. The lessons that we have learned from
our past projects will continue to lead to improvements in the
management and execution of our capital program as we move
forward.
Thank you for the opportunity to testify before the
Committee today, and we look forward to answering any questions
the Committee may have.
[The prepared statement of Glenn D. Haggstrom appears in
the Appendix]
Mr. Coffman. Thank you, Mr. Haggstrom.
Mr. Haggstrom, the VA has 11 projects with a range of cost
increases from 4 to 59 percent. In all but two of these
projects the cost increases are over 10 percent. Has VA
officially informed Congress regarding all of these increases?
Mr. Haggstrom. Mr. Chairman, I don't know specifically
which projects you are referencing. But to the best of my
knowledge, we are very diligent in notifying the Congress if
there are cost overruns, and the amount of those costs, we must
notify Congress. If you would provide me a list of those
projects, I would be happy to supply the record for those.
Mr. Coffman. It is the projects that are listed in the GAO
report, the 11 projects listed in the GAO report. Do you need
us to go over those?
Mr. Haggstrom. No, I don't. I am in receipt of the GAO
report. And we will certainly look at those and will reply to
the Committee.
Mr. Coffman. So to the best of your knowledge, you don't
know whether or not Congress was informed?
Mr. Haggstrom. To the best of my knowledge, we have
fulfilled all our requirements in the notification of process.
Mr. Coffman. So Congress was informed?
Mr. Haggstrom. As far as I know, sir.
Mr. Coffman. Mr. Haggstrom, does VA believe that their
obligations for payment of construction completed extends only
to the prime contractor?
Mr. Haggstrom. Mr. Chairman, our contractual relationship
is with the prime contractor and only the prime contractor. We
do not have privity of contract with the subcontractors.
However, as you had mentioned in your openings remarks, that we
do require certification of the prime contractor to the VA to
ensure that they are paying their subcontractors.
When you look at what we do, go through the change order
process, the pay application process, all those things are to
be resolved with the prime contractor in terms of what payments
they are due and the payments that they would subsequently make
to their subcontractors.
I would like to add that the Miller Act, which was passed
in 1935, if you will, is really a safety net for
subcontractors. The Miller Act specifically requires that for
Federal projects over $150,000, that there is both a
performance bond and a payment bond that is held by the prime
contractor so that in the event if the prime contractor has a
contractual relationship with that subcontractor for a certain
amount, the subcontractor performs the portion of the project
for that amount and the prime contractor does not pay that
subcontractor, the subcontractor has recourse against the prime
contractor through Federal court.
Mr. Coffman. But doesn't current law go above that, go
beyond that in the Prompt Payment Act in terms of defining VA's
responsibilities to ensure that subcontractors are paid?
Mr. Haggstrom. Absolutely. And we adhere to that as closely
as we can. Once a month, we have what we call a pay application
review with our prime contractor. And during this, the prime
contractor will provide to VA the portions of the projects that
have been executed between the last pay application meeting and
the current pay application meeting. It is our goal and
requirement that once we receive that information, to process
that and make payment within 15 days to the prime contractor.
Mr. Coffman. Let me just say that I think all of you
referred to the VA facility that is being constructed in
Denver, and I think that is well within the boundaries of the
city of Aurora, which is in my congressional district. I think
there has been a history of those subcontractors not being
paid, and that is of concern to me.
Ms. St. James, did contractors submit excessive or
unwarranted change orders to drive up costs or cause delay?
Ms. St. James. That wasn't a central focus of our review.
We understood that the Committee was looking into that. But in
Orlando, we did hear of instances like that, and we are aware
of the show cause notice. But we did not verify independently
whether or not any of those charges were excessive or
unwarranted.
Mr. Coffman. Ranking Member Kirkpatrick.
Mrs. Kirkpatrick. Thank you, Mr. Chairman.
Ms. St. James, in our briefing book, we have four major
hospitals: Las Vegas, Orlando, Denver, and New Orleans? And
staff just gave me a list of just the Orlando problems with the
contracting officer, with cure notices, show cause notices that
really have delayed the project. Did you find that that was the
case with the other three facilities?
Ms. St. James. I think out of the four that we looked at,
it was that the relationship between VA and the prime
contractor was not as favorable, let's say, as the other
contracts that were out there. There seemed to be more problems
in Orlando with the prime contractor than we saw in the other
sites.
Mrs. Kirkpatrick. Thank you. Do you agree with Mr. Kelley's
recommendation that they go to an architect-design-build rather
than just a regular design-build model?
Ms. St. James. We looked at the different kinds of
contracts, as you just mentioned, and quite frankly, if you
have your requirements set up and agreed to and you have a
contractor and you have a good relationship with that
contractor, it doesn't really matter the vehicle that you
choose. A lot of it depends upon the relationships,
requirements being defined, and the relationship between the
sub and the prime as well.
Mrs. Kirkpatrick. So why is that relationship a problem at
the VA?
Ms. St. James. In Orlando?
Mrs. Kirkpatrick. In Orlando.
Ms. St. James. It is a big project. There are lots of
change orders. When subcontractors put in for the change
orders, we saw that the prime would agree with those change
orders, but VA would not agree with them, and therefore you
have a disagreement. And when you have a very large project,
you have lots of change orders. It is just natural to the
construction. So we found that that was a major problem in
Orlando, was the difference views of the cost information being
provided in the change orders. Neither VA or the contractor
agreed.
Mrs. Kirkpatrick. Thank you.
Mr. Haggstrom, on these projects do you have somebody on
the site who can review change orders who has the authority to
approve them rapidly at each one of these facilities?
Mr. Haggstrom. Yes, Congresswoman, we do. We have a
resident engineering staff, we have a project executive, we
have contracting officers assigned to all of these projects to
help facilitate and move the change order process along.
Mrs. Kirkpatrick. So how would you explain the bad
relationship that apparently exists between the contractor and
the VA that ends up with these show cause hearings and orders
to cure?
Mr. Haggstrom. Well, if I could, the show cause and cure
notices do not necessarily delay a project. Those are two
contracting vehicles that the Federal Government uses as part
of the procurement process to ensure our rights are protected
with regard to the contract that was consummated between
ourselves and the prime contractor and oversight and fiduciary
responsibility for the money that you have provided us to
construct these particular facilities.
With regards to the Orlando project, early on in my
previous testimony before the Committee, clearly VA had some
problems in terms of errors and omissions when we started this
project. Those errors and omissions were corrected through
working with our AE and with our contractor. Those drawings
were corrected and put back into place approximately a year
ago, and we moved forward on those.
There is a continuing, I think, discussion and issue with
the prime contractor over the cost of these things. Whether or
not perhaps the cost that they estimated were underestimated
with regards to the subcontractors performing this work, again,
I don't know. But these are all possibilities that drive the
relationship between ourselves and that prime contractor.
Mrs. Kirkpatrick. My time is almost expired, but I want to
ask one other question, and that is, where does the CRC then
fit in the whole scheme of things? You have somebody on site
who can approve the change orders and then you have got the
CRC. So what is their role in terms of direct review and
oversight of the construction on the site?
Mr. Haggstrom. The Secretary has made it very clear when we
formed the CRC that certain elements of the project would have
to come before the CRC and himself in terms of any change
orders, significant change orders that would drastically affect
the cost or the schedule of completion.
Mrs. Kirkpatrick. My time is almost up. Does that delay
then the decision on the change order?
Mr. Haggstrom. It does not.
Mrs. Kirkpatrick. I yield back my time, but I would like
another round of questioning if we have time.
Mr. Coffman. We will have a second round.
Mr. Huelskamp.
Mr. Huelskamp. Thank you, Mr. Chairman. I am going to read
what you have read once already from the GAO report. And I am
quoting here. It notes: ``Cost increases for these projects
range from 59 percent to 144 percent, representing a total cost
increase of nearly $1.5 billion and an average increase of
approximately $366 million per project. The schedule delays
range from 14 to 74 months, with an average delay of 35 months
per project.''
And I have a question for Mr. Haggstrom, if I might. The
GAO's report makes clear that for a number of years--and you
referenced the 2009 report--VA's construction arm has not been
doing a good job. Yet according to records I have, in 2009 you
received a $20,470 bonus, in 2010 you received an $18,022
bonus, and in 2011 you received a $16,300 bonus, all on top of
your base pay. Given this GAO report and what we have heard
here, do you really think you deserved these bonuses?
Mr. Haggstrom. Congressman, those bonuses were not
determined by myself. Those bonuses were determined by my
supervisors in the senior leadership at VA. And with all due
respect, I would ask you to take that up with them.
Mr. Huelskamp. My question is with you. Do you think you
deserve those bonuses in light of these GAO reports and these
cost overruns and delays in construction?
Mr. Haggstrom. Congressman, I believe I have answered your
question.
Mr. Huelskamp. Sir, let me re-ask it. Do you believe you
deserved these bonuses? It is either yes or no or I refuse to
answer the question.
Mr. Haggstrom. I will answer one more time. Those bonuses
were not by my own doing. Those were from my superiors.
Mr. Huelskamp. Did they indicate to you, Mr. Haggstrom, why
you deserved these bonuses when they gave them to you?
Mr. Haggstrom. Congressman, I have answered as far as I can
answer.
Mr. Huelskamp. Did they indicate to you why you deserved
these bonuses? Surely they told you. They didn't tell you at
all why you were given a $20,000 bonus in 2009, an $18,000
bonus? They didn't tell you why you were given a bonus?
Mr. Haggstrom. Those bonuses, I presume, were based on my
performance plan and my performance that they viewed and how I
did my job during those particular years.
Mr. Huelskamp. I wish you would answer that question.
Apparently they didn't tell you, then, why you deserved a
bonus?
Mr. Haggstrom. No. The bonus came down in my paycheck.
Mr. Huelskamp. Just magically appeared, I guess, for no
reason. And I would appreciate perhaps you might visit with
your superiors, in light of the GAO report. I mean, we are
talking about $1.5 billion of cost overruns on four projects.
Are you proud of these particular projects?
Mr. Haggstrom. I am not, but I think you need to put those
cost overruns in context.
Mr. Huelskamp. I am putting it in a bonus context.
Mr. Haggstrom. No, I am putting it in the fact that when
you looked or when VA looked at these projects and they costed
them out, many of these projects started out as nothing more
than large health care centers when we started the requirements
definition process. Those matured sometimes into full-fledged
inpatient medical facilities, based on emerging needs. So you
have got to look at ultimately what the VA planned to build as
opposed, in the end, to what they started to build in the
beginning.
Mr. Huelskamp. Mr. Haggstrom, the VA for here is you.
Mr. Haggstrom. Pardon me?
Mr. Huelskamp. The VA today is you. It wasn't somebody
else, some other agency determined what they should be. It was
based on your estimates, what you described to Congress of the
money you needed for this project. And they come in at an
average of $366 million per project cost overrun. And you can't
blame it on the DoD made you do these. I mean, these are the VA
estimates coming out of the GAO report. And that is what we
have here.
Mr. Haggstrom. These are VA estimates based on what we
started with.
Mr. Huelskamp. Did you have any--
Mr. Haggstrom. When you move from a health care facility of
several hundred thousand square feet to build a full-fledged
medical inpatient care facility at sometimes 1.5 million square
feet, you are going to have a change in the cost of that
project.
Mr. Huelskamp. Absolutely. Obviously, we were wrong on the
first estimate. Obviously, you are going to have a massive
change because you made a mistake at the beginning. And what
bothers me is you are in charge of these, you are the gentleman
sent here to represent why this wasn't too bad, and these same
folks give you a very, very big bonus, multiple years in a row,
in light of these GAO reports, and you claim not to know why
you got a bonus.
That to me, Mr. Chairman, is very disappointing. Bonuses
are not given just because. They are given for performance. And
if I was giving a bonus here, we would actually dock your pay.
And that is what most of my constituents say.
One last thing I want to note, and you might indicate to
your superiors as well. I have sent multiple letters to the VA
that they have ignored on other budgetary issues. In
particular, I sent a letter on September 23, 226 days ago, and
the VA just says we don't care what Congress thinks. And that
is why you wonder why we get upset when you have cost overruns
and you try to explain to us that your estimates initially were
wrong and then you get massive bonuses. This is not a proper
way to run an agency.
And I yield back, Mr. Chairman.
Mr. Coffman. Thank you, Mr. Huelskamp.
Ms. Kuster.
Ms. Kuster. Thank you very much.
Mr. Haggstrom, my question is with regard to the change in
scope of these projects. What were the factors that led to the
change to a more complex facility? Did it have to do with the
number of veterans that were coming back from Iraq and
Afghanistan and the complexity of their issues? And where in
the Veterans Administration is that type of decision-making
made?
