[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]








          A REVIEW OF VETERANS AFFAIRS MAJOR LEASE PROCUREMENT

=======================================================================

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON NATIONAL SECURITY

                                 OF THE

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 25, 2015

                               __________

                           Serial No. 114-39

                               __________

Printed for the use of the Committee on Oversight and Government Reform



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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                     JASON CHAFFETZ, Utah, Chairman
JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland, 
MICHAEL R. TURNER, Ohio                  Ranking Minority Member
JOHN J. DUNCAN, Jr., Tennessee       CAROLYN B. MALONEY, New York
JIM JORDAN, Ohio                     ELEANOR HOLMES NORTON, District of 
TIM WALBERG, Michigan                    Columbia
JUSTIN AMASH, Michigan               WM. LACY CLAY, Missouri
PAUL A. GOSAR, Arizona               STEPHEN F. LYNCH, Massachusetts
SCOTT DesJARLAIS, Tennessee          JIM COOPER, Tennessee
TREY GOWDY, South Carolina           GERALD E. CONNOLLY, Virginia
BLAKE FARENTHOLD, Texas              MATT CARTWRIGHT, Pennsylvania
CYNTHIA M. LUMMIS, Wyoming           TAMMY DUCKWORTH, Illinois
THOMAS MASSIE, Kentucky              ROBIN L. KELLY, Illinois
MARK MEADOWS, North Carolina         BRENDA L. LAWRENCE, Michigan
RON DeSANTIS, Florida                TED LIEU, California
MICK MULVANEY, South Carolina        BONNIE WATSON COLEMAN, New Jersey
KEN BUCK, Colorado                   STACEY E. PLASKETT, Virgin Islands
MARK WALKER, North Carolina          MARK DeSAULNIER, California
ROD BLUM, Iowa                       BRENDAN F. BOYLE, Pennsylvania
JODY B. HICE, Georgia                PETER WELCH, Vermont
STEVE RUSSELL, Oklahoma              MICHELLE LUJAN GRISHAM, New Mexico
EARL L. ``BUDDY'' CARTER, Georgia
GLENN GROTHMAN, Wisconsin
WILL HURD, Texas
GARY J. PALMER, Alabama

                    Sean McLaughlin, Staff Director
                 David Rapallo, Minority Staff Director
     Art Arthur, Staff Director, Subcommittee on National Security
                           Sarah Vance, Clerk
                   Subcommittee on National Security

                    RON DESANTIS, Florida, Chairman
JOHN L. MICA, Florida                STEPHEN F. LYNCH, Massachusetts, 
JOHN J. DUNCAN, JR., Tennessee           Ranking Member
JODY B. HICE, Georgia                ROBIN KELLY, Illinois
STEVE RUSSELL, Oklahoma, Vice Chair  BRENDA L. LAWRENCE, Michigan
WILL HURD, Texas                     TED LIEU, California
















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on June 25, 2015....................................     1

                               WITNESSES

Ms. Stella Fiotes, Executive Director, Office of Construction and 
  Facilities Management, U.S. Department of Veterans Affairs, 
  Accompanied by Mr. Norbert Doyle, Chief Procurement and 
  Logistics Officer, Veterans Health Administration, U.S. 
  Department of Veterans Affairs
    Oral Statement...............................................     4
    Written Statement............................................     5
Mr. Dave Wise, Director of the Physical Infrastructure Team, U.S. 
  Government Accountability Office
    Oral Statement...............................................     6
    Written Statement............................................     7
Mr. Jerry Cameron, Assistant County Administrator, St. Johns 
  County, Florida
    Oral Statement...............................................     7
    Written Statement............................................     8

                                APPENDIX

A Sketch of Events Surrounding the Relocation of the Saint Johns 
  County Veteran's Community Based Outpatient Clinic.............    18
A letter to The Hon. Ron DeSantis from William Dudley............    22
A letter to The Hon. Ron DeSantis from Richard Lofgren...........    24

