[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
VETERAN'S ADMINISTRATION DUBIOUS
CONTRACTING PRACTICES: SAVANNAH
=======================================================================
HEARING
before the
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
of the
COMMITTEE ON VETERANS' AFFAIRS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
MARCH 6, 2012
__________
Serial No. 112-47
__________
Printed for the use of the Committee on Veterans' Affairs
_____
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COMMITTEE ON VETERANS' AFFAIRS
JEFF MILLER, Florida, Chairman
CLIFF STEARNS, Florida BOB FILNER, California, Ranking
DOUG LAMBORN, Colorado CORRINE BROWN, Florida
GUS M. BILIRAKIS, Florida SILVESTRE REYES, Texas
DAVID P. ROE, Tennessee MICHAEL H. MICHAUD, Maine
MARLIN A. STUTZMAN, Indiana LINDA T. SANCHEZ, California
BILL FLORES, Texas BRUCE L. BRALEY, Iowa
BILL JOHNSON, Ohio JERRY McNERNEY, California
JEFF DENHAM, California JOE DONNELLY, Indiana
JON RUNYAN, New Jersey TIMOTHY J. WALZ, Minnesota
DAN BENISHEK, Michigan JOHN BARROW, Georgia
ANN MARIE BUERKLE, New York RUSS CARNAHAN, Missouri
TIM HUELSKAMP, Kansas
MARK E. AMODEI, Nevada
ROBERT L. TURNER, New York
Helen W. Tolar, Staff Director and Chief Counsel
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
BILL JOHNSON, Ohio, Chairman
CLIFF STEARNS, Florida JOE DONNELLY, Indiana, Ranking
DOUG LAMBORN, Colorado JERRY McNERNEY, California
DAVID P. ROE, Tennessee JOHN BARROW, Georgia
DAN BENISHEK, Michigan BOB FILNER, California
BILL FLORES, Texas
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
official version. Because electronic submissions are used to prepare
both printed and electronic versions of the hearing record, the process
of converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
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C O N T E N T S
__________
March 6, 2012
Page
Veteran's Administration Dubious Contracting Practices: Savannah. 1
OPENING STATEMENTS
Chairman Bill Johnson............................................ 1
Prepared statement of Chairman Johnson....................... 19
Hon. Joe Donnelly, Ranking Democratic Member..................... 2
Prepared statement of Congressman Donnelly................... 20
WITNESSES
Robert L. Neary, Acting Executive Director, Office of
Construction and Facilities Management, DVA.................... 3
Prepared statement of Mr. Neary.............................. 21
Accompanied by:
George Szwarcman, Director, Real Property Services, DVA.......... 3
Brandi Fate, Director, Capital Asset Management and Support,
Veterans Health Administration, DVA............................ 3
MATERIAL SUBMITTED FOR THE RECORD
Post-Hearing Questions and Responses for the Record:
Hon. Bill Johnson, Chairman, Subcommittee on Oversight and
Investigations, Committee on Veterans' Affairs, to Hon. Eric K.
Shinseki, Secretary, U.S. Department of Veterans Affairs....... 24
U.S. Department of Veterans Affairs Reponses..................... 25
VETERAN'S ADMINISTRATION DUBIOUS
CONTRACTING PRACTICES: SAVANNAH
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TUESDAY, MARCH 6, 2012
U.S. House of Representatives,
Committee on Veterans' Affairs,
Subcommittee on Oversight and Investigations,
Washington, DC.
The Committee met, pursuant to notice, at 12:03 p.m., in
Room 334, Cannon House Office Building, Hon. Bill Johnson,
[Chairman of the Subcommittee] presiding.
Present: Representatives Johnson, Donnelly, McNerney, and
Barrow.
OPENING STATEMENT OF CHAIRMAN JOHNSON
Mr. Johnson. Good morning. This hearing will come to order.
I want to welcome everyone to today's hearing on the VA'S
Dubious Contracting Practices: Savannah.
As this Subcommittee made clear to the VA in its invitation
to this hearing, we are examining the proposed clinic in
Savannah as a case study for the rest of the country. We have
evidence of similar dubious practices taking place at other
locations, and our intent is to have the VA fix the problems
and conduct necessary oversight at all of its construction
sites.
The problematic practices referred to in today's hearing
title have to do with the VA exceeding the size and scope of
requested authorizations, conducting haphazard due diligence,
and not being forthcoming about its actions to Congress.
In fact, this Subcommittee contacted the VA last year with
several specific concerns about this site in Savannah with the
hopes of helping the VA conduct better business. The response
was disheartening. Despite the specific concerns cited, the VA
dismissed the Subcommittee's efforts to reach out and work
together, instead giving a cursory response.
When the VA selects a site, such as Savannah, and requests
a specific authorization from this Committee, it is reasonable
to expect that the VA intends to move forward toward those
goals. As is the case with Savannah and many other sites around
the country, the VA's actions have not matched its words.
In its fiscal year 2013 budget request, the VA claims to
use, and I quote, the best infrastructure planning practices
from both the private and public sectors to integrate all
capital investment planning, end of quote.
It is my hope today, that today's discussions elaborate on
those best practices the VA says it uses, as well as best
practices that it declines to use.
The VA's fiscal year 2009 budget request includes an
authorization request of over $3 million for expansion of its
Savannah CBOC, with an annual rent of over a million dollars.
The fiscal year 2013 budget includes the same authorization
amount and the same net usable square feet for what the VA
refers to as a ``satellite outpatient clinic.'' On the surface,
things appear to be the same.
However, in 2009, the VA issued a request for a proposal
for nine to twelve acres in Savannah that could accommodate
constructing an outpatient clinic. The difference between what
the VA had proposed to Congress less than a year earlier and
what it was moving forward with in the community was
significant.
Among the alternatives submitted in its fiscal year 2009
budget submission to Congress, the VA stated that constructing
an outpatient clinic and I quote, burdens VA with additional
owned infrastructure.
Conversely, a November 2010 letter from Glenn Haggstrom,
the VA's Executive Director for Acquisition, Logistics, and
Construction, can't say enough good things about the VA
building new construction.
Notwithstanding the lack of communication with Congress,
the VA also stumbled through its acquisition process, using an
incomplete and careless appraisal process that according to
many involved in commercial real estate lacks common sense. To
veterans, taxpayers, and Congress, the resulting concern is
that the VA is failing to get the best value.
Based off the original fiscal year `09 budget request, the
expanded Savannah clinic would be occupied in June of 2011. In
the most recent budget request submitted just a few weeks ago,
the status is listed as ``acquisition process initiated.''
As I mentioned earlier, this is not an isolated incident,
and the veterans in need of services are the ones being harmed
by delays, cost overruns, and failure to thoroughly analyze
costs and the benefits associated with every alternative.
I look forward to an honest discussion today on the VA's
methodology, including mistakes and missteps. I further hope to
hear solutions that can bring veterans in Savannah and
throughout the country a timely delivery of health care
services at the best value.
I now recognize the Ranking Member for his opening
statement.
[The prepared statement of Bill Johnson appears on p. 19.]
OPENING STATEMENT OF HON. JOE DONNELLY, RANKING DEMOCRATIC
MEMBER
Mr. Donnelly. Thank you, Chairman Johnson for holding this
hearing.
Today's hearing will explore, in detail, issues surrounding
the major medical facility lease for expanding the community-
based outpatient clinic in Savannah, Georgia. By closely
looking at one such facility, it will help us get a clear
picture of how this vital program is currently operating.
Beginning with last year's budget submission, the VA's
construction and leasing decisions are made under the VA's
Strategic Capital Investment Planning process. Lease projects
are an important component of the VA's effort to modernize its
health care delivery system and provide greater access for our
veterans.
Because of its importance for the provision of quality
health care, it is essential that the lease process be as
quick, fair, and transparent as possible. This includes keeping
Congress informed of important decisions and making sure that
taxpayer dollars are spent as wisely as possible.
The VA sought congressional authorization for the Savannah,
Georgia clinic in its FY 2009 budget submission. This
authority, for a clinic with 38,900 net usable square feet at a
cost of $3.2 million, was provided in October 2008.
Some time after this authorization, the VA expanded the
project and is now seeking to lease a clinic with a maximum net
usable square footage of 55,193. The VA has not notified
Congress or sought additional authorization. And in addition,
construction is now going forward at this time, although it was
authorized in 2008.
The clinic in Savannah is a project that we continue to
work on, and in addition to exploring how and why VA feels it
has the authority to move forward on projects with a larger
scope than authorized, I am hopeful we will get a better idea
as to the time frame, not only--for all of these projects.
I look forward to hearing from our witnesses and getting a
better understanding how the lease program operates, as well as
exploring possible changes to the program that may be necessary
to ensure that VA and Congress are working together, and that
the process from identifying leasing opportunities up to the
ribbon-cutting ceremonies is fair, fast, economical,
transparent and efficient. Thank you and I yield back.
[The prepared statement of Joe Donnelly appears on p. 20.]
Mr. Johnson. I thank the gentleman for yielding back. I
would now like to welcome the panel to the witness table, and I
see they're already assembled. On this panel, we will hear from
Robert Neary, Acting Executive Director of the Office of
Construction and Facilities Management at the Department of
Veterans Affairs. He is accompanied by George Szwarcman,
Director of Real Property Services at the Department of
Veterans Affairs, and Brandi Fate, Director of Capital Asset
Management and Support in the Veterans Health Administration.
Mr. Neary, you're now recognized for your testimony.
STATEMENT OF ROBERT L. NEARY, ACTING EXECUTIVE DIRECTOR, OFFICE
OF CONSTRUCTION AND FACILITIES MANAGEMENT, ACCOMPANIED BY
GEORGE SZWARCMAN, DIRECTOR, REAL PROPERTY SERVICES; BRANDI
FATE, DIRECTOR, CAPITAL ASSET MANAGEMENT AND SUPPORT
STATEMENT OF ROBERT L. NEARY
Mr. Neary. Thank you, Chairman Johnson and Ranking Member
Donnelly, and Members of the Subcommittee.