Mr. Haggstrom. Certainly. When you look at the
requirements, the requirements that we work to in construction
and facilities management are determined by the
administrations. Principally, we build for Veterans Health
Administration, the medical facilities, and the National
Cemetery Administration, our national cemeteries. Those are the
folks who provide to us, the engineers, what they require in
order to be built. They use multiple factors. They use the
demographics. We use the databases that VA has maintained
through the year. And all those things are subject to change.
Let's take a look, if you will, just at the Denver facility
as an example. As we talked before, Denver started out as an
outpatient community health center when we started to build
that. Then through the years we went back and forth at the
senior level in VA to decide is it going to be that or is it
going to be an inpatient facility with bed towers or are we
going to use shared facilities with the University of Colorado
to handle our inpatient loads.
Ms. Kuster. Excuse me for interrupting, but was the
Congress kept apprised as these decisions were made?
Mr. Haggstrom. I am sorry, I can't answer that. I was not a
part of VA when those major decisions were being made. When
Secretary Shinseki came in, one of the first things he directed
as the Secretary of Veterans Affairs is directing us to build a
full inpatient medical facility. And that is where I
essentially pick up.
All those things previous, though, until those decisions
are made, you can't design a facility. You may be able to look
at pieces of it, but in terms of designing a full medical
complex, the relationship of how all these clinics work, the
inpatient, the diagnostic and treatment, all those can't be
completed until a decision is made on what is going to be the
final scope of this facility.
Ms. Kuster. Thank you. I wanted to say I had a tour during
our district work period of the VA facility in White River
Junction, Vermont, New Hampshire being the only State that
doesn't have a full-service VA hospital, but my constituents go
to Vermont. And I was very impressed, actually, and I
understood the complexity, given the age of the building. But
one of the things that was particularly impressive was the
opening of a new women's health facility. And I just would love
to have you comment on the changing types of issues that you
are dealing with and some of these issues that are coming back
from the Iraq and Afghanistan war in particular.
Mr. Haggstrom. Certainly. And while I am not a clinician,
our involvement in working with the VA staff, the emerging
requirements in health care today are so different from what
our veterans faced from World War II and Korea and even
Vietnam. When you look at today, I believe almost 15 percent of
our armed forces are women. And so years ago, when you walked
into a VA hospital you would probably not find very many
facilities that were equipped to handle women veterans and the
special needs they have. These are all things that the
Department is making very focused attention on in terms of
modifying and modernizing our facilities to cope with these new
requirements--traumatic brain injury, mental health, post-
traumatic stress syndrome.
All of those things are, if you will, perhaps they were
present in previous conflicts. It is only now during our last
two engagements that these are really coming to the surface and
having the clinicians look at how we can better treat our
veterans to help overcome these disabilities.
Ms. Kuster. Thank you. And just one quick question--my time
is almost up--for Ms. St. James.
How do you believe the VA can better communicate within
their own organization and with contractors to improve upon
this process so that we are not facing cost overruns and
delays?
Ms. St. James. In this regard, we noted that in the
Council, the VA's Council, Construction Review, that they plan
to take action on this. And basically what is needed is a
matrix which indicates who in VA has responsibility for what,
so that the contractor knows the direction that they should
follow. We did find in Orlando there was confusion there, and
the contractor was directed in one case to go ahead and build a
room, a part of the facility, and then was later directed,
redesign it.
So it is really common sense when you have a project that
is as large and complex as these are, we are talking over a
million square feet in some of these and 31 acres in some of
these facilities, you absolutely must have clear communication.
Ms. Kuster. Thank you very much.
I yield back the balance, which I do not have.
Mr. Coffman. Mr. O'Rourke.
Mr. O'Rourke. Thank you, Mr. Chairman.
I am interested in the context of the projects that have
been highlighted today within the SCIP list, or the Strategic
Capital Investment Planning list. And my understanding is there
are 3,900 projects that have been identified on that capital
list that need to be at some point built in order to fill the
gaps in service to our veterans.
When these projects go over these many months or these many
dollars, what does it do to the projects behind them?
Mr. Haggstrom. In terms of the time, it has no effect. When
you look at--when you say ``cost overruns,'' what are we
talking about in terms of a cost overrun? When you look at the
projects that are under construction today, we are within the
appropriated amounts that Congress has provided to us to
construct those facilities, and so if a cost overrun could have
two different meanings, the cost overrun vis-`-vis what the
original project was bid at and--
Mr. O'Rourke. That is what I am trying to get at. So, if
you are spending $366 million more than you originally
budgeted, where is that money coming from if not from projects
that would have been funded further down the list, or did you
have a contingency of $366 million for that project?
Mr. Haggstrom. No, there is not a contingency of $366
million. Conceivably, under what you are talking about, if
those cost overruns were in fact correct, it would, of course,
push the program out to the right and projects would not be
funded as quickly as perhaps we would have liked them to be.
Mr. O'Rourke. And I see, you know, I am obviously most
concerned about El Paso, the community I represent and the
veterans there, who today have to go to Albuquerque for the
nearest full service veterans hospital, which is a 10-hour
roundtrip, and these are veterans, whose service extends as far
back to World War II, going for cortisone treatment, for
example. And so we desperately, in my opinion, need a full
service VA hospital in El Paso, and I see we are number 79 in
that list, and the 2014 request is zero dollars. A few projects
up, there are dollar requests for those projects.
So I can't help but read into this that, but for these
overruns or whatever the term of art is for spending more than
we originally anticipated, we would have been able to get to
these projects sooner.
I don't know, Ms. St. James, if in your analysis of the
VA's construction projects you were able to correlate, you
know, these overruns in time and dollars to what it did to our
ability to construct other projects further down the list.
Ms. St. James. No, we really did not look at that. I would
hope, though, that VA's implementation of providing better
estimates where the design is 35 percent complete at the time
they submit it to you, that you would have a better idea of
what the project would cost and that is what we would hope to
see.
When VA comes back to you for money, with having 35 percent
complete done at the initial asking, you should have a better
idea and a better knowledge of how much more it could actually
increase. But a lot of things happened that are unanticipated
as well, but we are aware of the SCIP process. It is relatively
new, and we have looked at that in the past and within the last
couple of years.
Mr. O'Rourke. And I guess, for Mr. Haggstrom again, in El
Paso, it seems like we have a number of opportunities for a new
VA facility, full service VA hospital. One is to co-locate it
with the new William Beaumont, the DoD active duty hospital,
which is moving forward now. Another is to find a partner
within the public health community with Texas Tech, for
example. What do those opportunities do in shortening
construction time and reducing costs when we are co-locating
with other facilities? Does that offer a community like El Paso
an opportunity to jump up a little bit on the list since we
have a partner with whom we can construct that facility with?
Mr. Haggstrom. Congressman, with all due honesty, that is a
very difficult question to answer with regards to how you put
it because there are so many other factors that are taken into
consideration when we look at the SCIP process and the planning
and programming, and many of that goes to the demographics of
the areas, what the needs of those veterans are and how they
can be best served.
If you would like to, for me to take that back as a
question, I will certainly be more than happy to do that and
try to provide that for the record.
Mr. O'Rourke. I appreciate that. Thank you.
Thank you, Mr. Chairman.
Mr. Coffman. Thank you, Mr. O'Rourke.
Ms. St. James, when we talk about say the facility in
Aurora, Colorado, and the cost overrun issue and the time
delay, it did start out as a--or I think there was discussion
at least of being a joint facility and then it was a standalone
facility, VA facility. How much did that contribute to the cost
overruns or to the--that delay? But I understand, obviously,
when it went to bid, it was sent out to bid as a standalone
facility. I don't think it was sent out to bid as a joint
facility, so I don't know how you can contribute that as it was
contributed to the cost overruns.
Ms. St. James. That is actually a good question. There are
four cycles from beginning to end for a construction project,
and we look at it from the very beginning, from the planning
aspect, and so we felt that if you do not include that planning
aspect in looking at how long it takes, then you are not really
looking at the full picture of how VA manages this entire
process, and in our report, we know that VA really wanted us to
look at from the construction point on, but I think you have to
realize that that--the risk is on the contractor from that
point. Prior to that point, the risk is on VA. So, I think
their estimates for these projects done decades ago were not
done as well as they could have been, which is why they are
looking at doing the 35 percent design to be complete in
submitting it to you in the very beginning.
Mr. Coffman. Is that normal to have a certain percentage of
the design done before they go out to bid, because I know that
is their practice. Is that also the practice in say the private
sector?
Ms. St. James. What we found in VA actually had an industry
forum and the industry recommended to VA that they have a 35
percent design complete.
Mr. Coffman. Okay. Mr. Haggstrom, what is--now, I
understand, first of all, I just want to commend you on
putting--in our visit to Aurora, Colorado last week, at the
facility, I think you or somebody associated with you has said
that you-all, 2 months ago, put more resources in terms of
personnel to process the change orders so that the prime gets
paid and hopefully the subcontractors get paid in a more timely
manner. And I will certainly be monitoring them, but I want to
commend you on that. But obviously not having adequate
resources on the ground has contributed to these delays, and so
where--where--do the other facilities have the same problems
that Aurora, Colorado, has in terms of the delay--a delay in
payments and problems with subcontractors?
Mr. Haggstrom. We experienced that with Orlando, Mr.
Chairman, and we took the same steps to remedy that by putting
additional resident engineers on staff and construction
management support. I believe we certainly have taken our
lessons learned from both Orlando and Denver in that we are
staffing our project in New Orleans, which is currently on cost
and schedule, to make sure that those same issues are not
encountered.
Mr. Coffman. Ms. St. James, other facilities of the Federal
Government, I think, are managed by the GSA. Should that be the
same case with the VA? Are their practices better? I mean,
would the taxpayers and the veterans be better served if in
fact the process of constructing facilities like health care
facilities were managed by the GSA instead of the VA?
Ms. St. James. That is a good question. We actually have
not looked at, GSA doing that, but I know that VA has reached
out to GSA in terms of some of its management issues in the
report that we have been referring to that they put out
November 2012. But I can say that when you look at these four
facilities, it really doesn't matter the type of contract you
have. The relationship that exists between a contractor, the
prime or the subcontractor, taking 8 to 10 years to build a
facility, at the end of the line is the veteran, and that is
where our concern also is.
Mr. Coffman.--And, I just want to say as a Gulf War veteran
and Iraq War veteran, I am very disappointed and I think that
when there are delays in these projects and these projects are
designed to meet the capacity needs of our veteran population,
then I believe, and maybe let me refer to Mr. Kelley, I believe
that care is ultimately delayed. Mr. Kelley.
Mr. Kelley. I agree with your statement that care is
delayed. I want to commend VA for using the SCIP process. It
really does outline what the needs are. They need to put
processes in place to be able to achieve those. They understand
that demographics change. If they were to use a master planning
in the Las Vegas facility, they would have known that adding
onto Nellis wasn't going to cut it. They knew the demographics
had changed. They knew the medical equipment and the processes
that took place needed to change, and they needed a larger
facility.
So I think having a full master plan at each facility early
on would provide them the insight to know, when we start this
planning process, what do we really need, and then you don't
have a small facility turning into a large facility and you get
quicker access to the veterans.
Mr. Coffman. Ms. Kirkpatrick.
Mrs. Kirkpatrick. Thank you, Mr. Chairman.
Mr. Haggstrom, I have over 20 years experience as a health
care hospital attorney. In that time period, we completely
remodeled the hospital, project started and completed, then we
built a huge new addition. That project was started and
completed. Then we built a cancer center, and that project was
started and completed.
In all fairness to you, can you identify differences in
your procedure between the private sector and the VA that would
explain these huge delays in construction?
Mr. Haggstrom. Congresswoman, I have never served in the
private sector construction industry. My entire, almost 40
years in public service has been with Air Force civil
engineering. I was a civil engineer for 28 years in the Air
Force and subsequently with the Department of Agriculture here
and VA. So, in all honesty, I am not that familiar with private
sector developments and how they go about it, but I will tell
you that there are different requirements when you deal with
Federal contracting in terms of the contracting process, in
terms of the due diligence, in terms of how we do our design
and construction laws that have to be applied, perhaps like
Davis-Bacon, the Miller Act, all those kinds of things. Those
are not necessarily applied in the private sector.
