[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]









 FROM THE GROUND UP: ASSESSING ONGOING DELAYS IN VA MAJOR CONSTRUCTION

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

                                HEARING

                               before the

                     COMMITTEE ON VETERANS' AFFAIRS
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                        TUESDAY, MARCH 27, 2012

                               __________

                           Serial No. 112-52

                               __________

       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

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 27, 2012

                                                                   Page

From The Ground Up: Assessing Ongoing Delays In VA Major 
  Construction...................................................     1

                           OPENING STATEMENTS

Chairman Jeff Miller.............................................     1
    Prepared Statement of Chairman Miller........................    53
Hon. Bob Filner Prepared Statement only..........................    53
Hon. Corrine Brown Prepared Statement only.......................    54
Hon. Silvestre Reyes.............................................     2
    Prepared Statement of Hon. Reyes.............................    55

                               WITNESSES

Miller Gorrie, Chairman of the Board, Brasfield & Gorrie General 
  Contractors....................................................     4
    Prepared Statement of Mr. Gorrie.............................    57
    Accompanied by:

      Tim Dwyer, President, South Region, Brasfield & Gorrie 
          General Contractors
John P. O'Keefe, President, National Group, Clark Construction 
  Group LLC......................................................     6
    Prepared Statement of Mr. O'Keefe............................    58
Hon. Robert A Petzel, M.D., Under Secretary for Health, Veterans 
  Health Administration, U.S. Department of Veterans Affairs.....    29
    Prepared Statement of Hon. Petzel............................    61
Glenn D. Haggstrom, Executive Director, Office of Acquisitions, 
  Logistics, and Construction, U.S. Department of Veterans 
  Affairs
    Accompanied by:

      Robert L. Neary, Jr., Acting Executive Director, Office of 
          Construction & Facilities Management, U.S. Department 
          of Veterans Affairs
      Bart Bruchok, Resident Engineer, Office of Construction and 
          Facilities Management, U.S. Department of Veterans 
          Affairs

                   MATERIAL SUBMITTED FOR THE RECORD

Office of Construction and Facilities Management status report on 
  VA'S Health Care Centers projects requested by Chairman Miller.    40

                        QUESTION FOR THE RECORD

Question From: Bob Filner, Ranking Democratic Member to Hon. Eric 
  K. Shinseki, Secretary, U.S. Department of Veterans Affairs....    63
Response From: Hon. Eric K. Shinseki, Secretary, U.S. Department 
  of Veterans Affairs............................................    64

                       SUBMISSION FOR THE RECORD

Hon. Charles Boustany, Jr., M.D. from Louisiana..................    55

 
 FROM THE GROUND UP: ASSESSING ONGOING DELAYS IN VA MAJOR CONSTRUCTION

                        Tuesday, March 27, 2012

                     U.S. House of Representatives,
                            Committee on Veterans' Affairs,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 10:30 a.m., in 
Room 334, Cannon House Office Building, Hon. Jeff Miller 
[Chairman of the Committee] presiding.
    Present: Representatives Miller, Bilirakis, Roe, Stutzman, 
Johnson, Denham, Runyan, Brown, Reyes, Michaud, McNerney, 
Donnelly, and Walz.
    Also Present: Representatives Mica, Adams, and Webster.

           OPENING STATEMENT OF CHAIRMAN JEFF MILLER

    The Chairman. The Committee will come to order.
    Good morning, everybody. Welcome to today's Full Committee 
hearing From the Ground Up: Assessing Ongoing Delays in the VA 
Major Construction Projects.
    Before we would begin today's hearing, I would ask 
unanimous consent that our colleagues from Florida, Mr. Mica, 
Ms. Adams, and Mr. Webster, be allowed to sit at the dais and 
participate in today's proceedings. Seeing no objection, so 
ordered.
    I would also like to ask unanimous consent that a statement 
from Dr. Boustany from Louisiana, our colleague, be entered 
into the record. Hearing no objection, so ordered.

    [The prepared statement of Charles Boustany, Jr. appears in 
the Appendix]

    The Chairman. Thank you all for joining us. And I know 
everybody has a busy schedule this morning. We will be going in 
and out. I appreciate you being here at the drop of the gavel.
    We are here today to examine the status of ongoing 
Department of Veterans Affairs major construction projects and 
leases and to assess the management and oversight issues which 
have led to significant setbacks in recent projects.
    The fiscal year 2013 budget for VA shows that four major 
medical facility projects in Denver, Las Vegas, New Orleans, 
and Orlando have each experienced significant cost increases 
and schedule delays from their original congressional 
authorization.
    Although all of these projects were authorized between 
fiscal years 2004 and 2006, none are open for business today.
    Additionally, there are 55 major medical facility leases 
that have been authorized in recent years with a total startup 
cost of $442 million.
    However, only five of those facilities are now open. 
Thirty-eight are behind schedule with 14 of these falling three 
or more years behind their intended opening date.
    As the VA health care system has grown, it appears that we 
have come to a point in VA's major construction program where 
the administrative structure is an obstacle that is not 
effectively supporting the mission.
    As a result, our veterans are the ones who are left without 
services and our taxpayers are the ones who are left holding 
the check or writing a new one.
    A case in point. On October 24th, 2008, VA broke ground to 
build a new medical center in Orlando with a scheduled 
completion date of October 12th of 2012. Yet, this past 
December, I learned of serious and significant issues 
surrounding the construction of this new facility to better 
care for the veterans in that region.
    It was not the VA, but the contractor who came forward and 
they came forward out of sheer frustration. When VA confirmed a 
few days later that the project was indeed going to be delayed, 
I quickly scheduled a visit to Orlando to see the situation 
myself.
    Needless to say, what I saw was startling and unacceptable. 
There is a disconnect between VA central office and what they 
were telling me about the extent of the delay and the day-to-
day reality on the ground.
    Clearly there are problems with design, problems with 
procurement of specific medical equipment, change orders and 
how they all fit together. Look, the issue of pointing fingers 
has got to stop.
    We cannot and we must not allow the problems in Orlando to 
exist there or anywhere else. It is vital that reputable, long-
standing companies want to work with the VA on significant 
projects such as these. They are flagship projects and they are 
important to the delivery of care to our veterans.
    Today's plans and projects are tomorrow's hospitals and 
clinics. And whether it is by building the new, renovating the 
old, or leasing the existing, our allegiance must always be to 
the veteran, who relies on the VA to provide the benefits and 
services they need to lead healthy, productive lives.
    Again, I want to thank everybody for joining us here today.
    I now yield to the Ranking Member, Mr. Reyes, for any 
opening comments he may have.

    [The prepared statement of Chairman Miller appears in the 
Appendix]

          OPENING STATEMENT OF HON. SILVESTRE REYES, 
                       DEMOCRATIC MEMBER

    Mr. Reyes. Thank you, Mr. Chairman. I am pleased to be here 
filling in for Mr. Filner. I will now read his opening 
statement.
    Good morning and pleased to be here. Thank you for 
attending and for your continued interest in veterans' issues.
    I also want to thank you, Mr. Chairman, for focusing the 
Committee on the critical issue of the VA construction program. 
It is clear to me that the department needs to shore up their 
process of managing the construction and completion of 
significant projects that are important to every single person 
on this Committee and most importantly to our veterans.
    At issue today is an all-too-familiar theme of these 
oversight hearings, lack of management, lack of control, lack 
of accountability, and very much needed oversight.
    I would say that most of the problems that have been 
encountered during the construction of the facilities we are 
looking at today could have been avoided with proper management 
and vigilant project oversight.
    Let me just take Denver as an example, a facility that has 
received appropriated funds as far back as fiscal year 2004. As 
of November 2011, VA announced that the target completion date 
for this hospital is 2015, 11 years after first receiving funds 
and an increase of at least 29 percent to the cost. And to 
date, it is not even built yet.
    Denver is not alone. The Las Vegas facility has increased 
in cost from the original estimate by at least 110 percent, 
Orlando 89 percent, and New Orleans 45 percent. These increases 
represent over a billion dollars in funding. That is just the 
increases.
    Too often we hear of cost increases such as those that I 
have just mentioned, delayed or suspended construction 
activities, inadequate design plans, and very little 
communication between VA and its partners, communication that I 
understand would have helped to clear up some of the 
misunderstandings at certain construction sites such as 
Orlando.
    It is hard for me to believe that VA would refuse to meet 
with contracting officials concerning any construction project 
much less one that is behind schedule and beset with problems, 
yet that is what I am being told today.
    VA's testimony points to the fact that it has been 18 years 
since they have built a medical center. That may be true, but 
it does not excuse poor management and basic oversight 
responsibilities.
    I would like to hear more details from Dr. Petzel on the 
integration of risk management into the core project of 
management functions.
    I believe this is one of two recommendations from the 
Government Accountability Office's December 2009 report on 
project cost estimates.
    I am sure that everyone would agree that we have to do 
better than this. We expect better than this. Veterans deserve 
better than this. And I hope that today's hearing will help 
shed light on the barriers and challenges that VA faces during 
the construction process of these projects.
    As we move forward, I look forward to working with VA on 
improving the construction program and ensuring more 
transparency and efficiency in the process.
    Again, I thank you, Mr. Chairman, for calling this hearing.

    [The prepared statement of Hon. Reyes appears in the 
Appendix]

    The Chairman. Thank you, Mr. Reyes.
    I first want to welcome our first panel to the witness 
table. With us this morning is Mr. Miller Gorrie, Chairman of 
the Board for Brasfield & Gorrie General Contractors.
    Mr. Gorrie is accompanied by Mr. Tim Dwyer, President of 
the south region for Brasfield & Gorrie. We are also joined by 
Mr. John O'Keefe, National Group President for Clark 
Construction Group, LLC.
    Thank you for being with us today and being willing to 
share your insight.
    And I think it is important to note that of the six firms 
that we invited to participate in today's hearing, Brasfield & 
Gorrie and Clark were the only ones willing to speak on the 
record regarding their experience contracting with VA.
    I understand that VA is your customer and I appreciate you 
being here today.
    Gentlemen, your past will be somebody else's future. I 
appreciate you speaking with us this morning.
    Mr. Gorrie, you are recognized to proceed. Thank you for 
being here.

STATEMENTS OF MILLER GORRIE, CHAIRMAN OF THE BOARD, BRASFIELD & 
  GORRIE, ACCOMPANIED BY: TIM DWYER, PRESIDENT, SOUTH REGION, 
BRASFIELD & GORRIE; JOHN P. O'KEEFE, PRESIDENT, NATIONAL GROUP, 
                 CLARK CONSTRUCTION GROUP, LLC

                   STATEMENT OF MILLER GORRIE

    Mr. Gorrie. Thank you, Mr. Chairman and ladies and 
gentlemen.
    I am Miller Gorrie. I am the Chairman of Brasfield & 
Gorrie, a general contractor that I founded in 1964.
    Last year, we were ranked number two in the Nation in terms 
of health care revenues, hospital work completed. And in the 
last 15 years, we have been ranked no lower than third and six 
of those 15 years, we were ranked number one in health care 
construction. So we do have some experience in health care 
construction.
    We are the contractor on the Orlando hospital. Not long 
after we were awarded the job, we began to realize that we did 
not have adequate information to complete the job. In other 
words, we did not have enough information to build the job and 
we began asking for information.
    We were restricted during the bid process from asking for 
this information. For the final 12 weeks, we were shut down 
from asking questions.
    But after we got the job, we had to ask questions in order 
to build the job and we learned that the medical equipment 
lists that were included in the documents had been discarded by 
the VA and that the medical center had been allowed the 
opportunity to select equipment on their own.
    We were obligated by our contract to coordinate this 
medical equipment, so when the medical list began to change, we 
did not have any way to coordinate it. And more importantly, 
the designers, the architects and engineers who were supposed 
to design the hospital around medical equipment, which is 
customary to do, you have to know what your equipment is and 
design the hospital around it, they could not do it because 
equipment had not been selected and it was changing.
    So we got behind the eight ball to start with. We got 
behind because the equipment had not been selected and the 
details were not there.
    So we began construction and we got the structure up pretty 
well. And then we got into the fit-out portion which is the 
interior of the hospital and we again run into problems because 
we did not have the information.
    We could not do the fit-out and finish work, so we had 
about a thousand man crew and we had to cut it back because 
could not work efficiently. So we cut it back to about 500 and 
that was frustrating that we had to do that.
    So we have been on the job now for 18 months and we have 
been impacted since the beginning with--spent 18 months and we 
have not had complete drawings to work with.
    During 12 of those 18 months, the hospital in certain 
portions of it have been suspended where we could not work to 
allow for completion of the documents. So now we are trying to 
figure out what to do. So we go to the contracting officer and 
ask for help.
    In May, we come up here and meet with the contracting 
officer and were told basically to continue the course, that 
they did not give us any additional information and said that 
things will be worked out, but we did not get any information.
    We waited a few more months and then November, we asked for 
another meeting. We had a meeting on the job site and same 
thing. We did not get much help. We did not get any 
information.
    So now we are a year into the job and we have no completed 
design. We are trying to build a hospital. We have inadequate 
information. We are being held up.
    So, I mean, it is our job. I mean, under the terms of our 
contract, we had a lump sum, fixed price contract. We were 
supposed to be given drawings up front to build by. That was 
the nature of a lump sum, fixed price contract. We did not have 
that. We did not get that. We were supposed to, but we did not.
    So we are trying to work and we are running into obstacles 
everywhere we turn.
    In January, the VA told the designers to finish the 
drawings and they put on a blitz to finish the drawings. And 
last week, in March, we got 200 drawings which is supposedly 
the final set of drawings. We now have been issued--we 
originally had a set of 4,500 drawings. Now we have got--we 
have been issued over 10,000 drawings, about 1,000 drawings, 
new drawings since the early part of the year.
    And now we are being told to go to work and catch up, so to 
speak, and man up. With all these drawings that have been 
changed and all the information that has been added, it is 
going to take us some time to get all that information ferreted 
out to estimate what is on the drawings, to purchase it, 
schedule it, you know, figure the changes, and get it worked 
out. So it is going to take time.
    The job is--all during the job, we have had problems with 
getting changes resolved and now we are in the midst of a whole 
new set of drawings with lots of changes and it has got to be 
resolved. We cannot continue to work indefinitely without 
resolution of anything. It is just kicked down the road. So we 
have got to have some kind of timely resolution of all these 
issues.
    And the cost has been significant to us and the time has 
been extended. And it will get worse unless there is some 
resolution to the issues that are outstanding.
    So that is what I hope we can find a solution to is how do 
we get things resolved and just do not keep kicking down the 
road.
    Thank you.

    [The prepared statement of Miller Gorrie appears in the 
Appendix]

    The Chairman. Thank you, sir.
    Mr. O'Keefe, you are recognized.

                  STATEMENT OF JOHN P. O'KEEFE

    Mr. O'Keefe. Chairman Miller, Ranking Member Reyes, Members 
of the Committee, my name is John O'Keefe. I am the president 
of the National Group of Clark Construction.
    I would like to thank the Committee for the opportunity to 
address two VA hospital projects constructed by Clark 
Construction, the VA hospital in Las Vegas, Nevada, and the VA 
hospital in New Orleans, Louisiana.
    In 2008, the Department of Veterans Affairs selected the 
joint venture of Clark Construction Group and Hunt Construction 
Group to construct a new medical center in Las Vegas, Nevada. 
The Clark, Hunt team has over 30 years of experience working 
together to deliver a number of successful projects for our 
clients.
    Clark Construction Group, founded in 1906, is today one of 
the Nation's most experienced and respected providers of 
construction services with over $4 billion in annual revenue 
and major projects throughout the United States.
    Hunt Construction Group, another of the country's largest 
construction companies, has been in business for over 66 years 
with over $1.7 billion in annual revenue.
    The Las Vegas VA medical center project was awarded to 
Clark, Hunt, a joint venture, in September of 2008 and the 
notice to proceed was issued on October 22nd of 2008. The 
original contract completion date was August 22nd, 2011 and due 
to time extensions granted for changes to the project, the 
contract completion date was extended to December 12th of 2011.
    The project was completed on time. The VA has begun their 
activation of the facility including installation of medical 
equipment, training, and maintenance of facilities. The Las 
Vegas VA medical center is scheduled to begin treating patients 
by mid-summer of this year.
    On this project, Clark, Hunt, and the VA had an outstanding 
relationship. Our relationship and the open communication 
between Clark, Hunt, and the VA proved critical in making the 
project a success for both parties.
    In 2009, the Department of Veterans Affairs selected Clark 
McCarthy Health Care Partners in association with Woodward 
Design Build, Landis Construction as the contractor for the New 
Orleans VA replacement hospital. The team of Clark, McCarthy, 
Woodward, and Landis has a combined successful history of more 
than 400 years of continuous health care construction 
operations.
    McCarthy Building Companies, founded in 1864, is the oldest 
privately-held construction firm in the United States and has 
successfully managed projects in 45 states with annual revenues 
approaching $3 billion.
    The Clark McCarthy joint venture has successfully provided 
construction services together since 2002 with nine projects 
completed or underway representing over $4.5 billion in 
construction value.
    The joint venture of Clark McCarthy Health Care Partners 
proposed on the southeast Louisiana veterans' health care 
system replacement hospital and received notice of award on 
October 1st, 2009.
    The contract utilizes an incentive price revision 
successive targets contract using a target price and a ceiling 
price approach to manage costs.
    Prior to a notice to proceed, the project was protested to 
the U.S. Government Accountability Office by one of the other 
proposers. While the protest was ultimately denied, it delayed 
the notice to proceed with the work and the start of pre-
construction services until February 11th, 2010.
    The project experienced additional delays as the result of 
issues related to the land acquisition by the VA, investigation 
for artifacts of historic significance by the Louisiana State 
Historical Preservation Office, and the discovery of 
contaminated soils and underground storage tanks on the site.
    During this delay period, Clark McCarthy worked closely 
with the VA to develop an early demolition and abatement 
package for the existing Pan Am Building which is scheduled for 
renovation as a part of the project.
    The Clark McCarthy and VA team also finalized the earthwork 
design and engineering which allowed Clark McCarthy to bid and 
procure this work during this delay period.
    The property once free of encumbrances was fully released 
to Clark McCarthy for construction commencement on February 
12th, 2012. Our team was able to quickly mobilize and begin 
work on February 22nd, 2012 as a result of the pre-planning and 
coordination between Clark McCarthy and the VA.
    As of this date, work is underway and is progressing in 
accordance with our plan with a completion of the project 
planned to occur in 2016. That would be in January of 2016.
    The Clark McCarthy team and the VA are determined to 
complete our work as quickly as possible while maintaining our 
stringent standards for safety, quality, and integrity. To 
ensure timely completion of this important project, 
cooperation, coordination, and effort will be required from all 
of the parties.
    I would like to thank you for this opportunity to testify 
and welcome any questions you may have. Thank you.

    [The prepared statement of John P. O'Keefe appears in the 
Appendix]