 
          A REVIEW OF VETERANS AFFAIRS MAJOR LEASE PROCUREMENT

                              ----------                              


                        Thursday, June 25, 2015

                  House of Representatives,
                 Subcommittee on National Security,
              Committee on Oversight and Government Reform,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 2:01 p.m., in 
Room 2154, Rayburn House Office Building, Hon. Ron DeSantis 
[chairman of the subcommittee] presiding.
    Present: Representatives DeSantis, Hice, Hurd and Lieu.
    Mr. DeSantis. The subcommittee on National Security will 
come to order. Without objection, the chair is authorized to 
declare a recess at any time.
    The Department of Veterans Affairs operates one of the 
Nation's largest healthcare delivery systems. To help meet the 
changing medical needs of the veteran population, the VA has 
increasingly leased medical facilities to provide healthcare to 
veterans. This hearing will review the process by which the VA 
leases outpatient clinics.
    Through the examination of specific cases, such as the 
community-based outpatient clinic at St. Johns County Florida, 
we will aim to identify inefficiencies in the lease procurement 
process in order to formulate solutions that will benefit 
veterans who seek access in nearby, modern medical facilities.
    The VA's Office of Construction and Facility Management 
stated in a VA fact sheet that major lease projects for 
replacement or new medical facilities are ready to serve 
patients within 5 years from the, ``start date.'' GAO report, 
though, on this topic from April 2014 revealed that 39 of the 
41 projects reviewed with the contract value of about $2.5 
billion experienced schedule delays ranging from 6 months to 
13.3 years, with an average delay of 3.3 years.
    With respect to the outpatient clinic surveyed in the GAO's 
report, 94 percent of the delays occurred prior to signing the 
lease agreement. This means that the vast majority of delays 
occurred during the planning phase, not during construction or 
renovation of new outpatient clinics. Costs also increased for 
all 31 lease projects for which VA had complete cost data, 
primarily due to delays and changes to the scope of the 
project. First-year rents increased a total of $34.5 million, 
an annual cost that will extend for the life of the lease 
normally for 20 years.
    Some specific examples help bring these statistics to life. 
The outpatient clinic in Austin, Texas, experienced the largest 
size and cost increase from the time the authorization for the 
clinic was approved by Congress. The size increased from 85,000 
square feet to 135,000 square feet during its first renovation, 
and increased during a second renovation a final total of 
185,000 square feet.
    The total first-year cost tripled from $6.2 million to 
$19.8 million. An increase of $8.4 million in the cost of the 
lease will impact the VA's annual budget for the duration of 
the 20-year lease. The outpatient clinic in Jacksonville, 
Florida, experienced the longest delay of the projects reviewed 
by GAO in their report. Due to an increase in size and the need 
to procure additional land adjacent to the existing property to 
fit the new facility, the total delay amounted to more than 13 
years.
    County officials in St. Johns County, which is the district 
that I represent, have been involved in trying to facilitate a 
new location for the veterans community-based clinic since late 
2011. The outpatient clinic in question serves 5,000 veterans. 
St. Johns County notified the VA in 2011 about the sale of the 
property, where its current outpatient clinic is located. The 
notification provided more than 3 years for the VA to procure a 
new permanent clinic site and vacate the current facility by 
March 31, 2015.
    Today, 3.5 years have passed since the initial 
notification, and the VA still has not selected a permanent 
site for its new outpatient clinic or vacated the current 
facility. After VA's lease expired for the current outpatient 
clinic in March, the VA began paying a penalty of approximately 
$50,000 per month. At the end of September, the penalty will 
double to approximately $100,000 per month.
    Without a solution for a permanent clinic in place, the VA 
is forced to construct and open interim clinic at even 
additional costs to the taxpayers. This situation is not 
supporting the services that our veterans need in my district, 
and it's not showing good stewardship of taxpayer dollars, and 
it is not unique to my district in Florida.
    So this hearing is about meeting the needs of veterans in 
my district and across the country who could benefit 
tremendously from the VA executing lease procurement in a much 
more efficient and effective manner than the examples I've 
highlighted. We look forward to hearing from our panel of 
witnesses today, as we aim to find solutions to this issue.
    And I now recognize the gentleman from California, Mr. 
Lieu, who is sitting in for Mr. Lynch, who is the ranking 
member of our subcommittee, for his opening statement. Five 
minutes.
    Mr. Lieu. Thank you, Mr. Chair.
    Let me first ask for permission to submit the opening 
statement of Ranking Member Lynch for the record.
    Mr. DeSantis. Without objection.
    Mr. Lieu. Okay. Mr. Chairman, I appreciate the opportunity 
to examine major lease projects at the Department of Veterans 
Affairs. I also want to welcome our witnesses and thank you for 
your public service.
    Ever since Secretary McDonald was confirmed last year, I 
have seen a sea change in leadership. I have seen Secretary 
McDonald take seriously the reports of deficiencies at the VA 
and work hard to try to fix them. The VA has already undertaken 
tremendous efforts to respond to recommendations made by these 
various reports, conducted its own studies on how the VA could 
improve, and implement department-wide changes.
    I am pleased to inform you of the following efforts that VA 
has completed: Elimination of redundant approval requirements. 
The VA has now eliminated the requirement that a secretary 
approve leases between $300,000 and $1 million in annual 
unserviced rent when they were already receiving approval 
through the VA strategic capital investment process. Instead of 
the redundant approval, the Secretary will be briefed regularly 
on all projects approved through that process.
    Over the past several years, the VA has also issued new 
policies and procedures in a number of areas, including leasing 
procurements, establishing requirements, procurement steps, 
pre-award vetting, compliance, and quality assurance. Many of 
the new policies and procedures issued are a result of 
recommendations made by the OIG, GAO, and congressional 
Members. So, again, the VA leadership is taking seriously 
reports made by these various agencies.
    Contract reorganization. In fiscal year 2014, the VA Office 
of Acquisition, Logistics and Construction restructured its 
contracting groups allowing for a clearer division of labor and 
decisionmaking authority between contracting officers and 
project management. In addition, leasing officials have been 
integrated into OALC's contracting arm to provide contracting 
assistance review and oversight of lease procurements.
    The VA has also engaged in standardization of GSA 
delegation requests. The VA has implemented an internal review 
and approval process for delegation requests be submitted to 
GSA to ensure consistency and completeness of submissions 
department wide.
    I've also seen significant changes within my own district 
at the West Los Angeles VA campus. After four decades of 
dysfunction, we now have the Secretary settling a major 
lawsuit, having a master plan being set up in October, having 
stakeholders come in and improve the quality of healthcare, and 
to help address homeless veterans.
    I also want to specifically thank Carolyn Clancy, Vince 
Kane, and so many others who were turning the West L.A. VA in 
my district into a model for other VAs. We're also specifically 
working with the VA on enhanced used leases, and I look forward 
to this hearing.
    With that, I yield back.
    Mr. DeSantis. Gentleman yields back.
    Mr. DeSantis. Thank you. I will hold the record open for 5 
legislative days for any members who would like to submit a 
written statement.
    We will now recognize our panel of witnesses. I'm pleased 
to welcome Mrs. Stella Fiotes, Executive Director Office of 
Construction and Facilities Management at the Department of 
Veterans Affairs; Mr. Norbert Doyle, Chief Procurement and 
Logistics Officer, Veterans Health Administration at the 
Department of Veterans Affairs; Mr. David Wise, Director of the 
Physical Infrastructure Team at the Government Accountability 
Office; and Mr. Jerry Cameron, Assistant County Administrator 
for St. Johns County, Florida, although not much longer, as I 
understand.
    Welcome to you all. Pursuant to committee rules, all 
witnesses will be sworn in before they testify. So if you could 
please rise and raise your right hand.
    Do you solemnly swear that the testimony you're about to 
give will be the truth, the whole truth, and nothing but the 
truth so help you God?
    All witnesses answered in the affirmative.
    Thank you. You may be seated.
    In order to allow time for discussion, please limit your 
testimony to 5 minutes. Your entire written statement will be 
made part of the record.
    Mrs. Fiotes will be giving one oral statement on behalf of 
both witnesses from the Department of Veterans Affairs, and she 
is recognized for 5 minutes. Go.