I appreciate the opportunity to testify on the Department
of Veterans Affairs' contracting practices for our leasing and
specifically the Savannah, Georgia clinic.
You've introduced my colleagues, I would ask that my
complete written statement be included in the hearing record.
First, I would like to thank the Members of the Committee
for bringing a discrepancy within VA's 2010 appraisal of the
site selected in Savannah to VA's attention, and allowing me to
testify on the subject. I will begin by providing this
committee the most current information on VA's actions
concerning this matter.
In response to a series of questions from the Subcommittee
in December of 2011, VA provided incorrect data regarding the
size of a comparable property that was used within the
appraisal for the selected site of the relocated clinic.
Instead of correctly referencing a comparable property of 46.85
acres, VA's certified appraiser believed this comparable sale
referenced a 16.85 acre location. VA provided this data based
on confirmation in December 2011 from the appraiser, that he
had performed appropriate due diligence regarding comparable
properties for VA's appraisal of the selected site.
VA has since conducted further research, that reveals the
source of the inaccurate information, which was based on a
discrepancy between the records of Chatham County, Georgia and
the recorded deed for the comparable property.
Since learning of the discrepancy, VA immediately requested
that its appraiser revise his appraisal and provided an update
to the Subcommittee on March 2nd, acknowledging the error.
VA is also contracting for--with another certified
appraiser to review the initial appraisal, and provide a
determination regarding the fair market value of VA's selected
site as of the spring of 2010, as well as providing a new
appraisal that reflects the current land value of the site.
We will review all the appraisal reports concerning the
selected site in Savannah in order to determine what
appropriate corrective measures should be taken.
I would like to assure the Subcommittee that VA only uses
appraisers who maintain appropriate licensure and
accreditation, and are experienced with the requirements of the
Uniform Appraisal Standards for Federal Land Acquisition.
I would again like to thank the Subcommittee for drawing
VA's attention to the discrepancy and apologize for VA's delay
in uncovering the facts. And additionally, provide assurance
that responses to future inquiries will be more thoroughly
investigated.
I'd also like to take this opportunity to provide an update
on the delivery of the Savannah clinic, and provide information
on VA's leasing program in general.
Leasing is an essential tool utilized by VA to provide high
quality facilities to serve our Nation's veterans. VA currently
leases approximately 13.4 million square feet of medical space
in support of the health care system that serves veterans.
The lease for the first Savannah clinic was entered into in
1991 and was set to expire in 2011. Due to the expiration of
the 20-year existing lease, which is VA's maximum authority,
and due to the growing demand for health care services, VA
determined that a new lease for Savannah was required.
It is important to note VA continues operations at the
current facility through a succeeding lease, to maintain
continuity and veteran care until a new space is procured and
activated.
In fiscal year, Congress authorized $3,168,000 for a new
38,900 square feet clinic. However, in 2009, the Charleston VA
Medical Center, Savannah's parent facility, raised its request
to over 55,000 square feet, based on an increased projection in
veteran patient workload, the need for enhanced mental health,
optometry, and radiology services, and the addition of
audiology services, to provide additional health care resources
for Savannah veterans.
For large leases such as this, VA typically uses a two-step
process for obtaining built-to-suit lease based medical
facility. Step one is advertising and selecting a site, and
obtaining an assignable option to purchase. Step two is
conducting a best value procurement for a developer to design
and build the facility.
VA is currently near the end of the two step process and
evaluating final proposals from developers occurred in
December. Based on updated space requirements, the current
market base pricing for the 55,000 net usable square foot
facility, indicates a cost that exceeds by more than 10 percent
the amount authorized by Congress in 2009.
Once we have resolved the issue with the appraisal, and in
accordance with 38 U.S.C. 8104(c), VA will submit a notice to
the Committees of VA's intent to proceed with the lease.
We look forward to completion of the facility and to
providing enhanced care to veterans in Savannah, and I look
forward to answering any questions the Subcommittee has
regarding the Savannah lease procurement or other aspects of
VA's leasing programs. Thank you, Mr. Chairman.
[The prepared statement of Robert Neary appears on p. 21.]
Mr. Johnson. Thank you, Mr. Neary, for your testimony.
We'll now begin with the questioning and I'll begin.
The VA clearly indicates in a letter from Secretary Gould
on the 24th of November 2010, that they automatically go to the
two-step acquisition process, which by definition, precludes
evaluation of existing lease space as an option, for all leases
greater than 20,000 square feet.
Does VA presume that this authorizes them to bypass the
requirements of Federal Acquisition Regulations in 38 U.S.C.
Section 8104(b)?
Mr. Neary. No, sir, we do not presume that we've got
authority to violate either Title 38 or the Federal Acquisition
Regulations.
Mr. Johnson. Why did the three annual lease status report
submitted to Congress since 2009 continue to repeat the
original authorization amounts, when the VA clearly knew their
efforts were not consistent with the Congressional limits?
Mr. Neary. Sir, I think our current process for the past
several years has been to notify the Congress, or to notify the
Committees on Veterans Affairs when we are planning to enter
into a lease that exceeds what was authorized by greater than
10 percent. And our practice has been to do that after we have
received market based pricing based on our procurement.
Now, in this case, significant time has passed since the
original authorization. But that's the reason that we have not
notified the Committee. We're waiting for price proposals to be
received through competition.
Mr. Johnson. Okay. I'd like to point out that the Green Bay
Clinic is a similar scenario. The FY'09 budget authority
request was for 70,600 square feet, $2,008,000 annual rent and
$3,883,000 initial payment. Total budget authorized over 20
years was 44,000--I'm sorry, 44,043,000.
As recently as to the 2012 submission to Congress, the VA
has indicated in the lease status report that Green Bay lease
was not changed from FY'09 authorization request; however, SFO
VA-101-09-RP-0200 issued 6/24/09 was for 161,525 square feet,
228 percent higher than authorized. And news reports indicate
that the Green Bay lease has now been awarded.
Let me ask you another question, has the VA already paid
approximately 100,000 or so for a purchase option on the land
in Savannah?
Mr. Neary. That's correct, Mr. Chairman.
Mr. Johnson. Under what authority does VA purchase an
option to buy real property?
Mr. Neary. I'd like to ask Mr. Szwarcman to answer that.
Mr. Szwarcman. Thank you, Mr. Neary, thank you, Mr.
Chairman.
VA, according to a decision or an opinion by the Office of
General Counsel, VA does have authority to purchase options, to
purchase real property. The only distinction I would make in
this case is that VA is purchasing an option for an assignable
option, or I should say, yeah, purchases an option to buy that
property which will be assigned to the eventual developer. So
it is never really the intent of VA to acquire a piece of
property such as in Savannah for VA to own.
Mr. Johnson. You know, the--I think the operative word here
is to purchase an option. The red book makes it clear that
agencies need a specific statutory authority to purchase an
option. This is a separate authority than the authority to buy
real property out right.
I can refer you to that, to the red book. A quick search of
VA's authorities do not provide an authority for their action.
So I'm a little bit lost with that.
There's a difference between purchasing an option and
purchasing property out right. Has the VA obligated itself to
purchase the land?
Mr. Neary. No, sir, we've not. We----
Mr. Johnson. And if the land is not purchased, will VA get
any of that money back?
Mr. Neary. No, sir.
Mr. Johnson. So that's taxpayer dollars down the drain?
Mr. Neary. If a decision were made not to acquire that
site, then money would be lost, yes.
Mr. Johnson. Okay. Why did VA ask for money to expand while
simultaneously planning to build a new facility well over the
authorized project limit?
Mr. Neary. Sir, I'm not sure I understand the question.
Mr. Johnson. It's a simple question. Why?
Mr. Neary. We asked for authority to enter into a new
lease, which would be an expanded lease, correct.
Mr. Johnson. An expansion of the current facility?
Mr. Neary. Not the expansion of the current facility, an
expansion of space within Savannah. It was our conclusion as
the planning process proceeded, that the existing facility
could not be effectively expanded to meet VA's requirement,
while VA continued to operate a clinic there.
Mr. Johnson. But all the while, planning instead to build a
new facility well over the authorized limit that was in the
expansion, correct?
Mr. Neary. We have planned to provide space in excess of
the authorized limit, and in accordance with the provision in
Title 38 and long standing practice, we communicate that via
notification letter to the Committee.
Mr. Johnson. I'll have another round of questions, but I'll
yield now to the Ranking Member for his questions.
Mr. Donnelly. Thank you, Mr. Chairman.
In regards to the Savannah project, there was a 3 year
delay, what would you attribute that to primarily? And do these
delays almost automatically come about because of the way the
process is designed at this time?
Mr. Neary. No, sir, I don't believe that this is a common
practice. In Savannah, we encountered three hurdles that
contributed to the delay.
The first, once the project was authorized in 2008, it
became evident locally and to the Veteran's Health
Administration, that the number of veterans who would be using
the facility was growing, and that additional services will be
needed. And there was a period of time spent in validating the
space requirement, determining what would be the appropriate
space requirement. So that was number one.
Number two, we initially selected a site and the land owner
of that site, after extensive negotiations, concluded that they
were not willing to sell the site to the government.
And number three, we had an architectural and engineering
firm under contract to support us in the development of the
early design. Unfortunately, that firm was not performing up to
what we considered acceptable standards, and it was necessary
to bring in a second firm to prepare the design.
So those three items, validating the requirement, of moving
to site number--choice number two, and negotiating the
agreement, and retaining a second AE were major contributing
factors to delay.
Mr. Donnelly. When and do you plan to seek additional
authorization for the Savannah facility and the other
facilities where the size, the scope, et cetera, is
significantly increased?
Mr. Neary. Sir, by agreement with the Committees over time,
a notification letter as opposed to a new authorization by law
is the process to have that communication and advise the
Committees of our intentions.
And once we have resolved the issue that's arisen because
of the erroneous appraisal, the Department would expect to
submit such notification to the Committees, advising of what
our intentions are.