    The Chairman. Thank you very much for your testimony.
    Each Member will have an opportunity to ask questions of 
the first panel.
    Mr. Gorrie, in your testimony, you said you were working 
off a fixed price contract but that the drawings were not 
complete at the time, of the contract award.
    How does that work? How can you do a fixed price contract 
without a complete set of drawings? Were the drawings complete 
when you bid, or not complete when you bid? Did they say they 
would give them to you at a later date?
    Mr. Gorrie. Well, they changed substantially and they have 
changed for the full 18 months we have been on the job. It has 
been a progression of completion of the drawings.
    Had they all been a hundred percent completed when we 
started, we would not be here. I mean, we would have had 
completed documents. We could have planned and scheduled and 
worked through the job like we would normally do.
    But once we got up to a point where we had to work on the 
interior of the building and the space was not fully defined 
and not determined because equipment had not been selected and 
the drawings could not be designed around them, we were too 
blocked. We had no place to work. So we had to scale back.
    The Chairman. My question is, how can you do a fixed price 
bid without having a complete set of drawings to bid off of, 
Mr. Dwyer?
    Mr. Gorrie. You want to answer that?
    Mr. Dwyer. Mr. Chairman, we did have a representative, the 
complete set of documents. There were roughly 25,000 pieces of 
medical equipment in which the architect and engineers designed 
by and designed to.
    When you are designing a hospital, you want a design from 
the medical equipment out, if you will. So there were a set of 
documents that were said to be complete and we had no reason to 
believe that they were not via the 25,000 pieces of equipment.
    What lacked was the discipline of the administration, 
Veterans Administration to lock down those selections of 
medical equipment and they allowed the medical center in 
Orlando to go out and basically re-choose their equipment. Some 
they kept. Most of it they did not. I think we are closing in 
on 28,000 pieces of equipment right now.
    So to answer your question, there was a finite set of 
documents, but those changed. When we asked in November about 
three or four weeks after mobilizing the job, we asked the 
question to the administration or to our CFM Office, which is 
called an RFI request for information, and we asked simply for 
the list of medical equipment. And that RFI as we sit here 
today is still outstanding.
    So it is 18 months later. They have made some progress on 
the medical equipment, but we are sitting here. That is how we 
were able to do it.
    The Chairman. During the bid process, were you allowed to 
ask for information or additional questions?
    Mr. Dwyer. Yes, sir, we were allowed. There were four 
different postponements of the bid which, you know, again 
questions went in. Questions came back. I think we asked over 
700 ourselves and the competing contractors, I am sure, asked 
several themselves as well.
    But there was an addenda, which is another set of documents 
that comes out prior to bid, which basically reissued every 
drawing, roughly 4,500 drawings. And at that time, there were 
no more questions allowed.
    So we had to take what we had in our hands, which was 4,500 
drawings, and put together a fixed price number.
    The Chairman. You testified that electrical drawings for 
Orlando increased from 889 drawings originally to more than 
2,700 today and the total number of drawings has gone up to 
10,000 from 4,500.
    How does this compare on average with another project? How 
do increases of that magnitude affect your job as a general 
contractor on the job?
    Mr. Dwyer. It does not compare, quite frankly. I mean, you 
know, four months into the job, those roughly 900 electrical 
drawings got reissued in four different sets, roughly about 250 
drawings per set. So we went from, you know, 900 to 1,000 
drawings in the first four months of the job.
    This is unprecedented for us. In our 48 years doing 
business, we have not seen literally the quantity of drawings 
almost triple. I mean, two and a half times.
    The Chairman. Mr. O'Keefe, is that standard in the process? 
Would you expect the drawings to increase by that number? I 
know this did not happen in Las Vegas. I am just talking from 
an industry standard. Would you anticipate drawings to be 
increased to that increment?
    Mr. O'Keefe. Mr. Chairman, no, we would not. And on our 
project in Las Vegas, the contract documents that we received 
at bid time were pretty complete. So I think that the scenario 
was different there.
    The drawings were complete. It was the same lump sum, fixed 
price procurement model, but we did not experience those kinds 
of issues.
    I would like to add that in health care construction, there 
are generally changes made. We see changes made to the medical 
equipment as the project goes along because they are trying to 
implement the very latest in technology and there is such a 
fast change in the technology development in the medical field 
that the equipment will often change during the life of a 
project.
    We take it upon ourselves to try to coordinate with our 
clients, in this case the VA, and we did have some changes on 
that project to the radiological equipment. But we take it upon 
ourselves to provide them the information, the cost of that 
change, and any time impact.
    And also where we recognize where they are thinking about 
making a change, we sort of give them the deadlines. If we do 
not want to impact the end date of the project, then we would 
need to have those choices made by a certain date. And we 
provide that information to them so that they can make the, you 
know, the best, most educated decision about their equipment.
    The Chairman. My time is expired. If you do a fixed price 
contract and there is a change order, are you able to pass that 
cost along?
    Mr. O'Keefe. Yes. Yes. If we have a fixed price contract 
with a set of documents and a change is made that costs more or 
takes more time to implement, then those would be addressed 
through the formal change order process.
    The Chairman. Thank you.
    Mr. Reyes.
    Mr. Reyes. Thank you, Mr. Chairman.
    Gentlemen, thank you for being here.
    So given that you have, Mr. Gorrie, the fixed price just as 
Mr. O'Keefe does, are you able to pass on the cost of these, 
for lack of a better way to describe them, upgrades the same 
way?
    Mr. Gorrie. We should be able to. We should be able to.
    Mr. Reyes. But are you?
    Mr. Gorrie. Well----
    Mr. Reyes. And what is different in the contract?
    Mr. Gorrie. Nothing is different. We just have not been 
able to resolve everything and it has been changing. We just 
got the final set of drawings just last week. So it has been a 
constant change up until this point. Now we have got to get it 
all resolved.
    But, you know, we have had a lot of changes during the 
course of the project that have not totally been resolved. We 
have got a lot of outstanding changes and that is one of our 
issues to get things resolved.
    Mr. Reyes. So is it fair to say that your number one issue 
with this experience and this contract is communication?
    Mr. Gorrie. I do not know.
    Mr. Dwyer. I would say that the number one issue has been 
really the lack of, you know, discipline on the job with 
regards to selection of equipment. We do our fair share of 
health care as well and we actually offered to the VA our 
procurement methods of buying, if you will, medical equipment, 
a purchase order.
    The change order process that you asked about, though, what 
is happening on our job is that we will get RFP or request for 
proposal and then we go out and price it and the government 
also goes out and prices it. It is called the independent 
government estimate.
    So what they do is they present a price. We have ours. But 
in the meantime, they direct us to go to work and they use what 
is called a warrant, a resident engineer warrant. And they have 
$100,000 per engineer. So on our job, we have two that can do 
it.
    They issue that $100,000 and we are directed to go to work. 
So there is a gap of Brasfield & Gorrie and our subcontractors 
going to work for, just pick a number, a million dollar change 
order. The independent government estimate may be $500,000. So 
you have a difference. But we get a warrant for 100.
    So, again, we go out and start doing work. There is still a 
gap of which----
    Mr. Reyes. Which would be resolved when? Is there a 
mediation panel or----
    Mr. Dwyer. Well, that is a great question. When, that is 
probably the four letter word right now that we are looking for 
is when because we do not know.
    We have, you know, roughly $30 million plus out there in 
change orders right now that we know of, that we have priced. 
We have not even begun to price the myriad of changes that have 
come since the first of the year and, yet, we are probably 20-
ish, $20 million short on funding as we sit here today.
    Mr. Reyes. And in the interim, are you getting paid for the 
work that is going on for this warrant directive?
    Mr. Dwyer. Yes, sir. Up to the warrant amount, yes, sir.
    Mr. Reyes. Has that been your experience, Mr. O'Keefe, as 
well?
    Mr. O'Keefe. No. Again, the change orders that we proceeded 
with in the Las Vegas project, they were generally discussed 
openly with the VA. We had very good communication with the VA 
folks there on that project.
    So when they issued something, we would provide them with 
the pricing and we negotiated those as we went along. So things 
did not pile up to the end of the job. They were handled, 
brought up, handled, addressed by both sides of the team on a 
pretty timely basis.
    Mr. Reyes. And both of you are dealing with the same 
department of VA? One is able to negotiate as you go and one is 
not. Am I understanding that clearly?
    Mr. Dwyer. It appears that way.
    Mr. O'Keefe. Yeah. I am not sure who they are dealing with, 
but that was our experience at the Las Vegas project.
    Mr. Reyes. So if I were to ask you what would be your 
recommendation to the Committee about working with the VA and 
what they need to do to provide better direction, better 
service to the selected contractor, your answer would be 
dramatically different just based on your testimony here this 
morning?
    Mr. O'Keefe. That is directed to me?
    Mr. Reyes. Yes.
    Mr. O'Keefe. Yes. I mean, our experience has been that we 
have had good communication with the VA people at Las Vegas and 
did not experience those types of problems. And I think 
communication is the key to these things. These are very large, 
complex, and complicated projects and issues are going to arise 
on every job.
    And we feel that developing a teamwork approach where we 
are all working toward the end mission, the real mission of 
providing a first-class facility for our veterans and our 
military, is really what is at stake and having that open, 
honest communication and being able to bring up issues, put 
them on the table, resolve them along the way so that they do 
not end up at the end of the project all stacked up is key, 
critical to a successful project.
    Mr. Reyes. Thank you, Mr. Chairman.
    Thank you, gentlemen.
    The Chairman. Mr. Denham?
    [No response.]
    The Chairman. Mr. Webster, questions?
    Mr. Webster. Thank you, Mr. Chairman.
    Mr. Dwyer, I do not think anybody is questioning the fact 
that there are changes over a job as I have seen from little 
jobs to big jobs that have change orders and there is pricing 
and so forth and communication.
    But it seems to me like, though, the magnitude of the 
number of change seems to be what is in order here.
    Tell me how many pieces of equipment were changed and you 
are just now getting the documents necessary to install those. 
What was the number again? It was thousands, wasn't it?
    Mr. Dwyer. Sir, I do not know the exact number that has 
changed out of the 25,000 original to 28,000 now roughly. But 
it is safe to say the majority of those items have changed.
    And as Mr. O'Keefe said, you know, technology does change. 
It changes at a rapid pace. And our communication on the site 
has been very good with the on-site resident engineers.
    Where we seem to have fallen short with Mr. O'Keefe's 
success, if you will, of bringing resolution is going up to our 
contracting officer and there above. That is where we have 
fallen short with regard to resolution.
    The 28,000 new pieces of equipment or revised pieces, 
again, in January, mid-January, we had that blitz or the VA put 
a blitz on with the designers to complete the medical 
equipment, major medical equipment. There were 52 different 
RFPs issued between January and really mid-March. Those RFPs 
resulted in 450 RFIs from us, again, requests for information.
    But the answers we got back on those were we had 60 more 
RFPs forthcoming with the questions that we had. So we went 
from 52, which supposedly, if you will, cleaned up the medical 
equipment, to now 60 plus, so we are at 112, 113.
    Mr. Webster. So when you bid the job, there was a timeline/
schedule part of the construction and bid documents?
    Mr. Dwyer. Yes, sir, there was.
    Mr. Webster. In that timeline, was there a specified date 
that the equipment would be either selected on the job? I 
assume it is bought through the VA by some other contract. So 
it would be selected and on the job. Was there a time that that 
was stated in that timeline?
    Mr. Dwyer. I am not sure about the timeline stated in the 
documents. But what was stated and what is assumed is that the 
pieces of equipment that were on our bid documents which, 
again, it is the obligation to provide a complete set of 
documents, we assumed rightfully so that the equipment was what 
was going to be installed.
    Mr. Webster. Thank you, Mr. Chairman.
    The Chairman. Mr. Michaud.
    Mr. Michaud. Thank you very much, Mr. Chairman.
    Mr. Gorrie, you had mentioned that the cost has been 
significant to your company because of the delays in getting 
designs and what have you. And we have heard about it being a 
fixed price. However, we have also heard about change orders.
    So on the cost, what exactly is it costing your company or 
are you getting reimbursed for those so-called additional 
costs?
    Mr. Gorrie. The short answer is no, but I will let Tim 
answer.
    Mr. Dwyer. The question of are we getting reimbursed for 
our costs, when the job started changing rapidly, we actually 
increased our manpower on the job both in the field and in the 
office, our project management, and we went from eight project 
managers, which is how we bid the job, to roughly 25 now on the 
project, three times as many, just to handle the massive 
amounts of changes that were taking place.
    And what we have done or what we are obligated to do is 
submit scheduled changes, if you will, they are called 
fragnets, but scheduled changes with each change that we 
submit, RFP, and we submitted several hundred fragnets to 
this----
    Mr. Michaud. My question is, are you getting reimbursed for 
the costs you are doing for the project?
    Mr. Dwyer. No, sir.
    Mr. Michaud. You are not getting reimbursed for any of it?
    Mr. Dwyer. We have not been reimbursed for any of our 
additional people or time.
    Mr. Michaud. And you do not expect to get reimbursed?
    Mr. Dwyer. We----
    Mr. Michaud. You have not, so I assume----
    Mr. Dwyer. We fully expect to get reimbursed. It is just a 
matter of when.
    Mr. Michaud. Okay. Well, I guess, you know, looking at this 
statement, and I quote, the problem on this project, the 
Orlando project is unprecedented in your company's 48-year 
history.
    I mean, what company would sign a fixed bid project 
knowing--I assume within that 48 years, you have dealt with the 
VA before and with change orders--that you are not going to get 
reimbursed?
    Mr. Dwyer. Well, we signed a fixed price contract knowing 
that it was a completed set of documents or assuming it was a 
completed set of documents.
    So we did not enter into the contract with a hope of being 
reimbursed for changes. We thought we would be dealt with 
fairly and forthright and honestly. And thus far, again, we 
have only gotten two fragnets back from the government that 
gave us 114 days in a project that is arguably going to be much 
later.
    Mr. Michaud. Okay. Mr. O'Keefe, you are the president of 
the National Group.
    What company does not allow, when they negotiate contracts, 
wouldn't a company assume that there is going to be change 
orders? Wouldn't that be part of some type of contract, whether 
it is VA or any other Federal agency? Is it a common practice 
that fixed price is fixed price?
    Mr. O'Keefe. Yeah. Fixed price is fixed price for what is 
shown on the documents. If there are changes made by the client 
after the signing of the contract, there are provisions within 
the contract to address those situations.
    And it is very clear on how you proceed with the work and 
negotiate the cost and the time implications of any change. And 
when those provisions are followed, that is very commonplace.
    Mr. Michaud. So most companies do negotiate that proviso in 
the contract if there are change orders that they will----
    Mr. O'Keefe. There are FAR clauses in the government 
contracts that dictate how that is handled. That is non-
negotiable.
    Mr. Michaud. I guess my other question is, when you look 
at--and this is for Mr. Gorrie or Mr. Dwyer--when you look at 
the Orlando, you know, facility, you know, where has most of 
the problem been dealing with the VA? Has it been with the 
project manager at the facility level? Do they seem to know 
what they are doing or has it been higher up at the VISN office 
or central office? Where have you run into most of the problems 
with the VA?
    Mr. Dwyer. I would say that the on-site resident engineers 
are very capable of handling the day-to-day issues. The amount 
of changes, the sheer amount of changes on the job has somewhat 
handcuffed them, though, because the manpower associated with 
trying to keep up with the changes, just as it has us, it has 
handcuffed the resident engineers. The challenges have come up 
the chain, if you will, with our contracting officer and senior 
contracting officer and above.
    Mr. Michaud. Okay. Good. Thank you.
    Thank you very much, Mr. Chairman.
    The Chairman. Mr. Johnson.
    Mr. Johnson. Thank you, Mr. Chairman, and I want to thank 
you for having this hearing.
    Mr. Gorrie, I am deeply troubled by your testimony and the 
lack of adequate information provided to you by the VA for this 
job.
    Has the VA given any explanation why it has taken them an 
additional 18 months to give you a complete set of contract 
working documents?
    Mr. Gorrie. No. They have just again given the information 
out incrementally throughout the course of the project and 
there has been no overall explanation. It has just been a 
process that they have been designing you might say on the fly 
as we have been trying to build a lump sum, fixed price 
contract which is contradictory by its nature, you know.
    It is all right to give us information incrementally as 
long as you adjust the price as you go and compensate us 
accordingly. But we have had to get out front with all these 
changes and do this work and we are not getting reasonable 
current reconciliation of the cost and the time.
    Mr. Johnson. In my nearly 27 years in the air force, I 
dealt extensively with fixed price contracts as a government 
project manager and so I know how critically important it is to 
define the requirements up front because as those requirements 
change, the cost of that project goes up and ultimately it is 
the American taxpayer that winds up footing the bill.
    Do you get any sense from the folks that you are talking to 
at the VA that they understand that they are driving the cost 
of this project up every time they give you a change?
    Mr. Gorrie. I do not know whether they understand it, but 
they do not really acknowledge it and accept the responsibility 
and say we are going to resolve it and work it out. We are just 
left not knowing.
    Mr. Johnson. Are there any additional documents or 
information that are still missing as far as you know or do you 
have now a complete set of working documents?
    Mr. Dwyer. Again, back on the 19th of January of 2012, we 
started--you know, we had a meeting and then the architects and 
engineers issued a log of documents that would be forthcoming 
to clean up the documents that we have.
    We received what was supposed to be the last part of that 
about a week or so ago. And then last week on the 23rd, we got 
what is called a conformed set of documents.
    So the architect and engineer under VA's direction has 
taken the 10,000 plus drawings and consolidated them with all 
the changes, RFIs, et cetera, down to a set of drawings that 
are about 4,600 now.
    But, frankly, this is like deja vu. It is the bid process 
all over again. We got cut off to ask questions when there were 
4,500 drawings and just yesterday we were advised that we were 
supposed to go back to work in two weeks after just receiving 
another, you know, 1,000 drawings in the last six weeks.
    Mr. Johnson. And, Mr. Chairman, I apologize. Maybe this 
question was asked. And if it is, we can move on.
    Do you have a dollar figure assigned with these changes 
that you have experienced so far? You got any idea how much 
this has driven the cost of this project up?
    Mr. Dwyer. Not specifically to the changes, sir. As far as 
the last set, we have not put, you know, pencil to paper on 
that. But we have provided a rough order of magnitude to one of 
the executive directors of the VA. And we have a rough order of 
$120 million plus over our contract amount right now.
    Mr. Johnson. A hundred and twenty million plus over the 
initial contracted amount?
    Mr. Dwyer. Yes, sir.
    Mr. Johnson. Wow.
    Mr. O'Keefe, in your written testimony, you mention that 
Clark, Hunt, and the VA had an outstanding relationship while 
working on the Las Vegas medical center project.
    Have you experienced the same type of relationship with the 
VA on the New Orleans replacement hospital project?
    Mr. O'Keefe. That project is at the very early stages. We 
have less than three percent of the work in place. But we 
expect that and we hope that we will have the same sort of 
relationship there that we did in Las Vegas. And, in fact, we 
have taken our team leader who led our project in Las Vegas and 
have moved him to New Orleans to lead our project down there.
    Mr. Johnson. Okay. In your opinion, is the location of the 
New Orleans replacement hospital adequate and have any 
considerations been given to protecting this new facility from 
flood or water damage should New Orleans experience the kind of 
severe weather phenomenon that we have seen in the past?
    Mr. O'Keefe. I cannot really speak to the choice of the 
property. But the design has what they call a defend in place 
design where it is fully functional for seven days in the event 
of a catastrophic flood scenario.
    And I am told that the design also has the ground floor 
being a sacrificial floor. So, in other words, it can actually 
flood and have the hospital still be fully functional.
    Mr. Johnson. Okay. Mr. Chairman, I yield back.
    The Chairman. Mr. Johnson, when you build it in a 
floodplain, do you have to sacrifice certain floors?
    Mr. Johnson. That is my understanding, Mr. Chairman.
    The Chairman. Yes, sir.
    Mr. Walz.
    Mr. Walz. Thank you, Mr. Chairman.
    And thank the three of you for being here. Very much 
appreciate it.
    I think all of us are here for a common goal. That is to 
provide the best facilities with the best possible care for our 
veterans and they deserve nothing less.
    Thank you for helping us exercise our oversight 
responsibility because we can get the best facilities, the best 
care and should be expected to do it in the most cost-efficient 
manner for the public. So this is helpful to me.
    Mr. Gorrie, would you work with the VA in the future?
    Mr. Gorrie. Sure.
    Mr. Walz. Assuming we get changes. It is important, though, 
right? It is important to have us there. We need the private 
sector to be there and the VA is an important part of this 
business. They build a lot of hospitals. So we want to make 
this work right.
    Mr. Gorrie. Right.
    Mr. Walz. Okay. Now, the one thing this will help us with, 
and I guess you are starting to suggest some of the things or 
whatever, but this is our opportunity. Coming after you is 
going to be all the people you said you did not get to ask all 
the questions to.
    What should I ask them? What should those of us ask the 
next panel that comes up here to help fix this for you if you 
get the opportunity? And they will sit right where you are and 
they will answer our questions. What should I ask them from 
your perspective to make this better, make sure you can do it 
in the future?
    Mr. Dwyer. I guess I would ask them have they listened to 
the contractor and the suggestions being made by one of the 
largest contractors in the country that does health care work, 
what needs to take place and when it needs to take place.
    And the answer to that is that we have suggested that this 
new set of documents--again, keep in mind the hospital has been 
suspended now for 12 months out of our 18, but we have 
suggested that we cannot look forward without looking in the 
past.
    So what we suggested was doing a, if you will, a clean 
slate approach where we would use eight weeks to digest these 
documents to make sure we have submittals in order. We do not 
know what they are, so we have got to get submittals from our 
subcontractors. We have to price the documents. We need to 
reschedule the job. We potentially need to re-sequence the job.
    We have made a suggestion to them that they give us an RFP 
to look at accelerating the project to see value added, if you 
will, so we can get the veterans in early, you know, for a 
certain value.
    We have to redo our modeling. So there are a lot of 
suggestions that we have made and I guess the question to them 
is, why aren't you listening?
    Mr. Walz. So this reset, you think, has the potential to 
not only get us back on the right track but to potentially save 
taxpayer money and get the project moving forward.
    But it is like we are in this, we have hit and we are stuck 
in this lane and we are continuing to go down it no matter what 
happens, is that----
    Mr. Dwyer. Yes, sir. And we are not only potentially stuck 
in the lane, but we could be very well off the rails before we 
know it again if we are not careful with the start work order 
two weeks from now on 4,600----
    Mr. Walz. Is there a precedence to reset in projects like 
this?
    Mr. Dwyer. I cannot answer that.
    Mr. Walz. Okay. Mr. O'Keefe, do have any--and I appreciate 
that because this would be the question to ask--what should I 
ask or how do we go about this because our goal of all of us in 
this room is to make this process more efficient, more 
effective, and deliver to you what you need?
    Mr. O'Keefe. I think that, again going back to my comments 
earlier, I think open communication and resolving the issues 
that are bound to happen on these projects, resolving them on 
an ongoing basis. I think if the VA comes to the table prepared 
to resolve those issues as they occur, I think you get those 
behind you and you can keep projects on track. That would be my 
recommendation.
    Mr. Walz. Wouldn't you think this should be able to be done 
without having a congressional hearing? I am just curious.
    Mr. Dwyer. One would hope, yes, sir.
    Mr. Walz. Okay. Well, that is all I have. I yield back, Mr. 
Chairman. Save those questions.
    The Chairman. Mr. O'Keefe, have you experienced any 
problems on the Orlando project yet?
    Mr. O'Keefe. You are referring to the----
    The Chairman. I am sorry. The New Orleans project.
    Mr. O'Keefe. New Orleans. No, we have not. It is very early 
in the project. You know, it is a very different kind of 
contract form there too. It is an integrated design and 
construction contract where we are actually working together 
with the VA and the design firm so the design is not complete. 
You start the work in packages, so it is more of a fast-track 
approach but more of an integrated, collaborative approach to 
contracting versus the lump sum, fixed price bid.
    The Chairman. Thank you.
    Ms. Adams.
    Mrs. Adams. Thank you, Mr. Chairman.
    I want to thank you for coming and talking with us today. I 
know you were here last week and I appreciate that.
    And as we discussed last week and this week, the concerns 
are, one, that you get the information you need so that you 
complete the project and especially the project needs to be 
completed for our veterans, our veterans who have been injured 
while doing their jobs protecting us.
    They have the need for this hospital in the central Florida 
area. And some of those men and women cannot comfortably get in 
a vehicle and travel to the long distances where they have to 
go currently today for treatment.
    And so I am really concerned about what we heard last week 
and again this week. I need to confirm. You said you have been 
waiting 18 months for confirmation on the equipment; is that 
correct?
    Mr. Dwyer. Yes, ma'am.
    Mrs. Adams. And it went from 25,000 pieces of equipment to 
28,000 pieces of equipment and you still do not know what those 
pieces are?
    Mr. Dwyer. We have the information on the 28,000, but we, 
you know, we have not gotten a full list yet, so we will be 
going through that. But we think we might have all of it now.
    Mrs. Adams. And you submitted over 700 questions just 
recently on these, correct?
    Mr. Dwyer. No, ma'am. It was roughly 500-ish, 450 to 500 
over the last six weeks.
    Mrs. Adams. And have you had any responses back?
    Mr. Dwyer. Some of the RFIs where the questions came back 
with RFP forthcoming and then some have been integrated into or 
presumably integrated into the documents that we received.
    Mrs. Adams. But for the most part, have you gotten the 
answers to your questions?
    Mr. Dwyer. Not in an RFI manner, but, again, we are hopeful 
that the documents that we received over the last six weeks 
will clean that up a little bit, a lot actually.
    Mrs. Adams. Mr. O'Keefe, you were able to complete the Las 
Vegas hospital. And I heard your testimony that this is not 
normal, it is unusual for this amount of changes and drawings.
    Do you happen to have any idea how many changed drawings 
that you had in the Las Vegas?
    Mr. O'Keefe. I do not have that information with me, but I 
could get that to you if you would like.
    Mrs. Adams. Was it close to 10,000 drawings?