                       WITNESS STATEMENTS

                   STATEMENT OF STELLA FIOTES

    Mrs. Fiotes. Thank you. Good afternoon, Mr. Chairman and 
distinguished members of the committee. Thank you for the 
opportunity to discuss the Department of Veterans Affairs 
leasing program.
    The Department's main priority is to provide high-quality 
care and benefits to veterans in facilities that meet our 
mission requirements and are procured legally, constructed 
soundly, and comply with Federal regulations. In many cases, 
leasing some of those facilities rather than constructing and 
owning all medical space allows VA flexibility to best adapt to 
demographic shifts in the evolving needs of our Nation's 
veterans.
    While VA is working to deliver world-class facilities to 
best care for our veterans, we are also aggressively working to 
shorten the delivery timelines for our leases by improving and 
streamlining VA's internal and external processes and 
implementing agency-wide programmatic changes. We are also 
working with our partners in the Office of Management and 
Budget, General Services Administration, U.S. Army Corps of 
Engineers, and experts from the private sector to achieve 
maximum efficiencies and implement best practices in our 
leases.
    Even though leasing provides an essential tool in helping 
ensure veterans have access to VA care and services, we face 
limitations in our ability to deliver these leases. We are 
often unable to swiftly provide healthcare facilities and make 
decisions that are in the best interest, first, of our 
veterans, and second, of taxpayers because of the framework 
within which we operate.
    There is a long list of laws, regulations, and rules that 
frequently control and govern our efforts to deliver timely 
access to facilities and services. VA's compliance with these 
requirements narrows what could be a universe of options into a 
small, tightly-controlled box of what we are legally able to 
accomplish. When compared with the private sector, we are 
critically hamstrung by the impact of these constraints.
    Private care providers have greater freedom than VA to 
negotiate directly and to select a developer, a site, an 
architect, general contractor, and the lease terms that allows 
for the fastest possible delivery of care to patients. The St. 
Augustine community-based outpatient clinic is an example of 
how VA's timelines are affected and our options limited because 
of these factors.
    We were late starting what we knew was the required, 
lengthy, competitive process to find new space. For that, we 
accept responsibility. But soon after starting, the project was 
placed on hold while VA and GSA worked out issues related to 
VA's leasing authority. After the project resumed, we 
experienced difficulty with offers achieving operating lease 
status according to OMB Circular A-11. As a result, VA has 
requested multiple rounds of proposals from offerers.
    If we are unable to achieve operating lease status, our 
options will be further limited. In compliance with Federal 
acquisition regulations and GSA regulations, we will need to 
cancel and restart the lease procurement with different 
parameters. This does not help provide optimal services in a 
timely way to St. Johns County veterans. And while we may be 
interested in exploring a partnership with the county 
government, our legal options to do so are also limited.
    Mr. Chairman, VA is focused on providing veterans top-
quality accessible care and services in the best facilities 
possible. We take this duty very seriously and we're looking 
for ways to improve the speed, efficiency, and flexibility by 
which we provide access to care. VA has faced serious 
challenges in the execution of its leasing program in the past. 
We have learned from our mistakes and have made great strides 
recently in streamlining and managing our processes.
    Positive change is happening now. However, we can only 
change as much as we control, and we don't have control over 
many external factors that affect our processes. We believe 
changes are required to regulations governing Federal leases, 
particularly in the area of medical facilities. We need the 
latitude to act more like a private sector healthcare provider 
when it comes to establishing facilities and getting services 
to veterans when and where they need them. That's why we exist 
as a Department and we need your help to fulfill our 
obligation.
    We believe too that 4 or 5 years is too long for our 
veterans to have to wait for new clinics. We are working to 
improve our part, and we will work with Congress and others to 
come up with workable solutions to reduce the constraints that 
impact our ability to best provide veterans the timely access 
to care and services they deserve.
    Thank you for the opportunity to discuss these important 
issues. We look forward to your questions.
    Mr. DeSantis. Thank you.
    [The prepared statement of Ms. Fiotes follows:]
    [For complete submitted testimony, please see the following 
website: [https://oversight.house.gov/hearing/a-review-of-
veterans-affairs-major-lease-procurement/]
    Mr. DeSantis. The chair now recognizes Mr. Wise for 5 
minutes.