Mr. Donnelly. Okay. And this facility is becoming
significantly larger in size. How do you plan to fund the
increase in costs on this?
Mr. Neary. I'll ask Ms. Fate to answer that question.
Ms. Fate. Thank you, sir. The--with the existing clinic,
the funding for the existing lease is within our current base
of the funding that we have in our medical facilities. And the
increase is planned to be absorbed in our request for an
increase in 2014 appropriation.
Mr. Donnelly. And then we would also like to get a copy of
the General Counsel's opinion as well.
Mr. Neary. Yes, sir.
Mr. Donnelly. Thank you very much. Thank you, Mr. Chairman.
Mr. Johnson. I thank the gentleman for yielding. We'll now
go to Mr. McNerney.
Mr. McNerney. Thank you, Mr. Chairman.
Mr. Neary, a recent Inspector General audit of the VA's
enhanced use lease authority stated that the program needs
improvements. One of the items mentioned is that there were
often delays in executing lease programs. Can you provide an
example or two of the delays why they have occurred, and how
the VA is working to prevent that from happening in the future?
Mr. Neary. Certainly, sir. With respect to the enhanced use
leasing program, I'm not intimately involved in that program
and would be unable to comment on that. But in terms of the
more traditional leases that my office is responsible for, as I
mentioned the--in the case of Savannah, the need to revalidate
and consider increasing the space contributed to the delay, one
of the things that the Department has seen, as you well know in
recent years, is many more veterans coming to the VA, and also
a decision by the health care system to provide more
sophisticated medical services in some of these clinics, in
some of these larger clinics.
And so I think that as an example of delay, the need to
validate and make sure we're getting it right in terms of the
space that we would provide is one of the things that
contributed to this delay and has contributed to some others.
Mr. McNerney. Do you have another example in mind?
Mr. Neary. We, on occasion, get into more protracted
negotiations with land owners. Sometimes we have a difficulty
finding an adequate site in some areas, particularly in urban
areas where we would want to have a clinic located near the
population centers for easier access by veterans. And often
times, it's difficult to identify property and reach a
satisfactory negotiation with land owners.
So identifying and an agreement on the site could
contribute to delay as well.
Mr. McNerney. I've been a little frustrated with a project
in my district at the French Camp facility and the delay that
it's taken so long to get that identified, and now get started.
Can you give me some concrete hope on when we might move
forward on that facility?
Mr. Neary. Certainly, sir. That facility and the second
clinic is an important priority for the VA. If I could just
take a second and look something up here.
We have retained an architectural firm to begin the design.
I think as you know, we've been funded $55.4 million in the
budget for this fiscal year, fiscal year 2012, awarded a design
contract, and we are moving forward to begin the design. We
have completed the acquisition of both the French Camp and the
second site that's associated with that initiative.
Mr. McNerney. So we'll break ground within a year?
Mr. Neary. Sir, the breaking of ground will be dependent
upon when we receive construction funding. The funding is not
in the 2013 budget. It, along with other initiatives, will be a
consideration as we build the 2014 budget, and we'll be
positioned to break ground as soon as we have construction
funding available.
Mr. McNerney. Well, would you agree that the IG report that
I referred to earlier highlights serious flaws within the VA's
goal to end veteran homelessness?
Mr. Neary. Sir, I'm not able to comment on the VA's
homeless program and the enhanced use. Ms. Fate, would you
have--or provide for the record.
Ms. Fate. Thank you, sir. We'd like to provide for the
record the questions that you have for the homeless.
Mr. McNerney. Okay. Thank you, I'll yield.
Mr. Johnson. I thank the gentleman for yielding back. I
will now go to my colleague, Mr. Barrow.
Mr. Barrow. Thank you, Mr. Chairman.
Mr. Neary, thank you for being here today. Just a couple of
matters, and then I want to yield the balance of my time to the
chairman in the interest of continuity and the questions he was
following up on.
First at the outset, there's standard language in the
appropriations bills that we pass, to the effect that, and I
want to quote the most recent one, ``The scope of work for a
project included in `construction major projects' may not be
increased above the scope specified for that project and the
original justification date provided to the Congress as part of
this request for appropriations.''
Meaning anything like that, that applies specifically to
the facility leasing program, the major facility leasing
program, in your opinion, would it be a useful thing for us to
do to include in appropriations language a similar limitation
on projects that are included in the major leasing--major
facility leasing program, either in the Appropriations Act that
we enact from year-to-year, or in general legislation in Title
38? Would that be a good idea?
Mr. Neary. Sir, in my opinion, it is my opinion not as a
Department, but I think we and the Committee need to work
together to ensure that when an appropriate change is necessary
it can be implemented effectively and efficiently.
One of my concerns about requiring an entire new
authorization is that it could--that act could result in a
potentially 1 year delay in that initiative. But I certainly
agree that we need to have effective communications with the
Committee, and if the Congress were to choose to implement
that, we'd obviously follow that guidance.
Mr. Barrow. Thank you. As somebody who represents both the
City of Savannah and Augusta, I can tell you that the folks
right up the road in Statesboro, Georgia regard Augusta as
their parent facility. It's right down the road. Savannah looks
to Charleston as its parent facility.
I gather that by, you know, 15 minutes or so, a difference
in drive, but I can tell you as someone who's driven both
directions, it's a much easier drive up to Augusta than it is
over to Charleston. And folks feel a stronger pull in the
direction of the river to a principal city in their own state,
than they do a principal city elsewhere.
What all is involved in transferring a CBOC like the one in
Savannah from its nearest parent facility like in Charleston to
a more effective parent facility right up the road in their own
state? What all is involved in something like that?
Mr. Neary. Ms. Fate, would you answer that?
Ms. Fate. Thank you for the question. It's a--the
demographics of where the boundaries are for all the parent
facilities across the country are based on where veterans live.
And it's a very sophisticated complex mapping of where each
parent facility is mapping to their--every CBOC that they have
that they support.
We can get you the specifics of why Charleston supports
Savannah, as opposed to Augusta supporting Savannah, and take
that for the record----
Mr. Barrow. I only want the----
Ms. Fate [continuing]. To get you----
Mr. Barrow [continuing]. Parent facility that's most
conducive to the needs of the veterans in the Savannah area,
that's all. But I can tell you there's a lot more sense of pull
in one direction than there is another, and a whole lot less
difficulty in getting from one to the other from personal
experience.
With that, Mr. Chairman, I want--in the interest of
continuity, I want to yield the balance of my time to the
Chairman, so he can follow up with the line of questions he was
engaged in before. Thank you, Mr. Chairman.
Mr. Johnson. I thank my colleague for yielding.
Did--Mr. Neary, did the VA submit a report to Congress on
their detailed plan to construct a new facility in Savannah and
provide a cost benefit analysis of new versus expansion of the
existing facility?
Mr. Neary. A cost benefit analysis was conducted. I'm not
sure if that was provided to the Congress or not. We could
check on that.
Mr. Johnson. Was a detailed plan submitted?
Mr. Neary. A prospectus was submitted at the time that
would outline what the plan was, yes, sir.
Mr. Johnson. Okay. Under--and we acknowledged just a few
minutes ago, you said the VA is not exempt from Title 38 U.S.C.
Section 8104(b). Under that provision, the Secretary must
submit to each committee on the same day, a prospectus of the
proposed medical facility including a detailed cost-benefit
analysis comparing total cost of new construction versus
utilization of existed or expanded lease space.
Do you have a copy of your cost benefit analysis with you?
Mr. Neary. No, sir, I do not.
Mr. Johnson. I do, Mr. Neary. That's it. One page. 8104(b)
requires a detailed cost benefit analysis. Here is a cost
benefit analysis of a similar size and cost project for the
Martin Luther King Memorial Library. It's over a quarter of an
inch thick with detail, the operative word is detailed, not an
executive summary, but a detailed cost benefit analysis. So I
would submit to you, that the VA did not submit a detailed cost
benefit analysis as required by Section 8104(b).
Approximately how many real estate firms or brokers does
the VA use to assist in its leasing and site acquisitions such
as with Public Properties, LLC in Savannah?
Mr. Neary. I'll ask Mr. Szwarcman to answer that question.
Mr. Szwarcman. Yes, thank you. We use approximately six
national firms to perform brokerage and/or consulting services
related to real estate acquisitions and/or leases.
Mr. Johnson. How much of that is the VA qualified to do
internally?
Mr. Szwarcman. I believe that VA is qualified to do most of
that activity internally. The issue, however, being resources.
Mr. Johnson. What's the cost of the brokerage fee to these
firms?
Mr. Szwarcman. The brokerage fee is dependent upon a case-
by-case basis. The contracts call for a maximum of a 3 percent
commission that's to be paid by the lessor. It's--I don't know
what the percentages are, Mr. Chairman, but I would say at
least 50 percent of the times we negotiate a percentage that is
significantly lower than 3 percent.
Mr. Johnson. Approximately how much does the VA pay
annually to these firms for services such as this?
Mr. Szwarcman. I believe the answer is zero.
Mr. Johnson. Well then the Federal Government would be
accepting a gift, which is illegal. So . . .
Mr. Szwarcman. I believe that this is an indefinite quality
contract that is based solely on brokerage commission.
Mr. Johnson. But----
Mr. Szwarcman. Now, when we do consulting services through
these brokerage firms as we sometimes do, we do have the option
and do pay them on an hourly or task basis.
Mr. Johnson. So again, then how much annually do you pay?
Mr. Szwarcman. I don't have that figure right now, but I
can take it for the record, it will depend on how----
Mr. Johnson. Please. I would appreciate----
Mr. Szwarcman [continuing]. Many tasks we have asked.
Mr. Johnson. Yeah. I'd appreciate it if you'd get that
back.
What are the specific services that these brokers provide?
Mr. Szwarcman. The brokers will provide a variety of
services including acquiring or commissioning for appraisals
with us or other due diligence functions. Basically, things
that are associated with our due diligence and/or procurement
of real estate assets.