    Mr. O'Keefe. No. I am quite sure it was not that.
    Mrs. Adams. Well, do you think it may be under a thousand?
    Mr. O'Keefe. Likely. But, again, I do not have that figure 
with me, so we can get that information to you.
    Mrs. Adams. Thank you.
    I yield back, Mr. Chairman. I appreciate it.
    The Chairman. Mr. O'Keefe, what would you do if you were on 
a project and you were experiencing the things that have 
happened to Brasfield & Gorrie?
    This is hypothetical, I understand, but, how would you get 
your client's attention so that it would not just lag on and on 
and on because, I think without question, the veterans in 
Orlando have been caught by surprise because as they watch the 
walls go up, the roof go on, they thought they were getting 
close to having their hospital? But then you walk inside the 
walls and it isn't happening.
    So, how would you handle it?
    Mr. O'Keefe. Well, again, I want to reiterate we did not 
have that scenario at Las Vegas. But I think that you have got 
to be forceful. You have got to keep bringing up the issues. 
You have got to take it up the chain of command within whatever 
the client organization is, whether it be the VA or a private 
client. You have to elevate those issues.
    But you really have to insist that the issues be addressed 
on an ongoing basis because if you do not, you know, you end up 
with big problems that balloon and build on top of each other 
and create additional problems as you go. So I think the key to 
it is really insisting that those issues be resolved along the 
way.
    The Chairman. Mr. McNerney.
    Mr. McNerney. Thank you, Mr. Chairman, for holding this 
hearing.
    I have a hospital planned in my district, so I am very 
concerned about this and want to make sure that this is fixed.
    Mr. Gorrie, I certainly hear the frustration in your 
testimony. Do you think it would have made any difference at 
all one way or the other if it would have been a cost plus 
contract versus a fixed price contract?
    Mr. Gorrie. Sure. I mean, there would not have been a 
problem. I mean, as far as our concern, it would not have been 
a problem if it was cost plus. We would have been compensated.
    Mr. McNerney. But it would not have helped the project get 
done any sooner or anything?
    Mr. Gorrie. I mean, if we had been given authority to make 
certain decisions, I mean, it might not have sped it up, but it 
would have resolved the contract issues we have and the 
resolution of changes. If it was cost plus, it would not have 
been any conflict as to the taking care of the changes.
    The problem we have now is that the changes have not been 
resolved and we have taken it up the chain, but we are here. 
This is the top of the chain and we are trying to get them 
resolved. What do we do now?
    Mr. McNerney. So from your point of view, it would not have 
been better to have a cost plus, but it would have still been 
much more expensive than originally estimated if it was a cost 
plus?
    Mr. Gorrie. Yes, I would guess so because the changes 
occurred after we started. And the most efficient thing is for 
the documents to be complete and correct and you start, you 
manage the process from the beginning and you can organize the 
flow of work.
    When it begins to change, regardless of the nature of the 
contract, the costs are going up because you are disrupting the 
flow and you are changing the game at midstream. So it has got 
to run the costs up regardless of the nature of the contract.
    Mr. McNerney. So let me ask a question or two for both of 
the witnesses about your experience and interacting at the 
project management level.
    Was the VA project management well informed and 
knowledgeable in your opinion? Was there sufficient oversight 
from the VA on the ground?
    Mr. O'Keefe. With regard to the Las Vegas project, our 
belief is that the VA staff on the ground at the project site 
performed very well. Again, it was a very good relationship, 
open communication, took each of the issues as they came and 
resolved them.
    I am not sure about the oversight. I really cannot speak to 
it because I do not believe that many of those issues bubbled 
up beyond what was occurring at the project site.
    Mr. Dwyer. The on-site personnel for Orlando is very 
capable and has been willing and the lines of communication 
have been open. You know, our trailers literally are right next 
to each other, so we walk, you know, it seems like every hour 
over there back and forth.
    With regards to upper management being informed, I would 
venture to say that they were not totally informed of what was 
going on.
    Specifically in our main meeting with the senior 
contracting officer, he advised us that he was looking after 60 
different projects and so that, you know, arguably Orlando is 
one of the largest, but still it is a lot of projects to look 
over.
    Mr. McNerney. I mean, that kind of gets to the point then. 
There was probably insufficient VA resources from one 
department or another devoted to this program as opposed to 
having competence at some level; is that right?
    Mr. Dwyer. I would say it would be insufficient VA 
resources with the proper authority to act upon the on-site 
conditions and, again, very capable men and women on site, but 
their authority was limited.
    Mr. McNerney. So from your point of view, what you are 
saying is it is a bureaucratic issue?
    Mr. Dwyer. It would be a flow of authority upwards.
    Mr. McNerney. Okay. Well, thank you. That answers my 
question.
    Mr. Dwyer. Excuse me. We did, however, meet with, you know, 
we--and Mr. O'Keefe mentioned, you know, taking it up the 
ladder, if you will. We hit every rung of the ladder in Orlando 
with the executive director and we were actually very 
optimistic, frankly, that we had someone that was listening.
    And when he tried to think a little bit outside the box, if 
you will, of getting us both on the same page communicating, it 
appeared that he got undermined, for lack of better terms, from 
his folks beneath.
    Mr. McNerney. Okay. Thank you.
    The Chairman. Mr. Mica.
    Mr. Mica. Thank you, Mr. Chairman.
    And thank you all for holding this. This is, again, I think 
a very important hearing, particularly as we have the veterans 
hospital we have been waiting for so long in central Florida.
    When I go home recently, I hear from folks and my veterans 
ask me when is the hospital going to be open and when I have 
folks that do not have a job and are seeking employment, they 
ask me, and construction is probably 15 to 20 percent 
unemployment in central employment, they ask me when can I get 
a job. So my questions center around that.
    Now, Chairman, you know, we were alerted of the delays and 
the Chairman went down almost immediately upon request and 
toured. And I was not able to go with him. So I came right 
after his visit.
    And we sat down and when I sat down with the VA, they told 
me by March 15th, they would have a recalculation plan. It 
sounded a little bit like that lady you have in your GPS box, 
you know, recalculating.
    So, unfortunately, I am hearing that recalculating too much 
because they told me March 15th, they would have a plan. Then 
about a week ago, we met here behind closed doors March 15th. 
And I saw the notes you had of meeting on the 14th with VA. But 
then they were saying recalculating again sometime in April.
    Then the most important question I think that was asked is, 
when we are going to open this thing and they said, well, VA 
says mid-summer 2013, but the contractors are saying December 
or the end of 2013.
    Mr. Gorrie, what is the story?
    Mr. Gorrie. You want to----
    Mr. Mica. Can anybody tell me? Mr. Dwyer.
    Mr. Dwyer. Yeah.
    Mr. Mica. Is there an opening?
    Mr. Dwyer. I cannot tell you that, but I----
    Mr. Mica. But you just got the design, right, Mr. Gorrie?
    Mr. Dwyer. Yes.
    Mr. Mica. So, I mean, Mr. Webster was an HAV contractor. 
Then I was a developer. You have got the design now.
    When do you think we can open the door? I have got to go 
back Thursday and they are going to ask me, veterans, when is 
that thing going to open. So do you guys know?
    Mr. Dwyer. I think the answer lies with your statement of 
we just got the drawings. So if we are----
    Mr. Mica. So mid-April, you can tell us or the end of 
April, you can recalculate again and then give us a definite--
--
    Mr. Dwyer. You know, we are sitting here, you know, end of 
March, so that would be a fair assessment.
    Mr. Mica. Okay, because I----
    Mr. Dwyer. Mid to end of April, we would be able to give 
you a----
    Mr. Mica. Because VA is telling us something different, 
next summer, and that does not appear to be realistic since you 
just got the drawings and there may be even more change orders 
coming.
    Mr. Dwyer. I would definitely tell you that the project 
will not be open in the summer of 2013.
    Mr. Mica. Couple of quick questions. The other thing is the 
only good news is that I heard this is going to come in under 
budget and I had heard figures.
    Now, I just heard some figures that you told me that at 
least $30 million more for something and all these change 
orders, all of these, again, being in development, contracting 
over here.
    When you do a change order, there are costs. So are we 
looking at under budget or are we looking at over budget or 
what?
    Mr. Dwyer. Under our current contract value, Mr. Mica, we, 
you know, provided a rough order of magnitude and this is a 
guess because, again, the documents are still out there. We do 
not know when the job is going to----
    Mr. Mica. So it could go over?
    Mr. Dwyer. Not could. It will.
    Mr. Mica. I will go over. That is not happy news for the 
taxpayers because we thought we were going to have, again, 
lower cost on this, but I guess the confusion has a price tag.
    There were 400 workers. I have folks that are losing their 
homes, people that cannot survive week to week because they do 
not have a construction job. There were 400 people on the job 
and I was told 11 to 12 hundred should be on the job.
    When do you think we will have that number?
    Mr. Dwyer. If we have a chance to assess, recalculate where 
we are, we would think in the next six to eight weeks we would 
have a full plan in place assuming we got, you know, a price 
put together and accepted change order.
    Mr. Mica. So maybe next summer? I mean----
    Mr. Dwyer. This summer.
    Mr. Mica. This summer rather, this summer----
    Mr. Dwyer. this summer, sir.
    Mr. Mica. We might be up to full employment?
    Mr. Dwyer. Yes, sir.
    Mr. Mica. Finally, Mr. Chairman, just one point of 
privilege. My Committee oversees FEMA and we--on the New 
Orleans project. This is a good update for all of us because in 
2005, we had the hurricane.
    June 1st, 2009, I went out four years later and did a 
hearing in a boarded up Charity Hospital, which now is under 
construction; is that correct? Isn't Charity under 
construction?
    Mr. O'Keefe. The New Orleans project is under construction 
now, yes.
    Mr. Mica. And the VA hospital is right across the way. The 
VA hospital, of course, now, there are extenuating 
circumstances because of some of the local issues. But we 
really have not started construction on the VA hospital, not to 
mention that the old VA hospital is supposed to be converted to 
a clinic; is that correct? Could you have your staff work with 
our staff to see what is going on there?
    This, last time I checked today was, March what, 27th, 
2012, and New Orleans, we are still a long ways away. Charity 
Hospital, which is boarded up, we had it un-boarded, did the 
hearing there, and also focused on the VA.
    That was not their fault. That was government's fault. FEMA 
would not make a decision. That is when we said in an arbitrary 
manner to move forward with decisions for both VA and private 
sector reimbursement.
    But our Committees will be glad to work with you because it 
sounds like New Orleans is headed downstream instead of 
upstream.
    Thank you. Yield back.
    The Chairman. Ms. Brown.
    Ms. Brown. Thank you, Mr. Chairman. And I want to thank you 
for having this hearing today.
    This is very important to me and very important to my 
district. I have worked on this project for over 25 years and I 
guess I have adopted the military motto, what do you do when 
failure is not an option. You get the job done. We want to get 
this online as quickly as possible.
    I have talked with the developers and I have talked to the 
VA. And, sir, I just need to know one of the problems, and you 
know I know about the problems that we have had in the 
facility, and I will not even go on record with all of the 
problems that we have had with the work going on there, but it 
seems to be a roofing problem and an equipment problem so you 
cannot finish until you know exactly what kind of equipment 
and, of course, we are waiting for the latest equipment.
    Can you tell me what it is that we can do to expedite this 
project because I really do not have--I am like my veterans 
now. I do not have a lot of patience. And they think we are 
trying to wait until they pass away and that is not true. The 
facility is looking good physically on the outside, but I want 
to know what we need to do to complete it.
    And I really wanted to know how we would expedite it as 
opposed to talking about what kind of delay. And to me, I have 
a problem when you or when we have all of the money and then we 
still cannot get the work done.
    So, Mr. Gorrie, who is going to answer my question?
    Mr. Dwyer. I will.
    Ms. Brown. You, sir, what is your name?
    Mr. Dwyer. Tim Dwyer.
    Ms. Brown. Okay. Tell me what I want to hear.
    Mr. Dwyer. I will tell you what I think the answer is and 
hopefully it is what you want to hear.
    But how we can expedite the project is, it is simple to do, 
is to use the documents we have right now, get with our 
subcontractors and our suppliers, meet with the VA, put all 
that together, and put an accelerated schedule together with 
extra forces, extra time, and hopefully move the date up if the 
VA chooses to do so.
    Ms. Brown. Sir, has the VA been slow about paying you your 
money?
    Mr. Dwyer. Ma'am?
    Ms. Brown. Have you been receiving your reimbursements?
    Mr. Dwyer. We have been receiving our pay applications on a 
monthly basis but not necessarily all the costs.
    Ms. Brown. Okay. So has there been questions about the 
various costs?
    Mr. Dwyer. Well, it is more in regards to the change orders 
and the extra personnel, et cetera. That is what has not been. 
But we are working through that. It is just a matter of, again, 
bringing the right people and continued congressional oversight 
on this project will hopefully help that.
    Ms. Brown. Well, most people want the congressional people 
out of it. We just want you all to do your jobs between the VA 
and the construction people the last time I checked with my 
colleagues, and this is in my area.
    Let me just ask you another question. We had a big 
discussion because we have a lot of veterans returning and I 
know that they did not put it in writing, but informally what 
is the percentage of veteran businesses that you all work with 
and what is the percentage of veteran-owned companies that you 
partner with to buy anything from, you know, paper clips to 
bringing in the lunch?
    Mr. Dwyer. Let me check. Five to seven percent of service-
disabled vets and veteran-owned businesses on this particular 
project.
    Ms. Brown. Okay. But workers or partners? I mean, what are 
we saying?
    Mr. Dwyer. I would think it would be the veteran-owned 
businesses. I do not know their employment practices of hiring 
veterans.
    Ms. Brown. Can we find out what is the percentage? We have 
a very high unemployment as far as veterans are concerned and 
we are encouraging that we hire additional veterans when all 
possible----
    Mr. Dwyer. Yes, ma'am.
    Ms. Brown. --when the skills being the same. But I still am 
not sure as to when this project can be completed and what it 
is that you all have to do without the congressional people. I 
cannot imagine us having a hearing on a hospital in my 
district.
    Mr. Dwyer. Your question, ma'am? I am sorry.
    Ms. Brown. I want to know what you all can do along with 
the VA to expedite this project.
    Mr. Dwyer. What we think moving forward, the best solution 
for this project would be to engage, if you will, an outside 
consultant that specializes in health care administration, put 
them in with Brasfield & Gorrie and the VA and work together as 
a unit to get this thing completed.
    We also feel like reconciling the past as well as the 
future needs to happen. And if we can do all that moving 
forward, I think we will have both wheels on track, so to 
speak.
    Ms. Brown. I guess I am the only person on Congress that 
does not believe in all these outside consultants because you 
are paying people to do what I thought we paid you all to do.
    Mr. Dwyer. Actually, our job is to construct the facility 
as it is presented to us. We need decisions from management in 
order to do so.
    Ms. Brown. Is that the VA?
    Mr. Dwyer. Yes, ma'am.
    Ms. Brown. Okay.
    Mr. Dwyer. And that is what has been lacking on the project 
thus far----
    Ms. Brown. Well----
    Mr. Dwyer. --is direction, the direction of which we should 
proceed, et cetera, et cetera. We can take it upon ourselves, 
ma'am, but, again, our hands are a little bit tied with our 
contract.
    With regards to having approved sequence of work, approved 
schedule, et cetera, we have to follow that. And if we choose 
to go off of that, it would be at our own risk, if you will.
    Ms. Brown. How many VA projects have you all participated 
in?
    Mr. Dwyer. Roughly ten.
    Ms. Brown. Ten? And have you had problems with others?
    Mr. Dwyer. No, ma'am.
    Ms. Brown. So this is the only one in my district? Not very 
good. Not a good report for me.
    Mr. Dwyer. No, ma'am.
    Ms. Brown. Uh-huh. I really would like to see the 
congressional--it is no reason that we are having this hearing 
here except I guess it is politics. But, you know, I want to 
take the politics out of it. I just want the work done. I want 
to see that facility up and operational and I really want to 
see it done by the end of this summer. I did not want it 
October.
    And now we are talking about how many months after October?
    Mr. Dwyer. Potentially six to twelve.
    Ms. Brown. You know, I have a real problem----
    Mr. Dwyer. Excuse me. After this October?
    Ms. Brown. Yes.
    Mr. Dwyer. Oh, you are 12 to 15 to 18 months. I cannot 
answer the question. As previously discussed, we----
    Ms. Brown. What percentage of the building is complete?
    Mr. Dwyer. Roughly 40 percent, roughly.
    Ms. Brown. You know, I am going to talk. I talked to the VA 
and I talked to you all. And I really would like to see us work 
this out. I do not want to pay another independent consultant 
to do what we need the VA and the construction team to do. And 
I would like to see us do it and I would like to see it 
expedited. And I know that is what the veterans want.
    Mr. Dwyer. And, actually, that is what we want too. We 
want----
    The Chairman. Ms. Brown.
    Mr. Dwyer. Sir?
    The Chairman. Ms. Brown, you will have an opportunity to 
question VA or the next panel. You will have an opportunity to 
question them in regards to that issue.
    Ms. Brown. I am going to grill them too.
    The Chairman. It is coming up. Your time expired.
    Ms. Brown. Can I just----
    The Chairman. Do you have----
    Ms. Brown. Yes. I just have just a couple more questions.
    The Chairman. One more.
    Ms. Brown. One more.
    Sir, my understanding it is a problem with the roof. Where 
are we with the roof?
    Mr. Dwyer. The roof is being installed as we speak. We 
actually--VA elected to change the roof design to a system that 
is being used in Lexington, Kentucky by the VA. So we are right 
now installing that roof.
    And then there is another roof which is called a super 
roof. It is that one that sticks up higher. We received the 
final design on that in January and we are constructing it as 
we speak.
    Ms. Brown. Thank you, sir.
    And thank you, Mr. Chairman.
    The Chairman. Thank you, Ms. Brown, very much.
    Ms. Brown. Yes, sir.
    The Chairman. Mr. Bilirakis.
    Mr. Bilirakis. Thank you, Mr. Chairman, and thank you for 
holding this hearing.
    And I appreciate all your testimony, the panel here.
    A question for Mr. Gorrie and Mr. Dwyer. When you request 
information from the VA, particularly as it relates to the 
medical equipment installation information, what is the typical 
timeframe which you receive this information?
    Mr. Dwyer. Well, the average duration right now on our 
project has been roughly a month, 27 days or so per----
    Mr. Bilirakis. How long?
    Mr. Dwyer. Twenty-seven days roughly, a month.
    Mr. Bilirakis. Twenty-seven days. Okay. I am going to ask a 
broad question and give you an opportunity to respond again.
    What are the biggest obstacles you are facing with the VA 
to resolve the issues and, of course, complete the project? 
Anyone who wishes to respond.
    Mr. Gorrie. You want me to answer that?
    Mr. Dwyer. Go ahead.
    Mr. Gorrie. Well, I think resolution of all the job issues, 
you know, get them resolved now. You know, the longer it goes, 
the more they grow and fester. You have got to get things 
resolved timely or they just get out of control. And the issues 
have not been resolved timely. And one party cannot resolve an 
issue. It takes two parties.
    Mr. Bilirakis. Okay. Give me specifics on that.
    Mr. Gorrie. Well, we have got----
    Mr. Bilirakis. You said the issues have not been resolved 
timely.
    Mr. Gorrie. We just got hundreds of changes that are not 
converted into change orders that are billable, that are just 
sitting out there.
    Mr. Bilirakis. Yeah. Give me a specific example.
    Mr. Gorrie. Tim, you will have to.
    Mr. Dwyer. Well, a specific would be or a general would be 
this, would be getting a change order, again, for the 
electrical work associated with the access control system. That 
would be a good change.
    That access control system which is our security and card 
access, we are still working through that change order of 
submitting pricing, resolving pricing. We are gaining on the 
process, but it is still lagging significantly behind.
    Again, the main problem is having under-funded changes 
where the change order is not even funded to the independent 
government estimate. You will have a government estimate of 
$500,000 and we will get a change order for $100,000.
    So we are in turn funding the project for that specific 
change, et cetera. And now multiply that times, you know, a 
couple hundred. And, you know, there is $30 million roughly of 
issues out there that still have to be resolved.
    I guess another specific would be the head wall issue. And 
a head wall in a hospital is where the bed comes in and you 
plug in your medical gas, oxygen, et cetera, to that wall. The 
original design had a single head wall, basically one line 
across and you plug it in.
    Well, they changed the design to a vertical two wall head 
wall system. That change is still out there. We think we have 
gotten the information we need. We have not gone through the 
documents. We just got them again. But there is a specific 
change. That has been out there for eight months plus and we 
still are sitting here talking about it.
    Mr. Bilirakis. Okay. Thank you very much.
    I yield back, Mr. Chairman.
    The Chairman. Dr. Roe.
    Mr. Roe. Thank you all.
    I am sorry I am a minute late. I had another meeting. And I 
am an Eagle Scout. I have an orienteering merit badge. I got 
off the wrong elevator in Rayburn and wandered around. So if 
you have ever been in there, you understand.
    I had an opportunity last night to read the testimony and 
to go through this in some detail.
    And just to give you a little bit of my background, I was 
in private medical practice for 31 years, but I was also Mayor 
of the city, Johnson City, Tennessee. And we bid projects all 
the time.
    And just to give you a little bit of an example, we are 
working on $100 million worth of sewer, water and sewer 
projects now that have been contracts let, engineering 
contracts, job done, $22 million in roads, $50 million in 
schools. Personally our practice built a $25 million office 
building we have been in three years. I have seen two hospitals 
go up in my time.
    I have never seen anything like this. This is beyond pale. 
I do not know how you can bid a project. We typically put back 
about ten percent for change orders. And I almost do not recall 
the change orders from the original design doing what you are 
talking about.
    When I read your testimony last evening and I can 
understand Ms. Brown's frustration about not having the 
hospital. You cannot complete a hospital when the target moves 
all the time and when the design changes all the time.
    And I think you made the statement, one of you did, your 
problems on this job are unprecedented in our company's 48-year 
history. That is pretty telling, a company that is a half a 
century old and has never run across.
    And I can promise you if the conditions keep changing, you 
will never get it done. And it costs more.
    How can you even bid a project when you do not know what 
the project is going to look like or it changes during that 
time and you do not get funded properly to do the change order? 
How do you do that? How do you make money doing that?
    Mr. Dwyer. Well, first of all, you bid the project with the 
documents, as Mr. O'Keefe said and I mentioned earlier, you 
have to bid the documents as you see them and as they are 
produced.
    Mr. Roe. That is the way it typically works.
    Mr. Dwyer. And part two to that, how do you make money, you 
do not if it continues to change. You know, there are several 
folks that relish, frankly, the change order process and look 
at it as an opportunity. We on the contrary do not. We look at 
it as an impediment to us getting finished. We would much 
rather be building the 4,500 original drawings than the 10,000 
new ones.
    Mr. Roe. Well, clearly when you do a sealed bid, as I am 
sure you did, that is the way we bid all of ours, you did a 
sealed bid and you picked the bid up on Friday afternoon and 
whenever you opened the bid, you bid based on the documents you 
had to go by.
    Now, I know when I did a little work in my house, my 
contractor said, yeah, doc, we can do whatever you want as long 
as you have got enough money.
    Mr. Dwyer. Right.
    Mr. Roe. So they do not mind the change orders as long as 
you fund them. You are right about that. But it is much simpler 
for you to finish on--and none of these projects, all these 
projects I am talking about, I do not remember any of them 
going but about a month maybe. The two hospitals were in under 
the time because the documents, the engineering, the 
architectural drawings were there and it got done by the 
contractor.
    And obviously your business is a highly qualified 
contractor or you would not have been in business for 50 years.
    So, I mean, how do you resolve this? I have never seen such 
a mess in my life when I read it. How do you all----
    Mr. Gorrie. We have not either.
    Mr. Roe. How do you get out of this mess is what I am 
saying?
    And Ms. Brown, I certainly can understand her frustration 
because the hospital for the veterans is not completed.
    But like you said, I understand those walls completely. I 
have plugged the stuff in them.
    Mr. Dwyer. I think the answer, again, first of all, the 
project was awarded on a best value, so it is a price as well 
as your technical merit. So we submitted technical merit as 
well as our proposed price or our stipulated sum price.
    And how do we get out of this? I mentioned earlier I really 
believe that, you know, as much as you do not want to hear time 
is your friend, on this particular job, resetting, getting the 
subcontractors organized with this new set of documents, 
getting the forces mobilized, marching down the path that we 
originally thought we had which is a complete set of documents.
    Sure there is going to be questions on documents. There 
always are. But this particular set and with the medical 
changes that took place really handcuffed this project.
    Mr. Roe. Well, it looks to me like if you could get 
everybody, all the players in a room and sit down and say with 
the engineers, with the architect, whoever you need, this is 
best--and, sure, you are right, you are going to run across 
something. Somewhere you are going to have change a little bit. 
I understand that.
    But the basic concept of a hospital is not new. I mean, we 
know how to build hospitals. I have seen four built in my own 
community. So we know how to do that.
    I guess my question is, why can't all the parties get 
around a table, agree on the documents, and you guys, you do 
not care what you built? You are going to build what you are 
told to build and you will go build it. Am I right?
    Mr. Dwyer. We have been around the table several times and 
we started back in May of 2011. And we had several meetings, 
roundtable meetings, partnering meetings, all types of 
meetings.
    And, again, we are hopeful, and that is the key word is 
hopeful, that this latest set of informed documents that we 
have gotten and the 50 plus RFPs that have gone into that as 
well as all the previous will give us something that we can, 
you know, lock step to and march. And we are very hopeful of 
that.
    Mr. Roe. We have another panel. I will yield back. Thank 
you.
    Mr. Dwyer. Yes, sir.
    The Chairman. Thank you very much.
    Members, we do have a second panel and I would like to go 
ahead. If you would hold any questions that you have for the 
first panel or submit them for the record, I would appreciate 
that.
    Gentlemen, thank you. We have been at this now for an hour 
and a half. I thank you for your testimony and you are now 
excused. Thank you.
    As they are heading to their seats, I want to invite at the 
same time the second panel to approach the witness table.
    This morning, we are going to have with us Dr. Robert 
Petzel. He is the Under Secretary for Health for the Veterans 
Health Administration, Mr. Glenn Haggstrom, the Executive 
Director of the Office of Acquisitions, Logistics, and 
Construction.
    Dr. Petzel is accompanied by Robert Neary, the Acting 
Executive Director of the Office of Construction & Facilities, 
and Bart Bruchok, resident engineer for the Office of 
Construction & Facilities Management.
    I appreciate your patience and also your willingness to 
allow us to allow the contractors to testify first to give us 
an opportunity to get a flavor of the situation that we are in. 
We do appreciate you being here today.
    And at this time, Dr. Petzel, you may proceed with your 
testimony.