                     STATEMENT OF DAVE WISE

    Mr. Wise. Chairman DeSantis and distinguished members of 
the subcommittee, I'm pleased to be here today to discuss our 
work examining scheduled delays and cost increases at the VA's 
major-leased outpatient clinics. The clinics provide both 
primary care and various other medical and dental services.
    As of November 2013, VA's leasing program had a long-run 
liability of $5.5 billion with a total of 1,889 leases. VA's 
Office of Construction and Facilities Management Office of Real 
Property Services is responsible for acquiring land and leasing 
space for the construction of medical and medically-related 
facilities for VA and provides guidance to regional and local 
VA offices regarding real property.
    My statement today discusses, one, schedule and cost 
increases for selected VA outpatient clinics we reviewed and 
the contributing factors involved; and two, actions VA has 
taken to improve its leasing practices for outpatient clinics 
and any opportunities that may exist for VA to improve its 
management of project schedules and costs.
    This statement is based on our April 2014 report, which 
discussed 41 major outpatient clinic leases for which a 
prospectus was submitted to Congress as required by law for any 
lease over $1 million. The total contract value of these 41 
projects was $2.5 billion.
    Our report noted that VA has experienced substantial delays 
in executing new outpatient clinic-leased projects. Nearly all 
of the delays occurred in the planning stages prior to entering 
into a lease agreement. Specifically, we found that 39 of the 
41 outpatient clinic projects for which VA submitted a 
prospectus experienced schedule delays, ranging from 6 months 
to 13.3 years, with an average delay of 3.3 years. Two projects 
experienced schedule time decreases.
    Our analysis showed that 94 percent of these delays 
occurred prior to entering into the lease agreement. For all 
but one of the projects that experienced a delay, the delay 
occurred during the pre-lease agreement stage. A number of 
factors contributed to the delays, including VHA's late or 
changing requirements, site selection challenges, and outdated 
guidance.
    In addition to substantial delays, our report noted that VA 
also experienced cost increases to its outpatient clinic 
projects when compared to the costs in the project's 
prospectuses. For the 31 projects with complete cost data, 
first-year rents increased a total of $34.5 million when 
compared to prospectus cost, an annual cost which will extend 
for 20 years the life of these leases.
    The causes of the total cost increase can be attributed 
primarily to increases in the projects awarded first-year rent 
due to the schedule delays and/or changes in the design or 
scope of a project. Changes in a project's size expand the 
scope of the project requiring design changes and schedule 
delays further adding to costs. VA's made some progress in 
addressing issues with its major medical facilities leasing 
program.
    In 2012, VA formed a high-level counsel to oversee its 
capital asset program, including leasing. VA has been working 
on or planning the following improvements: Requiring detailed 
design requirements earlier in the design process to help avoid 
the delays, scope changes, and cost increases; developing a 
process for handling scope changes; providing Congress with 
more complete information on the cost to propose future lease 
projects; and refining and updating lease guidance.
    To improve the outpatient leasing program, we recommended 
the VA update VHA's guidance for leasing outpatient clinics to 
better reflect the roles and responsibilities of all VA's staff 
involved in leasing projects. VA concurred with our 
recommendation and has actions underway to implement it.
    Chairman DeSantis and distinguished members of the 
subcommittee, this completes my prepared statement, and I'd be 
pleased to respond to any questions that you may have.
    Mr. DeSantis. Thank you, Mr. Wise.
    [The prepared statement of Mr. Wise follows:]
    [For complete submitted testimony, please see the following 
website: [https://oversight.house.gov/hearing/a-review-of-
veterans-affairs-major-lease-procurement/]
    Mr. DeSantis. The chair now recognizes Mr. Cameron for 5 
minutes.