Mr. Johnson. Are these things that contracting officers
could provide?
Mr. Szwarcman. Well, ultimately, the contracting officer is
responsible for committing the government. The contractors,
brokers, and entities of that sort have absolutely no authority
to commit the government.
Mr. Johnson. Wait a minute, say that again, I'm sorry.
Mr. Szwarcman. The brokers and/or contractors have
absolutely no authority to commit the government. So basically
any of the tasks that we assign to the contractors ultimately
have to be reviewed by staff in-house, and ultimately the
commitment of funds can only be done by VA employed FAC-C
certified contracting officer.
Mr. Johnson. Okay. So back to the beginning of this series
of questions, we've got services being performed by brokerage
firms, from which you've acknowledged that most of those
services could be performed by VA employees, contracting
officers and such, correct?
Mr. Szwarcman. It's conceivable that most of those services
could be provided by VA employees; however, there are a lot of
talents and specific knowledge that the brokers bring to the
real estate market.
Mr. Johnson. Then why are we paying for five brokerage
firms, five or six, I think the number you said was about six,
to perform work that VA employees are being paid to perform?
Mr. Szwarcman. Mr. Chairman, I think that the brokers are
really utilized more in the sense of assisting us with a
national program to essentially provide us with local expertise
whether it's through market surveys or through other types of
real estate related functions that sitting in Washington in
central office, our staff my not have the best up-to-date
knowledge.
Mr. Johnson. Well, in the VA's testimony regarding the two
step process for larger leases, specifically it talks about a
market survey team of VA employees with experience in different
fields.
So I find it hard to believe that there's that much
experience that brokerage firms are bringing to the table that
a market survey team of VA employees with experience in
different fields would not be bringing to bear. It seems to me
like we're paying taxpayer dollars irresponsibly for services.
Mr. Szwarcman. Sir, the way our two step process works, is
that before we initiate any of our lease actions specifically
the two step type lease actions, what we would do is we would
task the broker to survey the market area and see what is
generally available in the market.
Based on that information, what we do then is we issue an
advertisement in the Commerce--in the FedBizOp, along with the
local newspapers. And after we get replies from specific
interested parties, who may have land for sale, it is at that
time that we get together a VA internal market survey team, and
that team goes out and looks and evaluates each specific site
that is under consideration.
The broker's function in that instance is largely that of
making a determination what's available, what are the
prospects, how much land, how many parcels are listed on the
market currently. So that we know we're basically in the right
area. And we also use that information to establish our
delineated area by which we will advertise for interest.
Mr. Johnson. Okay. I think I've consumed the beginning of a
second round already, so I'm going to yield to my colleague,
Mr. Barrow.
Mr. Barrow. Thank you, Chairman. No, you're the Chairman,
go right ahead.
I want to get a better idea than I have at present of the
role that this Charleston VA facility had in both the initial
proposal and in the upgrade, the decision to increase the size
of the facility.
How would you compare and contrast Charleston's VA's input
into each of those two decisions, both the initial proposal and
the decision to enhance?
Mr. Neary. Assuming that Charleston was the parent facility
at the time, and I think that they were, they would have been
the initiator of the original proposal, would have been
reviewed by their veteran service--veteran integrated service
network, the supervisory chain of command and come forward to
the Washington central office for consideration.
Then the Charleston facility would have also recognized and
come forward with their proposal to expand the size of the
planned clinic, based on the veteran population or veteran
users that are going to be coming to VA growing, and their
proposal to increase some of the services that would be
provided, so.
Mr. Barrow. Yeah, I want to parse the difference between
those two, increase in the number of patients, of customers on
the one hand, and the increase in the number and variety of
services being provided on the other.
Because first off, I commend y'all for trying to make
services available as and when needed, and to expand the range
of services available. I just wanted to distinguish between
those two in this case.
Because in 2009, if I understand correctly, when the
decision was made to expand the facility in Savannah, the
patient workload was actually projected to go down over time,
the figures that we've been provided, saying that in 2009 VA's
estimate of the patient population, the veteran population in
the area covered by the Savannah was going to go from 56,250 in
2005 to an estimated 47,940 in 2015, to a projected 43,057 in
2025. So there's a steady decrease in the number of patients.
And yet, also I understand that the services that can be
provided at the CBOC are going to be much more expansive, it's
going to cover not just an increase in workload but mental
health services, optometry, audiology, radiology, new physical
security requirements, the PACT initiative, all of that stuff
was going to be added to what's available at the Savannah.
Am I correct in understanding that that's the nature of the
service, the level of service that was going to be expanded to
there?
Ms. Fate. Yes, sir, that's correct.
Mr. Barrow. So how much of the increase in the square
footage and the size of the physical facility there is
attributable to the increase in services, as opposed to the
increase in the number of patients?
Ms. Fate. We can get you that specific information.
Mr. Barrow. It looks like it's going to be all of it
because it's looks like a projected decrease in the number of
patients.
Ms. Fate. Well, there was a projected decrease in the
number of patients, that's correct; however, it was always an
increase in the projected workload demand. And so every unique
has its own workload and the services that we can expect for
every veteran.
And so while it was projected to go down back then when the
original submission came in, the projected ambulatory stops for
primary care and specialty was planned to increase by 92
percent.
And so just for those services that were going to be
included in the original submission, and subsequent to then,
based on projected workload models that have been updated since
that time, the projections increased even 30 percent more for
just those same services for primary care, as well as mental
health.
Mr. Barrow. Again, this is something I think we want to
commend, and we want to support in every way we can. I'm going
to put in another plug, though, for the idea of directing folks
in Savannah up to Augusta. It's a whole lot easier drive. It's
a real hard slog to get from Savannah to Charleston. You can
ask General Sherman what it was like.
It's not that much easier today than it was back then.
Thank you very much. I yield back.
Mr. Johnson. I thank the gentleman for yielding back. For
clarification purposes, VA leases are paid from the medical
facilities account, correct?
Mr. Neary. Yes, sir, that's correct.
Mr. Johnson. In the FY 2013 budget submission and prior
submissions, VA includes a prospectus on each major medical
facility lease for which it is requesting congressional
authorization. The prospectus also includes what appears to be
an appropriation request which tracks the authorization
request. For FY 2013, the total request for all leases is 103
million.
Does the FY 2013 appropriations request for medical
facilities include the 103 million for the lease
authorizations?
Mr. Neary. Ms. Fate.
Ms. Fate. Thank you, sir. While the prospectus provides the
authorization request, the appropriation for these major leases
is managed at a more aggregate level. And so we do not have
specific appropriation for leases like we would for our major
construction projects.
Mr. Johnson. But is that 103 million included in that
aggregate?
Ms. Fate. Well, the--according to the prospectus where the
schedule shows for these leases, they plan to be awarded in
2014 for all of these leases. And so the budget appropriation
request that requests for the 2014 would include those leases,
not for the 2013. The 2013 includes leases that are currently
ongoing, as well as any--the new ones that we have coming
online that would be obligated in requiring 2013 funds.
Mr. Johnson. Okay. What is the--what are the updated
demographic data that the VA used to go from 38,900 square feet
up to 55,193 in Savannah and from 70,600 up to 161,525 square
feet in Green Bay?
Ms. Fate. Well, for--sir, for Green Bay, we're going to
have to take for the record and get back to you.
For the demographics that we anticipate for the workload
projections, we only have the projected workload and the
projected workload going from the most updated 2010 base line
of 43,000, in the next 10 years, increases 31 percent, just for
the ambulatory and mental health care stops, to be projected
for the Savannah clinic.
Mr. Johnson. Is that--are those services that you're not
performing today?
Ms. Fate. No. We are performing services either at the
parent facility or at the Savannah facility.
Mr. Johnson. How can you have that big of an increase in
services provided when you've got a 23 percent decline in
population? How--I'm having trouble making the connection.
You say you're providing the services today, and yet you
see a 23 percent decline in population. How is the workload
going to go up that much, that's going to require nearly a--
looks like a 17,000 addition to the original estimate?
Ms. Fate. And again, that is for over a 10 year period, so
we don't--we won't see it in 2012 or '13 per se, but we would
see it in the next 10 years.
It's based on our actuarial model and assumptions made when
the planning horizon for the next 10 to 20 years. And so we can
get you--what the assumptions were that were loaded into the
model to provide our actuarial results.
Mr. Johnson. Can you get us that? That's some of the kind
of information that would go into a detailed cost benefit
analysis.
Does the contract for Savannah include the local tax breaks
associated with a Federal building?
Mr. Szwarcman. I'm sorry, Mr. Chairman, it does not.
Mr. Johnson. Okay. Does the projected VA lease in Savannah
include utilities?
Mr. Szwarcman. The projected lease amount is an unserviced
amount that we are quoting, so the answer is no.
Mr. Johnson. What is the projected size of the new VA
clinic in Savannah and the best estimate of the total lease
cost over 20 years for the new project?
Mr. Neary. We are in the middle of the negotiation and the
procurement phase with proposers, so it would be inappropriate
for me to state here on the record, sir, what we think the
price will be. But I can say that it will approach $2 million
per year.
Mr. Johnson. Can you take that back and confirm it?
Mr. Neary. I certainly can.
Mr. Johnson. Okay. Thank you. Another item that could've
been or might've been included in a detailed cost benefit
analysis is some of the alternatives to expansion. Why isn't
the VA simply expanding the clinic's hours to more effectively
use the existing capital investment like the private sector
does before making new capital investments?
Mr. Neary. In this case, we entered into a lease for the
current facility for 20 years, that's the maximum authority
that the Department has. In order to continue on in that
building should we have chosen to do so, it would need to be
reacquired through a competitive procurement.
I think I mentioned earlier that it would be very difficult
to expand and modernize that building while the clinic
continued to operate.
Mr. Johnson. That's not the question. The question was, why
not expand--Ms. Fate talked about the need for increased
service workload. Why not expand the hours that the service
providers work, rather than expanding the physical facility?
Mr. Neary. You want to comment on it?