  STATEMENT OF ROBERT A. PETZEL, UNDER SECRETARY FOR HEALTH, 
  VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF VETERANS 
  AFFAIRS; GLENN D. HAGGSTROM, EXECUTIVE DIRECTOR, OFFICE OF 
 ACQUISITIONS, LOGISTICS, AND CONSTRUCTION, U.S. DEPARTMENT OF 
VETERANS AFFAIRS, ACCOMPANIED BY: ROBERT L. NEARY, JR., ACTING 
    EXECUTIVE DIRECTOR, OFFICE OF CONSTRUCTION & FACILITIES 
MANAGEMENT, U.S. DEPARTMENT OF VETERANS AFFAIRS; BART BRUCHOK, 
    RESIDENT ENGINEER, OFFICE OF CONSTRUCTION & FACILITIES 
        MANAGEMENT, U.S. DEPARTMENT OF VETERANS AFFAIRS

                 STATEMENT OF ROBERT A. PETZEL

    Dr. Petzel. Chairman Miller, Ranking Member Filner, thank 
you for the opportunity to testify on the status of VA's major 
construction and leasing programs.
    I am accompanied today by Glenn Haggstrom, Executive 
Director of the Office of Acquisition, Logistics, and 
Construction; Robert Neary, Acting Executive Officer of the 
Construction & Facilities Management; and, finally, Bart 
Bruchok, resident engineer with the Office of Construction & 
Facilities Management.
    Thank you for allowing my written statement to be submitted 
for the record.
    With the support of Congress, VA has engaged in one of the 
most significant capital improvement programs in our history. 
Since 2004, we have received appropriations for 86 major 
construction projects. We are supporting and have built a range 
of projects including new outpatient clinics, specialty care 
centers, four large full-service hospitals.
    These efforts in addition to our increasing use of our 
lease authority are a major part of our ongoing commitment to 
provide veterans across the country access to timely quality 
care.
    VA's written testimony provides updates on the four major 
medical facilities. These remarks are focused on how we are 
improving our oversight of those efforts to ensure that we 
complete on time and at budget.
    VA has designated the Office of Acquisition, Logistics, and 
Construction as the single point of accountability within the 
department. We are also hiring additional staff to conduct an 
on-site management and oversight of our major construction 
projects.
    Similarly, we are integrating risk management into our 
project management functions to identify potential costs and 
schedule impacts as early as possible. This will help us reduce 
any problems from arising in the first place, fix those that do 
emerge, and ensure leadership is constantly appraised of 
developments on these major projects.
    Finally, beginning with the submission of the fiscal year 
2012 budget, VA has begun implementing a new department-wide 
planning process to track and prioritize the department's 
capital investment needs called the strategic capital 
investment process or SCIP.
    SCIP results in the creation of a single integrated 
prioritized list of proposed projects annually covering all 
capital investment accounts, major construction, minor 
construction, and VHA's nonrecurring maintenance.
    SCIP is designed to improve the delivery of services and 
benefits to veterans, their families, and survivors by 
addressing VA's most critical needs and most critical 
performance gaps first, investing wisely in VA's future, and 
significantly improving the efficiency of VA's far-reaching 
wide range of activities.
    In addition, we are expanding the reach of VA's care in a 
number of ways. New technologies including telehealth, 
telemedicine, teleradiology are extending our range in 
providing health care as also is the use of expanded hours, 
fee-basis care, contract care, and mobile clinics.
    Major construction and lease operations are critical to 
VA's efforts to improve access to quality health care and 
benefits. We appreciate the opportunity to discuss these issues 
with you and to hear your concerns.
    Mr. Chairman, this concludes my prepared statement. My 
colleagues and I look forward to answering any questions you or 
the Members of this Committee may have regarding these issues.

    [The prepared statement of Robert A. Petzel appears in the 
Appendix]

    The Chairman. Anybody else?
    Dr. Petzel, a written statement by Mr. Gorrie, who you just 
heard testify, includes the following claim: The original VA 
base of design for the medical equipment at bid time, this is 
the Orlando medical center, was mostly discarded and VA allowed 
the medical center user group to change what they wanted.
    Hence, we never knew what was going to be selected and more 
importantly the architects did not know either. The architect 
could not put the details on the contract working drawings that 
we needed to construct the building and ensure that the spaces 
provided in the building were adequate.
    If you would respond to that statement and describe the 
process VA has in place to evaluate the validity of changes 
requested by local facilities once the design and/or 
construction on a given project has begun?
    Dr. Petzel. Thank you, Mr. Chairman. I am going to begin 
the answer and then turn to Mr. Haggstrom.
    The practice of updating the equipment needs in a new 
construction project is common. I have been involved in major 
construction myself and we heard the example that the Clark 
individual gave of Las Vegas.
    You want to be sure that when you open that hospital, you 
have got absolutely the most up-to-date----
    The Chairman. If I could interrupt you for just a second. 
And I apologize. But there are two different contracts between 
Las Vegas and Orlando, correct? Were they exactly the same type 
of contract? Were they different?
    Dr. Petzel. I would have to ask Mr. Haggstrom specifically 
about that.
    Mr. Haggstrom. Mr. Chairman, if you look at it, they were 
both for fixed price contracts in terms that we had a best 
value selection on the contractor to construct these 
facilities.
    The Chairman. And our time is going to be limited, so I 
apologize again for interrupting, Dr. Petzel.
    Why the problem? If they were pretty much the same types of 
contracts, why is one contractor saying there were significant 
issues with the drawings and the change orders and Clark saying 
differently?
    Dr. Petzel. To reiterate what I said before, it is common 
practice. The question is the timing between the final 
determination of the need for equipment and the execution, the 
complete execution of that facility.
    You generally have stub-in of utilities in places like the 
operating room and radiology and then as the final decisions 
are made about the equipment, those are turned over to the 
contractor as augmented drawings, as I understand it.
    And the process in Orlando was identical, as I understand 
it, to the process----
    The Chairman. Has the stub-in taken place?
    Dr. Petzel. I would have to turn to Mr. Haggstrom, the 
stub-ins for the equipment.
    Mr. Haggstrom. Yes, sir. For the most part, the base of 
design rough-ins have occurred. There are some pieces of 
equipment that changed from perhaps a floor or wall mounted 
piece of equipment to ceiling mounted in which case, you will 
have some structural impacts. But the contractor has gone to a 
certain point with those rough-ins.
    The Chairman. Were the same design team and engineers used 
in this project or were they different designers and engineers?
    Dr. Petzel. Mr. Neary.
    Mr. Neary. Mr. Chairman, they were different architectural 
and engineering firms that designed the two projects.
    The Chairman. Do they bid the project the same way as a 
general contractor does? How do you select your design and your 
engineering team?
    Mr. Neary. Certainly. We select architects and engineers 
under a process which is generally referred to as the Brooks 
Act legislation that allowed quality-based selections of 
architectural and engineering firms.
    So firms compete with one another based on their quality, 
their strength of the company, experience in doing the type of 
work that is going to be done. They are rated and ranked by a 
team of experts and then we would negotiate price with the 
highest ranked firm. Assuming we can come to agreement, they 
would be the firm put under contract. If there were a problem, 
we could go to number two.
    The Chairman. Have you ever before used the firm team that 
you used for Orlando?
    Mr. Neary. The Orlando architect was a joint venture of a 
firm known as Ellerbe Becket in joint venture with a firm from 
Winter Park, RLF. We have used both of those companies. We used 
Ellerbe Becket extensively.
    More recently Ellerbe Becket was acquired by a larger firm, 
architectural firm known as AECOM. I do not know that we have 
used AECOM very much, but that was pretty late. That was late 
in the process.
    When AECOM came in and we alerted them to some of the 
problems we had experienced, I think they were quite responsive 
in making some changes in the teams that they had working on 
the design.
    The Chairman. Would you ever use them again?
    Mr. Neary. We will have to evaluate firms going forward 
based on their status and what kinds of work they are doing and 
the quality of that work.
    The Chairman. Based on the quality----
    Mr. Neary. Certainly AE----
    The Chairman. --based on the quality of work done by 
Ellerbe Becket, who has been purchased by somebody else, and 
the other firm, do you feel satisfied with the work product 
they provided?
    Mr. Neary. The work product, I would not comment so much on 
the AECOM because they came in very, very late. But the earlier 
work product had many, many problems as has been discussed.
    The Chairman. And discussed by the contractor, correct?
    Mr. Neary. Discussed by the contractor here today, 
discussed by the VA, and recognized by the VA.
    The Chairman. I did not hear anybody at the table discuss 
problems with the design firm.
    I am sorry. Dr. Petzel, did you in your testimony refer to 
many problems with----
    Dr. Petzel. No, sir, I did not. But we need to acknowledge 
the fact that there were problems with the design of the 
electrical that did add----
    The Chairman. That was all, just the electrical? That is 
the only design problem that there is?
    Dr. Petzel. I would ask Mr. Neary and Mr. Haggstrom to 
comment on that.
    Mr. Neary. The electrical area is the area that had the 
most significant and noticeable errors.
    The Chairman. What about the roof? Was there a design issue 
with the roof or was it improperly installed?
    Mr. Neary. There is a design issue with what is known as a 
super roof. I will ask Mr. Bruchok to talk in more detail.
    Mr. Bruchok. Yes, sir. There is a mixture of causes. The 
initial installation, there were some deficiencies. We did 
discuss with our AE consultant and his roof consultant the 
validity of that design and the application for that building. 
And we are still researching the results of that.
    But the VA acknowledged that there might be another path 
going forward in discussions with the contractor. That was what 
I would call one of the success stories of the project. We did 
work with the contractor and our engineer to come up with an 
alternate roof installation, a lightweight concrete product 
that they are making very good progress on as we speak.
    The Chairman. What is amazing to me is when I first found 
out about this issue, one of the things that VA threw up right 
away was the fact that the roof leaked, giving the impression 
that the contractor had improperly installed the roof. Now you 
are telling me that is not the case.
    Mr. Bruchok. Not exactly, Mr. Chairman. I am sorry if I am 
confusing the issue. The initial installation of the original 
design, we did note some deficiency issues and that roof did 
have the potential to leak.
    There were other areas of the building that were not yet 
roofed where we were getting water infiltration which I think 
has been broadly reported as a leaky roof. But in those cases, 
there was no roof.
    So when we had some questions about the quality 
installation, we stopped, worked with the contractor and the 
engineers of record, and came up with this alternate approach.
    The contractor and VA entered into a no-cost bilateral 
agreement to make that change and, again, they are proceeding 
with that new product as we speak.
    The Chairman. Mr. Reyes.
    Mr. Reyes. Thank you, Mr. Chairman.
    All these firms that you are discussing they are all 
bonded, correct? That is a requirement?
    Mr. Haggstrom. Yes, it is.
    Mr. Reyes. And the reason I am asking this question, and 
maybe it is a good time to ask you, Dr. Petzel, can you react 
to that statement from Mr. Gorrie that said this project is 
going to be about $120 million above the original cost? I would 
like to get your take on that.
    Dr. Petzel. I will just briefly comment on it and then I 
will ask Mr. Haggstrom to speak in some more detail.
    We do not know what the change orders that are being 
discussed by the contractor, what the eventual cost of those, 
if any, is going to be. Those things are all under discussion, 
as I understand it, right now. So it is impossible to comment 
on what, if any, costs there might be additional to what we see 
right now.
    Mr. Haggstrom.
    Mr. Haggstrom. Dr. Petzel, thank you.
    Mr. Reyes, clearly we know there is going to be an increase 
in cost in this facility. Roughly up to this point in time, we 
have issued about $15 million and paid $15 million in change 
orders connected with those things.
    I did receive a correspondence from Brasfield & Gorrie I 
think about a week, week and a half ago that kind of laid out 
these costs that they looked at.
    Until we get to a point in time where we can start to 
quantify what these costs are and work with the contractor, I 
do not have a final cost on this project.
    Mr. Reyes. When will that time be?
    Mr. Haggstrom. That is going to be, I believe, an iterative 
process, sir. As Brasfield & Gorrie goes through and looks at 
the most recent drawings that we provided them, looks at the 
impact to their schedule, they will come back to us and work 
and provide a cost which we will then review and probably go 
into negotiations with them over what the value of that perhaps 
work stoppage or work delay is along with any additional 
material cost.
    Mr. Reyes. As it pertains to the Orlando facility, because 
although I am a long way from there, these are veterans that 
are being impacted because of the delay in the process and 
taxpayers are being impacted because of a potential, as was 
testified here, of $120 million over the original cost of the 
facility.
    So my question is, in terms of the bonding capacity, are 
they on the hook as well in these negotiations between you 
and----
    Mr. Haggstrom. Conceivably, yes, if it came to that, which 
we would never want it to come to that because both of us are 
losers. If we have to involve the sureties to correct the and 
finish the hospital, VA would never want to see that happen. I 
firmly believe Brasfield & Gorrie would never want to see that 
happen.
    But if I could, Mr. Reyes, while not to minimize the delay 
in the hospital there, there are absolutely no veterans in the 
Orlando area that are going un-serviced as a result of the 
delays associated with this hospital.
    The VA has ensured and made sure that all the veterans' 
cares whether it can be provided at our current facility or 
through facilities in the community or, yes, they do have to 
sometimes travel to other VA facilities, those needs are being 
met without question.
    Mr. Reyes. And I appreciate that.
    Perhaps the final question I have, are any of you four 
directly in consultation, negotiations with the contractor, you 
know, that can testify about the 10,000 changes and 
modifications and all of that?
    Mr. Haggstrom. Yes, we can, Mr. Reyes, if you would allow 
me.
    Mr. Reyes. Please.
    Mr. Haggstrom. Mr. Bruchok, Bart, is our senior resident 
engineer. He is on the job site daily. Mr. Neary as the Acting 
Director of Construction & Facilities Management, he is 
assigned here in VACO. At their office, they have weekly and 
monthly dialogues in terms of the status of construction.
    I am also assigned here in VACO. Mr. Neary is a direct 
report to myself. And we do have recurring meetings in terms of 
looking at issues with our construction.
    Mr. Bruchok, he is on the ground, though, and can address 
if you have any----
    Mr. Reyes. Okay.
    Mr. Haggstrom. --specific issues on RFIs.
    Mr. Reyes. Well, perhaps you could react to all the change 
orders numbering in the thousands. Certainly from my 
perspective, although I have a limited background in this, it 
seems just way beyond whatever the industry standard may be.
    And I understand and appreciate that hospitals are unique 
when they are constructed. But in my district, there have been 
two or three private hospitals that have gone up and they have 
not experienced any of these kinds of issues.
    But can you give some perspective to the changes and 
perhaps the $120 million projected cost over the original?
    Mr. Bruchok. Yes, Mr. Reyes. Appreciate the opportunity.
    Just to clarify, there is a couple numbers that were thrown 
out. The thousands number refers to RFIs, I believe, were over 
3,000. Those are questions that the contractor asks of the VA 
and ultimately of the engineer to clarify something in the 
document that was not clear.
    Change orders are numbering in several hundred. We are 
addressing those on a one-by-one basis with the contractor.
    Mr. Haggstrom quoted $15 million in change orders that have 
been issued. This is in response to direct cost for items that 
the government had an estimate and the contractor had a 
proposal. We negotiate with them, arrive at a fair and 
reasonable value of the work, and issue the modification to 
them.
    The other numbers as have been alluded to are other things 
that we are trying to evaluate. One of the numbers that Mr. 
Dwyer talked about was additional staff. We have evaluated that 
number on site and forwarded it to our senior leadership and 
contracting officers so that they can be compensated for the 
additional staff that they have had to bring on the project.
    Also, a number that is being evaluated now is the cost of 
the additional time that was issued. The 114 days keeps the 
contractor on site for an additional time past the original 
contract duration and he does have a cost that we reimbursed 
him for.
    And the dollar amount of that cost requires that it be 
audited and that currently is being audited. So at the 
conclusion of that, we can compensate Brasfield & Gorrie for 
the additional time they expect to be on site in relates to the 
electrical change orders.
    Mr. Reyes. All right. Thank you, Mr. Chairman.
    The Chairman. Mr. Haggstrom, I will ask the question again. 
When did you say you would be able to have all of the change 
order issues resolved and the dollar amount negotiated between 
the contractor and the contractor paid for what is in the 
pipeline now?
    Mr. Haggstrom. For what is in the pipeline now, Mr. 
Chairman, there is two pieces to these change orders that we 
have to contend with. One are the direct costs which are 
essentially the material costs that we can validate through 
cost and pricing. The other, as Bart referred to, are these 
indirect costs. And this is time delays, what is the value of 
that time, what is the value of taking the contractor or now 
allowing him to pursue the critical path, and those types of 
things that have to be made.
    We did get a certified cost and pricing now from the 
contractor that we have forwarded to the auditor. The Office of 
our Inspector General is in the process of doing that audit 
now. And we will validate and verify those costs in that they 
are fair and reasonable and the government would then proceed 
to pay them.
    Once that is completed, then we can take that final piece 
and make payment.
    The Chairman. And that time frame will take----
    Mr. Haggstrom. Sir, at this point in time, I have talked 
with Ms. Regan whose office is providing it, but they have not 
provided me a completion date. I have clearly stated to Ms. 
Regan that this is of the utmost importance to the VA and also 
to our contractor to be fair to them in getting them any 
compensation that they----
    The Chairman. Would you think months or weeks?
    Mr. Haggstrom. I would hope in the next six to eight weeks 
they would be able to complete that audit.
    The Chairman. So it is fair for VA to take six to eight 
weeks to do the audit, yet after suspending the hospital 
project for the length of time it has been suspended, you just 
issued a lift of the suspension that allows them to begin work; 
they have asked for a period of weeks to be able to reschedule, 
to get ready to start again, I think it is about eight weeks is 
what they have asked for, yet you have told them or somebody 
has told them that they have to be up and fully functioning on 
that job by the 13th of April; is that correct?
    Mr. Haggstrom. That is what we directed them and that was 
in direction to the diagnostic and treatment portion of the 
hospital which was where the partial work stoppage was given to 
them.
    We were advised I believe about a week or so ago that 
effective yesterday, they would begin full mobilization again 
to begin work on the clinic.
    So there are portions of the hospital that can be worked. 
If you look at it, it is the inpatient piece of it, the D&T, 
the diagnostic and training, the clinic, and then the atrium.
    We viewed in looking at those schedules that because of the 
way the schedules were laid out and the questions and the 
workflow stream that there was work that could be done in the 
D&T area while they continued to get their subcontractors 
together and have an opportunity to review the drawings that we 
provided to them over these past weeks.
    The Chairman. Mr. Bilirakis.
    Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it.
    Why is the medical equipment procurement so far behind?
    Mr. Haggstrom. Mr. Bilirakis, we take accountability for 
that as the VA. As Dr. Petzel I believe has stated, it is our 
desire to get the most modern and up-to-date technology in 
terms of outfitting our hospitals to serve our veterans.
    In this particular case, that time frame went too far 
forward. We should have made decisions earlier in the process 
that would have allowed us to provide to Brasfield & Gorrie the 
necessary changes and drawings for them to be able to proceed.
    Mr. Bilirakis. Is this modern equipment not available?
    Mr. Haggstrom. The equipment is available. It is a decision 
from the clinicians on what best piece of equipment meets their 
needs. Once that is established, it is then put into the 
procurement process and the procurement process can take a 
period of time, especially for this equipment, to procure, get 
the specifications, turn those specifications over to our A&E 
and make the necessary modifications to the drawings.
    Mr. Bilirakis. Okay. Mr. Petzel and Mr. Haggstrom, I have a 
question. You mentioned in your testimony that 30 additional on 
the ground engineers will be hired to more effectively manage 
and oversee the VA construction projects.
    One of the complaints from Brasfield & Gorrie was that the 
VA staff on site was both limited and unable to resolve the 
major information issues.
    Has the VA given the new site managers any additional 
authority in your plan to use these site managers in Orlando?
    Mr. Haggstrom. We have made several changes to our process, 
Mr. Bilirakis. First of all, we did increase staff at the 
Orlando project to help support and go through the request for 
information and work our processing on the change orders. So we 
increased our staff by about eight engineers on site along with 
the necessary administrative staff.
    We also looked at some internal processes that we could 
take that would allow us to accelerate the decision-making 
process that goes with those change orders. So in agreement 
with our legal counsel, we made some adjustments as to the 
value of those change orders that would then require OGC review 
as opposed to allowing our contracting officer to make those 
changes unilaterally.
    Mr. Bilirakis. I know this question will be asked a couple 
times. When do you anticipate the project to be completed, the 
Orlando project?
    Mr. Haggstrom. Based on an evaluation by our A&E firms and 
the subject matter experts such as our construction management 
teams that are on site, we believe that a reasonable period of 
time to complete this project would be the summer of 2013.
    Mr. Bilirakis. Summer. Thank you very much.
    I yield back.
    The Chairman. Ms. Brown.
    Ms. Brown. Sir, I got to tell you I am on this Committee 
for one reason, because it is my service to the country. And I 
have got to tell you that I am not a happy camper.
    The idea that we possibly could spend an additional $130 
million is not acceptable. So everybody needs to know that is 
not going to happen.
    But, I mean, if you look at where we are, I worked 
extremely hard getting these projects through, getting the 
authorization for years. I mean, we worked on this particular 
project for the VA in Orlando for 25 years.
    Now, what does it mean? I know that they are not receiving 
the service or everybody is receiving service, but we are 
talking about a step-up service. We are talking about 1,400 
jobs and opportunities to hire people in the profession.
    We are talking about the VA being the catalyst for research 
at the University of Florida, the University of Central 
Florida, the children's hospital and the research institute. We 
are talking about putting people to work but serving the 
veterans.
    And 2013 is just not acceptable to me. It is not. So what 
we have is a step backward.
    I want to know what we can do to expedite this project. And 
I am not interested in bringing in another group of 
consultants. I want to know what can the VA do, what can the 
construction group do.
    Everybody else's project around the country is online, on 
time except mine. What can we do? What can we do? The military 
would say failure is not an option. We built a bridge in 
Minnesota in a matter of months. We put incentives in there and 
we got it done. I want to see that happen here.
    I am not going to casually sit here and say it is okay that 
we are going to have a delay of 13 months or a year later. That 
is not acceptable for me. I need to know what can we do, VA.
    Mr. Haggstrom. Would you like me to answer now?
    Ms. Brown. I am waiting.
    Mr. Haggstrom. Ms. Brown, we share your frustration and 
where we are we believe is unacceptable also. We are very 
grateful to the Congress on the appropriations and allowing us 
to build these very critical facilities that our veterans need 
to have the necessary care that they so absolutely deserve in 
service to their country.
    In this particular case, it is unfortunate to be able to 
tell you, but this hospital is not going to open in October of 
2012 and that is a fact. I do not believe there is enough labor 
or things that we could conceivably do either on the part of VA 
or the contractor that could meet the original completion date.
    What I will commit to you, though----
    Ms. Brown. But let me just say one thing. October was not 
soon enough for me. It was late. So I want to know what can we 
do to expedite this project.
    Mr. Haggstrom. Well, Ms. Brown, while October unfortunately 
may not be a reasonable date to you, that is the contractual 
and legal date we had with Brasfield & Gorrie to complete this 
project from the onset and that was October of 2012.
    We will continue to work with B&G. I hope that we have 
turned the corner. I believe we have turned the corner with 
this latest set of drawings. We will continue to entertain and 
work with B&G on proposals on how to accelerate.
    With credit to B&G, they have come to us prior and offered 
us ways to accelerate. When we looked at that at that point in 
time, that was not an affordable option to us. So I will say 
B&G has been willing to lean forward and provide 
recommendations which we have at least looked at. In several 
cases, they were not affordable or we could not do those things 
contractually because of the way the contract was structured.
    But I will assure you we will continue down the road with 
them and partner with them. And I believe both of us, B&G and 
ourselves, very much want to complete this project.
    Ms. Brown. Well, you know, what they mentioned was that we 
need an outside mediator, you know, someone to sit down in 
between, a consultant to sit down with you and them to tell you 
how to move the project forward.
    I think you all have the expertise and they do to get this 
project done. Why should we pay another group of consultants?
    Mr. Haggstrom. I do not think there is another need for 
another group of consultants. I agree with you that both the 
respective organizations have the necessary talent and 
expertise to move forward on this.
    Ms. Brown. How many hospitals are you all bringing online 
as we speak?
    Mr. Haggstrom. The hospital that is coming online right now 
is Las Vegas. Then we will be bringing online New Orleans, 
Denver, and Orlando.
    Ms. Brown. And I am dead last.
    Mr. Haggstrom. It was not necessarily in that order, Ms. 
Brown.
    Ms. Brown. Sir, whatever you all could do. We waited the 
longest, the veterans in central Florida. We have been waiting 
25 years. That is a serious indictment on the VA and the 
Members of Congress. I mean, there have been all kinds of 
problems with this particular hospital.
    But we have the veterans in the area. It is overcrowded and 
they deserve, they deserve a new facility with all of the 
modern, you know, equipment and everything.
    So I am just really hoping that we can sit down and not 
have the congressional people involved, but you all do your 
job. I have never had a hearing in 20 years to discuss a 
project, never.
    So I hope this is the first and last hearing I participate 
in pertaining to, you know, how we can expedite a project and 
how we make sure the project is moving forward and what kind of 
oversight we need to have.
    (Pause)
    I guess I will take that silence for yes, we all agree 
then.
    Mr. Haggstrom. Absolutely, Ms. Brown. We are in complete 
agreement with you. We have fully taken ownership of the delays 
and the issues associated with the design and the medical 
equipment. And we are working to resolve those here on this 
project, but also ensure that they do not repeat themselves on 
future projects in Denver, Louisville potentially in the 
future, and also New Orleans.
    Ms. Brown. Thank you very much.
    The Chairman. Ms. Brown, I thank you for your pointed 
questions. The chair appoints you as a Committee of one to work 
with the VA and the contractor to resolve these issues.
    Ms. Brown. And my consulting is free.
    The Chairman. Mr. Haggstrom, thank you for your words of 
appreciation to the Congress for providing the authorization 
and the funding for these much needed medical facilities.
    With that in mind, I would like to ask the status of the 
seven health care centers that were authorized under Public Law 
111-82. The schedule for each of these facilities suggested 
that they would be completed by the summer of 2012. I 
understand they are behind schedule. Can you give us an update?
    Mr. Haggstrom. We can, Mr. Chairman. If I could ask Mr. 
Neary to address that.
    Mr. Neary. Thank you, Mr. Chairman.
    Yes, the seven health care centers that were originally 
authorized in 2010 have experienced problems of a varying 
nature, in some cases difficulties in identifying and selecting 
a site, in some cases the need to refine the requirement to 
ensure that what is being put into those facilities best meets 
the needs of veterans in those areas.
    Those initiatives are moving well along I think at this 
time. A couple of them will be lease contracts awarded within 
the next few months and others going out over the next year to 
18 months. In one case, the site was just identified recently 
and we are beginning more thoroughly moving into the 
procurement process, selecting the lessor.
    I would be glad to provide for the record a written status 
report on each of those projects.
[Office of Construction and Facilities Management subsequently provided 
                     the following status report:]
                             Charlotte, NC 
                        Health Care Center (HCC)