When you look at it, I believe, when you look at the
Federal sector and how we complete construction projects, we
exercise significantly greater oversight in terms of what our
contractors are doing, the quality of what they are doing, and
the fact of the matter is, just because they tell us there is
additional money required to finish this out does not
necessarily mean that we will agree with those contractors. And
we do our due diligence to ensure that what they are claiming
is in fact the truth and the fact that they deserve payment. So
there are a lot of--
Mrs. Kirkpatrick. Well, let me just interrupt you there. I
can tell you, in the private sector, we do due diligence also
and it doesn't cause these kinds of delays, so I have a big
concern about that. But let me switch to a different line of
questioning. You mention that one of the reasons the Denver
project took so long is that--the needs of the veterans were
changing and you had to change the scope of the project and the
design, but are you looking down the road at new delivery
systems in health care, for instance, using technology. Do we
still need these large medical facilities when we are entering
an age of telemedicine?
Mr. Haggstrom. I think that is an excellent point, and Dr.
Petzel, who heads Veterans Health Administration, clearly is
looking at the various ways of delivery and not necessarily
sticking to infrastructure or bricks and mortar, if you will,
in terms of care for veterans. Telemedicine, home telehelp, in-
home health care, all those kinds of things I know are on the
VHA's plate in order to do better delivery and provide better
care for our veterans.
Mrs. Kirkpatrick. One last question, and I direct this to
Mr. Kelley. You know, it seems to me that when you have a 10-
year delay in a completion of a project, by the time that
project is complete, it is already obsolete. Do you see that in
what you have investigated? Do you see the VA trying to come
back to Congress asking for authorization to then remodel these
facilities that have been 10 years in the construction?
Mr. Kelley. I don't know the facility becomes obsolete. I
do know that the demographics change, that veterans have an
expectation when VA comes out into the community and says, we
are going to build a facility, this is what we are going to
build, and here is the timeline we are going to build it. Now
the veterans are invested in this, they are waiting, they have
marked their calendar. And when that doesn't come through, they
start getting very, very anxious: Are we not going to get our
hospital? Is it going to have the full services that we were
promised? Where am I going to get my medical care? Now that the
population has grown, the wait lines are getting longer where I
am at. I have to travel further to receive this care. I have to
do contract care with a doctor I don't know. So, there are a
lot of implications. I don't know if it necessarily makes a
facility obsolete, but it--quicker delivery would provide
better care to our servicemembers and vets.
Mrs. Kirkpatrick. No question about it. You know, delayed
care is denied care. I thank the panel. I thank the Chairman
for having this hearing.
Mr. Coffman. Thank you.
Ms. Kuster.
Ms. Kuster. Thank you very much, Mr. Chairman, and I, too,
thank you for having this hearing. I think it is an important
topic, anything that we can do to meet the needs of the
veterans, but I also can appreciate the complexity in the
health care delivery model throughout. And my experience, 25
years in the private sector on the legal side with health care
delivery is that it is far more complex now than it certainly
was.
My question is along the lines of Representative O'Rourke
in terms of those who are waiting for facilities, and I am
looking at much, much smaller facilities. I don't represent an
urban area. I represent a very rural area in New Hampshire. We
also have long distances to travel, mountains and weather and
such, and so what we are looking at is a much smaller clinic
model, and I am just wondering, this is just a question as to
how you build facilities, do these big projects hold up a small
clinic in a rural area?
Mr. Haggstrom. I don't believe so because the way the
appropriation is structured and the way you provide us
resources comes down in two different programs. Well, actually
several different programs, but the two that focus on
construction is the Major Construction Program, which are
facilities at $10 million or greater.
Ms. Kuster. Right.
Mr. Haggstrom. Those are line item appropriations where it
very specifically says we will build X at Y. When you look at
the Minor Construction Program, that is an appropriation. It is
not a line item appropriation, and so it is much more flexible
in terms of responding to the needs of our veterans and where
those monies are placed to meet those critical needs.
When you look at the third scenario and one that we have
relied on very heavily, and that is usually with our community-
based outpatient clinics and our health care facilities, we use
a build-to-suit model, and there are several break points in
that leasing process, if you will. The clear break point being
that if we have an annual rent in excess of $1 million, we must
attain approval from the Committee to move forward with that.
For less than a million dollars on service rent during the
course of a year, the Secretary has the authority to make those
decisions for those facilities.
So when you look at it, because when we do a build-to-suit
model in putting these facilities on the ground, those leasing
costs are borne by the medical facilities accounts or through
the annual appropriations process.
Ms. Kuster. Trust me, where I am talking about, the rent
will be significantly less that be a million dollars, so--and
my other question, and if you have this information or if not,
if you could get back to the Committee, I am very focused on
serving women veterans, and in particular, those who have
experienced military sexual trauma or assault. And I was so
impressed by this White River Junction facility with a separate
facility for women, separate entrance, very, very well thought
through with a task force that included veterans in the
planning and the architecture and the design to make women feel
safer when they come to the hospital for treatment. Do you
know, or any of the panel members, the number of facilities or
the percentage of facilities nationwide that are now equipped
to deal with the increasing numbers of women veterans
separately from being mixed in the general population?
Mr. Haggstrom. Right off the top of my head, I don't, but I
would be happy to take that question and get the answer for you
as a matter of record.
Ms. Kuster. Yeah, I would be very interested, and also,
just as my time runs down, just for planning purposes, looking
forward, whether that is something that is being included in
the planning, and I see you nodding your head, if you would
like to respond.
Ms. Fiotes. Yes, it is, Congresswoman. I recently attended
my first SCIP board meeting and was introduced to the process,
and among the very many large number of projects and plans that
were presented by the various medical centers and veterans
integrated service networks, there was specific reference in
several cases, in numerous cases, to the specific needs of
women veterans, and they are considering that, and they are
planning it in their programming going forward.
Ms. Kuster. Excellent. Thank you very much.
I yield back my 2 seconds.
Mr. Coffman. Mr. O'Rourke.
Mr. O'Rourke. Thank you. Mr. Kelley offered some
suggestions to address some of the findings made by Ms. St.
James and the GAO, and I wonder, Mr. Haggstrom, if you could
give us your thoughts or your reaction to his suggestions.
Mr. Haggstrom. Certainly. I fully agree that medical
planners are a crucial part of these large projects, and we
have already taken steps to include professional medical
planners on both the Denver and the New Orleans project, so we
are moving forward with that.
With regards to eCMS. ECMS is a contract writing system.
Mr. O'Rourke. Right.
Mr. Haggstrom. It is not a program management system, so we
are in the process of fielding a new program management system
which is specifically tailored to manage construction projects.
What we will do, though, is look to interface the contract
writing system with the program management system so that we do
have a seamless process for contractual record and all the
change orders or what goes on, on a project.
When you look at an AE-led design build, to be honest with
you, I have never been involved in a project with an AE design
build, but when we looked at it and we talked about it because
we did see that you mentioned it, we will take a look at it,
but one of our initial reactions was bonding capacity of the AE
firms. So, that could be somewhat problematic in terms of who
is the lead, the bonding capacity that that particular firm may
be able to attain, where typically you would probably see a
much larger bonding capacity on the construction side as
opposed to on the AE, but these are all things that we will
certainly take a look at.
Mr. O'Rourke. I appreciate that. We in our office would be
interested in hearing your answers to the specific
recommendations made by Mr. Kelley.
And then I want to follow up on something that
Congresswoman Kuster brought up and I tried to address in my
earlier questions, but essentially learning from what has gone
less than ideally, I guess, in some of these projects that have
been highlighted in this report, what can communities like ours
who need new facilities and need investment from the VA to
serve veterans who currently are not able to get service in our
communities and have to travel for that service, what can we do
to improve that process, whether it is through a co-location, I
talked about DoD, or through a university system, whether it is
providing land and leasing opportunities, give us some guidance
in El Paso on how we can partner with you to be able to service
these veterans who aren't getting that service today.
Mr. Haggstrom. I think the things that you said are very
relative to looking at the future needs. I know VHA, we are in
many, many communities across the United States, sit down, talk
with your medical center directors, talk about the requirements
that you need in your community, make sure they are aware of
those things, and those things can be put forth as we go into
the planning and programming process. They can come up through
the SCIP process, all those kinds of things.
So, I think you are on the right track. I will tell you, as
you noted, the number of projects that are in the queue as
requirements, there is a substantial list, and certainly as
part of the SCIP process, we do our best to ensure that the
most critical needs that serve our veterans are first in the
queue to make sure that they happen.
Mr. O'Rourke. And are the criteria you use to determine
ranking within that SCIP process, are those published along
with--
Mr. Haggstrom. They would. In fact, I would like to ask Ms.
Fiotes if she can go through that, having just--
Mr. O'Rourke. That would be great.
Mr. Haggstrom.--been on the SCIP process. She is a board
member, so she participates in that planning process.
Ms. Fiotes. Thank you for the opportunity.
Actually, the criteria are very well defined, and the
entire process is very deliberative, comprehensive and
integrated, and it starts with a 10-year planning horizon where
all the VISNs, the networks, present their gaps and their
proposals how to address these gaps, and by the way, in many
cases, they also talk about non-capital ways to address the
gaps, which goes to the Congresswoman's question earlier about
other, other than just building facilities, solutions.
Mr. O'Rourke. And those come from the local VHA directors
or the regional?
Ms. Fiotes. They come from what we call the Veterans
Integrated Service Networks, there are 23, I believe, across
the country, and they--those plans are presented to the SCIP
board. Along with this 10-year planning horizon, we then do,
subject matter experts then do a review of the proposed
projects and the business cases for those projects, and this
forms the basis for the annual budget request.
So we go from the 10-year horizon to what should we be
looking at for the upcoming year. The criteria, to get to your
initial question, again, are defined and are used for the
ranking, it includes improving safety and security, fixing what
we already have, increasing access to veterans, right sizing
the inventory, ensuring the value of the investment, then, of
course, the department's initiatives, so they've --and each
criterion has sub-criteria that, again, the entire process is
data driven to allow us to do the most objective assessment and
prioritization.
Mr. O'Rourke. Thank you. Appreciate that.
Thank you, Mr. Chairman.
Mr. Coffman. We will do one last round for anybody that has
any clean-up questions.
Mr. Haggstrom, I think you mentioned the electronic
contract management system, and tell me what that is supposed
to do again.
Mr. Haggstrom. The eCMS or Electronic Contract Management
System is a contract writing tool that we use in VA to put in
place the various contracts, whether they be service contracts,
construction contracts or commodity contracts. They are used by
the contracting workforce to do this, and what it does is, it
is an electronic repository for the contract files in terms of
what the terms and conditions are, the standard clauses are,
what the costs are, when it is gone out to bid, what those bids
were, all those kinds of things. It is the electronic file for
contracts.
Mr. Coffman. Is it designed to make the system more
efficient?
Mr. Haggstrom. It is designed to make the contracting
workforce more productive. It gets us out of the paper
business. It is transportable so that multiple contracting
officers can use the same file at different times. We can do
our risk assessments electronically as opposed to having to go
out to the contracting offices and look at the paper copies. So
it is what we are moving to in the department in terms of our
contracting records.
Mr. Coffman. Ms. St. James, is that system being utilized
by VA?
Ms. St. James. I am sorry. Say again.
Mr. Coffman. Is the Electronic Contract Management System
being currently utilized, to your knowledge?
Ms. St. James. That is a recommendation that again is
coming out of their report, and I would wholeheartedly push VA
to do that. Particularly when we were asking questions about
the change orders and how long things were taking, they
couldn't really tell us. There was no system to do that. So for
accountability and for tracking and for metrics, it certainly
is something that I think needs to be done.
Mr. Coffman. So it is not being currently used?
Ms. St. James. Not that I am aware of.
Mr. Haggstrom. Well, it is being used. When you look at the
contracts that we are putting in place, the vast majority of--
all the new contracts are in fact going through the Electronic
Contracting System and into the Federal Procurement Data
System.
Ms. St. James. For the four that we looked at as well?
Mr. Haggstrom. Yes.
Ms. St. James. Okay. We just know that for the change
orders, we couldn't get that information easily. There was no
real good system in order to give that to us.
Mr. Coffman. Mr. Haggstrom, how long has this system been
in place and been used? Apparently, there was a mandate in
2007.
Mr. Haggstrom. That is correct.
Mr. Coffman.--for this system. How long has it been
utilized now?
Mr. Haggstrom. I believe the system was established, it was
prior to my arriving there, back around 2006 or so. It was not
well received. Our OIG did an audit on the usage of the system.
At that particular time, it was down in the low 40s, the
percentage, even lower than that. Through the years, this is
one of the metrics that we track internally to the goal, and I
believe we are now up in the high 70s to mid 80 percent usage
of electronic contract writings.
Mr. Coffman. Is this a mandate by Congress? I mean, is it
the law?
Mr. Haggstrom. No, it is a mandate of the department, sir.
Mr. Coffman. It is a mandate by the--and you put out a memo
two years ago for everybody to use it and not everybody is
using it now?