Ms. Fate. Thank you, sir. I'll try and attempt to answer
that. The--we're not certain--I mean, I'm not certain whether
or not the clinic has expanded hours right now or whether or
not it was--we can take that for the record. I know that's an
initiative that we're looking at across the country to ensure
that we're expanding hours where it's viable.
Mr. Johnson. Yeah. The----
Mr. Neary. Mr. Chairman, if I could add, the fact that our
lease is expiring and we don't have the authority to be in the
building does impact the concept of expanded hours. As Ms. Fate
said, many VA facilities are using expanding hours to
accommodate workload, but in this case, we need to find another
facility or a new lease to function.
Mr. Johnson. Aren't you already--isn't that facility
already on a succeeding lease?
Mr. Neary. We're on a----
Mr. Johnson. From the original?
Mr. Neary. We are on a succeeding lease, to permit us to
continue in operation while the new space is acquired, yes,
sir.
Mr. Johnson. Okay. I'll yield to my colleague, Mr. Barrow.
Mr. Barrow. Thank you, Mr. Chairman.
Just to sum up, if I understand today's testimony, that
Charleston initiated a request for an expansion of the Savannah
CBOC beyond what had been previously authorized by Congress,
correct?
Mr. Neary. That is correct, sir.
Mr. Barrow. There is no formal process for coming to
Congress to request an increase in the authorization. If I
understand what happens, the VA decides whether or not to grant
Charleston's request based on the resources that are already
otherwise available to the VA without coming to Congress to ask
for an increase in congressional authority; is that correct?
Mr. Neary. We are required to come to the Congress and
notify the Veterans' Affairs Committees of our intent to expand
if that expansion is greater than 10 percent of what was
authorized.
Mr. Barrow. And did that happen in this case?
Mr. Neary. That has not happened yet. We're in the process
of preparing to do that, and would intend to do that once we've
resolved the issue associated with the erroneous appraisal.
Mr. Barrow. And as has been previously established, because
of the timing of this, it is possible for resources to be lost
if the authorization isn't granted?
Mr. Neary. I'm sorry, if the authorization were not
granted?
Mr. Barrow. Yes, sir.
Mr. Neary. If we were to make a decision to walk away from
this site, we would lose the resources that we've committed and
acquire in the purchase option--the transferrable purchase
option.
Mr. Barrow. Likewise, if Congress decided not to authorize
the expansion by the time y'all finally come back to ask for
it, then that's another way in which y'all would walk away from
it because Congress wouldn't authorize it. Nonetheless, it
would be a loss incurred along the way.
Mr. Neary. That's a possibility.
Mr. Barrow. Okay. All right. You can agree, can you not,
that there's a greater need for enhanced communication between
the VA when its acting at the initiative of one of its medical
facilities, and the body that represents the taxpayers, trying
to make sure that all the resources are being allocated on a
fair and equitable basis and reach as many people as possible,
and with a minimum potential for loss along the way. You'll
agree with that, won't you?
Mr. Neary. I can agree with that, sir, yes.
Mr. Barrow. Okay. Well, I hope we can achieve that. Thank
you very much.
Mr. Johnson. I thank the gentleman for yielding back. I
want to go back to the fact that you're on a succeeding lease
now, and I think if I understood you and you correct me if I'm
wrong, you stated that expanding the current facility is not an
option?
Mr. Neary. We believe that to be the case, yes, sir.
Mr. Johnson. How do you know that? Have you asked the
current lessor whether they can expand that facility?
Mr. Neary. We did, and as I understand it, members of my
staff met with the current lessor and their technical advisors,
and they were--in that discussion, the lessors' advisers
discussed the difficulties and I'm told, stated that that
building could not be modernized to meet VA's current
requirement.
Mr. Johnson. Interesting. That's what the lessor said, that
it could not be modified to meet the current requirement?
Mr. Neary. It's my understanding the lessors' advisers, not
necessarily the lessor.
Mr. Johnson. Because that's contrary to the information
that we've got. And see that again, if I look at the--that's
the kind of information that I would expect to find in a cost
benefit analysis, Mr. Neary. But if I read your cost benefit
analysis, I don't see an alternative of expansion to the
current lease facility in your cost benefit analysis. That's
one of the many things about this that causes me concern.
Let's move to the appraisal process. Who is at fault for
the initial contract with the uncertified unqualified appraiser
for the Savannah site?
Mr. Neary. The appraisal company that performed the
appraisal and the individual that performed the appraisal is
certified, and appropriately licensed, notwithstanding that,
they made an error in conducting that appraisal.
Mr. Johnson. The initial appraiser?
Mr. Neary. The initial--the appraisal that had the error in
it that the Committee identified for us, yes, sir.
Mr. Johnson. The initial appraiser for the--you're saying
was performed by a qualified certified appraiser?
Mr. Neary. Yes, sir.
Mr. Johnson. Okay. That's your testimony?
Mr. Neary. Sir, obviously if the Committee has----
Mr. Johnson. That's contrary to what we're finding.
How much did that initial appraisal cost, and how much was
the appraiser paid?
Mr. Neary. Sir, we'll have to find out and provide that for
the record.
Mr. Johnson. Please. Okay. Well, seeing that there are no
further questions, I have no further questions.
I want to thank the panel for being here today, and you are
now excused.
The issues discussed here today were yet another example of
this Committee's efforts to reach out to the VA with founded
concerns in an attempt to quickly and easily resolve them.
The dismissive response from VA Congressional Affairs makes
it appear that the VA does not desire a cooperative
relationship in solving these problems. Now, I heard my
colleague as the question, could communication be improved,
your response was yes.
I too hope that we could get to that point, and I hope that
we can move forward together to solve these problems and
others.
I want to again mention that today's hearing topic is not
limited to Savannah. We know these actions are occurring in
other locations, and today's discussion is a case study of this
national issue.
With that, I ask unanimous consent that all members have
five 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 and business meeting. This
hearing is now adjourned.
[Whereupon, at 1:00 p.m. the Subcommittee was adjourned.]
A P P E N D I X
----------
Prepared Statement of Hon. Bill Johnson, Chairman
Good morning. This hearing will come to order.
I want to welcome everyone to today's hearing on the VA'S Dubious
Contracting Practices: Savannah.
As this Subcommittee made clear to the VA in its invitation to this
hearing, we are examining the proposed clinic in Savannah as a case
study for the rest of the country. We have evidence of similar dubious
practices taking place at other locations, and our intent is to have
the VA fix the problems and conduct necessary oversight at all of its
construction sites.
The problematic practices referred to in today's hearing title have
to do with the VA exceeding the size and scope of requested
authorizations, conducting haphazard due diligence, and not being
forthcoming about its actions to Congress.
In fact, this Subcommittee contacted the VA last year with several
specific concerns about this site in Savannah with the hopes of helping
the VA conduct better business. The response was disheartening: despite
the specific concerns cited, the VA dismissed the Subcommittee's
efforts to reach out and work together, instead giving a cursory
response.
When the VA selects a site, such as Savannah, and requests a
specific authorization from this Committee, it is reasonable to expect
that the VA intends to move forward toward those goals. As is the case
with Savannah and many other sites around the country, the VA's actions
have not matched its words.
In its Fiscal Year 2013 budget request, the VA claims to use ``the
best infrastructure planning practices from both the private and public
sectors to integrate all capital investment planning . . . '' It is my
hope that today's discussion elaborates on those best practices the VA
says it uses as well as best practices that it declines to use.
The VA's Fiscal Year 2009 budget request includes an authorization
request of over three million dollars for expansion of its Savannah
CBOC with an annual rent of over a million dollars. The Fiscal Year
2013 request includes the same authorization amount and the same net
usable square feet for what the VA refers to as a ``satellite
outpatient clinic.'' On the surface, things appear to be the same.
However, in 2009, the VA issued a request for a proposal for nine
to twelve acres in Savannah that could accommodate constructing an
outpatient clinic. The difference between what the VA had proposed to
Congress less than a year earlier and what it was moving forward with
in the community was significant. Among the alternatives submitted in
its fiscal year 2009 budget submission to Congress, the VA stated that
constructing an outpatient clinic ``burdens VA with additional owned
infrastructure.'' Conversely, a November 2010 letter from Glenn
Haggstrom, the VA's Executive Director for Acquisition, Logistics, and
Construction, can't say enough good things about the VA building new
construction.
Notwithstanding the lack of communication with Congress, the VA
also stumbled through its acquisition process, using an incomplete and
careless appraisal process that according to many involved in
commercial real estate lacks common sense. To veterans, taxpayers, and
Congress, the resulting concern is that the VA is failing to get the
best value.
Based off the original FY 2009 budget request, the ``expanded''
Savannah clinic would be occupied in June 2011. In the most recent
budget request submitted just a few weeks ago, the status is listed as
`acquisition process initiated.' As I mentioned earlier, this is not an
isolated incident, and the veterans in need of services are the ones
being harmed by delays, cost overruns, and failure to thoroughly
analyze costs and benefits associated with every alternative.
I look forward to an honest discussion today on the VA's
methodology, including mistakes and missteps. I further hope to hear
solutions that can bring veterans in Savannah and throughout the
country a timely delivery of health care services at the best value.
I now recognize the Ranking Member for an opening statement.
I would now like to welcome the panel to the witness table. On this
panel, we will hear from Robert Neary, Acting Executive Director of the
Office of Construction and Facilities Management at the Department of
Veterans Affairs. He is accompanied by George Szwarcman, Director of
Real Property Services at the Department of Veterans Affairs, and
Brandi Fate, Director of Capital Asset Management and Support in the
Veterans Health Administration.
Our thanks to the panel. You are now excused.
The issues discussed today were yet another example of this
Committee's efforts to reach out to the VA with founded concerns in an
attempt to quickly and easily resolve them. The dismissive response
from VA Congressional Affairs makes it appear that the VA does not
desire a cooperative relationship in solving problems. I hope this is
not the case, and that we can move forward together to solve these
problems and others.