    Purpose: To update Congressional members on the status of VA's 
Health Care Center (HCC) lease procurement in Charlotte, North 
Carolina.

    Background: This project proposes the acquisition of a 295,000 net 
usable square foot HCC in Charlotte, NC. This new HCC will enable VA to 
consolidate outpatient specialty services and better serve VISN 6 the 
needs of Veterans and their families. The HCC will include Specialty 
Medical and Surgical services in addition to a wide array of outpatient 
services. This is a two-step lease procurement for a term of 20 years, 
and will include approximately 2,400 parking spaces.

    Discussion: VA selected a 35 acre parcel, at the southeast corner 
of the intersection of Tyvola Road and Cascade Point Boulevard, 
Charlotte, NC and entered into an Assignable Option contract in August 
2011. Since that time, VA and the land owner have been negotiating a 
sales price for the land. Through a lengthy process, that included 
three appraisals, an agreement was reached in March 2012. VA is now 
pursuing real estate and environmental due diligence on the site, and 
will concurrently develop the schematic design and technical aspects of 
the Solicitation for Offers (SFO) document. The SFO will be used to 
procure a developer who will purchase the site, construct the clinic 
and then lease it back to VA for 20 years.

    Next Steps: Following an advertisement for developers, the SFO will 
be issued in late Fall 2012, followed by a Pre-Bid Conference. After 
initial offers are received, VA will conduct both price and technical 
evaluations on the offers. Lease award is anticipated in late Spring/
early Summer 2013. Building design and construction is estimated to be 
complete in late Spring/early Summer 2015 with HCC activation to 
follow.

    Prepared April 2012
    Office of Construction and Facilities Management

                           Fayetteville, NC 
                           Health Care Center

    Purpose: To update Congressional members on the status of VA's 
Health Care Center (HCC) lease procurement in Fayetteville, North 
Carolina.

    Background: This project for a 250,000 net usable square foot 
(NUSF) HCC will relocate outpatient services from the current 
Fayetteville VA Medical Center (VAMC) to a leased, build-to-suit 
facility in Fayetteville, NC. The new HCC will relieve the current 
space shortage at the VAMC and accommodate the projected outpatient 
workload by consolidating Primary Care and Specialty Care Clinics. The 
size of the lease has increased from 236,000 NUSF to 250,000 NUSF in 
order to implement the new Patient-Centered Medical Home and Patient 
Aligned Care Team space requirements instead of the conventional 
Primary Care space approved in the HCC's original space program. This 
two-step lease procurement will be for a term of twenty (20) years and 
will include approximately 2,000 parking spaces.

    Discussion: VA selected a 35.414-acre site located at 749 Raeford 
Road, Fayetteville, NC, and entered into an Assignable Option contract 
in August 2011. Since that time, VA has pursued real estate and 
environmental due diligence on the site, and has been concurrently 
developing the schematic design and technical aspects of the 
Solicitation for Offers (SFO) document. The SFO will be used to procure 
a developer who will purchase the site, construct the clinic and then 
lease it back to VA for 20 years.

    An advertisement for developers was posted on FedBizOpps on March 
26, 2012, and subsequently published in the Fayetteville Observer. VA 
intends to release the SFO on or about April 9, 2012, and subsequently 
host a Pre-Bid conference in Fayetteville on April 19, 2012. The 
purpose of the Pre-Bid conference is for VA to review the key 
requirements of the SFO and schematic design, and address questions 
that developers may have about the project or process.

    Next Steps: Issue the SFO in early April and subsequently hold a 
Pre-Bid Conference. After initial offers are received in May/June, VA 
will conduct both price and technical evaluations on the offers. Lease 
award is anticipated in Fall 2012. Building design and construction is 
estimated to be complete in Fall 2014 with HCC activation to follow.

    Prepared April 2012
    Office of Construction and Facilities Management

                            Loma Linda, CA 
                           Health Care Center

    Purpose: To update Congressional members on the status of VA's 
Health Care Center (HCC) lease procurement in Loma Linda, California.

    Background: This project provides for the lease of a 271,000 net 
usable square foot HCC in Loma Linda, California. Creation of the HCC 
will allow the Loma Linda medical staff to deliver services with 
greater efficiency and will house Dialysis, Nephrology, Oncology, 
Prosthetics, as well as elements of Primary Care, Dental Health, Mental 
Health, Women's Health and various other services. The lease will be 
for a 20 year firm term. This is a two-step procurement and will 
include approximately 1,500 parking spaces.

    Discussion: VA advertised for 32 acres of land in Loma Linda, CA, 
and is working on an assignable option with the landowner. Once the 
land option is executed and a sales price determined, VA will pursue 
real estate and environmental due diligence on the site, and 
concurrently develop the schematic design and technical aspects of the 
Solicitation for Offers (SFO) document. The SFO will be used to procure 
a developer who will purchase the site, construct the clinic and then 
lease it back to VA for 20 years.

    Next Steps: Following an advertisement for developers, the SFO will 
be issued in late Summer 2012, followed by a Pre-Bid Conference. After 
initial offers are received, VA will conduct both price and technical 
evaluations on the offers. Lease award is anticipated in Spring 2013. 
Building design and construction is estimated to be complete in Spring 
2015 with HCC activation to follow.

    Prepared April 2012
    Office of Construction and Facilities Management

                             Monterey, CA 
                           Health Care Center
    Purpose: To update Congressional members on the status of VA's 
Health Care Center (HCC) lease procurement in Monterey, California.

    Background: This project is for a 99,000 net usable square foot HCC 
in Monterey, California. The proposed HCC will be a joint, integrated 
facility between VA and Department of Defense (DoD); DoD will occupy 
16,000 nusf of the total 115,000 square footage. The proposed HCC would 
enhance existing VA outpatient services in the Monterey County region 
by expanding primary care, specialty care and mental health services. 
Laboratory, Radiology and Pharmacy services will also be available 
within the proposed HCC. The lease will provide the VA Palo Alto Health 
Care System (VAPAHCS) with the necessary space to accommodate their 
growing workload within the Monterey County area, and room to expand 
the clinical capacity of primary and specialty services closer to the 
Monterey Veteran population, and meet VAPAHCS' strategic goals. This 
two-step lease acquisition will be for a term of twenty (20) years and 
will include approximately 900 parking spaces.

    Discussion: VA selected a 14-acre site located a block away from 
the intersection of 9th Street and 2nd Avenue, Marina California, and 
is working on the assignable option to purchase. VA is pursuing real 
estate and environmental due diligence on the site, and will 
concurrently develop the schematic design and technical aspects of the 
Solicitation for Offers (SFO) document with DoD. The SFO will be used 
to procure a developer who will purchase the site, construct the clinic 
and then lease it back to VA for 20 years.

    Next Steps: Following an advertisement for developers, the SFO will 
be issued in late Fall 2012 , followed by a Pre-Bid Conference. After 
initial offers are received, VA will conduct both price and technical 
evaluations on the offers. Lease award is anticipated in late Spring 
2013. Building design and construction is estimated to be complete in 
late Spring 2015 with HCC activation to follow.

    Prepared April 2012
    Office of Construction and Facilities Management

                            Montgomery, AL 
                        Health Care Center (HCC)
    Purpose: To update Congressional members on the status of VA's 
Health Care Center (HCC) lease procurement in Montgomery, Alabama.

    Background: This lease project is for a 112,000 net usable square 
foot HCC in Montgomery, Alabama. The HCC will provide for Primary Care, 
Specialty Care, Mental Health, and Ancillary and Diagnostic services 
for Veterans in the Montgomery area.This is a two-step lease 
procurement for a term of twenty (20) years and will include 
approximately 900 parking spaces.

    Discussion: VA selected a 35.854-acre site located at the 
intersection of Chantilly parkway and Ryan Road, Montgomery, AL, and 
entered into an Assignable Option contract in December 2011. Since that 
time, VA has pursued real estate and environmental due diligence on the 
site, and has been concurrently developing the schematic design and 
technical aspects of the Solicitation for Offers (SFO) document. The 
SFO will be used to procure a developer who will purchase the site, 
construct the clinic and then lease it back to VA for 20 years.

    Next Steps: Following an advertisement for developers, the SFO will 
be issued in late Summer 2012, followed by a Pre-Bid Conference. After 
initial offers are received, VA will conduct both price and technical 
evaluations on the offers. Lease award is anticipated in Winter 2013. 
Building design and construction is estimated to be complete in Winter 
2015 with HCC activation to follow.

    Prepared April 2012
    Office of Construction and Facilities Management

                           Winston-Salem, NC 
                        Health Care Center (HCC)
    Purpose: To update Congressional members on the status of VA's 
Health Care Center (HCC) lease procurement in Winston-Salem, North 
Carolina.

    Background: This project proposes the acquisition of a 280,000 net 
usable square foot HCC in Winston-Salem, North Carolina. This new HCC 
will enable VA to consolidate outpatient specialty service and better 
serve the needs of Veterans and their families. The HCC will include 
specialty medical and surgical services in addition to a wide array of 
outpatient services. This is a two-step lease for a term of 20 years 
and will include approximately 2,200 parking spaces.

    Discussion: VA selected a 40-acre site located on Kernersville 
Medical Parkway, Kernersville, NC, and entered into an Assignable 
Option contract in February 2012. VA is pursuing real estate and 
environmental due diligence on the site, and concurrently developing 
the schematic design and technical aspects of the Solicitation for 
Offers (SFO) document. The SFO will be used to procure a developer who 
will purchase the site, construct the clinic and then lease it back to 
VA for 20 years.

    Next Steps: Following an advertisement for developers, the SFO will 
be issued in late Summer 2012, followed by a Pre-Bid Conference. After 
initial offers are received, VA will conduct both price and technical 
evaluations on the offers. Lease award is anticipated in Spring 2013. 
Building design and construction is estimated to be complete in Spring 
2015 with HCC activation to follow.

    Prepared April 2012
    Office of Construction and Facilities Management

                              Butler, PA 
                        Health Care Center (HCC)
    Purpose: To update Congressional members on the status of VA's 
Health Care Center (HCC) lease procurement in Butler, Pennsylvania.

    Background: This project contemplates the acquisition of a 168,000 
net usable square foot (NUSF) HCC in Butler, PA. This new HCC will 
expand Butler's outpatient services to meet increasing Veteran demand, 
and will include Primary Care, Specialty Care, Dental, Lab, Pathology, 
Radiology, Mental Health, and Ancillary and Diagnostic services. The 
size of the lease has decreased from 180,000 NUSF in the original 
authorization to 168,000 NUSF because three services, Endoscopy, 
Ambulatory Surgery and Adult Day Health Care have been removed from the 
scope of the project because those needs can be better served by nearby 
VA and community resources. This is a one step lease for a term of 20 
years, and will include approximately 1,400 parking spaces.

    Discussion: An advertisement was posted in FedBizOpps on June 23, 
2010, and a market survey was held on July 20, 2010. Several qualified 
sites were identified to compete. After preparing the schematic design 
and Solicitation for Offers (SFO), the SFO was released on October 21, 
2011, and a pre-bid conference was held shortly thereafter at the 
Butler VAMC. The SFO will be used to procure a developer who construct 
the clinic and then lease it back to VA for 20 years. Initial offers 
were received and evaluated in January 2012. A second round of offers 
was received and evaluated in March 2012.

    Next Steps: Lease award is anticipated in late Spring 2012. 
Building design and construction is estimated to be complete in Spring 
2014 with HCC activation to follow.