                   STATEMENT OF JERRY CAMERON

    Mr. Cameron. Thank you, Chairman DeSantis, and 
distinguished members of the subcommittee. It is a privilege to 
address you today on this important subject.
    The governing body of St. Johns County believes it is not 
just the Federal Government that has the responsibility of 
coming to the aid and assistance of those who have served this 
country, but this responsibility extends to every level of 
government.
    Up until this spring, our veterans enjoyed having a 
veterans service office located directly beside the VA's 
community-based outpatient clinic, or CBOC, where they received 
assistance in filing for their benefits and appeals. In 
addition, at the same site, veterans had access to many other 
resources through our division of Health and Human Services, 
such as food stamps, temporary assistance to needy families, 
affordable housing, credit counseling, and credit repair, 
resume development, use of computers for job search and 
communication, and a host of other services.
    This ideal arrangement ended this spring when the VA 
refused to join other service providers and move the CBOC to 
the new state-of-the-art facility built by St. Johns County.
    Almost 4 years ago, in October of 2011, St. Johns County 
first notified the VA regional office in Gainesville there was 
a potential for a sale of the existing facilities to Lowe's 
Home Improvement. The VA was kept informed as the county 
entered into a contract with Lowe's, which ultimately closed in 
March 2013. At which time, the VA was notified that the 
premises must be vacated no later than March 31 of 2015. Time 
does not permit detailing the timeline for this process, but I 
have included in your packages a sketch of that timeline.
    It became obvious in early 2014 the VA was not going to 
meet the March 31, 2015, vacation deadline and would either 
have an interruption of clinical services to our veterans or a 
delay in the construction of the new Lowe's store, a crucial 
economic development and job-producing project. By the summer 
of 2014, the county became so alarmed that it offered to build 
a separate clinic at the new site, and at one point even 
offered to relocate their own agencies so the VA could use the 
space.
    When the vacation date arrived, the VA had no other viable 
options. In order to avoid interruption of services, it fell on 
St. Johns County to negotiate an extension with Lowe's and 
devise a plan to keep the old building operational, including 
penalties and increased cost for operation. The VA's monthly 
cost went from approximately $26,000 a month to approximately 
$90,000 and will increase to approximately $135,000 a month on 
October 1 of 2015.
    In addition, taxpayers will now have to pay for site 
preparation in modular units to house a temporary clinic. This 
is the new Health and Human Services building. The VA clinic 
would have been operating out of here today had they not 
steadfastly refused any meaningful dialogue with St. Johns 
County. Given this experience, it is our fear that the VA will 
make a serious error in selecting a site for a permanent 
clinic.
    The VA has put out at least three different search area 
boundary maps, one as far south as the southern county line. To 
date, they have refused to consider population growth patterns. 
The northern portion of the county is exploding with the new 
town of Nocatee being the third fastest-growing community in 
the Nation.
    It is critical the VA not make a mistake that the veterans 
of our county will have to live with for decades to come. St. 
Johns County is still willing to provide what has always been 
the VA's best option: An opportunity to locate with other 
essential services providers in a central location of the 
county.
    In short, St. Johns County has become a classic example of 
the overall problems plaguing the VA throughout the country. 
The VA is so insular that it has not only lost touch with those 
it has intended to serve, but it has lost connection and 
accountability to the Congress created it. As an over-mature 
bureaucracy, it suffers from a policy sclerosis that denies it 
situational flexibility.
    Its focus is now on what is best for the bureaucracy and 
not what is best for the veterans it serves. The VA must once 
again become responsive to Congress and return its focus first 
and foremost to the welfare of the men and women who have 
served in our armed forces.
    I thank you again for the unique opportunity to appear 
before you, and I am confident that this proceeding is an 
important step toward finding solutions to this nation-wide 
problem. I would be pleased to answer any questions. Thank you.
    Mr. DeSantis. Thank you.
    [The prepared statement of Mr. Cameron follows:]
    [For complete submitted testimony, please see the following 
website: [https://oversight.house.gov/hearing/a-review-of-
veterans-affairs-major-lease-procurement/]
    Mr. DeSantis. The chair now recognizes himself for 5 
minutes.
    You know, it just strikes me that the folks who serve our 
country in uniform and do so honorably, I mean, they show up on 
time. They're there, report for duty, they perform their 
duties. Some of them perform very, very difficult duties. Some 
of them have the scars and the wounds to prove it. And it's 
frustrating that we're here where these delays are really a 
matter of course. And that's just unacceptable.
    Mr. Cameron, you mentioned this, but when did St. Johns 
initially notify the VA that the property where the current VA 
clinic is located was sold, and how much time did the VA have 
to relocate?
    Mr. Cameron. The VA, as well as all other agencies, after 
the closing, were notified immediately, and had 2 years in 
order to make arrangements.
    Mr. DeSantis. And they were notified that this was a 
possibility as early as 2011?
    Mr. Cameron. Actually, in October of 2011 it was first 
brought to the attention that it was a possibility, and they 
were notified again in the spring of 2012 that a contract had 
been entered into.
    Mr. DeSantis. Now, during that same time, St. Johns County 
was able to move a number of their human services. And what was 
the extent of that project? And was St. Johns able to complete 
that project within the time allotted?
    Mr. Cameron. Mr. Chairman, St. Johns County was able to 
construct that. They broke ground for that new facility in 
March of 2014. They built a 72,000-square foot facility in a 
little less than 12 months at a cost of $12 million that came 
in on time and in budget, and we actually moved our folks in, 
in less than a year after ground was broken.
