“Building VA’S Future – Confronting Persistent Challenges in VA’S Major Construction and Lease Programs”
November 20, 2013
RAYMOND C. KELLEY, DIRECTOR
NATIONAL LEGISLATIVE SERVICE
VETERANS OF FOREIGN WARS OF THE UNITED
COMMITTEE ON VETERANS’ AFFAIRS
UNITED STATES HOUSE OF REPRESENTATIVES
“Building VA’S Future – Confronting
Persistent Challenges in VA’S Major Construction and Lease Programs”
WASHINGTON, D.C. November 20, 2013
MR. CHAIRMAN AND MEMBERS OF THE
behalf of the men and women of the Veterans of Foreign Wars of the United States
(VFW) and our Auxiliaries, thank you for the opportunity to submit our views
regarding the Department of Veterans Affairs (VA) major construction and
capital leasing projects.
vastness of VA’s capital infrastructure is rarely fully visualized or
understood. VA currently manages and maintains more than 5,600 buildings and
almost 34,000 acres of land. Although VA has decreased the number of critical
infrastructure gaps, there remain more than 3,900 gaps that will cost between
$54 and $66 billion to close, including $10 billion in activation costs.
of underfunding has led to a major construction backlog that has reached
between $19 billion and $ 23.3 billion. There are currently 21 Veterans Health
Administration (VHA) major construction projects that have been partially
funded dating back to 2007. In the Administration’s budget request for FY 2014,
VA requested funding for only one project.
The total unobligated amount for all currently budgeted major construction
projects exceeds $2.9 billion.
Yet, the total budget proposal for FY 2014 major construction accounts was less
than $342 million.
finish existing projects and to close current and future gaps, VA will need to
invest at least $23.2 billion over the next 10 years.
At current requested funding levels, it will take more than 67 years to
complete VA’s 10-year plan.
VA’s 49 current major medical facility construction projects on which there is
data, 23 are over their initial cost estimate, 21 are at cost and five are
under cost. These 49 facilities have a total cost overrun of $2.9 billion. Some
of the changes in cost can be attributed to a change in the size of the
facility or the scope of care it will deliver, but many of these cost overruns
are a result of poor communication with the general contractors. In addition to
cost overruns, 24 of the 29 projects that have been initiated have gone past
their initial estimated completion date, while only five have been delivered on
of these delays are a result of poor communication between VA and the general
contractors. Not having defined roles and responsibilities for each VA official
that manages portions of major construction projects, particularly within the
change order process, causes contractors to get permission from one VA employee
only later to be denied by a different employee. Failing to place medical
equipment planners at each major construction site has also led to construction
errors and change orders that would not have been necessary if the planner
would have been on site. The lack of a project management plan makes it
difficult to keep both the contractor and VA on the same page during the
VFW believes VA could improve its major construction projects by changing to an
architect-led design-build process. VA currently employs two project delivery
methods: Design-bid-build and design-build. Design-bid-build project delivery
is appropriate for all project types. Design-build is generally more effective
when the project is of a low complexity level. It is critical to evaluate the
complexity of the project prior to selection of a method of project delivery.
is the most common method of project design and construction. In this method,
an architect is engaged to design the project. At the end of the design phase,
that same architect prepares a complete set of construction documents. Based on
these documents, contractors are invited to submit a bid for construction of
the project. A contractor is selected based on this bid and the project is
constructed. With the design-bid-build process, the architect is involved in
all phases of the project to insure that the design intent and quality of the
project is reflected in the delivered facility. In this project delivery model,
the architect is an advocate for the owner.
design-build project delivery method attempts to combine the design and
construction schedules in order to streamline the traditional design-bid-build
method of project delivery. The goal is to minimize the risk to VA and reduce
the project delivery schedule. Design-build, as used by VA, is broken into two
phases. During the first phase, an architect is contracted by VA to provide the
initial design phases of the project, usually through the schematic design
phase. After the schematic design is completed, VA contracts with a contractor
to complete the remaining phases of the project. This places the contractor as
the design builder.