    Office of Construction & Facilities Management
    April 2012
    The Chairman. I appreciate that. But for the record, all of 
these facilities are moving forward?
    Mr. Neary. Yes, they are, sir.
    The Chairman. You are the Acting Director?
    Mr. Neary. Yes, I am.
    The Chairman. For how long?
    Mr. Neary. For approximately two years.
    The Chairman. Why has that not been made permanent? Why are 
we still in an acting position? Do you know or should I ask Dr. 
Petzel?
    Mr. Haggstrom. If I may, Mr. Chairman, Mr. Neary is an 
acting capacity for this particular office as a result of 
requirements put into Public Law 109-461 in 2006. That 
requirement stipulates that the director of the Office of 
Construction & Facilities Management have an undergraduate or 
an advanced degree in engineering or architecture and have the 
requirement of extensive program management.
    In Mr. Neary's case, his undergraduate degree is not in an 
engineering or architectural career field. And because of that, 
he has not been made permanent.
    We have been going through some re-looks on how the Office 
of Construction & Facilities Management works along with the 
Office of Acquisition, Logistics, and Construction. Those 
changes were recently approved in September or October of last 
year. And we will now fully move forward with seeking a 
permanent director for this particular position.
    I would like to say that although Mr. Neary is not 
credentialed in terms of holding a diploma, Mr. Neary is 
extensive in this department in Construction & Facilities 
Management, is beyond reproach.
    He clearly does know what is going on. He has an absolutely 
grasp on the processes that we use and just because he does not 
hold a degree has not been in one way detrimental to this 
project that we are talking about here today or the overall 
construction program.
    The Chairman. I was not implying that at all. All I am 
saying is it has taken two years to permanently fill the 
position. That is not an issue that is only in this one area 
within VA. We have doctors chief of staff positions at medical 
facilities that have gone unfilled. It seems to be a 
bureaucratic problem throughout VA and this just looks like it 
is another issue.
    And I appreciate the accolades for Mr. Neary, but you 
cannot tell me over two years you could not find somebody that 
did, in fact, fill the qualifications for the director's 
position.
    Mr. Haggstrom. You are absolutely correct, sir. This was a 
conscious decision on my part to allow Mr. Neary to continue to 
serve in this capacity for this period of time.
    The Chairman. And the reason was?
    Mr. Haggstrom. The reason was is I felt he was doing a very 
good job.
    The Chairman. Even though he does not meet the 
qualifications?
    Mr. Haggstrom. He does not have a degree of that 
requirement and the fact that we were going through a formal 
organizational change that needed to be approved and I wanted 
to make sure that was approved before we move forward.
    The Chairman. Probably could have gotten a certification in 
the two years that he has been acting. He could have gone to 
school and gotten it.
    Mr. Haggstrom. I will defer to Mr. Neary on that.
    The Chairman. Dr. Roe.
    Mr. Roe. Thank you. Just a couple of questions, Mr. 
Chairman. Thank you.
    Do you all believe you have a competent contractor? Does VA 
believe that they have a contract with a competent contracting 
firm?
    Mr. Haggstrom. Mr. Roe, I absolutely do. Brasfield & 
Gorrie's credentials in constructing health care facilities are 
second to none. They are an extremely large, well-represented 
firm in the southeast in constructing health care facilities. I 
believe they are constructing facilities in other parts of 
Orlando.
    Mr. Roe. I think they have been in business for 48 years. 
They would not be there if they were not competent, I think.
    And, secondly, then, how do you explain their delays? Are 
you laying the blame on them for this because, I mean, I read 
through this? I have never seen anything like this in my 30 
years of being around multi-hundreds of millions of dollars 
worth of construction.
    And the reason the private sector cannot get away with this 
is we lose capital. We run out of money. The banks will not 
lend you any more money and you just have to stop. So you do 
not run across these things. You make sure.
    And the comment that the delays are because you are going 
to get the newest technology, well, then you would never buy an 
iPad because you never have the newest technology. You always 
got iPad two and three and four and whatever is coming up.
    So, I mean, design a hospital, this is not new. We design 
hospitals all the time in this country. And I cannot see how 
that would have held it up if you would have had a solid set of 
documents to start with so a contractor could look in there and 
bid that project with some profit in there and get it done on 
time. I have seen it done time after time after time.
    How do you explain the delay? Is it the contractor or is 
it----
    Mr. Haggstrom. I am not placing the blame on Brasfield & 
Gorrie at all. We fully recognize that we did have problems in 
our design and the delay in----
    Mr. Roe. Why would that be, though, when--because I helped 
design hospitals. This is not my maiden voyage. And you sit 
down. It is a laborious process. You are right. You go to the 
medical staffs, the nursing staff, and you go to the food 
folks. You go to everybody involved in that process to see how 
they can make their shop work better.
    And you come to a conclusion and an architect draws the 
drawings. And you look at them and you go over those and 
meeting after meeting, boring meeting after meeting, and you 
get it done and then you bid the project.
    I cannot understand how this thing gets going and then just 
change after change after change unless the original design was 
completely inappropriate.
    Mr. Haggstrom. And that is in part why we are here today.
    Mr. Roe. The problem is, is that the original design of 
this facility did not meet the needs of the facility; is that 
correct?
    Mr. Haggstrom. I do not think we can say it did not meet 
the needs. The design was not executed properly and we depended 
on our A&E firm to do that as we do with all our projects. We 
heavily depend on the private sector A&E firm to do our design 
for us.
    In this particular case, there was a failure in the 
original firm to provide the necessary quality of drawings that 
were needed in order to proceed on this project.
    Mr. Roe. Okay. So I think I heard someone--well, you cannot 
answer that. I am not going to ask that question again.
    But I do not see how you can expect a contractor to perform 
to an ever-changing target. How do you do that? I mean, if I am 
the contractor, they got to be incredibly frustrated because, 
look, I mean, these guys build stuff. You give them the plans. 
They are going to go build what you tell them to build. They 
are not going to build something different. They are going to 
build it to the standard. If you have got a good contractor, 
they are going to build it to the standards and specifications. 
I have seen it over and over and over again.
    And I understand it cannot be done. There is no way on this 
earth if it is 40 percent done it can get done by October. I 
mean, maybe a year, a year and a half from now would be even 
pretty generous with a hospital because it is very complicated 
with all the electrical and all that.
    But do they have any penalties for being late? Surely not 
with something to me that does not look like it is their fault.
    Mr. Haggstrom. I would not expect there be any penalties 
because of lateness at this point in time, no.
    Mr. Roe. I yield back, Mr. Chairman.
    The Chairman. Dr. Petzel, how many times have you been to 
the Orlando facility?
    Dr. Petzel. Mr. Chairman, I have been there once.
    The Chairman. Mr. Haggstrom, how many times have you been 
there?
    Mr. Haggstrom. Mr. Chairman, I have been there three times 
within the last two months.
    The Chairman. And prior to the last two months?
    Mr. Haggstrom. I had not been at the Orlando facility.
    The Chairman. Mr. Neary, how many times have you been to 
the facility?
    Mr. Neary. I have probably been there eight or ten times.
    The Chairman. Since I was there in January, prior to that, 
how many times?
    Mr. Neary. Since the building has been under construction, 
I believe I was there twice prior to the time that you were 
there.
    The Chairman. Okay. So the heads had only been there twice 
in the entire time of the construction prior to my visit in 
January, second week of January. Is that true?
    Dr. Petzel. I was there prior to your trip.
    The Chairman. How many times?
    Dr. Petzel. Once.
    The Chairman. And when was that? Ground breaking?
    Dr. Petzel. No, no. I was not even here in ground breaking. 
It was about one and a half years ago.
    The Chairman. Okay. Mr. Michaud.
    Mr. Michaud. Thank you, Mr. Chairman, for having this very 
important hearing.
    And I want to make it clear it is not only a problem we are 
having with major construction as far as delays. We have had a 
clinic in Rumford, Maine that in 2009 was awarded a contract 
for renovations. Ultimately the contract ended up being 
terminated. It has been shuffled between contracting officers. 
And we are here today three years later and we still are 
waiting for a contract to be awarded. So it is not only major 
construction, but it is also in minor construction.
    My question is, I guess, for Dr. Petzel is with regard to 
the major medical facility leases, of the 55 that are listed in 
the fiscal year 2013 budget submission, over half I am told are 
behind schedule by approximately two years. Why is that? Is it 
similar problems that we are hearing today with the Orlando 
facility?
    Dr. Petzel. I will just make an opening comment and then 
ask Mr. Neary who knows much more about the leases.
    The major problem in my experience with leases is land 
acquisition, that invariably we have a longer time in acquiring 
the land for the leases than had been anticipated in the 
original schedule.
    But, Mr. Neary.
    Mr. Neary. Thank you, Doctor.
    And thank you for the question, Congressman Michaud.
    Let me first comment relative to the land. Dr. Petzel is 
correct. Many of these clinics, most of the ones you are 
referring to are built-to-suit clinics in which we will acquire 
a piece of property or rather take an option on a piece of 
property that our developer will then acquire.
    We have been affected in the last couple of years 
significantly by the market conditions out there. These are 
properties which three or four years ago would have had a 
higher value than they do today. Their landowners are often 
anxious to sell but are hoping for a price commensurate with 
the value three or four years ago rather than currently. So 
these negotiations are tougher and they take longer.
    Another thing that has happened in many of these clinics is 
the increase in veterans who are expected to come to the 
clinics and a desire on the part of the Veterans Health 
Administration to expand in some ways the concepts of these 
clinics to provide more functionality.
    So many of the clinics that have fallen behind schedule 
have done so while their requirement, their space, the programs 
that are going to be offered in those clinics are expanded to 
provided additional services, in some cases including 
ambulatory surgery which would not have been contemplated just 
a few years ago.
    So we are working vigorously to move these clinics forward. 
We are making some changes in the way we go about executing 
these leases. Historically we have not begun the process of the 
procurement of the lease until the Congress has authorized 
these facilities.
    And we did that, I think, because of you in the past, that 
we did not want Members of Congress or the Committees involved 
to take offense that we were moving out on an initiative that 
the Congress has not endorsed.
    We have held some discussions recently with some members of 
your staff and we want to do some more of that, but we would 
like to begin moving out on them sooner once they have been 
identified and in the President's request for authorization so 
that by the time Congress has actually authorized the projects, 
we will be better positioned to move more swiftly into the 
formal procurement process.
    Mr. Michaud. Thank you.
    Looking at some of the costs of the projects, let me know 
if I am correct, but from what staff tells me for Las Vegas, 
Nevada, it has increased from $286 million to $600 million, 
Orlando, Florida $347 million to $656 million, New Orleans from 
$636 to $925 which is estimated that that is going to go up 
even higher to $1.2 billion, Denver, Colorado from $621 to $800 
million.
    It is a huge difference in the cost of these projects. Why 
is that?
    Mr. Neary. Thank you.
    Each case probably is a little different. But in general, 
they have, I think, two similarities. One, the requirement in 
the facility grew from the time that it was originally 
conceived at those lower values until it was in design and 
completing and, two, those projects were originally identified 
at a time when the construction economy was in a sense taking 
off and going up and a good bit of the increases came about, 
particularly in Las Vegas, as a result of the growing economy.
    Now, the economy went down and the construction as well as 
other areas of the world, but a lot of those costs were still 
at the levels that came about through the significant 
escalation that the construction economy was seeing.
    Mr. Michaud. But as legislators, I mean, when we put 
together a budget, we have got to have at least somewhere near 
what it is going to cost. And these are way over what it is 
going to cost. And it is a big concern that I have.
    And I guess, Dr. Petzel, is it a management problem? How 
can we be so far off on these particular projects?
    Dr. Petzel. Thank you, Congressman Michaud.
    From my perspective, one of the major issues is the fact 
that costs get identified with these projects very early in the 
conception and it takes five or six years. You go back in 
Denver to before 2004 for probably the original estimate that 
was made on what Denver might cost. And, of course, now we are 
constructing that in 2012.
    The cost of construction of a similar project in 2004 is 
going to be almost double probably what it was in 2004. So 
number one in my mind is the length of time it takes to get 
from the originally conceived ideas.
    As Congressman Brown said, we have been talking about 
Orlando for 25 years. It takes a long time to get these things 
up and going. And then there is this gap between the conception 
and the appropriation eventually. That from my perspective and 
from where I look is the major cause of this difference in the 
prices that you are talking about.
    Ms. Brown. Mr. Chairman, may I take the rest of his time?
    The Chairman. His time has expired. We have another Member. 
We would be glad to get back to you, Ms. Brown.
    I would like to point out a GAO report of December of 2009 
that this Committee requested on VA construction and part of 
the problem the GAO in their findings talked about the fact 
that the VA cannot quantify the largest risks to a project or 
mitigate those risks.
    Is that still true today? I believe it is. It says VA does 
not require an integrated master schedule that includes VA and 
contractor efforts for all project phases which can be critical 
to a project's success.
    Do you use an integrated master schedule and, if not, why 
not?
    Mr. Haggstrom. Congressman, we took those GAO 
recommendations and we have acted on them for our 2011 and 2012 
projects. We have done a risk analysis both on time of schedule 
and cost. And we will have an integrated master schedule for 
all those projects.
    We are in the process now of going back to our projects 
prior to 2011 and putting those same things in place as we are 
at Orlando and Denver and New Orleans.
    The Chairman. Ms. Adams.
    Mrs. Adams. Thank you, Mr. Chairman, and thank you for 
holding this important hearing and allowing me to participate.
    As we discussed last week when I met with you in this room, 
I was concerned about the delays of the hospital because it 
does reside in the district I currently represent. And it also 
has been brought to my attention by various veterans across 
central Florida and the Veterans Advisory Board that I have. 
There are a lot of concerns.
    And listening both today and last week, I just get more and 
more concerned. I have to tell you. Someone said that veterans 
are not affected by this delay.
    Who was that?
    Mr. Haggstrom. I believe I made that comment, Ms. Adams, to 
Mr. Reyes.
    Mrs. Adams. Mr. Haggstrom, how do you quantify that 
statement based on the fact that we have veterans coming back 
from the field that have been injured and that they may never 
have survived in years past and, yet, they are coming home and 
this hospital is not on track to be completed? They are going 
to have to wait.
    And what I said earlier when the other gentlemen were at 
the table was that with these injuries, they cannot travel 
distances, that it is not comfortable, not just uncomfortable, 
it is not comfortable based on their injuries.
    How do you say they are not being affected by this delay?
    Mr. Haggstrom. Ms. Adams, I believe my statement was they 
have not been denied care. I did not say they have not been 
affected.
    Mrs. Adams. Well, I would have to differ a little bit 
there. They have not been denied care, but we have had to fight 
for their care in the general area of this hospital because 
this hospital is not completed.
    And some of these young men and women due to the pain that 
they incur when they are in a vehicle trying to travel between 
Tampa or Miami or wherever your agency wants to send them based 
on the fact that we do not have the ability to care for them at 
a VA hospital in central Florida, that is where my concern 
lies.
    So I have a couple of questions and I would love for some 
quick answers because I do not want to go over my time.
    But, Dr. Petzel, if you could, please, just answer yes or 
no. Congress passed the Veterans Health Care Facilities Capital 
Improvement Act of 2011, but in your 2013 budget submission, it 
did not include any of the additional information required by 
law; is that correct?
    Dr. Petzel. Congressman, I would have to go back and look. 
I do not know.
    Mrs. Adams. Well, the charter for this Committee says that 
it is not included. So I think maybe you need to take a close 
look at that.
    Dr. Petzel. We will.
    Mrs. Adams. And I saw, Mr. Haggstrom, you said it was your 
decision not to fill the position and it was an act, the 
Veterans Benefits Health Care and Information Technology Act of 
2006 that created this position that Mr. Neary is sitting in.
    And it is my understanding it has been since 2007 that it 
has been filled with a permanent position, correct?
    Mr. Haggstrom. When I arrived in VA in 2008, that position 
was filled by a qualified individual in accordance with the 
law.
    Mrs. Adams. Is that Donald Gordon?
    Mr. Haggstrom. That individual departed in February 1st, 
2010 and Mr. Neary has been occupying that position since.
    Mrs. Adams. Okay. And did I hear correctly that you are 
applying the integrated master schedule to the Orlando VA?
    Mr. Haggstrom. Yes, we are.
    Mrs. Adams. Have you given any of that information to this 
Committee?
    Mr. Haggstrom. Not to my knowledge.
    Mrs. Adams. What about the direct CFM to conduct a schedule 
risk analysis? You said you were applying that also to the 
Orlando VA?
    Mr. Haggstrom. If I could ask Mr. Neary to address that.
    Mr. Neary. Sure. We have implemented in our architect and 
engineer contracts and our construction contracts more robust 
risk analysis. In the case of Orlando, we completed a risk 
analysis. I believe it was in December of 2011.
    Mrs. Adams. And did you provide that to this Committee?
    Mr. Neary. I do not know that we have, but we would be glad 
to.
    Mrs. Adams. What about a cost risk analysis for all major 
construction projects? These are all three that the 2009 GAO 
report suggested that you make. So you are now doing them. Is 
that also applied to the Orlando VA clinic?
    Mr. Neary. It probably does not apply because of the 
situation we are in.
    Mrs. Adams. Because of the delays and the different 
drawings, the multiple drawings?
    Mr. Neary. Pardon me?
    Mrs. Adams. Because of the multiple drawings over and over 
again?
    Mr. Neary. We are doing risk analysis both in terms of 
schedule and cost in Orlando. The General Accounting Office 
recommendation was that at the outset and periodically through 
the entire life of a project we assess the risks associated 
with those two and we are implementing those across the 
enterprise.
    Mrs. Adams. Okay. So, Dr. Petzel, just to recap, we have 
two separate Federal laws regarding VA construction projects 
that you are not complying with.
    Next we have a GAO report that you are using under-
qualified people to do analysis on these projects which are 
recommended, three major changes in VA which you say you have 
started to implement, but, to my knowledge from me listening 
today, they have not been given to this Committee.
    And then, finally, I have about 300,000 veterans in the 
central Florida area that are paying every single day for the 
VA's incompetence.
    So tell us why VA is choosing to ignore Federal law and 
Congress and who should I hold responsible for the gross 
mismanagement of the Orlando VA facility?
    Dr. Petzel. The responsibility for the Orlando VA hospital 
rests with us and with the Federal Government. There is from my 
perspective no single individual that you could, as you wish, 
blame for what has happened.
    Mrs. Adams. Well, I just want to leave you with one thing. 
Our veterans deserve the care and they need this facility to 
come online. They have served our country well. They deserve 
this care.
    And I look forward to hearing more about your agency 
getting this facility back on track and completed as quickly as 
possible for their benefit, our veterans' benefit.
    Thank you, and I yield back.
    The Chairman. Ms. Brown.
    Ms. Brown. I would like to be associated with the remarks 
of the young lady from Florida, Ms. Adams.
    But in addition to that, let me just say that the 
construction industry is down. I do not understand why we are 
not getting a better bang for our buck right now because so 
many people--I mean, the industry is down. So it is lots of 
people that want to do work and will give us a good, you know, 
cost for the dollar.
    Have we been able to benefit in the VA from this?
    Mr. Haggstrom. In terms of the pricing in the industry, I 
believe VA has benefited from this.
    Ms. Brown. It also should include expediting of the work. 
If you are not doing a lot of work, then you should be willing 
to work night, day, weekends, overtime. I do it.
    Mr. Haggstrom. And we absolutely agree with you, ma'am. We 
have taken steps to allow Brasfield & Gorrie to extended work, 
to allow extended work hours and weekend work with regards to 
the roofs so we can get this facility dried in.
    And we also fervently believe that with the provision of 
providing these additional drawings Brasfield & Gorrie will be 
allowed to again begin work on this hospital at the levels that 
will allow us to complete this.
    Ms. Brown. Thank you.
    Mr. Chairman, can I share something for the Committee's 
benefit? I just returned from LA visiting the VA facilities our 
there. I visited three of them.
    And one of the things that came to my attention was on the 
main campus of the VA facility in LA, there is four new housing 
facilities, brand new that the state built. However, they do 
not have money to operate them. And so we have all of those 
homeless veterans and veterans that need housing. You have four 
new buildings sitting there empty.
    Is there a possibility that the government actually can 
work together? Is there anything that we can do, and I am 
putting that on the table for you, Mr. Chairman, and you, Mr. 
Ranking Member, to look into it?
    I was just appalled. Beautiful facilities, a hundred per 
unit. One, two, three, four, four hundred units sitting there 
empty because I guess the State of California is broke. 
However, we have all of those homeless veterans. Why can't we 
partner?
    And so these little trips do--you cannot find that 
information. So four facilities, 400 units sitting vacant 
because the state does not have money to operate. And we need 
to service these veterans.
    The Chairman. I think your point is well taken. We will 
look into it. It would be interesting to know what type of 
coordination was done between VA and the state upon the 
construction of these facilities. I would hope that the state 
would not have proceeded forward to build them without an 
agreement, the fact that there would be dollars to support 
them. We do need to look into that.
    So I appreciate you investigating that for us and we will 
look into it.
    Ms. Brown. Good. The state built them. I guess we have some 
kind of partnership with the state. They build the facilities. 
And they are very nice facilities, but they are sitting there 
empty. So it does not make sense. But I do not know that we 
always make sense.
    Thank you.
    The Chairman. Thank you very much.
    Any other questions?
    Ladies and gentlemen, thank you for being here today. Thank 
you for your testimony.
    I would like to request the entire contract file for New 
Orleans, Denver, and Orlando.
    Do you foresee any problems with the Committee receiving 
the entire contract file?
    Mr. Haggstrom. I do not believe so.
    The Chairman. Can you give us an idea of how long it will 
take you to reproduce those files?
    Mr. Haggstrom. Could I ask for 30 days, Mr. Chairman, to 
reproduce all those files? These are very thick files. With all 
our contracting, they have the history of the entire project.
    The Chairman. Thirty days may be a little bit long. Again, 
you have copy machines and we will be glad to lend you ours 
also. I will check with staff and see if they think that is 
acceptable and I will get back to you. I can tell you it will 
be not more than 30 days, but it could be less. I think we can 
all work on it.
    I think it is important that the Committee has these 
documents so we can look at and see where we have been, where 
we are going, and certainly on some other projects that are out 
there, where we may be going.
    I would ask unanimous consent that all Members would have 
five legislative days to revise and extend their remarks and 
add any extraneous material. Without objection, so ordered.
    And, once again, I want to thank you to the witnesses for 
being here to testify today.
    And with that, this hearing is adjourned.

    [Whereupon, at 1:08 p.m., the Committee was adjourned.]



                            A P P E N D I X

                              ----------                              

               Prepared Statement of Chairman Jeff Miller
    Good morning, and welcome to today's Full Committee hearing ``From 
the Ground Up: Assessing Ongoing Delays in VA Major Construction.''
    Before we begin, I would like to ask unanimous consent for our 
colleagues from Florida, John Mica, Sandy Adams, and Daniel Webster to 
sit at the dais and participate in today's proceedings.
    I would also like to ask unanimous consent that a statement from 
Charles Boustany, our colleague from Louisiana, be entered into the 
record.
    Hearing no objection, so ordered.
    Thank you all for joining us.
    We are here this morning to examine the status of on-going 
Department of Veterans Affairs (VA) major construction projects and 
leases and to assess management and oversight issues which have led to 
significant setbacks in recent projects.
    The VA's FY2013 Budget Submission shows that four major medical 
facility projects in Denver, Las Vegas, New Orleans, and Orlando have 
experienced significant cost increases and schedule delays from the 
original authorization.
    Although, all of these projects were authorized between fiscal 
years 2004 and 2006, none are open for business today.
    Additionally, there are 55 major medical facility leases that have 
been authorized in recent years with a total start-up cost of $442 
million.
    However, only five of those facilities are now open. Thirty-eight 
are behind schedule, with fourteen of these falling three or more years 
behind their intended target.
    As the VA health care system has grown, it appears that we have 
come to a point in VA's major construction program where the 
administrative structure is an obstacle that is not effectively 
supporting the mission.
    As a result, our veterans are the ones who are left without 
services and our taxpayers are the ones left holding the check.
    A case in point, on October 24, 2008, VA broke ground to build a 
new medical center in Orlando, Florida with a scheduled completion date 
of October 12, 2012.
    Yet, this past December, I learned of serious and significant 
issues surrounding the construction of this new facility to better care 
for our veterans. It was not the VA, but the contractor who came to me 
out of frustration.
    When VA confirmed a few days later that the project was indeed 
going to be delayed, I quickly scheduled a visit to Orlando to see the 
situation for myself.
    Needless to say, what I saw was a startling and unacceptable 
disconnect between what VA Central Office was telling me about the 
extent of the delay and the day-to-day reality on the ground.
    Clearly, there are problems with the design, procurement of 
specific medical equipment, change orders and how they all fit 
together.
    The issue of pointing fingers has to stop.
    We cannot and must not allow the problems in Orlando, or elsewhere, 
to persist.
    It is vital that reputable, long-standing companies want to work 
with VA on these significant flagship projects that are so important to 
the delivery of care.
    Today's plans and projects are tomorrow's hospitals and clinics, 
and--whether it is by building the new, renovating the old, or leasing 
the existing--our allegiance must always be to the veterans who rely on 
VA to provide the benefits and services they need to lead healthy, 
productive lives.

                                 
                Prepared Statement of Hon. Bob Filner, 
                       Ranking Democratic Member
    Good morning everyone. Thank you for attending and for your 
continued interest in veterans' issues. I also want to thank you Mr. 
Chairman for focusing the Committee on the critical issue of the VA 
construction program. It is clear to me that the Department needs to 
shore up their process of managing the construction and completion of 
significant projects that are important to every single person on this 
Committee.
    At issue today is an all too familiar theme of these oversight 
hearings - lack of management, control, accountability and oversight. I 
would say that most of the problems that have been encountered during 
the construction of the facilities we are looking at today could have 
been avoided with proper management and vigilant project oversight. Let 
me just take Denver, for example, a facility that received appropriated 
funds as far back as Fiscal Year 2004. As of November 2011 VA announced 
that the target completion date for this hospital is 2015 - 11 years 
after first receiving funds and an increase of at least 29 percent in 
the cost - and it isn't even built yet.
    Denver is not alone. The Las Vegas facility has increased in cost 
from the original estimate by at least 110 percent; Orlando 89 percent, 
and New Orleans, 45 percent. These increases represent over a billion 
dollars in funding.
    Too often we hear of cost increases such as those I have just 
discussed, delayed or suspended construction activities, inadequate 
design plans and very little communication between VA and its partners. 
Communication that I understand would have helped to clear up some 
misunderstandings at certain construction sites such as Orlando.
    It is hard for me to believe that VA would refuse to meet with 
contracting officials concerning any construction project much less one 
that is behind schedule and beset with problems, yet that is what I am 
being told.
    VA's testimony points to the fact that it has been 18 years since 
they have built a medical center. That may be true, but it does not 
excuse poor management and basic oversight responsibilities.
    I would like to hear more detail from Dr. Petzel on the integration 
of risk management into the core project management functions. I 
believe this was one of two recommendations from the Government and 
Accountability Office's December 2009 report on project cost 
estimations.
    I am sure everyone would agree that we have to do better than this. 
We expect better than this, veterans deserve better than this and I 
hope today's hearing will help shed light on the barriers and 
challenges that VA faces during the construction process.
    As we move forward, I look forward to working with VA on improving 
the construction program and ensuring more transparency and efficiency 
in the process.
    Thank you.

                                 
                Prepared Statement of Hon. Corrine Brown
    Thank you, Chairman Miller and Ranking Member Filner, for calling 
this hearing today.
    Central Florida has waited for over 25 years for the VA to build a 
VA Medical Center.
    I am ecstatic the VA Medical Center will be co-located with the new 
University of Central Florida medical school and near an urban medical 
complex. The new center, along with the Burnham Institute, will create 
a biotech cluster at Lake Nona, allowing the area to become one in 
which doctors and researchers can work together on the needs of our 
area veterans. It is known that teaching hospitals provide the best 
health care available, which is invaluable for the VA and Central 
Florida's veterans.
    25 years is too long for those men and women who have defended this 
country and the freedoms it holds dear. Too long for the oldest veteran 
population to wait for proper care.
    When Jesse Brown was the Secretary of the VA under President 
Clinton, he visited Orlando and I convinced him that he needed to keep 
the hospital at the base for the VA. I hope we can keep that clinic to 
augment the services here at the Medical Center.
    However, that clinic was never adequate to serve the veteran 
population of the Central Florida region.
    In 2009, Chairman Filner held a field hearing in Orlando where Mr. 
Robert Neary, who is with us here today and the Orlando VA Medical 
Center Director, Timothy W. Liezert, testified. It was a wonderful 
hearing and everyone was very pleased that this Medical Center was 
finally moving forward. Everyone was confident that this facility will 
be the feather in the cap of the VA as an example of the positive moves 
the VA has been making to put our veterans first.
    Then the reports began of problems at the worksite, with the 
workers and the roof.
    I have spoken to Secretary Shinseki and have been assured that the 
problems have been fixed.
    And yet here we are. Do not be mistaken, this is a political 
hearing. I have never been involved in a hearing where we are 
discussing one project. It is time for the VA to get to work and build 
this Medical Center.
    I do not want to have to wait another one, three or any number of 
years for this Medical Center to open. I want it open now.
    I look forward to hearing your testimony.