Mr. Haggstrom. There are pockets of folks that still have
not fully developed their contracts within the system. We go
through, we find those. We provide education. We provide
learning engagements to those folks.
Mr. Coffman. Well, I mean, you were in the United States
Air Force. If you gave out a mandate--I mean, you should put a
memo, we have got a copy of the memo 2 years ago that said
everybody has got to use this system, and you are saying now
people decide whether or not they want to use it. That is under
your leadership? You are saying that that is the way things
work?
Mr. Haggstrom. There are cases where people have not used
the system to the full capability that they should be using it
to. We go out, we do audit reviews, we find those, we talk with
the heads of the contracting agency. There is a hierarchy
within the department from me as the acting chief acquisition
officer to the heads of contracting authority within the
various administrations and/or staff offices. These are the
people that need to enforce through their leadership the use of
these. I do not have administrative authority over all of the
people who do contracting in the department. I just have
functional authority.
Mr. Coffman. Well, it sounds like you have got a real
organizational problem. If you have got a system that is
designed--you know, if you are--the problem is, you have got
delays; you have got cost overruns; the system isn't working;
you are not utilizing the system that is designed to make it
work; you are not able, in your position, to get people to use
the very system that Congress mandated in 2007. I think that is
problematic.
Mr. Haggstrom, on another issue. Is VA requiring surety
bonds of construction contracts currently?
Mr. Haggstrom. Yes, they do.
Mr. Coffman. Okay. Why is the VA making what appears to be
arbitrary last minute cuts to monthly payments to the prime
contractor, who then passes the cuts down to subcontractors?
Mr. Haggstrom. It would be helpful to have a specific issue
that that surrounds, but that could range from the work was not
performed--
Mr. Coffman. Specifically to Aurora, Colorado.
Mr. Haggstrom. In those particular cases, we have
encountered areas where the work was in fact not performed but
was being asked payment for. We found that, in some cases, the
work was performed years prior, and the time for the request
for those change orders and payments had been exceeded.
And we have also found that, in Colorado, there is a
request for payment above what the budgeted cost, but what that
is absent of is any rationale of why it was budgeted at X
dollars and now why it is at Y dollars.
The contract that we have in place is not a cost-plus
contract. It is a firm target price contract, where the
contractor is to adhere to those budgeted amounts. In the case
where there is clearly a reason, such as a change in scope or
complexity or something like that, they are well within their
rights to submit those changes to the VA, and we will respond
to them. And if they are due additional payments, we will make
those, based on what our government cost estimate is.
Mr. Coffman. Why is the VA pushing the prime in
subcontractors--in what project would this be? In Aurora,
Colorado, to complete work without an approved change order?
Mr. Haggstrom. Congressman, we, over the past two months,
we just sat down with Kiewit Turner and worked to resolve 111
change orders that Kiewit Turner provided to us as the greatest
needs to come to resolution on. That was completed back in mid
April. As a result of that, VA has issued to Kewitt Turner $4
million in change orders that Kiewit Turner can now invoice the
VA for, for payment.
Mr. Coffman. I will take a look at that.
Mr. Kelley, does the VFW conduct any field work to evaluate
VA's construction program?
Mr. Kelley. No, we do not.
Mr. Coffman. Very well. Mrs. Kirkpatrick.
Mrs. Kirkpatrick. Thank you, Mr. Chairman.
I want to follow up on your line of questioning regarding
the change orders. It appears that the CRC made a
recommendation, actually looked at the process for change
orders, and they made a recommendation that the VA examine the
authority levels of contracting officers in the field to
execute change orders without additional reviews and that the
VA consider support for hiring three additional attorneys to
review change orders.
Mr. Haggstrom, where are we in terms of those
recommendations?
Mr. Haggstrom. The authority for the change or the change
orders for the contracting officers in the field has been
increased from $100,000 to $250,000 per change order. That is
in effect, and we are working with our general counsel to hire
four additional attorneys that we--would be dedicated to
helping us manage the contractual requirements required by
these large contracts.
Mrs. Kirkpatrick. My last question is, does SCIP apply to
these four major projects that we are looking at in Las Vegas,
Denver, Orlando and New Orleans?
Mr. Haggstrom. They do not. This is pre-SCIP.
Mrs. Kirkpatrick. And why is that?
Mr. Haggstrom. SCIP was not, I guess, not envisioned when
we started the planning and programming and ultimately
requesting funds for these projects. It was not until fiscal
year 2012 that the SCIP came into being. All these projects
were developed and appropriations requested prior to that.
Mrs. Kirkpatrick. Mr. Kelley, would the processes in SCIP
help speed up completion of these projects?
Mr. Kelley. Appropriations at a level that would fund these
would speed up the process. I don't--I think SCIP can be used
for part of the planning, but as soon as the contract is
written, then that is where the delays begin, in my opinion.
There is some delay in the planning of that because I think
there is some long-term master planning that needs to happen
that would allow them to have a better understanding prior to
planning, but SCIP, SCIP lays out some of that. I think they
can go in a little deeper, but I don't think that--SCIP, in the
process of determining need, affects the way the contracts
are--in the end, are done or completed.
Mrs. Kirkpatrick. Ms. St. James, could you prioritize for
us the top three changes that you think the VA needs to make to
speed up completion of these projects?
Ms. St. James. Well, we made three recommendations in our
report that really were ran or systematic--systemic issues
throughout, and one of them was on the medical planners. You
absolutely need the medical planners to be involved up front
and to have guidance on when they should be used and
particularly in these very large complex medical facilities.
The communication, that needs to be clearly laid out so that
you don't have delays in what the contractor understands that
they need to do. And then the change order process, that change
order process was really systemic throughout. And when you have
delays, sometimes up to 6 months, it doesn't work well, and if
they don't get the process changed with the change orders and
streamline that, then you are going to continue to see delays,
and that is within the construction.
VA needs to get their planning to go away from, and I
understand that they are, from rough orders of magnitude and
giving Congress what they think they need. They need to put
that planning effort up front, which I believe they are trying
to do, and then to manage that construction process, including
correcting the change order.
Mrs. Kirkpatrick. Thank you.
I yield back.
Mr. Coffman. Thank you. My thanks to the panel. You are now
excused.
The obstacles facing VA construction are disheartening, but
I look forward to working with the VA to improve its
construction practices and to create a system that is both fair
to the veterans who have served this country and to the
taxpayers who foot the bill.
With that, I ask unanimous consent that all Members have 5
legislative days to revise and extend their remarks and include
extraneous material.
Without objection, so ordered.
I want to thank all Members and witnesses for their
participation in today's hearing. This hearing is now
adjourned.
[Whereupon, at 4:12 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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Prepared Statement of Hon. Mike Coffman, Chairman
Good afternoon. I would like to welcome everyone to today's hearing
titled ``VA Construction Policy: Failed Plans Result in Plans That
Fail.''
Providing veterans medical care is a core function of VA. When VA
does health care right, it can be second to none. However, the process
VA employs to build its health care facilities is abysmal and the
result leads to delays for much needed care to veterans
The Government Accountability Office's recent report noted that
VA's four largest medical-center construction projects have had an
average cost increase of $366 million dollars and an average delay of
thirty-five months. One of the most distressing items in the GAO report
is that VA failed to learn from its mistakes as it went from project to
project. I must add that many of these same issues have been identified
by GAO in the past and we seem to be no closer to a better result.
Unfortunately, it is not just major facilities that epitomize why
VA's construction policy is a debacle. A little more than a year ago,
this Subcommittee held a hearing on VA's failure to perform due
diligence and failure to inform Congress of project increases regarding
the proposed clinic in Savannah, Georgia. Based on subsequent
correspondence with VA over the past year, I am not quite certain VA is
getting the message that its construction program is dysfunctional and
not in keeping with industry best practices or veterans' expectations.
Not only is VA building facilities over budget and late, but it is
also failing to pay the contractors for their work in a timely manner.
While ensuring taxpayer dollars are properly spent is of the utmost
importance, VA must pay its bills on time. Last week, I visited the
Denver project and spoke directly with VA about prompt payment to
contractors and subcontractors and was alarmed by VA's response to the
issue. Under the Prompt Payment Act, and OMB's guidance, a Federal
agency is expected ``to ensure that prime contractors disburse the
funds that they receive from the Federal Government to their small
business subcontractor in a prompt manner.'' The Prompt Payment Act
also requires that the contractor certify that his sub-contractors are
receiving payment commensurate with the work performed. But as evidence
shows, some contractors and subcontractors in these four projects have
been waiting for months to be paid.
Moreover, the Small Business Act explains that it is ``the policy
of the United States that its prime contractors establish procedures to
ensure the timely payment of amounts due pursuant to the terms of their
subcontracts with small business concerns.'' VA's failure to abide by
the laws governing payment to its contractors is unacceptable and is a
problem in need of an immediate fix.
Given the number and variety of facilities VA has built over the
last several years, it is disturbing to me that VA continues to employ
policies and techniques that have repeatedly fallen short.
I look forward to hearing from today's witnesses regarding VA's
construction policy and how we can move forward to effectively and
efficiently build medical facilities for our veterans.
Prepared Statement of Hon. Jackie Walorski
Mr. Chairman and Ranking Member, it's an honor to serve on this
Committee.
I thank you for holding this hearing on such an important issue for
our veterans and the future of veteran health care.
The Department of Veterans Affairs (VA) oversees an impressive
health care delivery system comprised of 152 hospitals and 821
community-based outpatient clinics (CBOCs) in addition to close to 300
veteran centers. \1\ These facilities have a reputation for providing
quality care specific to veteran needs; however, many of these
facilities are in desperate need of repair and modifications to
accommodate the influx of new veterans as well as a veteran population
composed of approximately 43 percent who are 65 or older. \2\
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\1\ Department of Veterans Affairs, National Center for Veterans
Analysis and Statistics, ``Department of Veterans Affairs Statistics at
a Glance,'' Updated 4 February 2013. http://www.va.gov/vetdata/docs/
Quickfacts/Winter--13--sharepoint.pdf.
\2\ Ibid.
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There is an obvious greater need for state-of-the-art facilities
that can address the unique needs of all veterans. This is why I am
determined to ensure the replacement CBOC proposed for South Bend
remains on schedule to open in 2015. The approximately 53,000 veterans
in Indiana's Second Congressional District have earned access to the
primary care and mental health services promised with this new
facility. \3\
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\3\ There are an estimated 53,318 veterans in IN-02. This data was
compiled on 09/30/2012, based on the district lines from the 112th
Congress. http://www.va.gov/vetdata/Veteran--Population.asp.
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The delays and significant cost increases for other VA medical
center projects are disturbing. This is an issue which necessitates
immediate action from the VA.
I look forward to working with my colleagues and our panelists to
establish a plan of action for the Department of Veterans Affairs which
eliminates redundancies and streamlines processes that promote greater
efficiency in the construction of major medical-facility projects.
Thank you.
Prepared Statement of Lorelei St. James
Chairman Coffman, Ranking Member Kirkpatrick, and Members of the
Subcommittee:
I am pleased to be here today to discuss our recent work examining
cost increases and schedule delays at the Department of Veterans
Affairs' (VA) major medical-facility construction projects. \1\
According to VA's fiscal year 2013 budget submission to Congress, the
Veterans Health Administration's (VHA) existing infrastructure does not
fully align with the current health care needs of the veteran
population. \2\ To help address this situation, VA has 50 major
medical-facility projects \3\ under way, including new construction and
the renovation of existing medical facilities, at a cost of more than
$12 billion. Although VA has taken steps to improve its process for
managing these construction projects, opportunities exist for VA to
improve its efforts.
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\1\ GAO, VA Construction: Additional Actions Needed to Decrease
Delays and Lower Costs of Major Medical-Facility Projects, GAO-13-302
(Washington, D.C.: April 4, 2013).
\2\ U.S. Department of Veterans Affairs, Fiscal Year 2013 Budget
Request. Construction IV (Washington, D.C.: 2012).
\3\ The term ``major medical-facility project'' means a project for
the construction, alteration, or acquisition of a medical facility
involving the total expenditure of more than $10 million. See 38 U.S.C.
Sec. 8104. These projects cost at least $10 million, some in the
hundreds of millions of dollars. The project types include new
construction, renovation of existing structures, expansion, or a
combination of types. The total number of major VA medical-facility
projects is based on agency data from November 2012.