    Mr. DeSantis. So, Mrs. Fiotes, has the VA selected a new 
permanent site for the outpatient clinic in St. Johns?
    Mrs. Fiotes. We have not yet----
    Mr. DeSantis. Can you hit your mic, please.
    Mrs. Fiotes. We have not yet selected a site, Mr. Chairman. 
We are in the final rounds of negotiations and value 
engineering of the current offers to see if we can reach an 
agreement with an offer that would give us an operating lease.
    Mr. DeSantis. But it has been over 3.5 years since the VA 
was first notified of this potential to be vacating. So why 
hasn't the VA found a site in that intervening period?
    Mrs. Fiotes. As I mentioned earlier, Congressman, we were 
late getting started, and for that, we accept responsibility. 
At the time we did get started, which was in early 2013, 
shortly thereafter we were put on a temporary freeze because of 
the issues that had arisen with our leasing authorities and 
GSA. That stalled us for----
    Mr. DeSantis. What did you do to try to rectify that? 
Because when we were notified of this problem, we went to the 
GSA, and they were very interested in working with us and 
providing a waiver if necessary. And so it was--I was expecting 
this to be this big issue, but they seemed to be willing to 
work with us.
    Mrs. Fiotes. Unfortunately, that was not our experience. 
All our leases, not just this lease, every single lease, minor 
and major, was put on hold until we could come to an 
understanding with GSA----
    Mr. DeSantis. And did you raise that issue with the 
Congress?
    Mrs. Fiotes. I cannot remember specifically if we raised it 
with the Congress.
    Mr. DeSantis. Mr. Doyle, without a permanent site selected, 
and given the need to continue uninterrupted services to the 
veteran, you're now going to have to build an interim 
outpatient clinic. Now, does this strike you as an efficient 
use of taxpayer dollars given the fact that VA has had a 
significant period of time to build the permanent facility or 
choose a permanent facility?
    Mr. Doyle. Mr. Chairman, I think the VA has stepped up and 
acknowledged that this is not the optimal solution that we had 
and wanted. I'm happy to say, though, that of the interim 
lease, my contracting officers working with the program office 
that it is on schedule. We are confident we will deliver the 
services by the end of the summer so that veterans----
    Mr. DeSantis. All right. Look, I hope so. I mean, we've 
been told that this was going to happen in the past on a 
certain schedule, and it hasn't happened.
    I'm concerned also about the taxpayer penalties that the 
taxpayer is now going to have to pay. The lease expired March 
of this year, and so now you're in a situation where you're 
paying $50,000 a month. That is then going to go up to, I 
believe, at least $100,000 a month. And so given that there was 
a lot of time and a lot of notice, how is that a good 
stewardship of taxpayer dollars?
    Mr. Doyle. Well, I would say, Mr. Chairman, that it is not 
a good stewardship of the chairman dollars, and it's not what I 
think in hindsight the situation we would have endeavored to 
find ourselves in.
    Mr. DeSantis. Now, Mr. Cameron, you have informed us that 
there is a footprint for a VA outpatient clinic at the location 
of the new Health and Human Services campus in St. Johns 
County. And you say that the county is still willing to build 
the clinic at that site and lease it to the VA at the same rate 
per square foot as the recently-expired lease.
    And you also say that the facility will be built to the 
VA's floor plan design and comply with the VA's elevation 
requirements. You've stated this is not financially 
advantageous to the county, but, you believe it's the best 
outcome for local veterans. How has the VA responded to that 
offer?
    Mr. Cameron. As far as I know, Mr. Chairman, St. Johns 
County is not in consideration for a permanent site. There have 
been a number of reasons stated that we were not in 
consideration. And my last conversation while we were 
negotiating the holdover at the existing facility, when I said 
that St. Johns County stands ready to step up and provide this 
facility for the VA, I was told--and this is a direct quote--
``that is not happening.''
    Mr. DeSantis. Now, one of the VA's arguments for not being 
willing to accept the county's offer to have the permanent 
clinic within the HHS building is the 100-year flood zone 
issue. Now, did the county have similar concerns about building 
its own facility in this flood zone?
    Mr. Cameron. Mr. Chairman, that building is built on our 
campus, and we have hundreds of millions of dollars' worth of 
investment in there. We have to be approved by five different 
agencies in order to build. We are not going to build a 
building in the floodplain.
    Mr. DeSantis. And did you mitigate the concern of flooding 
when you chose this site and constructed the facility?
    Mr. Cameron. Yes, sir, we did considerable fill there.
    Mr. DeSantis. And you're willing to offer to mitigate the 
same concern if the VA clinic was there?
    Mr. Cameron. Yes, sir. We believe that the outcome is worth 
any effort we might be required to make.
    Mr. DeSantis. Now, the other argument that the VA has put 
forward is to do a demographics, that existing veteran 
population necessitates the site selection area to be south of 
the site where the current or the new HHS building is located. 
So how do you respond to the demographic argument that the VA 
has made?
    Mr. Cameron. From the beginning, Mr. Chairman, the VA has 
given us a number of different criteria that we were to proceed 
on. And by our GSI analysis in-house and use of the census 
data, we have the center of the veterans population located 
well north of the existing clinic and actually slightly north 
of our new clinic.
    Nocatee being an explosive community has got a significant 
veterans population coming in there. Veterans services are 
locating there. K-9 for Warriors just opened their new facility 
this weekend there. Wounded Warriors is looking at it as a 
possible site too. And to ignore that growth pattern is 
unconscionable.
    Mr. DeSantis. Now, Mrs. Fiotes, let me ask you this: I 
mean, this has been very frustrating for a lot of folks 
certainly in my community, and reading the GAO report, I would 
imagine that there is a lot of frustration in other communities 
all across the country. Now, you have cited some of the factors 
and constraints that limit your ability to act as rapidly as 
maybe somebody in the private sector would do.
    So my question for you is, what reforms has the VA proposed 
to Congress for us to implement so that you will no longer have 