                                 
               Prepared Statement of Hon. Silvestre Reyes
      Thank you Chairman Miller for convening this important 
hearing. One of the most critical functions of this Committee is to 
ensure that we provide the necessary oversight of the Department of 
Veterans' Affairs major construction projects. Oversight is crucial 
especially during times when we must be financially prudent, while at 
the same time ensuring our veterans are able to access the facilities 
they deserve.
      Today, I am particularly interested in hearing how the 
Department will deal with the issue of long range planning and 
management in regard to its major construction projects that have been 
authorized and appropriated, but yet timelines are not being met and 
additional funds were requested.
      Since 2004, the VA has received appropriations for 86 
major construction projects. However, of the 86 projects, only 32 are 
complete; 30 are under construction; 20 are under design; and 4 are in 
the planning stages. I am interested in hearing from VA if there is a 
time line and integrated master schedule for these projects and what is 
the current total cost for the 86 major construction projects.
      Each of the four locations being highlighted today; Las 
Vegas, Orlando, New Orleans, and Denver all experienced some degree of 
delays in scheduling and all have increased in cost since the initial 
estimate. Those that pay the price are our veterans who rely on the VA 
for their medical needs.
      It is imperative that we meet the needs of our nation's 
veterans and this requires effective long range planning that reflects 
fiscal responsibility. Had these delays and/or extensions been 
prevented, the Department could have spent the funds providing more 
benefits and services to veterans. The Department must improve its 
management of these major construction projects to ensure that they are 
completed on time and within the allotted budget. We fail to help our 
veterans when these projects meant to assist them are delayed in their 
dates of completion.
      Thank you

                                 
         Prepared Statement of Hon. Charles Boustany, Jr., M.D.
    Chairman Miller, Ranking Member Filner and Committee Members----
    Thank you for providing me the opportunity to submit written 
testimony. I am honored to provide remarks regarding this very 
important issue.
    Louisiana veterans should not have to drive for hours to receive 
care in VA Community Based Outpatient Clinics (CBOC). As a 
cardiothoracic surgeon with previous experience treating veterans in 
U.S. Department of Veterans' Affairs (VA) facilities, I know they 
deserve better, localized care, so I've worked hard to speed veterans' 
access to local medical clinics. I am outraged to learn VA errors will 
delay the construction of two new CBOCs in my district - Lafayette and 
Lake Charles.
    In a January 7, 2011 bi-monthly status update from the VA, 
Louisiana Director Gracie Specks states in regard to the Lake Charles 
CBOC, ``Proposals have been received in response to the solicitation 
for offer (SFO). Purchasing and Contracting is in the process of 
reviewing these proposals. Evaluation team selection is to begin on 
January 10, 2011. Once assembled the source selection team will begin 
the evaluation of the proposal, establish the competitive range, 
negotiate and select the successful offeror. The evaluation and 
selection of offeror will take anywhere from 30 to 60 days. It is 
anticipated that any build out will take approximately 13 months from 
the date of award. We anticipate the opening of the Lake Charles CBOC 
to patient care in July 2012.''
    In addition, on March 9, 2010, the following bi-monthly status 
update from Director Specks stated in regard to the Lafayette CBOC, ``A 
Technical Evaluation Board (TEB) was established to review the 
proposals received in response to the solicitation for offer (SFO). The 
TEB is responsible for evaluating and ranking the proposals based on 
the evaluation criteria in the SFO.
    The TEB will prepare a report with the decision/final evaluation 
and selection of offeror. The decision has been made and the offeror 
selected will be notified on or about June 3, 2011 and the negotiations 
between the parties (the VAMC and selected offeror) will commence at 
that time. It is expected that negotiations will take 30-60 calendar 
days to complete.''
    On March 26, 2010, after noticeable delays in the solicitation 
process for both the Lafayette and Lake Charles CBOCs, I called VA 
Central Office Real Property Service officials into my office for an 
explanation. The meeting was productive and I received a commitment 
from the VA Real Property Services that the CBOCs in my district were a 
high priority and would be followed with a close eye from VA Secretary 
Eric Shinseki.
    However, almost two years later on March 7, 2012, I received an 
update from Director Specks stating, ``Regrettably during the legal 
review of the Lake Charles CBOC lease package, it was determined that 
there were significant errors in the Solicitation For Offers (SFO). 
This same SFO was used for the Lafayette CBOC as well.'' Making matters 
worse, these ``errors'' reportedly happened because VA officials 
completed the wrong form at the start of the process.
    Director Specks continues, ``These issues have necessitated the 
cancellation of both SFO's for Lake Charles and Lafayette CBOC's and a 
re-announcement of a revised SFO for both clinics. In order to avoid 
the same issues with the revised SFO's, VA Central Office's Real 
Property Service will be responsible for the SFO's and subsequent 
contracting process and execution of the lease. As a result, there will 
be further delays associated with the opening of the Lake Charles and 
Lafayette CBOC's. Real Property Service has indicated that it may take 
a minimum of 12 months to complete the procurement process.'' According 
to the VA's own estimated time and errors, it will be at least three 
years until the opening of the clinics from the time VA Real Property 
Service pledged to me to carefully guide and expedite the process and 
when the doors will open at each clinic.
    It is time for VA upper management to fully explain why it allowed 
this to happen. With so much at stake for veterans, why didn't the VA 
require its employees to double check for their own errors long before 
they submitted a completed proposal to VA attorneys for final approval? 
I suspect Lake Charles and Lafayette aren't isolated examples, and that 
they are a symptom of larger management problems with the VA. Congress 
should demand more transparency and accountability.
    VA officials claim they will try to expedite the new solicitation 
for offers. However, Louisiana veterans deserve specifics from the VA 
Secretary - not more empty assurances and bureaucratic jargon. I hope 
this Committee will press the VA Secretary to explain plans to speed 
the construction of promised clinics and to tell us how he will prevent 
this avoidable error from affecting any veteran in the future.
    The Committee should use this unique opportunity to make the 
changes that need to be made now - so that future solicitations for 
veterans' facilities will not be compromised at the expense of those 
who fought for our freedom.

                                 
                  Prepared Statement of Miller Gorrie
    I am Miller Gorrie, Chairman of Brasfield & Gorrie, a General 
Contractor that operates throughout the Nation but primarily in the 
South. Our annual revenue averages around 2 billion dollars; 
approximately 50% of our work is construction of health care 
facilities. Last year we were the #2 general contractor in the Nation 
in terms of health care revenues. We are the only contractor in the 
Nation who has been in the top 3 for the past 15 years; for 6 of the 
last 15 years we were the #1 general contractor nationally in health 
care revenues.
    We were selected to build the VA Hospital in Orlando on the basis 
of a competitive Best Value proposal, which means we submitted a 
proposal based upon what was purported to be a complete set of 
documents; our resume for health care construction was also considered. 
The VA awarded the contract to us after determining our proposal 
represented the overall best value to the Government in both price and 
technical factors.
    The VA awarded 6 separate contracts to complete the overall 
facility and we were awarded 3 of the contracts - these included: the 
concrete frame, the garage & warehouse, and the hospital & clinic. The 
total amount of our contracts for these 3 contracts was $336,375,189.
    Not long after we began construction in October 2010, it became 
apparent that the drawings the VA provided to us were incomplete. We 
had some hint of this during the bid process but our ability to request 
information about the documents was limited due to bid restrictions and 
time constraints of the VA bid process.
    After beginning construction, we began asking for missing 
information. In November 2010, we asked for key missing medical 
equipment information, since the contract required us to coordinate 
installation of the equipment with the VA. Over the past two months we 
have begun to receive a considerable amount of information, however, as 
of today, we have not received all of the missing information regarding 
the medical equipment.
    The original VA basis of design for the medical equipment at bid 
time was mostly discarded and the VA allowed the Medical Center User 
Group to change what they wanted. Hence, we never knew what was going 
to be selected and more importantly, the architects did not know 
either. The architect could not put the details on the contract working 
drawings that we needed to construct the building and ensure that the 
spaces provided in the building were adequate.
    We received the Notice to Proceed to begin work for the hospital & 
clinic 18 months ago. We have waited 18 months to receive a completed 
set of contract working drawings from which we can complete the 
project. Last week we received over 200 drawings which the VA 
represented to be the last of the contract drawings. The VA was 
obligated to give us a completed set of documents before we began work 
but they did not. The VA failed to provide the required medical 
equipment information. To compound matters, the electrical documents 
for the hospital were inadequate. The number of electrical drawings 
alone has increased from 889 originally issued to more than 2,700 
today. Since the contract award for the hospital & clinic, the total 
number of drawings has increased from 4,532 to more than 10,000. As a 
result of the lack of completed design for the hospital, it was 
impossible to construct the hospital efficiently and therefore the 
entire project efficiently.
    Rather than help us work through the process by extending the 
contract time and covering the added costs we are incurring, the VA has 
attempted to deflect the responsibility including their own Medical 
Center Agency. We have received only 114 days additional time for a job 
that has been impacted for 18 months. The critical path of the approved 
schedule for construction was put on hold for over 12 months of the 
past 18 months while the Architect completed the drawings and equipment 
necessary for construction.
    Commencing in the spring of 2011, the lack of information began to 
seriously impact construction progress and we had to reduce our 
workforce over a period of months from approximately 1,000 to 500 as we 
had were ran out of areas where we could work either efficiently or 
where work wouldn't have to be removed later due to changes in design.
    Because the VA staff on site was limited and unable to resolve 
these issues, we requested a meeting with the Contracting Officer and 
Senior Contracting Officer in May, 2011. This meeting did not result in 
any substantial change. We requested another meeting with the Senior 
Contracting Officer in August, 2011. Our meeting request was denied. We 
met again at the job site with both Contracting Officers in November, 
2011, which also did not produce results. By this time we were one year 
into the job, neither the equipment selection nor the design process 
was anywhere near complete. We were not able to manage a workforce on 
the job efficiently as we had limited space to work; also, the work was 
suspended in major areas to allow for design completion.
    In early January we requested a meeting with the highest levels of 
authority at the VA to ensure the facts of the project were heard. As a 
result, on January 19, 2012, one of the Executive Directors of the VA 
issued a directive to the designers to complete the design by February 
29, 2012. The designers accelerated the design process, so between 
January 19 and March 19, 2012, we received over 50 RFPs (requests for 
proposal) that contained over 950 new or revised drawings. According to 
the VA, the documents released on March 19th were supposed to be the 
last of the required design documents, but it is not.
    After waiting 18 months to complete the project design, the VA is 
pressuring us to proceed. We have thousands of drawings to check for 
revisions. After the review, the new materials and equipment shown on 
the drawings must be purchased, shop drawings checked and deliveries 
scheduled. These activities, which have already been completed once 
before, will require some time (8 to 12 weeks) to complete properly. 
Also, the cost and time impacts of this added work will have to be 
settled.
    The problems on this job are unprecedented in our company's forty-
eight year history. These problems are different from anything that we 
have experienced on any jobs that we have constructed, including the 
first two packages of the Orlando VA project. On the hospital and 
clinic project, we were supposed to have completed documents to build 
by in August 2010; however, the drawings for this project were 
incomplete and under major revision until last week, March 19, 2012.
    The VA's process for resolving the changes, both time and money, 
has not been timely and must be corrected and improved. Our company and 
our subcontractors cannot be responsible for funding this project for 
the VA which is what is currently happening.
    The exact amount of the time and money needed to resolve these 
issues has not been determined, but it is significant.
    We need resolution of the above issue to avoid further cost and 
time impacts and to avoid irrevocable harm to contractors working on 
the hospital & clinic.

                                 
                 Prepared Statement of John P. O'Keefe
    Chairman Miller, Ranking Member Filner, Members of the Committee, 
My name is John O'Keefe and I am the President of the National Group 
for Clark Construction Group, LLC. I would like to thank the Committee 
for the opportunity to address two Veterans' Administration (VA) 
hospital construction projects, the VA Hospital in Las Vegas, Nevada 
and the VA hospital in New Orleans, Louisiana.
Clark/Hunt Collaboration
    In 2008, the Department of Veterans Affairs selected the joint 
venture of the Clark Construction Group and the Hunt Construction Group 
to construct the new Medical Center in Las Vegas, Nevada. The Clark/
Hunt team has over thirty years of experience working together to 
deliver a number of successful projects for our clients.
    Clark Construction Group, LLC, founded in 1906, is today one of the 
nation's most experienced and respected providers of construction 
services, with $4 billion in annual revenue and major projects 
throughout the United States. In 2011, we ranked ninth in the United 
States on the Engineering News Record Top 400 list.
    Clark Construction performs a full range of construction services 
throughout the United States from small interior renovations to some of 
the most visible architectural landmarks in the country. Some notable 
completed projects include Walter Reed Medical Center in Washington DC, 
and the San Antonio Military Medical Center in San Antonio, Texas. The 
foundation of all of our construction work is a solid relationship with 
both public and private clients who have the confidence to rely, time 
and again, on our experience, and in-house expertise to make their 
vision a reality.
    We approach each project with a cooperative mindset, working with 
clients, architects, subcontractors and the community toward the common 
goal - successful project delivery. Our diverse construction portfolio 
and specialized divisions and subsidiaries ensure that each project is 
matched with appropriate resources and expertise. Through technical 
skill, pre-construction know-how and self-performance capability, we 
anticipate project challenges, develop solutions that meet clients' 
objectives and ultimately deliver award-winning projects. In this way, 
our work today continues to meet the stringent standards of safety, 
quality and integrity, which have been the Company's core values since 
its founding.
    Hunt Construction Group (``Hunt''), another of the country's 
largest construction companies, has been in business for over sixty-six 
years and is headquartered in Scottsdale, Arizona. Hunt was built on a 
simple, yet powerful philosophy, ``do the job right''. This philosophy 
has proven to be Hunt's lasting foundation. With over $1.7 billion in 
revenues, in 2011 Hunt ranked twenty seventh in the United States on 
Engineering News Records Top 400 list.
    Strong client relationships are as important to Hunt as Hunt's 
construction expertise. Both are needed to get the job done on time, in 
a cooperative manner, and in a way that meets the client's needs. Hunt 
and their clients understand that at the end of the day they want the 
same thing, something both the client and Hunt are proud to put their 
names on.
    Hunt's portfolio encompasses nearly every type of project. 
Significant projects include the San Antonio Military Medical Center 
hospital in San Antonio, Texas, and other health care facilities, as 
well as a variety of stadiums, government buildings, infrastructure and 
other significant projects throughout the United States.
VA Medical Center, Las Vegas Nevada
    The Las Vegas VA Medical Center Project was awarded to Clark/Hunt, 
a Joint Venture in September 2008, and the notice to proceed was issued 
on October 22, 2008. The original contract completion date was August 
22, 2011, and due to time extensions granted for changes to the 
project, the contract completion date was extended to December 12, 
2011. The project was completed on time. The VA has begun their 
activation of the project including installation of medical equipment, 
training and maintenance of facilities. The VA has informed us that the 
Las Vegas VA Medical Center will begin treating patients by mid-summer 
of this year.
    With the original contract work now complete, we are in the final 
stages of the punchlist and commissioning. Clark/Hunt also received a 
change to modify the Mental Health Ward to accommodate revisions to the 
VA Design Guide issued after the September 2008 contract award. This 
work is well underway and scheduled to be completed next month. These 
revisions will not affect activation or occupancy.
    The VA Medical Center in Las Vegas maintained the schedule 
throughout the project including adjustments for modifications 
requested by the Veterans Administration. On this project, Clark/Hunt 
and the VA had an outstanding relationship. Our relationship and the 
open communication between Clark/Hunt and the VA proved critical in 
making this Project a success. Working through the VA Medical Center's 
liaison, we were able to actively coordinate the early stages of 
occupancy including services provided by their independent suppliers 
and the delivery of materials and equipment for activation. We believe 
that this project was a great success for both Clark/Hunt and the VA.
Clark McCarthy Collaboration
    In 2009, the Department of Veterans Affairs selected Clark McCarthy 
Healthcare Partners in association with Woodward Design+Build and 
Landis Construction, as the contractor for the New Orleans VA 
Replacement Hospital. The team of Clark Construction Group, LLC, and 
McCarthy Building Companies, Inc. and New Orleans-based business 
partners, Woodward Design+Build and Landis Construction has a combined 
successful history of more than 400 years of continuous health care 
construction operations.
    McCarthy Building Companies, Inc. (``McCarthy''), founded in 1864, 
and headquartered in St. Louis, Missouri, is the oldest privately held 
construction firm in the United States as well as one of the nation's 
leading health care builders. Current projects for the VA include the 
Southeast Louisiana Veterans Healthcare System Replacement Hospital, 
New Orleans, Louisiana, the 80 Bed Acute-Psychiatric Facility in Palo 
Alto, California and the Design Build Cogeneration Facility in Dallas, 
Texas. McCarthy is proud to be a 100% employee-owned firm, currently 
employing over 1,400 professionals and providing a wide range of 
construction related services under construction management, general 
contract and design/build contractual arrangements. McCarthy has 
successfully managed projects in 45 states and has annual revenues 
approaching $3 billion.
    McCarthy has been building hospitals for over a century and is the 
largest American-owned Healthcare Builder in the United States. The 
company has been ranked among the top health care construction managers 
in the Nation for the past 25 years, each and every year since they 
began keeping lists. McCarthy has provided construction services for 
over 650 major hospital projects. Over the last three years, McCarthy 
has delivered or is currently constructing over $2.4 billion in Federal 
construction projects. With each project, McCarthy focuses on serving 
our military and Federal clients by bringing state-of-the-art 
construction innovation to each project.
    The Clark McCarthy joint venture has successfully provided 
construction services since 2002. In the past 10 years, the two firms 
have realized a total of nine projects completed or underway together, 
representing over $4.5 billion in construction value. In addition to 
the New Orleans VA Replacement Hospital, Clark McCarthy is also 
building the Marine Corps, Camp Pendleton Replacement Hospital in 
Oceanside, California, the Stanford University Medical Center Adult 
Replacement Hospital in Palo Alto, California, and the California 
Department of Corrections and Rehabilitation/California Prison Health 
Care Services Health Care Facility in Stockton, California.
    In short, the Clark/McCarthy joint venture is a proven, integrated 
team whose systems, protocols and most importantly - relationships and 
culture - have been successfully merged delivering outstanding results 
for clients and partners.
Southeast Louisiana Veterans Healthcare System Replacement Hospital, 
        New Orleans, Louisiana
    The Joint Venture of Clark McCarthy Healthcare Partners proposed on 
the Southeast Louisiana Veterans Healthcare System Replacement Hospital 
and received notice of award on October 1, 2009. The contract utilizes 
an Incentive Price Revision Successive Targets Contract, using a Target 
Price and a Ceiling Price approach to manage costs. Almost immediately 
upon award, but prior to a notice to proceed, the project was protested 
to the U.S. Government Accountability Office by one of the other 
proposers. While the protest was ultimately denied, it delayed the 
Notice To Proceed and the start of the preconstruction services until 
February 11, 2010.
    We mobilized in New Orleans and the preconstruction services began 
in February 2010 immediately upon receipt of the Notice to Proceed. In 
addition to contractually required deliverables, Clark McCarthy worked 
closely with the design team, the VA Construction and Facilities 
Management Office and the VA Medical Center staff to manage and reduce 
overall project cost, expedite procurement activities, and mitigate the 
impact of the time lost during the protest.
    Originally it was contemplated that the preconstruction services 
would run concurrently with the first phases of construction. Because 
of the protest and further design development, preconstruction services 
were extended by approximately one year through mutual agreement 
between Clark McCarthy and the VA. The start of the first phase of 
construction was further delayed, as there were problems related to the 
land acquisition by the VA. The Pan American Life Building, originally 
slated to be turned over to the VA by the City of New Orleans in 
November of 2010, was not in the VA's possession until August of 2011. 
In an effort to reduce the impacts of the time lost, Clark McCarthy 
worked closely with the VA to develop an early demolition and abatement 
package for the Pan Am building. We received Notice to Proceed with 
this work on September 30, 2011. The early package was critical in 
ensuring that the Pan American Life insurance building could be 
renovated and turned over early for VA Medical Center administrative 
offices. The remaining property was originally scheduled to be 
available for construction in April of 2010, but was delayed until July 
2011. During that time period, Clark McCarthy worked with the team to 
obtain final designs for the first phases of the earthwork, allowing 
Clark McCarthy to procure the work prior to the state's completion of 
the property turnover. The delays caused by the property turnover, 
along with the continual refinement of the design necessitated that the 
preconstruction effort would continue through the end of 2011. The VA 
was able to provide Clark McCarthy with a Notice to Proceed on the 
first phases of earthwork on May 12, 2011.
    During the final phases of the property turnover, and after the 
original Notice to Proceed for the earthwork was issued, the Louisiana 
State Historical Preservation Office began to investigate the cleared 
site to determine if any items of historical significance were 
discovered on the property. Work at the site was suspended after 
articles of historic significance were located. The archeological 
investigation began in July 2011 and continued until December 2011. 
During the investigation contaminated soils and underground storage 
tanks were also identified. While largely concurrent, these 
discoveries, not unusual to large urban sites, were dealt with in 
cooperation between Clark McCarthy, the VA, their consultants and the 
Louisiana Department of Environmental Quality. The property, once free 
of encumbrances, was fully released to Clark McCarthy for construction 
commencement on February 12, 2012, and work resumed on February 22, 
2012. Our team was able to quickly mobilize and begin work on the site 
due to the preplanning and coordination between Clark McCarthy and the 
VA, which helped mitigate further delays. As of this date work is 
underway and moving along in accordance with our plan and schedule. 
Completion of the project is planned to occur in 2016.
    The Clark McCarthy team and the VA are determined to complete our 
work as quickly as possible while maintaining our stringent standards 
for safety, quality and integrity. To ensure a timely completion of 
this important project, cooperation, coordination, and effort will be 
required from all parties.
    I want to thank you for this opportunity to testify today and would 
welcome any questions you may have.
    Thank you.
  RELEVANT FEDERAL PROJECTS AWARDED DURING FEDERAL FISCAL YEARS 2010, 
                             2011, OR 2012
    The following Federal contracts were awarded within Federal fiscal 
years 2010, 2011, or 2012, and are relevant to the subject matter of 
the testimony:

    Southeast Louisiana Veterans Healthcare System Replacement 
Hospital, New Orleans, LA
      Agency: Department of Veterans Affairs
      Contract No. VA-101-09-RP-0123
      Contract Award Date: September 30, 2009
      Initial Contract Award Amount: $3,319,000
      Entity: Clark/McCarthy Healthcare Partners, a Joint 
Venture

    Camp Pendleton Naval Hospital, Marine Corps Base Camp Pendleton, CA
      Agency: Department of the Navy, Naval Facilities 
Engineering Command Southwest
      Contract No. N62473-10-R-0001
      Contract Award Date: September 1, 2010
      Initial Contract Award Amount: $393,883,000
      Entity: Clark/McCarthy, A Joint Venture

    Co-Generation Energy System, VA Medical Center, Dallas, TX
      Agency: Department of Veterans Affairs
      Contract No. VA701-C-0171
      Contract Award Date: September 14, 2011
      Initial Contract Award Amount: $22,865,715
      Entity: McCarthy Building Companies, Inc.