I want to again mention that today's hearing topic is not limited
to Savannah. We know these actions are occurring in other locations,
and today's discussion is a case study of this national issue.
With that, I ask unanimous consent that all members have five
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.
Prepared Statement of Hon. Joe Donnelly,
Ranking Democratic Member
Today's hearing will explore, in detail, issues surrounding the
major medical facility lease for expanding the community-based
outpatient clinic in Savannah, Georgia. By closely looking at one such
facility, we will also get a clear picture of how this vital program is
currently operating.
Beginning with last year's budget submission, the VA's construction
and leasing decisions are made under the VA's Strategic Capital
Investment Planning (SCIP) process. Lease projects are an important
component of the VA's effort to modernize its health care delivery
system and provide greater access to our veterans. Because of its
importance for the provision of quality health care, it is essential
that the lease process be as quick, fair, and transparent as possible.
This includes keeping Congress informed of important decisions and
making sure that taxpayer dollars are spent as wisely as possible.
The VA sought congressional authorization for the Savannah, Georgia
clinic expansion in its FY 2009 budget submission. This authority, for
a clinic with 38,900 net usable square feet at a cost of $3.2 million,
was provided in October, 2008. Sometime after this authorization, the
VA expanded the project by over 45 percent, and is now seeking to lease
a clinic with a maximum net usable square footage of 55,193. The VA has
not notified Congress or sought additional authorization for this
expansion. In addition, although this project was authorized in 2008,
construction is just now going forward.
The clinic in Savannah is not the only project which the VA has
expanded after seeking authorization. Projects in Atlanta, Georgia,
Eugene, Oregon, Fayetteville, North Carolina, Grand Rapids, Michigan,
Green Bay, Wisconsin, and Greenville, North Carolina are all slated to
be substantially larger than authorized by Congress.
In addition to exploring how and why VA feels it has the authority
to move forward on projects with a larger scope than authorized, I am
hopeful that we will get a better idea as to why these projects take so
many years to complete from initial authorization to the doors being
opened to serve veterans.
I look forward to hearing from our witnesses and getting a better
understanding how the lease program operates, as well as exploring
possible changes to the program that may be necessary to ensure that VA
and Congress are working together and that the process from identifying
leasing opportunities up to the ribbon-cutting ceremonies is fair,
fast, and economical.
Prepared Statement of Robert L Neary
Chairman Johnson, Ranking Member Donnelly and Members of the
Subcommittee, I appreciate the opportunity to testify on the Department
of Veterans Affairs (VA) contracting practices for leasing and
specifically on the Savannah, Georgia, Outpatient Clinic (OPC) lease
procurement as a case study. My testimony will outline the lease
process/procurement used by VA as well as address the reasons for the
changes required in the procurement of space for the Savannah OPC.
Savannah Appraisal
I would like to update information VA previously provided to the
Committee.
In response to a series of questions from the Subcommittee in
December 2011, VA provided an incorrect appraisal for the targeted
relocated Savannah Outpatient Clinic site. Instead of referencing a
46.85 acre site, VA inadvertently referenced a 16.85 acre location. The
appraiser failed to identify that the deed of sale and the tax records
did not reflect the same information.
Since learning of the discrepancy, VA immediately requested a
revised appraisal and provided an update to the Subcommittee on March
2, 2012, acknowledging the error. VA is contracting for another
certified appraiser to review the initial appraisal, and provide a
determination regarding fair market value of VA's preferred site as of
Spring, 2010. Finally, VA is also obtaining a new appraisal that
reflects the current land value of the site. VA will review all the
appraisal reports concerning the targeted parcel in Savannah in order
to determine what appropriate corrective action may be warranted.
I want to emphasize that VA only uses appraisers who maintain
appropriate licensure and accreditation, in addition to adherence to
the Uniform Appraisal Standards for Federal Land Acquisitions, which is
standard operating procedure.
I would like to apologize to the Committee for the delay in
uncovering the facts and provide assurance that responses to future
inquiries will be more thoroughly investigated.
General Leasing Information
Acquisition of space through lease is an important component to
ensure that VA has adequate health care facilities to serve our
Nation's Veterans. VA currently leases approximately 13.4 million
square feet in support of the health care system.
Beginning with the fiscal year (FY) 2012 budget cycle, decisions on
whether to move forward with a lease project are an outcome of VA's
Strategic Capital Investment Planning (SCIP) process. When analyzing
lease projects, SCIP considers several factors, including facility and
access requirements, availability of existing facilities and space,
safety and security needs, and cost. Lease project submissions include
the completion of an Office and Management and Budget (OMB) exhibit
300, in accordance with OMB Circular A-11, Part 7. The OMB-300 includes
a cost benefit analysis of potential solutions, including evaluation of
maintaining the status quo, constructing new space, and leasing. The
information enables VA to determine how to best use available resources
for capital investments.
There are specific approval thresholds for the acquisition of SCIP-
approved facilities through lease. A lease with an annual rent over
$1,000,000 requires specific congressional authorization under 38
U.S.C. Sec. 8104(a)2. Smaller leases, with an annual rent between
$300,000 and $1,000,000, require approval by the Secretary of Veterans
Affairs. Leases exceeding 10,000 square feet with annual rent under
$300,000 require approval by the Executive Director, Office of
Construction and Facilities Management. Leases that are less than
10,000 square feet, under $300,000 in annual rent, and a 10 year term
or less, are delegated to the Veterans Integrated Services Networks for
approval.
The lease acquisition process is typically conducted as a best
value competition, and is always in accordance with the Competition in
Contracting Act, the General Services Administration Acquisition
Regulation, and other applicable laws and executive orders. The best
value process awards projects to the contractor that best meets a
combination of price and technical qualifications. Technical
qualification criteria are identified in the Solicitation for Offers
(SFO), and are evaluated by a team of qualified professionals,
including architects and engineers. The price component of an offer is
also evaluated by qualified professionals, including technical and
contacting staff. This method results in performance-based
accountability, as well as a full and fair competition.
For large leases, VA prefers to use a two-step process for
obtaining a built-to-suit lease-based medical facility. Step one is
obtaining an assignable option to purchase a suitable site, and step
two is competitively procuring a developer. Step one is initiated by VA
determining a delineated geographic area and issuing an advertisement
for sites. The preferred site is competitively selected by a market
survey team composed of VA employees with experience in various
disciplines such as real property, engineering, environmental issues,
and clinical or program management. The market survey team uses a
standard set of criteria that includes an array of factors such as
evaluation of the surrounding area, accessibility, availability of
utilities and amenities, and the natural conditions of the site.
As part of step one, VA is also required to conduct certain due
diligence activities in the areas of real estate, including a title
report, survey, geotechnical survey and appraisal; and comply with the
National Environmental Policy Act (NEPA), the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA); and
Section 106 of the National Historic Preservation Act (NHPA). During
this stage, VA also conducts negotiations with the landowners, based on
the appraised determination of fair market value, in order to reach a
purchase price. Once a price is agreed upon, VA and the landowner
execute an assignable option to purchase the site. This option is later
assigned from VA to the developer selected in step two. When all of the
due diligence requirements are satisfied, the assignable option and all
due diligence documentation become part of the SFO package in step two.
Step two is the competitive procurement seeking a developer to
purchase the land identified in step one, and build the facility to VA
specifications. Wide competition is sought during the procurement
process to ensure reasonable rental rates. VA works with an
Architectural/Engineering firm and the local VA users to determine the
specific technical requirements of the clinic. These requirements are
made available to the potential offerors in the SFO. The offerors are
typically allotted 45 days to submit their offers to VA. Once the
offers are received, VA establishes a Technical Evaluation Board (TEB),
which evaluates each offer by a set of pre-determined criteria. VA also
conducts a price evaluation. Based on these evaluations, VA establishes
a competitive range of offerors, negotiates with the offerors within
the range, and requests Final Proposal Revisions from those offerors.
The TEB is then reconvened to review any new technical data before the
Contracting Officer determines which offer presents the best value to
the government. The lease is then processed for award.
Savannah OPC Information
The current lease of 34,760 square feet for the Savannah OPC was
activated in September 1991. Because the existing lease was due to
expire in 2011, and due to the growing demand for health care services,
VA determined that a new lease for the Savannah OPC was required.
Current lease action for the Savannah OPC began at that time, and
preceded use of the SCIP process. The original lease expired in 2011;
however, VA continues to occupy this space through a succeeding lease
executed in July 2011. This was necessary to maintain operations until
a new space is procured and activated.
In FY 2009, Congress authorized $3,168,000 for a new 38,900 square
feet OPC in Savannah, Georgia. The $3,168,000 includes $1,029,000 for
the first year's rent, plus a one-time lump sum payment of $2,139,000
for special purpose medically-related improvements.
The original requirement called for 38,900 square feet of space for
the Savannah OPC. However, in 2009, the Charleston VA Medical Center,
Savannah's parent facility, raised its request to 55,000 square feet,
based on an increased projection in workload, the need for enhanced
mental health services, the addition of optometry, audiology, and
radiology services, new physical security requirements, and the need to
support and implement VA's new Patient Aligned Care Teams (PACT)
initiative at all sites. This updated scope was based on an evaluation
of current workload data and seems to be a reasonable solution to
provided needed medical care to Veterans in the Savannah area. The
updated scope is reflected in VA's current SFO.
PACT provides accessible, coordinated, comprehensive, patient-
centered care, and is managed by primary care providers with the active
involvement of other clinical and non-clinical staff. PACT allows
patients to have a more active role in their health care and is
anticipated to be associated with increased quality and patient
satisfaction, and may lead to a decrease in hospital costs due to fewer
hospital visits and readmissions. It also calls for the delivery of a
full complement of mental health services, such as compensated work
therapy and mental health intensive care management.
VA received proposals in November 2011, based on the updated space
requirements. The current market-based pricing indicates a cost that
exceeds by more than 10 percent, the amount authorized by Congress in
FY 2009. Accordingly, per 38 U.S.C.