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This testimony discusses VA construction management issues,
specifically (1) the extent to which the cost, schedule, and scope for
selected new medical-facility projects have changed since they were
submitted to Congress and the reasons for these changes, (2) actions VA
has taken to improve its construction management practices, and (3) the
opportunities that exist for VA to further improve its management of
the costs, schedule, and scope of these construction projects. This
testimony is based on our April 2013 report. In that report, we discuss
VA's current 50 major medical-facility projects, including the original
cost estimates and completion dates and the projects' current status
according to November 2012 data. \4\ To understand issues involving
costs estimates and completion dates, we took a more detailed review of
four VA medical-facility projects in Las Vegas, Orlando, New Orleans
and Denver. We also reviewed and analyzed construction documents, VA's
Strategic Plan Fiscal Years 2011 to 2015, and other relevant documents.
We interviewed officials from VA; veterans support organizations;
architectural and engineering firms; general contractor construction
firms; and construction management firms. The work on which this
statement is based was conducted from April 2012 to April 2013 in
accordance with generally accepted government auditing standards. For a
more detailed explanation of our scope and methodology, see the April
2013 report.
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\4\ We identified reasons for selected facilities' overall cost and
schedule changes, but were not able to identify the extent to which
specific reasons changed these costs and schedules, unless specifically
noted.
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In summary, we recognize that some cost increases and schedule
delays result from factors beyond VA's control; however, our review of
VA's largest projects indicated weaknesses in VA's construction
management processes also contributed to cost increases and schedule
delays. Given that VA is currently involved in 50 major medical-
facility construction projects, including four large medical centers,
VA should take further action to improve its management of costs,
schedule, and scope of these projects.
Cost Increases and Schedule Delays at the Four Largest Projects
Occurred for a Variety of Reasons
Cost Increases and Schedule Delays
Costs increased and schedules were delayed considerably for VA's
four largest medical-facility construction projects, when comparing
November 2012 construction project data with the cost and schedule
estimates first submitted to Congress. Cost increases ranged from 59
percent to 144 percent, \5\ representing a total cost increase of
nearly $1.5 billion and an average increase of approximately $366
million per project. The schedule delays ranged from 14 to 74 months
with an average delay of 35 months per project (see table 1).
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\5\ According to the Office of Management and Budget (OMB), federal
agencies should keep a contingency fund of 10 to 30 percent above total
estimated costs to address increased costs on construction projects.
However, this guidance applies after construction has begun, and many
of the cost increases we observed occurred before that time. The
construction contractor is generally responsible for cost increases and
schedule overruns under the terms of the fixed-price contract. OMB
Circular No. A-11, Appendix 8 (2012).
[GRAPHIC] [TIFF OMITTED] T2234.001
Source: GAO Analysis of VA data.
a - The column titled ``total estimated years to complete'' is
reported to the nearest quarter year and is calculated from the time VA
approved the architecture and engineering firm to the current estimated
completion date. We calculated the ``number of months extended'' column
by counting the months from the initial estimated completion date to
the current estimated completion date, as reported by VA. According to
VA, the dates in the initial estimated completion dates are from the
initial budget prospectus, which assumed receipt of full construction
funding within 1 to 2 years after the budget submission. In some cases,
construction funding was phased over several years and the final
funding was received several years later. Naval Facilities Engineering
Command officials we spoke with told us that historically, their
medical facility projects take approximately 4 years from design to
completion. We calculated the percentage change in cost by using the
initial total estimated costs and total estimated costs, as reported by
VA.
b - VA provided time extensions to the Orlando, Florida contractor
extending the contract completion date to July 2013. Because of an
ongoing dispute between VA and the general contractor regarding
performance of the contract in Orlando, VA issued a ``show-cause''
notice to the contractor on January 31, 2013. The show-cause notice
provides the contractor an opportunity to present any facts relevant to
the dispute. As of the publication of this testimony, VA has yet to
determine the next steps to resolve this matter. July 2013 is
considered the current completion date provided to us by VA officials.
However, the general contractor disagrees with this date and has
estimated that it will be spring 2014.
Of the remaining 46 major medical-facility projects, 26 are under
construction or were recently completed. Of these 26, half have
experienced cost increases, but the other half experienced either no
change in costs or a decrease in costs. Nineteen of 24 construction
projects currently under construction or recently completed have
experienced schedule delays. \6\
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\6\ VA did not provide schedule data for both initial estimated
completion date and current estimated completion date for two projects
under construction.
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In commenting on a draft of our April 2013 report, VA contends that
using the initial completion date from the construction contract would
be more accurate than using the initial completion date provided to
Congress; however, using the initial completion date from the
construction contract would not account for how VA managed these
projects prior to the award of the construction contract. Cost
estimates at this earlier stage should be as accurate and credible as
possible because Congress uses these initial estimates to consider
authorizations and make appropriations decisions. We used a similar
methodology to estimate changes to cost and schedule of construction
projects in a previous report issued in 2009 on VA construction
projects. We believe that the methodology we used in our April 2013 and
December 2009 report on VA construction provides an accurate depiction
of how cost and schedules for construction projects can change from the
time they are first submitted to Congress. \7\ It is at this time that
expectations are set among stakeholders, including the veterans'
community, for when projects will be completed and at what cost.
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\7\ GAO, VA Construction: VA is Working to Improve Initial Project
Cost Estimates, but Should Analyze Cost and Schedule Risks, GAO-10-189
(Washington, D.C.: Dec. 14, 2009).
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Reasons for Cost Increases and Schedule Delays at VA's Four Largest
Projects and Related Scope Changes
At each of the four locations we reviewed, different factors
contributed to cost increases and schedule delays:
Changing health care needs of the local veteran
population changed the scope of the Las Vegas project. VA officials
told us that the Las Vegas Medical Center was initially planned as an
expanded clinic co-located with Nellis Air Force Base. However, VA
later determined that a much larger medical center was needed in Las
Vegas after it became clear that an inpatient medical center shared
with the Air Force would be inadequate to serve the medical needs of
local veterans.
Decisions to change plans from a shared university/VA
medical center to a stand-alone VA medical center affected plans in
Denver and New Orleans. For Denver and New Orleans, VA revised its
original plans for shared facilities with local universities to stand-
alone facilities after proposals for a shared facility could not be
finalized.
Changes to the site location by VA delayed efforts in
Orlando. In Orlando, VA's site location changed three times from 2004
to 2010. It first changed because VA, in renovating the existing VA
hospital in Orlando, realized the facility site was too small to
include needed services. However, before VA could finalize the purchase
of a new larger site, the land owner sold half of the land to another
buyer, and the remaining site was again too small.
Unanticipated events in Las Vegas, New Orleans, and
Denver also led to delays. For example, VA officials at the Denver
project site discovered they needed to eradicate asbestos and replace
faulty electrical systems from pre-existing buildings. They also
discovered and removed a buried swimming pool and found a mineral-laden
underground spring that forced them to continually treat and pump the
water from the site.
VA Has Taken Steps to Improve Its Construction Management Practices
VA has made improvements in its management of major medical-
facility construction projects, including creating a construction-
management review council. In April 2012, the Secretary of Veterans
Affairs established the Construction Review Council to serve as the
single point of oversight and performance accountability for the
planning, budgeting, executing, and delivering of VA's real property
capital-asset program. \8\ The council issued an internal report in
November 2012 that contained findings and recommendations that resulted
from meetings it held from April to July 2012. \9\ The report revealed
that the challenges identified on a project-by-project basis were not
isolated incidents but were indicative of systemic problems facing VA,
and made several recommendations to address these problems. But VA has
not yet developed specific guidance or instructions for how to
implement the recommendations.
---------------------------------------------------------------------------
\8\ The Construction Review Council was comprised of officials from
the VA, including the secretary, deputy secretary, chief of staff,
under secretaries, and assistant secretaries, as well as key leaders
across the department. The Secretary of VA chaired nine meetings from
April 18 through June 15, 2012, to review the VA construction program
and identify challenges that led to changes in scope, cost over-runs,
and scheduling delays of major projects.
\9\ VA, The Construction Review Council Activity Report
(Washington, D.C.: November 2012).
---------------------------------------------------------------------------
VA has taken some other actions to improve construction project
management. For example, VA has collaborated with other federal
agencies involved in medical facilities construction to tap their
experience, and convened a construction industry forum to communicate
about ways to improve medical facilities construction practices. In
addition, VA has taken steps to involve construction contractors
earlier in some projects to allow coordination with the architectural
and engineering firms in designing and planning a project.
Opportunities Exist for VA to Further Improve Its Construction
Management Practices
Although VA has made improvements in its management of major
medical-facility construction projects, many of these projects continue
to experience cost increases and schedule delays. We recognize that
some cost increases and schedule delays result from factors beyond VA's
control; however, our review of VA's four largest projects indicates
that weaknesses in VA's construction management processes-in
particular, those listed below--also contributed to cost increases and
schedule delays:
Using Medical Equipment Planners
VA officials have emphasized that they need the flexibility to
change their heath care processes in response to the development of new
technologies, equipment, and advances in medicine. \10\ Given the
complexity and sometimes rapidly evolving nature of medical technology,
many health care organizations employ medical equipment planners to
help match the medical equipment needed in the facility to the
construction of the facility. Federal and private sector stakeholders
during our review reported that medical equipment planners have helped
avoid schedule delays. VA officials told us that they sometimes hire a
medical equipment planner as part of the architectural and engineering
firm services to address medical equipment planning. However, we found
that for costly and complex facilities, VA does not have guidance for
how to involve medical equipment planners during each construction
stage of a major hospital and has sometimes relied on local VHA staff
with limited experience in procuring medical equipment to make medical-
equipment- planning decisions. In Orlando, medical equipment
specifications changed several times and led to cost increases of at
least $14 million in addition to schedule delays, as these issues
forced VA to suspend construction until the issues were resolved. In
our April 2013 report, we recommended that the Secretary of VA develop
and implement agency guidance to assign of medical equipment planners
to major medical construction projects. VA agreed and said it planned
to address this recommendation.
---------------------------------------------------------------------------
\10\ VA, Strategic Plan Refresh: FY2011-FY2015, (Washington, D.C).
---------------------------------------------------------------------------
Sharing Information on the Roles and Responsibilities of VA's
Construction-Management Staff
Construction of large medical facilities involves numerous staff
from multiple VA organizations. Officials from the Office of
Construction and Facilities Management (CFM) stated that during the
construction process, effective communication is essential and must be
continuous and involve an open exchange of information among VA staff
and other key stakeholders. \11\ However, we found that the roles and
responsibilities of CFM and VHA staff are not always well communicated
and that it is not always clear to general contracting firms which VA
officials hold the authority for making construction decisions. This
can cause confusion for contractors and architectural and engineering
firms, ultimately affecting the relationship between VA and the general
contractor. For example, contractor officials at one site said that
VA's project manager directed them to defer the design of specific
rooms until medical equipment was selected for the facility; however,
VA's central office then directed the contractor to proceed with
designing the rooms. This conflicting direction from VA could require
the contractor to redesign the space, further expending project
resources. Participants from VA's 2011 industry forum also reported
that VA roles and responsibilities for contracting officials were not
always clear and made several recommendations to VA to address this
issue. In April 2013, we recommended that the Secretary of VA develop
and disseminate procedures for communicating--to contractors--clearly
defined roles and responsibilities of the VA officials who manage major
medical-facility projects, particularly those in the change-order
process. VA agreed and stated they had actions underway to improve
communication involving roles and responsibilities.
---------------------------------------------------------------------------
\11\ VA, Construction Primer (Washington, D.C.: January 2013).
---------------------------------------------------------------------------
Managing the Change- Order Process
Most construction projects require, to varying degrees, changes to
the facility design as the project progresses, and organizations
typically have a process to initiate and implement these changes
through change orders. Federal regulations \12\ and agency guidance
\13\ state that change orders must be made promptly, and that there be
sufficient time allotted for the government and contractor to agree on
an equitable contract adjustment. VA officials at the sites we visited
stated that change orders that take more than a month from when they
are initiated to when they are approved can result in schedule delays,
and officials at two federal agencies that also construct large medical
projects told us that it should not take more than a few weeks to a
month to issue most change orders. \14\ However, officials at two
sites, New Orleans and Orlando, said that it was common for VA to take
6 months to process a change order, even though VA has directed its
staff to eliminate or minimize delays. \15\ Processing delays may be
caused by the difficulty involved in VA's and contractors' coming to
agreement on the costs of changes and the multiple levels of review
required for many of VA's change orders. In April 2013, we recommended
that the Secretary of VA issue and take steps to implement guidance on
streamlining the change-order process based on the findings and
recommendations of the Construction Review Council. \16\ VA concurred
with our recommendation and was reviewing the options proposed by the
Construction Review Council to streamline the change-order process.