particular method of project delivery under the design-build model is called
contractor-led design-build. Under the contractor-led design-build process, the
contractor is given a great deal of control over how the project is designed and
completed. In this method, as used by VA, a second architect and design
professionals are hired by the contractor to complete the remaining design
phases and the construction documents for the project. With the architect as a
subordinate to the contractor, rather than an advocate for VA, the contractor
may sacrifice the quality of material and systems in order to add to his own
profits at the expense of VA. In addition, much of the research and user
interface may be omitted, resulting in a facility that does not best suit the
needs of the patients and staff.
of contractor-led design-build has several inherent problems. A shortcut design
process reduces the time available to provide a complete design. This provides
those responsible for project oversight inadequate time to review completed
plans and specifications. In addition, the construction documents often do not
provide adequate scope for the project, leaving out important details regarding
the workmanship and/or other desired attributes of the project. This makes it
difficult to hold the builder accountable for the desired level of quality. As
a result, a project is often designed as it is being built, compromising VA’s
design standards. Contractor-led design-build forces VA to rely on the contractor
to properly design a facility that meets its needs. In the event that the
finished project is not satisfactory, VA may have no means to insist on
correction of work done improperly unless the contractor agrees with VA’s
assessment. This may force VA to go to some form of formal dispute resolution,
such as litigation or arbitration.
alternative method of design-build project delivery is architect-led
design-build. This model places the architect as the project lead rather than
the builder. This has many benefits to VA, such as ensuring the quality of the
project, since the architect reports directly to VA. A second benefit to VA is
the ability to provide tight control over the project budget throughout all
stages of the project by a single entity. As a result, the architect is able to
access pricing options during the design process and develop the design
advantage of architect-led design-build is in the procurement process. Since
the design and construction team is determined before the design of the project
commences, the request-for-proposal process is streamlined. As a result, the
project can be delivered faster than the traditional design-bid-build process.
Finally, the architect-led design-build model reduces the number of project
claims and disputes. It prevents the contractor from “low-balling,” a process
in which a contractor submits a very low bid in order to win a project and then
attempts to make up the deficit by negotiating VA change orders along the way.
has also fallen behind on awarding the seven health care center leases that
were authorized by Congress in 2009. Currently, four of the seven leases have
been awarded, but none of the facilities are operational. This has occurred because
VA lacks the guidance on how to manage the purchase process of projects of this
size. Before these leases were authorized, VA only had guidance for projects
that were much smaller in scope. However, they used this guidance to plan the
site selection and award the contract.
October 22, 2013, the VA Office of the Inspector General (IG) found that site
selection alone should have taken an average of 2.5 times the length of time as
the guidance they were using recommended. Additionally, VA could not accurately
account for how much has been spent to date on the health care center projects,
and VA will not be able to fully account for costs until an effective central
cost tracker is put in place.
IG provided VA with four recommendations to improve the timeliness and cost
management issues that resulted from the lack of guidance for lease projects of
this size. The VA has concurred with the recommendations and is in the process
of developing the appropriate guidance and transparency for future health care
VA has taken steps to improve their major construction and health care center
leasing projects, but small improvements over a long period of time will not be
sufficient. If VA cannot drastically improve its major construction operations,
it may be time for VA to ask for and receive assistance from outside its own
agency to get its construction projects on track. VA and the Department of the
Army (DA) currently have an Interagency Agreement (IAA) that allows VA to
request assistance from DA on capital planning, design, engineering, and
construction management services. It is unclear to what extent VA and DA have
worked together under this IAA, but it seems it could be central in developing
and maintaining VA’s major construction programs in the future.
Chairman, this concludes my testimony and I look forward to any questions you
or the Committee may have.
Department of Veterans Affairs, FY 2013 Budget Submission Construction and 10
year Capital Plan, Vol. 4 of 4, February 2012, p. 8.1-1.
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