Sec. 8104(c), VA must now submit a notice to the Committees on
Veterans' Affairs of VA's intent to proceed with the lease contract. VA
is in the process of finalizing the notice, and intends to award a
lease contract. In addition to the increase in size, the increase in
rent takes into account VA's increased environmental sustainability and
physical security requirements, which were updated since the
preparation of the original authorization request. Barring any
unforeseen circumstances, VA expects to award this lease in June 2012,
complete construction in June 2014, and activate for service shortly
thereafter.
In closing, we look forward to the completion of the facility and
to providing care to Veterans in Savannah, Georgia.
I look forward to answering any questions the Committee has
regarding the Savannah CBOC expansion.
MATERIAL SUBMITTED FOR THE RECORD
Post-hearing Questions and Responses for the Record:
Hon. Bill Johnson, Chairman, Subcommittee on Oversight and
Investigations, Committee on Veterans' Affairs, to
Hon. Eric K. Shinseki, Secretary, U.S. Department of Veterans Affairs
March 16, 2012
The Honorable Eric K. Shinseki
Secretary
U.S. Department of Veterans Affairs
810 Vermont Avenue, NW
Washington, DC 20420
Dear Mr. Secretary:
I request your response to the enclosed questions for the record I
am submitting in reference to the Oversight and Investigations
Subcommittee hearing entitled ``VA's Dubious Contracting Practices:
Savannah'' that took place on March 9, 2012. I would appreciate if you
could answer the enclosed hearing questions by the close of business on
April 27, 2012.
In an effort to reduce printing costs, the Committee on Veterans'
Affairs, in cooperation with the Joint Committee on Printing, is
implementing some formatting changes for materials for all full
Committee and Subcommittee hearings. Therefore, it would be appreciated
if you could provide your answers consecutively and single-spaced. In
addition, please restate the question in its entirety before the
answer.
Due to the delay in receiving mail, please provide your response to
Bernadine Dotson at [email protected]. If you have any
questions, please call Eric Hannel, Majority Staff Director of the
Oversight & Investigations Subcommittee, at 202-225-3527.
Sincerely,
Bill Johnson
Chairman
Subcommittee on Oversight & Investigations
BJ/rm
1. Based on Lease proposals currently being evaluated for award
in Savannah, what is the fee that the Lessors will be required to pay
to Public Properties, L.L.C., for the proposed new Savannah Clinic?
2. Including a reasonable return on capital and financing costs,
how much of the total lease costs to be paid by VA will be to
compensate the Lessor for payment of the Lease Acquisition Fee? For
that sum, how many additional VA Contracting Officers could be employed
to provide the same service?
3. If VA followed the Congressional Authorization Limits for the
Savannah Clinic, negotiated directly with the existing Lessor for
expansion of existing space and adhered to the Lease Cost budget
approved by Congress, how much would the lease acquisition fee
potentially paid to Public Properties, L.L.C., be?
4. Why isn't VA expanding the current Savannah, GA, clinic's
hours to more effectually use the existing capital investment, like the
private sector does, before making new capital investments?
5. What were the 2011 use statistics in Savannah or clinic stops?
VA projected current use would increase 85 percent in 10 years--how
much has it increased in 6 years? What does VA project impact on
Service needs in Savannah will be when the new 23,348 square-foot
clinic in Hinesville, GA, is completed?
6. What are the demographic statistics for Hinesville, GA, and
Savannah, GA?
7. What is the updated demographic data VA used to go from
building a 70,600 square-foot facility up to a 161,525 square-foot
facility in Green Bay, Wisconsin?
8. How does the new proposed site in Savannah's accessibility to
public transportation compare to the existing site's accessibility?
9. An expansion of the Savannah clinic was authorized in fiscal
year 2009, the current facility's lease expired in 2011, and VA is now
on a succeeding lease. When does VA anticipate a veteran will be able
to step foot inside a new Savannah clinic?
10. Will VA recover the costs for the initial unqualified
appraisal? If so, from whom?
11. Did the unqualified appraiser break the law?
U.S. Department of Veterans Affairs Responses, August 9, 2012
Questions for the Record Submitted by
Chairman Bill Johnson
Subcommittee on Oversight and Investigations
House Committte on Veterans' Affairs
``VA's Dubious Contracting Practices: Savannah''
March 9, 2012
Question 1: Based on Lease proposals currently being evaluated for
award in Savannah, what is the fee that the Lessors will be required to
pay to Public Properties, L.L.C., for the proposed new Savannah Clinic?
VA Response: The broker will obtain a commission of 2 percent of
the total contract value over the lease term. The actual fee will be
based on the cost of the lease, as proposed by the successful offeror.
Question 2: Including a reasonable return on capital and financing
costs, how much of the total lease costs to be paid by VA will be to
compensate the Lessor for payment of the Lease Acquisition Fee? For
that sum, how many additional VA Contracting Officers could be employed
to provide the same service?
VA Response: The brokerage commission earned by commercial firms
under a VA indefinite delivery/indefinite quantity (IDIQ) contract does
not affect the fair market value of the lease cost. While all
commercial developers, including VA's lessor, include project soft
costs and broker commissions into the total project cost, VA will only
pay the fair market value rental rate to the successful offeror that is
based on the competitive offers and independently verified by an
appraisal prior to contract award. Specifically, the cost VA is paying
on a per square foot basis, regardless of the costs incurred by the
lessor, will be confirmed as reasonable and supported within the
commercial real estate market prior to award. VA commissions an
appraisal to confirm the rental stream is fair and reasonable prior to
award, as well as performing an internal verification to ensure the
rental rate is reasonable and supported by the market pricing, in
consideration of the local market values, the size and complexity of a
major medical facility, and VA's specific physical security and
sustainability standards.
Regardless of the composition of each individual lessor's
individual financing, profit-margins and sub-contractor agreements, VA
will not award to a lessor whose rental rate exceeds market value.
It is important to note that the broker commission in the Savannah
area averages 6 percent as the industry standard and is typically split
between the listing and procurement brokers. The broker commission is
inherently built into the market value of properties within the
commercial real estate market. VA negotiates each percentage on a
project by project basis with the selected IDIQ firm, and under VA's
contract with the IDIQ brokers, in no event will the commission
authorized by VA exceed 3 percent, regardless if the market conditions
in the private sector would support a higher rate. In this case VA
negotiated a rate of 2 percent with the selected IDIQ contract broker.
Question 3: If VA followed the Congressional Authorization Limits
for the Savannah Clinic, negotiated directly with the existing Lessor
for expansion of existing space and adhered to the Lease Cost budget
approved by Congress, how much would the lease acquisition fee
potentially paid to Public Properties, L.L.C., be?
VA Response: VA does not have the option of negotiating directly
with the current lessor without conducting a full and open competitive
procurement.
At the time VA requested congressional authorization, the 20-year
term of the current lease was set to expire in April 2011. In a lease-
procurement, VA's authority is limited to 20 years, and after that
period VA must conduct another procurement to obtain leased space. As a
result, VA initiated a full and open competitive procurement in
accordance with the Competition in Contracting Act (CICA), in order to
align delivery of new space needs and requirements to support the
modern delivery of health care services within limitations of its
statutory leasing authority.
In 2009, prior to seeking solicitations for a new lease
procurement, VA determined that a clinic of over 50,000 net usable
square feet would be required in order to meet the needs of the Veteran
patient population within the catchment area. Pursuant to the CICA, 40
U.S.C. Sec. Sec. 3301, et seq., VA, as a Federal agency, is required to
obtain full and open competition through the use of competitive
procedures that are best suited under the circumstances of the
procurement. (41 U.S.C. Sec. 3301(a)). VA determined that there was
extremely limited competition for existing space within the catchment
area for a large medical facility. A build-to-suit facility would
fulfill Federal contracting requirements to allow for sufficient
competition as well as provide Veteran patients with a modern health
care facility, assist VA staff in providing patients a high quality of
health care, as well as meet various Federal sustainability and
physical security requirements. VA also met with the existing clinic
lessor and his representatives, and the lessor's representative stated
that the existing facility would require significant infrastructure
upgrades to meet current physical security and sustainability
requirements (i.e., significant upgrades and replacement of plumbing,
mechanical, electrical, and structural elements).
In light of Federal contracting requirements, the expiration of the
20-year lease contract, higher modern standards for VA facilities
regarding sustainability and physical security, and the growing needs
of the Veteran patient population, directly negotiating with the lessor
to expand in place was not a viable option.
Question 4: Why isn't VA expanding the current Savannah, GA,
clinic's hours to more effectually use the existing capital investment,
like the private sector does, before making new capital investments?
VA Response: Charleston VA Medical Center (VAMC) has previously
explored alternative hours of operation (i.e., extended hours during
the week and weekend operations) and Veterans' responses have been
mixed. A recent survey of 432 Veterans who receive care at the
Charleston VAMC, and its outlying clinics found that 52 percent would
not be interested in coming in for care during extended hours or on
weekends. Of the 48 percent who were in favor, 36 percent had no
preference and only 8 percent and 4 percent, respectively identified
weekends and evenings as preferences.
Question 5: What were the 2011 use statistics in Savannah or clinic
stops? VA projected current use would increase 85 percent in 10 years--
how much has it increased in 6 years? What does VA project impact on
Service needs in Savannah will be when the new 23,348 square-foot
clinic in Hinesville, GA, is completed?
VA Response: \1\
---------------------------------------------------------------------------
\1\ Data Source: VISN Support Service Center
Savannah Outpatient Clinic FY 2006 FY 2011 Variance
Visits 50,754 74,130 + 23,376 (46%)
Unique Veterans 8,173 11,026 + 2,853 (35%)
Preliminary End- of-
Savannah Outpatient Clinic FY 2012--thru 6-year average Year FY 2012
March (2nd Q) growth rate Projection
Visits 38,493 8% 80,060
Unique Veterans 8,708 6% 11,688
At present, the Hinesville lease is projected to activate before
the replacement Savannah lease. Award for Hinesville is projected to be
August 2012 with activation averaging 18-24 months thereafter. Award
for Savannah is still pending. Veterans Integrated Service Network
(VISN) 7 and Charleston VAMC discussed projected migration and
reassignment of Veterans from the Hinesville and Savannah surrounding
counties in developing the space plans for both leases.