---------------------------------------------------------------------------
\12\ 48 C.F.R. Sec. 43.201
\13\ VA, VA Resident Engineer Handbook, ``Chapter 3: Major
Construction: Contract Changes'' (3.24) (Washington, D.C.)
\14\ Specifically, we interviewed the U.S. Army Corps of Engineers
and Naval Facilities Engineering Command. We recognize that the
Department of Veterans Affairs serve different populations in the
defense community--active duty military personnel and veterans,
respectively. However, these organizations construct similar medical
facilities, in addition to abiding by federal government regulations
for construction projects.
\15\ Although officials at one of these sites said that VA's
timeliness of the change order process has improved, they noted that a
change order still takes an average of 2 to 3 months, indicating to
them that further improvement is needed.
\16\ GAO-13-302.
---------------------------------------------------------------------------
We provided a draft of our April 2013 report for VA for review and
comment. In its written comments, VA concurred with our
recommendations.
Chairman Coffman and Ranking Member Kirkpatrick, and Members of the
Subcommittee, this completes my prepared statement. I would be pleased
to respond to any questions that you may have at this time.
Contacts and Acknowledgments
If you have any questions about this testimony, please contact
Lorelei St. James at (202) 512-2834 or [email protected]. Other key
contributors to this testimony include are Ed Laughlin (Assistant
Director), Nelsie Alcoser, George Depaoli, Raymond Griffith, Joshua
Ormond, Amy Rosewarne, James Russell, Sandra Sokol, and Crystal Wesco.
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Prepared Statement of Raymond C. Kelley
MR. CHAIRMAN AND MEMBERS OF THE SUBCOMMITTEE:
On behalf of the nearly 2 million men and women of the Veterans of
Foreign Wars of the United States (VFW) and our Auxiliaries, I would
like to thank you for the opportunity to testify today regarding VA
construction policy.
As the Department of Veterans Affairs (VA) strives to improve the
quality and delivery of care for our wounded, ill and injured veterans,
the facilities that provide that care continue to erode. With buildings
that have an average age of 60 years, VA has a monumental task of
replacing or expanding the existing medical facilities. From 2004 to
2010, utilization of VA health care facilities grew from 80 percent to
121 percent, while the conditions of these facilities declined from 81
percent to 71 percent over the same period of time.
In 2010, VA adopted the Strategic Capital Investment Planning
(SCIP) process to identify current and future infrastructure needs.
Based on this process, VA identified 130 major construction projects
that need to be completed by 2021 to eliminate the current and future
gaps in utilization and safety. The price tag to close these major
construction gaps is between $21 billion and $25 billion. To even come
close to accomplishing these projects, VA must maximize every dollar
and implement processes that will expedite the construction process.
The VFW has identified four major areas that need to be addressed
to ensure that construction projects are done in a more efficient and
cost effective manner. First, VA must use the electronic Contract
Management System (eCMS) to its fullest potential; second, VA needs to
change from using the design-bid-build practice; third, VA must adopt a
comprehensive facility master plan; and forth, VA should being using
medical equipment planners on all major construction projects.
eCMS is VA's centralized electronic contract writing and management
platform that is intended to replace the current contract writer. eCMS
is designed to reduce costs, standardize the acquisition process,
reduce workload and improve communication for any contract valued at
$25,000 or more.
Roll-out and utilization of eCMS has been slow. By VA's own
account, usage has gone from 17 percent in 2008, to 77 percent in 2012.
The VA Office of Acquisitions and Logistics and Construction (OALC) has
mandated that all contracts costing more than $25,000 must be processed
through eCMS. However, design flaws within eCMS prevent it from being
an effective tool in contract management and fiscal oversight, and
causes contract officers who use the program to also write the contract
through the National Acquisition Center's Contract Management system.
Therefore, eCMS's information is incomplete and cannot be relied upon
for making sound procurement decisions and causes contract officers to
duplicate their effort, which results in inefficient use of time and
resources.
VA projects that system upgrades to eCMS will be completed in 2014.
Congress must ensure that the resources that are needed to complete
these upgrades are available and they must provide oversight to confirm
eCMS is being utilized. While the system is improving, OALC must follow
through with its mandate to write contracts in eCMS, so OALC can
consistently capture data, allowing them to make better acquisition
decisions.
VA has historically relied on the design-bid-build project delivery
system when entering into contracts to build major medical facility
projects. Of the 50 current VA major medical facility projects, 43 of
them are design-bid-build. With this model, an architect is selected to
design a facility, the design documents are used to secure a bid, and
then the successful contract bid holder builds the facility.
Design-bid-build projects often encounter disputes between the
costumer - VA in this case - and the construction contractor. Because
these contracts are generally firm-fixed-price, based on the completed
design, the construction contractor is usually responsible for cost
overruns, unless VA and the contractor agree on any needed or proposed
changes that occur with a change of scope, unforeseen site condition
changes or design errors. VA and the contractor negotiate these changes
through change orders. This process can become adversarial, because
neither party wants to absorb the cost associated with the change, and
each change order can add months to the project completion date.
The flaws of design-bid-build projects have become very apparent,
highlighted by the delays in Orlando, Florida, where a new medical
facility has been delayed by 39 months due mostly to change order
disputes. This contract must be followed through to completion, but VA
must use this as a lessons-learned and change their contracting model
to an Architect-led design-build model.
A design-build project teams the architectural/engineering company
and the construction contractor under one contract. This method can
save VA up to six months of time by putting the design phase and the
construction performance metric together. Placing the architect as the
lead from start to finish, and having the construction contractor work
side-by-side with the architect, allows the architect to be an advocate
for VA. Also, the architect and the construction contractor can work
together early on in the design phase to reduce the number of design
errors, and it also allows them to identify and modify the building
plans throughout the project.
VA must also use master planning at all of its facilities. Master
planning will allow VA to examine and project potential changes in
technology, patient care practices and changes in veteran demographics.
The new Las Vegas Medical Center is an example of not knowing the trend
in the veteran population, causing the project to be delayed while the
scope of the project was changed. Early on, VA only planned to expand
an existing facility, later realizing that a much larger facility was
needed to meet the needs of the veterans in the community. Having a
thorough master plan could have eliminated some the 74-month delay in
the construction of this facility.
The last area the VFW would like to discuss that has been
identified as causing delays in medical facility construction is the
purchase of medical equipment. VA wants to equip its facilities with
the most up-to-date equipment. However, procuring medical equipment
after the design of the facility inevitably causes building delays
while the designs are redrawn, and in some cases some demolition of
recently constructed areas must take place to accommodate the newly
purchased medical equipment.
The VFW believes that VA would benefit from the use of medical
equipment planners. Using these planners, which is an industry practice
used by the Army Corps of Engineers and other federal agencies, places
an experienced medical equipment expert at the disposal of the
architect and construction contractor. When used properly, a medical
equipment planner can work with the architect during the design phase
and then the construction contractor during the build phase to ensure
needed space, physical structure and electrical support are adequate
for the purchased medical equipment, reducing change orders, work
stoppages, and the demolition of newly built sections of a facility.
Using a medical equipment planner can reduce schedule delays and
cost overruns. Using the Orlando facility as an example again, issues
with the purchase of medical equipment caused cost overruns of more
than $10 million and construction had to be suspended until the issues
were resolved.
It is important for VA to become more efficient at constructing
facilities. Veterans have expectations that medical facilities will be
available when VA first states what the completion date will be. It is
obvious by looking at the number of delays and cost overruns that the
contracting and building procedures that VA currently uses are
antiquated and are costing VA millions of dollars more for each project
and causing five to six year delays in much needed medical facilities.
By implementing these four initiatives, future major construction
projects will have better oversight, cost controls and more efficient
procedures for unforeseen changes in the construction of facilities.
Mr. Chairman, this concludes my remarks and I look forward to any
questions you or the Committee may have.
Information Required by Rule XI2(g)(4) of the House of Representatives
Pursuant to Rule XI2(g)(4) of the House of Representatives, VFW has
not received any federal grants in Fiscal Year 2013, nor has it
received any federal grants in the two previous Fiscal Years.
Prepared Statement of Glenn D. Haggstrom
Chairman Coffman, ranking member Kirkpatrick, distinguished members
of the subcommittee, I am pleased to appear here this afternoon to
update the subcommittee on the Department of Veterans Affairs' (VA)
continuing efforts to improve construction procedures and planning
processes to ensure timely execution of major construction projects.
Joining me this afternoon is Stella Fiotes, Executive Director,
Construction and Facilities Management, OALC.
The Department's infrastructure programs which include major and
minor construction, non-recurring maintenance, and leasing are part of
our ongoing mission to care for and memorialize our Nation's Veterans.
We are committed to meeting our responsibility to design, build, and
deliver quality facilities as tools to meet the demand for access to
health care and benefits.
VA has made significant improvements in its real property capital
asset portfolio to provide state of the art facilities to meet the
needs of Veterans, allowing for the highest standard of service. We
have taken on the challenge of updating our aging infrastructure to
allow for management of increased workload demands; changing Veteran
patient demographics; advances in medical technology; new complex
treatment protocols and advanced procedures; delivering patient-
centered care and services closer to where Veterans live; and evolving
Federal requirements.
The focus of my testimony today is on VA's major construction
program - our program identification, process improvements and
challenges, and accomplishments. This will provide you a perspective of
how we deliver VA's major construction projects.
Program Identification
The Strategic Capital Investment Planning (SCIP) process was
implemented with the fiscal year (FY) 2012 budget. This Department-wide
planning process prioritizes the Department's future capital investment
needs to strategically target VA's limited resources to most
effectively improve the delivery of services and benefits to Veterans,
their families and survivors by addressing VA's most critical
infrastructure needs and performance gaps and investing wisely in VA's
future. Using this approach, VA has visibility across its entire real
property portfolio and is able to synchronize the projects we undertake
in our major infrastructure programs to address our most critical
needs. As part of this, VA has identified critical milestones for
review in the life-cycle of a project from the planning and programming
stages to the disposition of a facility when it is no longer functional
for its purpose or needed to fulfill the mission.
Process Improvements
VA has taken several steps to improve the management and oversight
of major construction projects. In 2009, the VA Facility Management
(VAFM) transformation initiative was established to improve planning
processes; integrate construction and facility operations; and
standardize the construction process. VAFM identified a need for the
following:
1. An enterprise approach to integrated master planning - Plans
were piloted in 2011 and are moving to full operation;
2. Systems for project management - VA procured a collaborative
project management software system in 2012 and is completing phase one
fielding and will complete fielding in 2014. This software supports
leases, major construction, minor construction as well as non-recurring
maintenance (NRM), and;
3. Post occupancy evaluations (POE) - The POE program, piloted
in 2012, is now standard practice for the major construction program
and is expanding to the minor construction program. POE evaluates the
completed construction to assure closure of all gaps and deficiencies
noted in the approved project scope.
In April 2012, as a follow on to the VAFM initiative, the Secretary
of Veterans Affairs established the Construction Review Council (CRC)
to serve as the single point of oversight and performance
accountability for the planning, budgeting, execution, and management
of the Department's real property capital asset program. Chaired by the
Secretary, the CRC identified findings to improve performance in four
major areas:
1. Development of requirements - Add rigor to the requirements
development phase of the project and complete 35 percent of a project's
design prior to requesting major construction funds. This assures that
full requirements are identified early, designed, costed and managed
through the construction cycle which results in more complete cost
estimates and scopes in VA's budget submissions.
2. Design Quality - VA has also implemented policy requiring
constructability reviews as part of every design review. These reviews
identify design errors and omissions prior to construction allowing the
design to be corrected, thereby reducing changes during construction.
3. Funding - VA is implementing an integrated approach to
activation and funding to assure the project construction program is
coordinated with information technology (IT) and medical equipment
budgets and plans. This identifies the funding and planning for the
procurement of medical equipment and IT infrastructure, and
incorporating major equipment delivery and installation into the master
construction schedule.
4. Program Management and Automation - VA continues to educate
and certify project managers and deploy modern collaborative tools for
project management to ensure project cost, scope, and schedule growth
is controlled.
Further, VA has implemented the findings of the December 2009
Government Accountability Office's (GAO) report on ``VA Construction:
VA is Working to Improve Estimates, but Should Analyze Cost and
Schedule Risks'' and now performs risk analysis for potential cost and
schedule delays as part of the project design process. The
recommendations in the May 2013 GAO report on ``VA Construction: VA
Additional Actions Needed to Decrease Delays and Lower Costs of Major
Medical-Facility Projects'' are improvements that were also previously
identified and are currently being addressed.
Challenges and Accomplishments
VA bears the responsibility to manage all projects efficiently and
to be good stewards of the resources entrusted to us by Congress and
the American people.
