[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 
further refined.























                            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

                              ----------                              


                         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.

                                 
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