this problem?
    Mrs. Fiotes. Congressman, I don't believe we have proposed 
a specific proposal at this point----
    Mr. DeSantis. But why not? You know it's a problem. You've 
acknowledged it's a problem. And that's part of the, I think, 
the frustration, and not just with the VA. VA has a lot of 
frustration because it's such a big bureaucracy, but what we 
find is there are always kind of excuses as to why things 
aren't done right.
    But what we don't tend to get is, okay, well, what should 
we do if you're legally constrained, tell Congress what we need 
to do to be able to free you to do your job so that the 
veterans are being served. And you're saying that the VA does 
not have a list of reforms that the Congress could implement 
right now?
    Mrs. Fiotes. None that we have shared with the Congress. 
But we are working with GSA and we are working with OMB to 
identify what improvements we might bring forward.
    Mr. DeSantis. Well, I think we need to do this as quickly 
as possible. I think time is wasting, and I think our veterans 
are being left to suffer.
    I am out of time, and I will recognize my friend from 
California.
    Mr. Lieu. Thank you.
    Having served on active duty in the Air Force in the 1990s 
and still being in the Reserves, I hit 20 years this year, I am 
passionate and concerned about veterans.
    And I just want to, first of all, say thank you, because 
you said something that is far too rare on Capitol Hill. You 
uttered the statement, ``we accept responsibility.'' Thank you 
for saying that. It tells me that you understand the challenges 
that are facing you, that you're working to make the problems 
better, and I appreciate that.
    I also note that the GAO report talks about things--April 
2014 and before that. These did predate Secretary McDonald 
coming in. They were not under his watch. So I look forward to 
the continuing leadership we are having from the Secretary.
    I do have a couple questions for you, Mrs. Fiotes. First, 
are some of these challenges facing you because you at the VA 
cannot sole source?
    Mrs. Fiotes. That is correct, Congressman. We are required 
to do our lease procurements in the competitive process because 
of the Competition in Contracting Act and because of Federal 
regulations. And, therefore, we could not take the county up on 
its offer as a sole source offer. We did ask them to 
participate when we put out the solicitation, which they did. 
They were outside of the delineated area that the VA had 
established for that solicitation.
    Our methodology for identifying the delineated area is 
different from that which the county follows. We do not follow 
political boundaries. We do not look at county limits. We look 
at catchment areas and we look at enrolled veterans. Those are 
some of the basic differences between our methodology. And that 
placed the delineated area south of the county's proposed site. 
That was the primary reason they were excluded from the initial 
competition.
    Mr. Lieu. Thank you.
    As you may know, in my district at the west Los Angeles VA 
campus, we cannot use enhanced use leases, which pretty much 
every other VA facility can. Do you believe having enhanced use 
leases would be important for the VA and your mission to help 
veterans?
    Mrs. Fiotes. Absolutely, Congressman. And Secretary 
McDonald has repeated the same as well in various venues. I 
think it would be one additional tool that we could use to help 
us take advantage of more opportunities to get facilities and 
to get private partners to help us in delivering those 
facilities. Absolutely.
    Mr. Lieu. Thank you.
    I have no further questions so I'll give you the 
opportunity if you want to clarify anything at all during this 
hearing. If not, then I will yield back.
    Mrs. Fiotes. I would like to offer one more thing, and 
that's about the delays that are mentioned in the GAO report, 
and we acknowledge those delays, and we have taken many steps, 
in addition to the ones you mentioned earlier. I think one of 
the most important things--and you noted that yourself, Mr. 
Chairman--that a lot of our delays happen in the upfront 
planning process and a lot of the changes happen there.
    We now have a much more structured process for planning 
our--not only our construction but also our major leases to 
make sure that we right size them the first time so that when 
we get the authorization we can stay with that size that we 
have. We also have a process in place to manage scope changes 
in the Department that elevates the requirement for change all 
the way up to the Secretary if it's above a certain threshold 
before we can implement such a change.
    So I think we have the right processes in place to avoid 
delays and growth such as the ones we saw in the reports--in 
the reported leases in the GAO report. And I'm confident that 
we are doing much better on that. I just wanted to point that 
out.
    Mr. Lieu. Thank you. I yield back.
    Mr. DeSantis. The gentleman yields back.
    It was interesting, because I was in Orlando when we opened 
the facility there. It's a great facility. And one of the 
speakers had got up and said: Isn't this great? He's like: 
Look, it's over budget. It hasn't been done on time. By it's 
not that over budget. It hasn't been that much over time, you 
know, given some of the other things. And so it was almost as 
if we were celebrating the fact that the cost overruns and the 
delays were of course they were there but they weren't as much 
as you would see in a typical project.
    And I know that's not limited to the VA, but I just think 
that that's not where we want to be. I mean, this should be a 
matter of course where we're getting this stuff done.
    Mr. Wise, let me ask you, that April 2014 report indicated 
that 39 of the 41 projects that GAO investigated were facing or 
faced some sort of delay. What was the nature of those delays, 
and what was the average delay?
    Mr. Wise. Well, Mr. DeSantis, the--yes. You're correct. 
First of all, there were significant delays on almost all the 
projects we looked at. And we found that basically the major 
issue that it involved was, as I think we've talked about 
throughout this hearing, was the real issue with requirements 
changing in the preplanning process. And once the requirements 
were changing, that led to this kind of a cascading effect of 
scope changes and further delays and land acquisition issues.
    So one thing all kind of fed on another resulting in what 
ended up being pretty significant delays for a number of 
projects. I think the average we ended up with was a little 
over 3.3 years, if I recall. So this was a--kind of an 