Last year we briefed the House Veterans Affairs Committee on the
construction of the new VA medical center in Orlando. The Orlando
project includes 134 inpatient beds, an outpatient clinic, a 120-bed
community living center, a 60-bed domiciliary, parking garages, and
support facilities all located on a new site. VA expects to serve
nearly 113,000 Veteran enrollees. The construction project has advanced
from approximately 50% completion a year ago to approximately 80
percent today. While the project has been challenged by design errors
and omissions, medical equipment coordination, and contractor
performance, VA remains committed to working with our contractor to
ensure a quality project is delivered to meet the needs of Veterans and
their families.
The lessons learned from Orlando and past major construction
projects are guiding us in our management of the Denver and New Orleans
replacement hospitals. Both complexes will be full-service tertiary
care medical centers that include specialty care; outpatient clinics;
inpatient services; central energy plant and parking structures; as
well as other support services. Both facilities are under construction
with completion dates of 2015 and 2016 respectively. Lessons learned
have resulted in increased staff to assure timely project and contract
administration; partnering sessions that include VA and the
construction and design contractors; early involvement of the medical
equipment planning and procurement teams; and engagement in executive
level on-site project reviews. VA will continue to provide regular
updates to the Congressional Committees to ensure you are fully
informed on the progress of these medical centers.
While VA's major construction program has encountered challenges,
it has also completed and delivered significant projects for Veterans
in the past five years. In FY 2012 and FY 2013 to date, VA has
delivered nearly $1 billion worth of facilities. This includes 16
medical facilities, including the new Las Vegas hospital, and five new
cemeteries or cemetery expansions, the vast majority of which were
delivered without construction delay and within the appropriated funds.
VA continues work to complete 52 major construction projects to provide
the much needed facilities for our Veterans and their families.
Conclusion
VA has a strong history of delivering facilities to accomplish our
mission to serve Veterans. We continually seek innovative ways to
further improve our ability to design and construct state-of-the-art
facilities for Veterans and their families and we regularly engage in
forums composed of both the private and public sectors that discuss
best practices and challenges in today's construction industry. The
lessons learned from our past construction projects will continue to
lead to improvements in the management and execution of our capital
program as we move forward. Thank you for the opportunity to testify
before the committee today. I look forward to answering any questions
the Committee has regarding these issues.
Questions For The Record
Letter and Question Submitted by Rep. Beto O'Rourke, To: VA
May 10, 2013
The Honorable Eric K. Shinseki
Secretary
U.S. Department of Veterans Affairs
810 Vermont Avenue, NW
Washington, DC 20420
Dear Mr. Secretary:
In reference to our Subcommittee on Oversight & Investigations
hearing entitled, ``VA Construction Policy: Failed Plans Result in
Plans That Fail,'' that took place on May 7, 2013, I would appreciate
it if you could answer the enclosed hearing questions by the close of
business on June 10, 2013.
Committee practice permits the hearing record to remain open to
permit Members to submit additional questions to the witnesses.
Attached are additional questions directed to you.
In preparing your answers to these questions, please provide your
answers consecutively and single-spaced and include the full text of
the question you are addressing in bold font. To facilitate the
printing of the hearing record, please e-mail your response in a Word
document, to Jian Zapata at [email protected] by the close of
business on June 10, 2013. If you have any questions please contact her
at 202-225-9756.
Sincerely,
MICHAEL H. MICHAUD
Ranking Member
CW:jz
Questions Submitted by Representative Beto O'Rourke
Mr. Glenn D. Haggstrom
1. Please identify the factors that go into determining the
Strategic Capital Investment Planning (SCIP) priority for a facility
that is co-located with either a U.S. Department of Defense (DoD)
facility or a private or public medical center.
VA Response to Questions Submitted by Rep. Beto O'Rourke
Question Submitted by Representative Beto O'Rourke
Question: Please identify the factors that go into determining the
Strategic Capital Investment Planning (SCIP) priority for a facility
that is co-located with either a U.S. Department of Defense (DoD)
facility or a private or public medical center.
VA Response: The Department of Veterans Affairs (VA) Strategic
Capital Investment Planning (SCIP) process provides an innovative and
methodologically-rigorous approach to providing a single, integrated
list of its prioritized capital investment projects. To identify
projects that best meet the Department's critical needs, SCIP relies on
a data-driven approach that includes the use of gap analysis, strategic
capital assessment, and long-term capital planning.
For the President's 2014 Budget proposal, VA ranked each capital
project according to how well each addressed six major criterion it
identified as critical for addressing the Department's and Veteran-s'
needs. Criteria include improving safety and security for Veterans and
VA staff; fixing and extending the useful life of current
infrastructure; increasing access; right-sizing inventory; maximizing
value; and the degree to which the project addresses mission critical
initiatives that are outlined in the Department's strategic plan. SCIP
criteria also includes collaboration with the Department of Defense
(DoD). Projects that have a VA/DoD component are given priority points
that factor into the project's overall prioritization score. Once a
recommendation is made, the integrated list is reviewed by VA
leadership for approval and inclusion in the annual budget request. It
should be noted that DoD's Capital Investment Decision Model (CIDM)
also contains a scoring component in its criteria that awards incentive
points for collaborative proposals that support both Departments.
VA and DoD have a long list of collaborating in the provision of
medical care to their respective beneficiaries. Support of capital
construction collaborations with DoD comports with Departmental
initiatives. The VA/DoD Joint Executive Council established a
Construction Planning Committee (CPC) to facilitate collaboration
between the Departments and ensure an integrated approach to planning,
design, construction (major and minor), leasing and other real
property-related initiatives for shared medical facilities. This
integration enhances service delivery and assures projects that are
mutually beneficial to both Departments. In order to enhance existing
capital asset management planning processes, the CPC developed a common
approach to identify and to share common data elements and to improve
communication. In 2012, the CPC shared point-of-contact information
with both VA and DoD planners as well as three data points: population,
workload, and purchased care, for utilization in each Department's
capital planning processes. In 2013, the CPC added two additional data
elements: access and available space, to aid in the early
identification of potential joint construction and leasing
opportunities at the field level.
While supportive of collaboration, VA does not have statutory
authority to construct or lease joint VA/DoD facilities. This is a
significant impediment to the Department's ability to collaborate
effectively with DoD. To address this issue, VA and DoD have both
proposed legislation in fiscal year 2014 that would alleviate existing
roadblocks to planning and funding future joint medical facility
projects.
Additional Questions & Answers to VA from the Committee Members
1. VA previously stated that it concurred with GAO's
recommendations for improving VA's construction management practices.
As such, please provide an overview of what actions VA is taking to
address these recommendations.
VA Response: Included in GAO's report, Appendix IV, are Comments of
the Department of Veterans Affairs (VA). VA intends to address the
report recommendations as follows:
Recommendation 1: Develop and implement agency guidance for
assignment of medical equipment planner to major medical construction
projects.
VA Comment: Concur. VA concurs that medical equipment planning is
critical to mitigating project cost and schedule risks.
In coordination with the Veterans Health Administration (VHA), the
Office of Acquisition, Logistics, and Construction (OALC) is evaluating
criteria for the assignment of medical equipment planners to major
construction projects, as well as medical equipment planner project
roles and responsibilities, and will develop and implement the
appropriate VA guidance. Additionally, VA has ensured that medical
equipment planners are incorporated into the Denver and New Orleans
major construction project teams.
Recommendation 2: Develop and disseminate procedures for
communicating to contractors clearly defined roles and responsibilities
of VA officials that manage major medical facility projects,
particularly the change order process.
VA Comment: Concur. VA concurs with the importance of establishing
and communicating clearly defined roles and responsibilities,
particularly with respect to the change order process.
VA currently addresses the roles and responsibilities under the
contract with the designer at the design kickoff meetings and with
construction contractors at the pre-construction conference. Roles and
responsibilities relative to changes are discussed in detail and
followed in writing. The contracting officer provides a letter
specifically naming individuals with the authority to execute changes
and the limits of their authority. The contractor is required to sign
the letter, acknowledging understanding of the stipulated authorities
and limits.
VA's project management plan (PMP) template requires the creation
of a communications plan and matrix to assure clear and consistent
communications with all parties. The communications plan must address
the following:
a. generation, collection, dissemination, and storage of project
information;
b. regular project communication, such as meetings and in-
progress reviews;
c. frequency and method of communication (e.g., e-mail, phone);
and
d. stakeholder roles and responsibilities. An appendix to the
plan provides more specific information on the development of the plan
and provides a sample of a typical communications plan matrix. VA will
continue to review and define these communications plans and develop
procedures to ensure distribution to all the stakeholders.
VA has also added a Construction Peer Excellence Review to assure
effective communication and collaboration are incorporated on projects
during construction. This program is an adaptation of the General
Services Administration (GSA) program. VA has GSA staff on loan to
stand up the program and perform the initial reviews. The program
involves industry leaders visiting the site and assessing individual
and ``team'' effectiveness.
Recommendation 3: Issue and take steps to implement guidance on
streamlining the change order process based on the findings and
recommendations of the Construction Review Council.
VA Comment: Concur. VA is developing and will implement guidance to
streamline the change order process to reduce review time and increase
proactive action. These strategic activities include:
a. Establishing time goals for processing change orders and
modifications to the contract. These time goals for processing will
clearly convey to the staff the acceptable performance level. These
time goals will be benchmarked with other Federal agencies to assure VA
incorporates best practice initiatives; and
b. Standing up a metrics program that will allow leadership to
monitor change order processing time in order to affect resources to
bring the change order processing time within acceptable standards.
In order to immediately streamline the process, VA has placed
contracting staff on-site in New Orleans, Orlando, Denver, Manhattan,
and Palo Alto and has additional contracting officers available to
deploy to any site requiring support to shorten review and processing
time. Additionally, VA has hired four additional attorneys dedicated to
the major construction program. These attorneys are being integrated
into the project teams to assure timely counsel and review of actions.
2. In response to GAO's recommendation to develop and disseminate
procedures for communicating to contractor's clearly defined roles and
responsibilities of VA officials responsible for managing major
medical-facility projects, VA states that it will develop procedures to
ensure distribution to all stakeholders. Please explain what these
procedures might include to ensure all stakeholders are made aware of
these roles and responsibilities.
VA Response: Please refer to response to Question 1, Recommendation
2.
3. In response to VA's concerns with GAO's methodology, VA
recommends using an alternative methodology such as calculating the
estimated completion date from when the construction contract was
awarded, rather than when the project was first submitted to Congress.
Can you please explain this methodology and why you think it is better
model to use?
VA Response: To clarify, VA did not recommend an alternative
methodology. Rather, VA requested GAO to consider and include
additional cost and schedule information that provides a more
comprehensive perspective regarding changes to construction
requirements and their impact on initial cost and schedule estimates.
VA detailed this request in its March 27, 2013 response to the draft
GAO report, and provides the same explanation below.
VA has significant concerns with Tables 3 and 5 of the GAO report
regarding the calculation of cost increases and schedule delays.
Designs, initial cost estimates, and schedule completion dates are
developed years prospectively, well before Congress appropriates
funding and the contract to construct is awarded, which determines
initial cost and ultimate completion date of the construction project.
For example, GAO referenced numerous cost increases in the Denver
project, which in some cases were driven by a change in requirements;
however, they failed to mention that during the mid-2000s (i.e., 2004-
2008), the construction market was experiencing extremely high cost
escalation which greatly contributed to the project's overall cost
increases. This was highlighted in the prospectus submitted for the
fiscal year 2008 budget.
As another example, Orlando indicated a completion date of April
2010 in the first prospectus included in the budget (referred to
throughout the report as ``Initial Estimated Completion Date'').
However, Orlando did not receive its final funding for the main
hospital building until fiscal year 2010, making it impossible to
complete the project any time during that fiscal year.
As a result, VA asked GAO to consider and include a clarifying/
amplifying footnote to the Initial `Estimated Completion Date' column
of Tables 3 and 5, as follows, ``The dates represented here are from
the initial budget prospectus, which assumed receipt of full
construction funding within one to two years after budget submission.
In some cases, construction funding was phased over several years, and
the final funding was received several years later.''
A more accurate depiction of the project cost and construction
schedule would be to make a comparison between the total appropriations
received and the current total estimated cost. For schedule issues, a
more accurate comparison would be the initial completion date
established at the award of construction contract and the actual or
estimated construction contract completion date.
Therefore, VA recommended adding the table below to supplement
Table 3:
[GRAPHIC] [TIFF OMITTED] T2234.002
a. Considering that VA's estimates are provided to Congress to
authorize and appropriate funds to projects, please discuss the
validity of these initial estimates?