The temporary clinic in Hinesville has already realized migration
of Veterans from other sites of care including the Brunswick Community-
Based Outpatient Clinic (CBOC) and the Dublin VAMC. The Hinesville CBOC
is also projected to increase collaboration with nearby Fort Stewart/
Winn Army Hospital for VA and Department of Defense (DoD) sharing
activities. Data is based on fiscal year (FY) 2012 (thru 2nd Quarter)
workload obtained from VISN Support Service Center.
Question 6: What are the demographic statistics for Hinesville, GA,
and Savannah, GA?
VA Response: Hinesville--The temporary CBOC was activated in July
2011 and will remain open until the permanent CBOC is activated. The
workload for FY 2011 was approximately 1,200 visits, and the workload
for FY 2012 (through 7/23/2012) is approximately 4,029 visits with
1,304 unique Veterans.
Clinical services at the temporary clinic include primary care and
tele-mental health. These services will be expanded at the permanent
CBOC to include optometry, general radiology, women's health, Operation
Enduring Freedom/Operation Iraqi Freedom/Operation New Dawn (OEF/OIF/
OND), and very select outpatient specialty care.
This CBOC is located in direct proximity to Ft. Stewart/Winn Army
Hospital and expanded VA/DoD collaboration and resource sharing is
expected. A resource sharing agreement for telehealth was activated
effective 2/3/2012 and allows Army Providers to focus more attention to
Medical Hold cases. Further expansion of mental health and telehealth
services will be discussed closer to activation of the expanded
Hinesville CBOC.
Workload Factors Justifying Scope Revision
The scope of the CBOC Business Plan was revised based on several
workload factors. The original CBOC Business Plan identified a
projected annual workload of 20,029 visits (primary care and mental
health only). The latest revised workload projections (including
migration from other existing VA sites of care) identified 32,625
annual visits--an increase of 12,596 (63 percent increase).
11 percent increase in primary care
55 percent increase in mental health
expanding radiology services (ultrasound and bone
density)
adding select specialty services not in original Business
Plan
There are currently 145 women Veterans treated in Hinesville. Local
projections identify a continued 8-10 percent annual projected increase
in women Veterans.
Revised projections were based on a maximum capacity of 7,200
unique primary care patients:
Resulting Changes in Space Plan
The original space plan concept was 10,000 net usable square feet
(NUSF). Due to future projected workload increases, Charleston VAMC did
not want to activate an undersized clinic. Therefore, a revised space
plan was submitted and approved for approximately 23,348 NUSF. The
revised space plan will include a separate team for women's health and
OEF/OIF/OND Veterans.
Savannah--the original lease was activated in 1991. The 2008
prospectus identified 39,196 NUSF in a new lease. The Charleston VAMC
requested and received approval to increase the NUSF to 51,040 in 2009.
The current design is at 55,193 NUSF, which is within the previously
utilized agency reapproval threshold of 10 percent.
Workload Factors Justifying Scope Revision
The original workload from 2007 identified future projected
workload of 55,465 visits.
Revised workload projections from 2008 identified an increase in
total visits to 76,571 visits (increase of 38 percent).
The current workload figures used a total of approximately 72,160
visits. This includes factoring in estimates for migration of Veterans
to Hinesville.
Future projections for the Savannah catchment area (2010 compared
to 2030. Projections based on data obtained from ProClarity).
ProClarity is a database identifying the latest VA Enrollee Health Care
Projection Model for future utilization, enrollee, and veteran
population projections.
20 percent decline in Veteran population
32 percent increase in enrollees
24 percent increase in market penetration
There are currently 1,440 women Veterans followed in Savannah.
Local projections identify a continued 8-10 percent annual projected
increase in women Veterans.
Resulting Changes in Space Plan
The original space plan identified 39,199 NUSF. Approval to
increase space due to workload was received in 2009, and the revised
space plan total was 51,040 NUSF.
Current space plan identifies 53,506 NUSF which is within the 10
percent limit.
Largest clinical increases were in:
Mental Health--2,850 NUSF
Specialty Care--5,107 NUSF
Radiology--1,307 NUSF
The rationale behind increasing select specialty care services was
to meet increasing workload, and also to help decompress specialty care
at Charleston VAMC. Select expansion includes:
Mental Health--full benefit package for mental health
services (required for sites of care with over 10,000 unique patients)
Audiology
Optometry
Radiology (including CT Scanner, ultrasound, and bone
density)
There are separate teams for women's care and OEF/OIF/OND in the
current revised space plan.
These strategies will have the following positive effects:
Decrease drive time to Charleston (approx. 100 miles) for
select Veterans;
Decrease travel pay for those Veterans who will receive
expanded services in Savannah;
Decrease fee basis expenditures in the Savannah area for
select services; and
Deliver care closer to the Veteran thus supporting
patient centered care leading to a positive influence on patient
satisfaction.
Question 7: What is the updated demographics data VA used to go
from building a 70,600 square-foot facility up to a 161,525 square-foot
facility in Green Bay, Wisconsin?
VA Response: Scope Increase Justification
70,600 NUSF facility was authorized by Congress (FY
2009 Appropriation)
Projected annual clinic stops: 105,400
107,000 NUSF facility was the result of adding
ambulatory surgery
161,525 NUSF facility was the result of a detail
analysis of projected workload and added program changes.
Projected annual clinic stops: 148,950; this is 25
percent less than actuary data: (actuary data projected workload to be
195,035)
Enrollment Factors that Contributed to Scope Change:
OEF/OIF/OND Veterans: 2,000 active patients from
Green Bay catchment, with an additional 1,500 projected to be
enrolled in the next 5 years. Wisconsin has a history of high
utilization of returning OEF/OIF/OND compared to VHA average
(65 percent compared to 49 percent);
Veterans receiving fee basis care: 2,743 patients
from Green Bay catchment (no capacity at current CBOCs);
Current Cost: $1.9 Million;
Projected Priority 8 Utilization increase (2017):
1,300 Veterans (4 percent); and
Specialty Care Programs including: Home Telehealth;
Department of Housing and Urban Development/Department of
Veterans Affairs Supportive Housing (HUD/VASH), tele-medicine;
compliance with the Uniform Mental Health Services Handbook.
Workload Factors Affecting the Increased Scope:
62 percent of the increase in scope is due to
workload projections.
25 percent of the increase is due to increased ambulatory
care workload projections.
37 percent of the increase is due to increased specialty
care, rehabilitation medicine, and surgical workload projections.
25 percent of the increase in scope is due to added
program changes that increased the scope: Audiology (2,506
NUSF) for Compensation & Pension exams, Pharmacy (4,886 NUSF)
requirements for chemotherapy and surgical needs, Radiology
(5,760 NUSF) for Computerized Tomography (CT), Ultra Sound and
Mammography.
13 percent of the increase in scope is due to space
that is not accounted for in the space driver, VA's estimating
space tool: Sterile Processing Service (3,065 NUSF) to
accommodate surgical and dental reusable medical equipment
requirements; Dialysis and Chemotherapy Infusion (4,000 NUSF)
carved out of the Ambulatory Care space.
The Green Bay Outpatient Clinic will serve approximately 20,000
Veterans per year and provide primary care, mental health, ambulatory
surgery, specialty care and diagnostic services. The clinic will be a
regional clinic for ambulatory surgery and provide a variety of
specialty care needs for Veterans traveling from the Iron Mountain VAMC
to Milwaukee.
Question 8: How does the new proposed site in Savannah's
accessibility to public transportation compare to the existing site's
accessibility?
VA Response: Chatham County currently provides a bus stop directly
in front of the current clinic, and has expressed willingness to extend
the same service in front of a relocated VA clinic at the selected
site, upon construction and activation, to serve the patient
population.
Question 9: An expansion of the Savannah clinic was authorized in
fiscal year 2009, the current facility's lease expired in 2011, and VA
is now on a succeeding lease. When does VA anticipate a veteran will be
able to step foot inside a new Savannah clinic?
VA Response: Based on the existing land option and value, VA had
previously anticipated awarding the development contract in June 2012,
with design and construction completed in spring 2014, and activation
in summer 2014.
VA has re-entered negotiations with the landowner of the selected
site. VA has offered to enter into an assignable option for the revised
appraised value, and has offered the landowner the opportunity to
commission his own appraisal of the property by August 15, 2012. If the
landowner decides to commission an appraisal, and this appraisal shows
a higher value than VA's appraisal, VA and the landowner will have the
option of mutually selecting a third appraiser, who will review both
appraisals and determine an appropriate valuation of the property. This
process, if it results in a successful agreement on price, would add
approximately 3 months to the timeline, potentially pushing activation
of the clinic to fall 2014.
If the landowner refuses to obtain his own appraisal, or VA and the
landowner are subsequently unable to reach a revised agreement on price
for the preferred site, VA will cancel the solicitation. VA will then
re-advertise and conduct another market survey to consider both land
and existing space within the delineated area. VA will then select the
procurement method that allows for maximum competition. This process is
anticipated to take a minimum of 12 months, potentially pushing award
until Summer 2013, and activation of the clinic to Fall 2015.
Question 10: Will VA recover the costs for the initial unqualified
appraisal? If so, from whom?
VA Response: VA issued a cure notice to the real estate broker firm
that contracted for this appraisal on March 29, 2012. The broker firm
responded to the cure to the satisfaction of VA's Contracting Officer,
by providing confirmation that all subcontractors in the future will
have the requisite qualifications in conformance with Federal, and VA,
requirements, and provided review appraisals from qualified appraisal
firms. In the meantime, VA is investigating options available for the
recovery of the costs it has incurred as a result of errors committed
by VA contractors.
Question 11: Did the unqualified appraiser break the law?
VA Response: VA has no direct knowledge of whether the appraiser
initially selected has broken any laws.