interwoven, intertwined process that led to some less-than-
optimal results.
    Mr. DeSantis. And so these are by and large pre-lease 
delays that are occurring?
    Mr. Wise. That's correct, sir.
    Mr. DeSantis. So, in other words, if you lease a property 
or you hire someone to construct a facility, there may be 
problems with that, but these are delays that are solely 
attributed to the government planning and execution initial 
process. Is that fair to say?
    Mr. Wise. That was our conclusion.
    Mr. DeSantis. Now, what about common delays. What are the 
most significant that you would see?
    Mr. Wise. Well, basically we found that--let me give you an 
example. We had, you know, just every project seemed to have 
kind of its own unique characteristics, but you find a 
situation where maybe VA had changed because they had done 
demographic studies that maybe went back a number of years. So 
you end up with a situation: Well, there was a thought that, 
well, maybe we're going to be serving a larger population than 
we thought we were, and so therefore we need a larger facility.
    So you decide to do some redesign, come up with plans for a 
larger facility. Then you say: Oh, wait a minute, now. The land 
won't support that building anymore, and the building--we need 
a bigger building for the numbers, and we need more land to 
support the buildings. So, therefore, you run into the whole 
problem. Then you have to acquire additional land, and that 
leads to, you know, all kinds of issues. The zoning and the 
stakeholder interests come into play, and sometimes there are 
problems with environmental issues when you go to another site.
    So it just leads to a whole host of complicating factors 
that the bottom line is you end up with--you can end up with 
some pretty significant delays.
    Mr. DeSantis. Now, these requirement changes that you 
mentioned, can you just explain that. I mean, this is like 
they're in the middle of this and then the requirements change 
and so it ends up prolonging everything?
    Mr. Wise. Well, they may have decided to add additional 
services, or there may be modernization of particular equipment 
that needs to be put into the place that maybe wasn't foreseen 
earlier. So therefore perhaps a particular facility now needs 
to be modified to accept this equipment. So you've got to go 
back and do some redesigning in order to make the building 
commensurate with the kind of equipment you want to put into 
it. That's one aspect of it.
    So because some of the facilities, the planning went back a 
number of years and by the time you got around to getting into 
the leasing aspect of it, you went back and realized that this 
doesn't quite fit the bill. And, again, that results in these 
kind of--when requirements change, this results in scope 
changes and further delays.
    Mr. DeSantis. Now, the delays in the report about 
determining the location of some of these sites, that struck 
me. There was, I think, a 7-year delay for the outpatient 
clinic in Las Vegas. For that Las Vegas, that delay, what was 
the reason for that?
    Mr. Wise. Well, the problem in Las Vegas was one where the 
facility was located adjacent to Nellis Air Force Base 
northeast of Las Vegas a bit. And I think the main problem they 
ran into there was that--that was unforeseen was the fact that 
there was--they were close to where the flight area was and 
there was then an environmental issue, which is pretty common 
in military bases. We've seen them in other real property work 
I've done. We often see BRAC'd military bases or other kinds of 
former bases with lots of environmental issues. And this had to 
do with aircraft and other kinds of residue that were left over 
from other kinds of activities at the base. And until you can 
get the NEPA requirements resolved, then you really can't 
proceed further with that. And so that resulted in a delay for 
constructing the Las Vegas facilities.
    Mr. DeSantis. Now, what was the longest delay in the 
report?
    Mr. Wise. I think the longest delay was about 13 years, and 
that was in the Jacksonville facility.
    Mr. DeSantis. And what was the cause of that delay?
    Mr. Wise. Well, again, that was kind of a complicated story 
with a number of factors interwoven to cause these delays. You 
had a situation where there was a parking garage that was 
supposed to be a shared facility between the city and the 
health clinic. But at the end, that fell through and, again, 
that resulted in having to acquire more land.
    Eventually they were able to acquire more land, but that 
alone took a number of years, and so until you got all that 
resolved and there were additional environmental issues, it 
just went on and on until finally it was all able to get 
resolved over a very long period of time.
    Mr. DeSantis. Now, based on the projects that you reviewed 
in your report, how would you characterize the delays, as more 
things that were outside the VA's control or more shortcomings 
in the development and planning of the basic requirements of 
the projects?
    Mr. Wise. The latter rather than the former, sir. In the 
case of the--there were certain things, in fairness to the VA, 
and when we spoke to officials there, they conveyed this to us, 
and we took that onboard. There were certain areas that really 
they didn't have particular control over. For example, in the 
Las Vegas situation, again, they ran into a NEPA problem.
    There were a couple other facilities where they ran into 
problems with either a contractor defaulted or the contractor 
didn't perform and had to be fired, and so you kind of had to 
start over again with that. But those were a relatively small 
number of cases compared to the problems we identified that 
went into the preplanning process with--that was within the 
control of VHA.
    Mr. DeSantis. Thank you. My time is expired.
    My friend from California, do you have another round of 
questions?
    Mr. Lieu. I do not.
    Mr. DeSantis. Okay. Well--we have no more members here. So 
let me just thank the witnesses for their testimony and for 
answering our questions. We really appreciate it. We hope that 
this hearing has highlighted some of the shortcomings in this 
process, you know, not just in my district, which is obviously, 
you know, a huge concern of mine. I'm concerned about this 
happening all over the country. Because there's a lot of good 
people who are potentially going to be negatively affected if 
we continue down this road.
    So thanks again. This hearing is now adjourned.
    [Whereupon, at 2:45 p.m., the subcommittee was adjourned.]


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