VA Response: The initial project construction cost estimates are
valid, based on the situation at the time of submission; however, as
noted above, the time of these initial estimates may precede actual
appropriation by several years, during which significant changes in
requirements (i.e., Veterans' needs, material and labor costs, and
market pricing) may necessitate adjustments to cost and schedule.
b.What steps has VA taken to develop accurate cost estimates?
VA Response: As noted in the November 2012 Construction Review
Council report, VA began requiring that major construction projects
reach 35 percent design completion prior to budget submission. The 35
percent design threshold will establish a true baseline cost estimate,
reflective of all requirements, with the benefit of engineering
studies. Furthermore, the 35 percent design threshold incorporates user
group input, thus ensuring a coordinated facility approach.
c.Would VA's recommended methodology account for any delays
experienced prior to awarding the construction contract?
VA Response: To reiterate, VA did not recommend an alternative
methodology; VA requested the inclusion of additional relevant cost and
estimate data. VA believes that providing the above table based on
final appropriations, along with Tables 3 and 5 of the report, based on
initial budget estimates provides specific context and helps account
for delays experienced prior to award of construction project
contracts.
4. In response to GAO's recommendation to develop and disseminate
procedures for communicating to contractor's clearly defined roles and
responsibilities of VA officials responsible for managing major
medical-facility projects, VA states that it will develop procedures to
ensure distribution to all stakeholders. Please explain what these
procedures might include to ensure all stakeholders are made aware of
these roles and responsibilities.
VA Response: Please refer to response to Question 1, Recommendation
2.
5. Where are the contracting officers located?
VA Response: Contracting Officers (CO) in support of OALC's major
construction program are currently located at four regional offices
(National Region, Washington, DC; Eastern Region, Silver Spring,
Maryland; Central Region, North Chicago, Illinois; Western Region, Mare
Island, California), and at the project sites in Denver, Coloardo; New
Orleans, Los Angeles; Orlando, Florida; and Palo Alto, California. OALC
has Administrative Contracting Officers (ACO) who are Senior Resident
Engineers (SRE) on every construction site. The ACOs/SREs hold Level I
contracting warrants and have the authority to issue contract changes
up to $100K each.
a. If long distance, how well does the long-distance management
model work when the Contracting Officer has the ultimate responsibility
to ensure this gets done on time and within budget for the job site?
VA Response: The acquisition team is comprised of a Project Manager
(PM), CO and ACO. PMs hold a Federal Acquisition Certification for
Program and Project Managers (FAC-P/PM) and ACOs hold a Federal
Acquisition Certification for Contracting (FAC-C). The COs maintain
close communications with on-site ACOs, PMs and SREs. The COs visit the
project site as needed; have regularly-scheduled meetings with the
contractors both in person and using available technology, and; hold
conferences, review progress status reports, and participate in weekly
progress meetings.
b. How many projects are the Contracting Officers responsible for?
VA Response: The number of COs varies from site to site, depending
on the demands of the project. The average workload is four to six
projects per CO.
6. Has the VA developed specific guidance on implementing the
recommendations of the Construction Management Review Council?
VA Response: Yes, VA has developed specific guidance on
implementing the recommendations of the Construction Review Council
(CRC).
a. Please provide this committee with a copy of that implementation
plan.
VA Response: VA has a draft Capital Programs Improvement Plan
(CPIP) which details VA's plan of action to implement the CRC report
requirements. This plan has been drafted in coordination with the
appropriate internal stakeholders and with the oversight of the former
Deputy Secretary of VA. The draft CPIP is currently going through
formal internal VA review and approval and VA will provide a copy upon
completion. In the interim, progress continues to be made to close the
CRC recommendations.
b. Please provide a copy of the Construction Management Review
Council's report from November 2012.
VA Response: A copy of the Construction Review Council report was
provided to Congressional committees, including HVAC, on January 23,
2013. See Attachment A.
7. What obstacles prevent VA from completing major medical-facility
projects on time and within cost?
VA has outlined its cost and schedule challenges in completing
major medical facilities in the CRC Report. VA is working to eliminate
these challenges and improve its delivery of major medical facility
projects, on time and within budget.
8. Can you describe in greater detail the problems you found with
the way change orders are processed? When does VA plan on completing
the development and implementation of new guidance concerning change
orders?
VA Response: VA's change order process involves several levels of
internal and external review to ensure due diligence is taken. VA's
review of the process found several opportunities for improvement in
the following areas:
1. Construction change orders require analysis against the
contractor's Critical Path Method (CPM) project schedule. VA in-house
expertise was over-extended, and this contributed to delays in
analyzing time extension requests. VA is in the process of hiring CPM
scheduler consultants for on-site support starting on the large
projects. VA also has plans to maximize use of existing Indefinite
Delivery/Indefinite Quantity contracts for additional support.
2. VA has taken several steps to address any delays attributed
to Office of General Counsel reviews. OALC's Senior Procurement
Executive granted individual deviations from VA Acquisition Regulation
(VAAR) 801.602-83 (concerning the documents submitted for legal or
technical review on contract modifications) for the Denver, New
Orleans, and Orlando projects. The VAAR requires legal review of all
unilateral contract modifications when one or more of the following
conditions are met:
The total modification value is $100,000 or more.
The modification is for a time extension of sixty (60)
days or more.
The contractor takes exception to VA's accord and
satisfaction language.
The individual deviations granted exemption from legal review
modifications with a value of $250,000 or less, and with time
extensions of no more than sixty (60) days. The deviations for these
projects provided an opportunity to expedite contract modifications
under $250,000. In addition, VA has made additional positions available
within the Office of General Counsel (OGC) to allow additional staffing
to assist in processing reviews. This has increased the ability of COs,
ACOs and SREs to process change orders.
3. VA encountered Defense Contract Audit Agency (DCAA) audit
delays on contractor's proposals. OALC received a VAAR deviation for a
third-party audit through the General Services Administration to
mitigate dependence on DCAA. VA also engaged in a service agreement
with VA Office of the Inspector General to assist OALC with the audit
demands.
4. In order to meet project demands due to the hiring problems,
VA has temporarily assigned COs and ACOs/SREs with warrant authority to
support the Denver project and complete the review of contracting
modifications. There are contract specialists and one additional CO
supporting the New Orleans project on-site. At the Orlando project, in
addition to the onsite ACOs/SREs and a contract specialist, the CO
travels to the site every other week.
5. VA is in the process of developing internal project control
measures to monitor progress and expedite the change order process.
9. What actions can VA take if a prime contractor is not paying a
subcontractor on time or at all for work that is completed?
VA Response: VA requires all prime contractors provide a payment
bond as required by the Miller Act (40 U.S.C. Sec. Sec. 3131-3134).
The performance bond guarantees the United States that the construction
work will be performed to completion. The payment bond assures payment
to subcontractors and suppliers supplying labor and materials in the
course of performance of the contract. Any subcontractor or supplier
who has so furnished labor or material under a contractual relationship
with the contractor and who has not been paid in full within ninety
(90) days after the last labor was performed or material supplied, may
bring suit on the payment bond for the unpaid balance. Subcontractors
and suppliers to second or lower-tiered subcontractors are not
protected by the Miller Act. VA routinely provides the bond information
to subcontractors that allege non-payment. VA also engages the prime
contractor on all non-payment issues brought forward by subcontractors
and reminds the prime contractor of its responsibility to pay
subcontractors in a timely manner from the money VA provides for
progress payments. Continued non-payment will impact the prime's final
performance evaluation.
10. VA states that it is currently evaluating criteria for
assigning medical equipment planners to major construction projects and
will later develop and implement appropriate guidance for VA. What
criteria are being weighed and when does VA expect to make a final
decision on the matter?
VA Response: VA has directed that all major medical projects employ
a medical planner. The medical planner will be provided by the designer
and continue with the project through construction.
VA's goal is timely procurement of medical equipment. VA sent the
following guidance to all project managers on May 15, 2013:
``Effective immediately, all medical projects that involve the
medical center procuring medical equipment to be installed during the
construction will retain the services of a Medical Equipment Planner.
The Medical Equipment Planner services shall begin during design and
continue through construction. The Medical Equipment Planner will work
with the medical center Activation Team and provide reports to the
Project Manager through the Design Manager and Senior Resident
Engineer.''
The Medical Equipment Planner is to provide the Project Manager
with the information to update the Integrated Master Schedule and will
provide advance notice of delays so the Project Manager has the
opportunity to implement mitigation measures.
Projects under construction and over 40 percent complete are
considered far enough along that they do not need to hire Medical
Equipment Planner services. Medical Equipment Planners are not required
for parking structures, central energy plants, or other projects that
do not include medical equipment. The Medical Equipment Planner role is
being incorporated into the Project Management Plan.
VA Central Office will issue a formal set of instructions by end of
July 2013.
11. How does the VA deal with the volatility of the construction
market as experienced in Las Vegas?
a. In its assessment of the Las Vegas medical-facility project, GAO
notes that, ``As construction of the medical facility progressed, the
economic recession that began in 2008 drove construction costs lower
than what was estimated. As a result, VA was able to add features back
into the project that had been eliminated and still stay on budget.''
What happens when the construction market picks back up and costs once
again increase?
VA Response: VA includes an allowance for cost escalation in every
project estimate. OALC performs local market surveys for each major
project area to keep abreast of factors that may affect construction
costs and contractor bids. OALC also requires the design and Architect-
Engineering firm to submit a local market survey with each design
submission. Escalation factors are based upon these surveys and Office
of Management and Budget (OMB) guidance. VA also structures Requests
for Proposals to include deductive alternate bids that may be exercised
in the event that bids exceed available funds.
The years just prior to 2008 were a period of high cost escalation.
Escalation rates far exceeded OMB projections and escalation allowances
used by Federal agencies across the board. In order to mitigate market
escalation, value engineering was conducted to reduce the cost of the
Las Vegas VA Medical Center (VAMC) and all other projects under design
during that period. In 2008 the construction market abruptly changed
from one of hyper-escalation and little competition to one of hyper-
competition and plummeting costs. This amplified the cost savings of
value engineering measures that had been taken and resulted in project
bids far below budget.
Currently there are no indications that escalation will return to
the double-digit rates experienced in the years immediately preceding
the recession. All market surveys and industry analyst projections
indicate escalation will be below five percent annually for the next
three to five years. Projects in development include appropriate
allowances for escalation based on their projected schedules. Costs may
exceed current budget estimates should projects be delayed beyond the
projected schedules. Value engineering measures would be taken and
project scopes may need to be reduced.
Question 12: In the recent GAO report, it was noted how additional
phases of the Las Vegas medical center project - specifically the
upgrade to the women's clinic - have pushed the completion date back to
June 2014. As female Veterans account for approximately 10 percent of
the overall Veteran population, can you explain why the decision was
made mid-construction to upgrade the women's clinic?
VA Response: VA completed the construction documents used to award
the construction contract for the new medical center on May 22, 2008.
The standards used in the design of the Women's Clinic were from VHA
Handbook 1330.1, dated July 16, 2004. VA updated this VHA handbook on
May 21, 2010, to incorporate new standards for the delivery of health
care to Women Veterans. Since the new medical center tower is still
under construction, the Las Vegas VAMC decided to pursue upgrading the
Women's Clinic prior to the opening. On July 21, 2011, the Las Vegas
VAMC requested approval from VA's Capital Asset Board to upgrade to the
Women's Clinic to meet the new standards. The request was approved. VA
has proceeded with the design and construction.
Additionally, construction of four large Primary Care Clinics (PCC)
was underway. Timing of construction at these PCCs allowed for
modifications to meet these increased privacy standards. Change orders
were issued to the three contractors adding the individual restrooms to
four exam rooms at each PCC with minimal cost and no delay in schedule.
The PCCs currently provide care to female Veterans until the new
medical center can be completed. This has led to a good response from
female Veterans enrolled in the program with improved convenience and
access. The remodel of the Women's Health Center at the medical center
has not delayed or interfered with the activation of the rest of the
facility.
Question 12a: Did the VA utilize the women stakeholders in
designing the clinic?
VA Response: Yes. Throughout the design, women stakeholders
participated in all user group meetings and VA solicited, reviewed, and
incorporated comments/suggestions in the design.
13. Please provide a status update on the Orlando, New Orleans, and
Denver projects? When do you anticipate these projects will be
completed? What major obstacles still remain for each project, if any?
VA Response: Attached are the April 2013 fact sheets for the Denver
(Attachment B), Orlando (Attachment C), and New Orleans (Attachment D)
major construction projects, which include current project status and
any major obstacles. VA is finalizing internal review of the May 2013
fact sheets, and will provide immediately after internal clearance. VA
will continue to provide this information monthly.