                                 
              Prepared Statement of Robert A. Petzel, M.D.
    Chairman Miller and Ranking Member Filner thank you for the 
opportunity to testify on the status of the Department of Veterans 
Affairs' (VA) major construction and leasing programs, as well as the 
management and oversight of major construction project design, 
construction, and activation. Accompanying me today is Glenn Haggstrom, 
Principal Executive Director, Office of Acquisition, Logistics and 
Construction.
    I will begin my testimony with a description of the scope of our 
construction programs and some of the challenges inherent in this or 
any major construction effort by a large organization. I will then lay 
out several of the actions we have taken to address these challenges, 
to put projects that have fallen behind schedule back on track, and to 
make sure that these same problems don't hinder our efforts in the 
future.
Construction
    The goal of VA's construction and leasing programs is to ensure 
that there are appropriate facilities to provide benefits and services 
to our Nation's veterans. With the support of the Congress, VA is 
engaged in one of the most significant capital improvement programs in 
our history, and overall, we are succeeding. Candidly, we have 
experienced challenges in managing our complicated, new medical 
projects; partly because it has been 18 years since the last VA 
hospital was built and activated. But, we have identified the issues, 
are taking steps to mitigate them, and using them as learning 
opportunities to avoid making the same mistakes again.
    Since 2004, VA has received appropriations for 86 major 
construction projects, that is, those projects with costs of over $10 
million. These include various types of projects, such as: outpatient 
clinics; spinal cord injury centers; community living centers; 
polytrauma centers; seismic safety corrections; and most notably four 
large, full-service inpatient hospital facilities in Las Vegas, Nevada; 
Orlando, Florida; New Orleans, Louisiana; and Denver, Colorado. Of the 
86 projects, 32 are complete; 30 are under construction; 20 are under 
design; and 4 are in the planning stages.
Hospital Projects
    Four major hospital projects are currently in different stages of 
construction. In Las Vegas, Nevada, we are in the process of accepting 
the recently completed construction of the new medical center. The 
facility consists of 90 inpatient beds, a 120-bed community living 
center, primary and specialty care, surgery, mental health, 
rehabilitation, geriatrics and extended care. VA will begin serving 
Veterans at the Las Vegas facility this summer, and expects to serve 
more than 61,000 Veteran enrollees.
    The Orlando project includes 134 inpatient beds, an outpatient 
clinic, a 120-bed community living center, a 60 bed domiciliary, 
parking garages and support facilities all located on a new site. While 
phases of the project have been completed or are nearing completion, it 
is the construction of the final phase--of the clinic, diagnostic, 
treatment and inpatient facilities--that will delay the opening of the 
new medical center. Three primary factors are contributing to the 
delays: errors and omissions in the original design; equipment 
coordination and design issues; and contractor performance. Errors in 
the initial design along with procuring and integrating specialized 
medical equipment into the existing design, both VA responsibilities, 
affected the contractor's schedule. This resulted in inefficiencies and 
delays that contributed to the extension of the original contract 
completion date. Construction quality and manpower issues have also 
significantly affected the project timeline. VA believes that the 
project can be completed in the summer of 2013, and expects to serve 
nearly 113,000 Veteran enrollees. We are working with the contractor to 
determine a completion date.
    The new 1.5 million square foot facility in New Orleans, Louisiana, 
will accommodate the Southeast Louisiana Healthcare System's needs for 
primary care, mental health, and specialty care. The project includes 
200 beds, an outpatient clinic, and research facilities along with 
support infrastructure. This project has experienced delays as the City 
of New Orleans and State of Louisiana acquired the site's property 
under a Memorandum of Understanding between the City and VA. 
Additionally, VA has had to remediate environmental issues on the site, 
which the City of New Orleans had agreed to remedy prior to the 
transfer of the property. This has required additional time not 
originally built into the schedule. VA now has title to the site with 
the exception of one parcel, which includes a historic property. While 
VA is working with the City to acquire this final piece of land, we are 
not delaying the project. Construction has already begun; the project 
is scheduled for completion in spring 2015, with the goal of serving 
more than 130,000 Veteran enrollees starting in the fall of 2015.
    The Denver replacement hospital is a 182-bed full service tertiary 
care medical center that includes a spinal injury/disorder center, 
community living center, research building, central energy plant and 
parking structures, as well as inpatient and outpatient services. 
Construction of the new facility recently began, and it is expected to 
be completed in the spring of 2015. The new Denver facility will begin 
serving its more than 119,000 Veteran enrollees in the fall of 2015.
    In addition to construction, the leasing of medical clinics is 
essential to providing Veterans access to state-of-the-art health care 
services. Leasing provides VA an additional tool and increased 
flexibility to serve our Nation's Veterans with both the space and 
timely services closer to where Veterans live. Since 2008, VA has 
opened 180 leased medical facilities, 50 of which are major facilities, 
or those with an annual rent exceeding one million dollars. VA 
currently leases approximately 13.4 million square feet in support of 
its health care system.
VA's Way-Forward
    To date, VA has taken several steps to improve the management and 
oversight of major hospital construction projects. Several 
organizations within the Department have responsibility for various 
elements of construction, which include defining facility requirements, 
budgeting and strategic capital investment planning, authorization and 
appropriation, design and construction procurement and oversight, 
specialized equipment procurement and facility activation. 
Historically, one office has not been identified as the ``accountable 
organization'' for major construction projects from beginning to end. 
This has led to difficulties with communication and shortfalls in 
project oversight. To address these issues going forward, the Secretary 
has designated the Office of Acquisition, Logistics and Construction as 
the single point of project accountability within the Department.
    VA has learned that we do not have enough site engineers to 
properly oversee our current volume of major construction efforts. 
Therefore, in Fiscal Year (FY) 2012, VA is hiring approximately 30 
additional on-the-ground, site engineers who are needed to properly 
manage and oversee our ongoing major construction projects, bringing 
the total number of VA site engineers up to 190. Congress recently 
appropriated the funding for these engineers in the Major Construction 
and Medical Facilities accounts. VA is also integrating risk management 
into the core project management functions. This will help identify 
potential cost and schedule impacts at an earlier point in time so that 
issues can be mitigated sooner and/or managed better. In the Veteran 
Health Administration (VHA) an oversight board has been enhanced, which 
will now be the central, key strategic communication path for risk 
management issues, and which will enable VHA leadership to act at an 
earlier point in time. VA is augmenting project reporting based on 
experiences from the large projects discussed above to improve 
performance within VA's construction program, including medical 
equipment procurement.
    Finally, with the submission of the FY 2012 budget, VA began 
implementing a new, Department-wide planning process, called the 
Strategic Capital Investment Planning Process (SCIP), to prioritize the 
Department's future capital investment needs. With SCIP, VA develops an 
annual, single, integrated prioritized list of proposed projects 
covering all capital investment programs (major construction, minor 
construction, leases and VHA non-recurring maintenance (NRM)). SCIP is 
designed to enable VA to strategically target its limited resources to 
most effectively improve the delivery of services and benefits to 
Veterans, their families and survivors by addressing VA's most critical 
needs and performance gaps and investing wisely in VA's future.
Conclusion
    VA has a strong history of learning from past experiences and 
adapting our approaches when necessary to accomplish its mission to 
serve Veterans. The lessons learned from our recent construction 
challenges will lead to improvements in the management and execution of 
our capital program as we move forward. We are committed to meeting 
VA's responsibility to design and build quality facilities that provide 
care and services to our nation's Veterans. I look forward to answering 
any questions the Committee has regarding these issues.

                                 
                        Question For The Record
    To Hon. Eric K. Shinseki, Secretary, U.S. Department of Veterans 
Affairs, from Bob Filner, Ranking Democratic Member

                                            March 28, 2012

    The Honorable Eric K. Shinseki
    Secretary
    U.S. Department of Veterans Affairs
    810 Vermont Avenue, NW
    Washington, DC 20420

    Dear Mr. Secretary:

    In reference to our Full Committee hearing entitled, ``From the 
Ground Up: Assessing Ongoing Delays in VA Major Construction'' that 
took place on March 27, 2012; I would appreciate it if you could answer 
the enclosed hearing questions by the close of business on May 7, 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 
Carol Murray at [email protected], and fax your responses to 
Carol at 202-225-2034. For additional questions, please call 202-225-
9756.

                                            Sincerely,

                                            BOB FILNER
                                            Ranking Democratic Member

    CW:cm

    1. The Government Accountability Office's Report of December 2009 
entitled ``The VA Is Working to Improve Initial Project Cost Estimates, 
but Should Analyze Cost and Schedule Risks'', recommended that in order 
to provide a realistic estimate of when a construction project may be 
completed as well as the risks to the project that could be mitigated 
the Secretary of Veterans Affairs should direct the Office of 
Construction and Facility Management (CFM) to:

    a.  Require the use of an integrated master schedule for all major 
construction projects. This schedule should integrate all phases of 
project design and construction.

    b.  Conduct a schedule risk analysis, when appropriate, based on 
the project's cost, schedule, complexity, or other factors. Such a risk 
analysis should include a determination of the largest risks to the 
project, a plan for mitigating those risks, and an estimate of when the 
project will be finished if the risks are not mitigated.

    Has this been done and if so, when was it implemented?

    How do you plan to manage these recommendations and ensure that 
they are being followed?

    2. I have been informed that we have asked for copies of the 
letters of intent to exceed 10 percent of the authorized amount for 
Orlando, Las Vegas and New Orleans that are referenced in the FY 2013 
budget submission. It is my understanding that the budget submission 
reflects that VA has sent these letters to the Committees in November 
2011. Please provide these letters to the Committee. Thank you.

    3. In testimony, Brasfield and Gorrie state that the Senior 
Contracting Officer refused to meet with them in August, 2011. Is this 
true? If it is true, what would be the reasoning for refusing to meet 
with the contractors on a project that is already behind and beset with 
problems?

    4. What is the exact amount of appropriations VA has received for 
the 86 major construction projects you reference in your testimony?

    5. In the spirit of transparency, please provide the Committee a 
spread sheet on the 86 major construction projects, authorizations for 
those projects, appropriations for those projects and any bid savings, 
carry over funding, or supplemental funding that is being applied to 
those projects.

    6. As an agency, do you believe the lease process is one that is 
advantageous to assist in fulfilling your mission? If you could change 
the lease program, what would it look like?

    7. With regard to Orlando, please explain to me what happened 
between the hearing in April 2009 and the beginning of the problem in 
the spring of 2011. What problems and lack of communication contributed 
to the delay? What is being done now to make sure this does not happen 
again?

    8. I was concerned with the lack of communication when it was 
determined the Orlando VA Medical Center was going to be delayed. The 
VA Central Office did not notify me or my staff of this development. My 
district staff was notified by a public relations staff member who then 
asked up here if that was the case.

    9. My concern is that VA Central Office did not have sufficient 
oversight of the Orlando project and if they had, the delays and lack 
of communication could have been avoided. What are your thoughts 
regarding communication between the Central Office and regional efforts 
considering what we have discussed here today?

    10. You know Fort Bliss is growing by tens of thousands of troops, 
and soldiers are leaving military service and more and more they will 
be staying El Paso. Our local veteran population is growing and will 
probably increase at a much faster rate than anywhere else in the 
country in the coming years. The Army is constructing a new medical 
center to replace the existing facility which is currently a joint DoD-
VA facility. The VA will need to make a decision about how to deal with 
this increased veteran population and with the need to expand their 
existing facility or move to a new location. I believe that the best 
location for a new VA hospital in El Paso is co-located with the Texas 
Tech Medical School on the campus of the Medical Center of the 
Americas. This would give the VA access to top notch research and 
clinic assets - proving cutting edge care to veterans by partnering 
with the medical school and others. How is the VA planning for new 
facilities in areas like El Paso that are seeing major growth?

    Responses to Bob Filner, Ranking Democratic Member from Hon. Eric 
K. Shinseki, Secretary, U.S. Department of Veterans Affairs

    Question 1: The Government Accountability Office's Report of 
December 2009 entitled ``The VA Is Working to Improve Initial Project 
Cost Estimates, but Should Analyze Cost and Schedule Risks'', 
recommended that in order to provide a realistic estimate of when a 
construction project may be completed as well as the risks to the 
project that could be mitigated the Secretary of Veterans Affairs 
should direct the Office of Construction and Facility Management (CFM) 
to:

    a.  Require the use of an integrated master schedule for all major 
construction projects. This schedule should integrate all phases of 
project design and construction.
    b.  Conduct a schedule risk analysis, when appropriate, based on 
the project's cost, schedule, complexity, or other factors. Such a risk 
analysis should include a determination of the largest risks to the 
project, a plan for mitigating those risks, and an estimate of when the 
project will be finished if the risks are not mitigated.

    Has this been done and if so, when was it implemented? How do you 
plan to manage these recommendations and ensure that they are being 
followed?
    VA Response: The Office of Construction and Facilities Management 
(CFM) accepted the findings in early 2010 and proceeded to study the 
issue and develop a plan for implementing the findings on Integrated 
Master Scheduling and Cost Risk Analysis. CFM studied other agencies to 
learn from their implementation of Integrated Master Schedules (IMS) 
and Risk Analysis. VA issued guidance to modify architect/engineer (A/
E) contracts to include submission of a cost loaded design schedule 
along with a construction cost risk analysis in August 2010. CFM 
changed the requirements in VA's Program Guide 18-15, A/E Design 
Submissions Requirements, in October 2010 to formally include the 
requirement for schedule and cost analysis as deliverables under the A/
E contract.
    A memorandum dated March 30, 2012 (Attachment A), was issued to all 
CFM Regional Directors and Project Managers requiring the development 
of a complete IMS for all projects that obtained initial funding in 
fiscal years (FY) 2011 or 2012. Schedules contain planning activities 
and milestones for procurement, design, construction, medical equipment 
procurement, and activation. The Project Managers completed the 
schedules requested at the end of June 2012. Those projects that 
received funding in a prior year have truncated schedules based on 
where they are in the planning, design or construction process. This 
requirement applies to all future projects. CFM has started to analyze 
the schedules to identify risk areas and develop mitigation plans. The 
memorandum of March 30, 2012, also required that a project cost risk 
analysis be conducted for all projects in the FY 2012 and FY 2013 
budgets. CFM's Cost Estimating Service conducted the analysis. The 
results of the cost risk analysis are being briefed to CFM leadership 
and an action plan is being developed to implement the recommendations. 
Project managers are taking actions on the project-specific-risks 
identified. The action plan for systemic risks is expected to be 
complete in December 2012.

    Question 2: I have been informed that we have asked for copies of 
the letters of intent to exceed 10 percent of the authorized amount for 
Orlando, Las Vegas and New Orleans that are referenced in the FY 2013 
budget submission. It is my understanding that the budget submission 
reflects that VA has sent these letters to the Committees in November 
2011. Please provide these letters to the Committee.

    VA Response: Footnote 1 on page 6-47 of Volume 4 of the FY 2013 
Budget Note Submission (Attachment B) states: `Authorization extended 
under P.L. 109-461. Notification letter sent to the Committees in 
November 2011 of intent to exceed 10 percent of the authorized amount 
(Attachment C).' The second sentence of the footnote only applied to 
Syracuse, NY, and not the other projects associated with footnote 1. 
Adding the second sentence to Footnote 1 was in error. A separate 
footnote regarding the notification letter should have been created 
that applied only to Syracuse.

    Question 3: In testimony, Brasfield and Gorrie state that the 
Senior Contracting Officer refused to meet with them in August, 2011. 
Is this true? If it is true, what would be the reasoning for refusing 
to meet with the contractors on a project that is already behind and 
beset with problems?

    VA Response: CFM has a strong history of partnering with its 
contractors and encourages open communication between the contractor's 
representatives and CFM staff. Specifically regarding the timeframe in 
question, there was a written request from Brasfield & Gorrie (B&G) 
dated September 13, 2011, to the senior contracting officer requesting 
a meeting to discuss seven (7) project matters affecting the respective 
project teams. The senior contracting officer responded to B&G on 
September 15, 2011, and arranged a meeting in Orlando on September 20, 
2011. VA and B&G held a follow-up meeting on November 17, 2011, in VA 
Central Office. Further, Mr. Robert Neary, Acting Executive Director, 
Office of Construction and Facilities Management met with B&G on 
January 5, 2012. The contracting officer continues to meet with B&G bi-
weekly. Mr. Neary and Mr. Glenn Haggstrom, Principal Executive 
Director, Office of Acquisition, Logistics and Construction, have met 
with B&G in a series of meetings since the beginning of 2012. VA 
continues to engage the Committee and provide updates on a regular 
basis.

    Question 4: What is the exact amount of appropriations VA has 
received for the 86 major construction projects you reference in your 
testimony?

    VA Response: VA received $7.4 billion for these 86 projects.

    Question 5: In the spirit of transparency, please provide the 
Committee a spread sheet on the 86 major construction projects, 
authorizations for those projects, appropriations for those projects 
and any bid savings, carry over funding, or supplemental funding that 
is being applied to those projects.

    VA Response: See spreadsheet on the 86 projects (Attachment D). 
This information can also be found in Volume 4 of 4 of VA's 2013 Budget 
Submission. Appropriations are summarized in Appendix F - History of 
VHA Projects (pages 10-58 to 10-61) and Appendix G - History of Non-VHA 
Projects (pages 10-102 to 10-105). The Status Report for Authorized 
Major Medical Facility Projects is summarized on page 6-45.

    Question 6: As an agency, do you believe the lease process is one 
that is advantageous to assist in fulfilling your mission? If you could 
change the lease program, what would it look like?

    VA Response: The leasing program is a valuable tool that allows VA 
to effectively manage its capital assets while adapting to changing 
needs of our ultimate customer - the Veteran. Leasing allows VA 
flexibility in response to changing needs within the Veteran 
population. VA can adapt to growing demands for services more rapidly 
without the significant capital investment and time involved in the 
major construction process. Leasing also allows VA to right-size 
facilities on a periodic basis to address changes in health care 
delivery. Leasing ensures VA does not have the fiscal responsibility 
for an aging asset. Leasing prevents VA from adding permanent assets to 
the portfolio. Permanent assets may become a burden to maintain and 
operate in the future and are difficult to dispose of once they are no 
longer needed. This allows VA greater flexibility to meet the needs of 
the ever-changing Veteran population.

    Currently, VA only has authority to lease for medical space, as 
defined in 38 USC Section 8101. The Department continues to seek ways 
to improve the leasing process. On April 2012, the Secretary of 
Veterans Affairs established the Construction Review Council (CRC) to 
periodically review the Department's development and execution of its 
real property capital asset programs. The CRC gives VA an opportunity 
to anticipate possible issues and create solutions without hindering a 
project.
    The CRC identified four areas of VA's construction program in which 
VA would pursue improvements in order to allow for facilities to be 
delivered on time and within scope. These four areas - Requirements, 
Design Quality, Funding, and Program Management- have been analyzed by 
the CRC in relation to the leasing program, and have resulted in the 
following changes.
    Regarding requirements definition, additional agency-wide emphasis 
is being placed on the requirements planning process in the very 
preliminary planning stages. VA is committed to close consideration of 
baseline cost and size estimates for leased facilities within the FY13 
and FY14 budgets, as well as future budget years, in order to correctly 
reflect the requirement to meet the need of the current Veteran 
population.
    For design quality, VA has implemented a pilot program in which 
CFM's planning office engages the A/E firm performing VA's schematic 
design, to ensure that VA is receiving a high quality of service by its 
A/E firms, and that VA's requirements are interpreted correctly into 
the very early stages of the procurement process.
    Regarding funding coordination, CFM is taking steps to have the 
funds required for initial due diligence funding to be held in a 
centralized location, to mitigate potential delays in receipt of 
required due diligence items within the procurement process.
    Finally, for Program Management, CFM's Leasing Project Managers are 
now required to be FAC-P/PM level III certified. Currently, almost 75% 
of RPS project managers have completed all required courses for FAC-P/
PM certification, with the remaining project managers currently 
participating in the training.

    Question 7: With regard to Orlando, please explain to me what 
happened between the hearing in April 2009 and the beginning of the 
problem in the spring of 2011. What problems and lack of communication 
contributed to the delay? What is being done now to make sure this does 
not happen again?

    VA Response: During the period, VA completed two phases of the 
project - the site utilities and infrastructure, and the foundations 
and superstructure of the main hospital. VA also made significant 
progress with the central energy plant, community living center and 
domiciliary, and the warehouse and parking garages. The main hospital 
build out package was awarded to B&G, the prime contractor, in August 
2010 and a notice to proceed was given in October of that same year. 
The electrical design issues discovered post award were just being 
resolved in April of 2011, and the timeliness of information regarding 
equipment procurement started to emerge shortly thereafter. 
Additionally, during that same period, the prime contractor was 
confronted with quality control problems as significant deficiencies 
were discovered with the roofing and interstitial steel. The converging 
challenges with contractor performance contributed greatly to the 
delay. The Government rectified the design and owner-furnished 
equipment problems. The prime contractor has yet to provide adequate 
manpower for the trades on site. The prime contractor has also failed 
to continue diligent prosecution of the work while awaiting resolution 
of potentially disputed issues.
    VA's architect-engineer joint venture team and construction 
management firm have provided additional staff to expedite any possible 
future design revisions and to analyze time and money impacts of change 
orders. They are on site and easily accessible, monitoring the ongoing 
activity daily. There are several meetings held each week for the sole 
purpose of removing impediments to progress. VA has gone to great 
lengths to respond to B&G's requests for information and to facilitate 
recovery. Additionally, senior leadership, from both VA and B&G meet 
regularly.
    Our mission is to serve Veterans, which includes delivering first-
rate facilities on time. VA bears the responsibility to manage all 
projects efficiently, meet deadlines, and be good stewards of the 
resources entrusted to us by Congress and the American people. VA is 
committed to completing the Orlando VA Medical Center as soon as 
possible and is working collaboratively with the prime contractor to 
get construction completed as soon as practicable.

    Questions 8 & 9: I was concerned with the lack of communication 
when it was determined the Orlando VA Medical Center was going to be 
delayed. The VA Central Office did not notify me or my staff of this 
development. My district staff was notified by a public relations staff 
member who then asked up here if that was the case. My concern is that 
VA Central Office did not have sufficient oversight of the Orlando 
project and if they had, the delays and lack of communication could 
have been avoided. What are your thoughts regarding communication 
between the Central Office and regional efforts considering what we 
have discussed here today?

    VA Response: CFM has regular communications with the regional 
offices. CFM VACO senior staff have routine weekly interaction with the 
Resident Engineer staff on site to ensure communication continues to 
improve and issues are resolved as quickly as possible. Field staff did 
discuss the delays with senior staff in VACO which resulted in many 
actions including: management concurrence in proposal postponement; 
review and approval of modifications; and strategic decisions on 
suspension of work. We believe the foundation for effective 
communications is in place and it will continue to be exercised.

    Question 10: You know Fort Bliss is growing by tens of thousands of 
troops, and soldiers are leaving military service and more and more 
they will be staying El Paso. Our local veteran population is growing 
and will probably increase at a much faster rate than anywhere else in 
the country in the coming years. The Army is constructing a new medical 
center to replace the existing facility which is currently a joint DoD-
VA facility. The VA will need to make a decision about how to deal with 
this increased veteran population and with the need to expand their 
existing facility or move to a new location. I believe that the best 
location for a new VA hospital in El Paso is co-located with the Texas 
Tech Medical School on the campus of the Medical Center of the 
Americas. This would give the VA access to top notch research and 
clinic assets - proving cutting edge care to veterans by partnering 
with the medical school and others. How is the VA planning for new 
facilities in areas like El Paso that are seeing major growth?

    VA Response: Veterans Integrated Service Network 18 has several 
initiatives underway to meet the needs of the current workload, the 
projected workload and any additional influx from the William Beaumont 
Army Medical Center (WBAMC) at Ft. Bliss activities as outlined below:

    Underway/Potential Projects:

      A 27,000 gross square foot (GSF) clinical building on El 
Paso VA Health Care System (EPVAHCS) grounds is currently under design 
for the expansion of dental, prosthetics/orthotics, and administration 
services. Construction is anticipated in FY 2013.
      The Las Cruces CBOC leased space is scheduled to be 
expanded in FY 2014 from its current size of 5,000 net usable square 
feet (NUSF) to 9,000 NUSF. Additional services are being finalized with 
a projected completion date of a new lease in 2014.
      Joint Incentive Fund with WBAMC endoscopy expansion is 
currently under construction. Activation is anticipated to be October 
2012.
      New Primary Care Telehealth Outpatient Clinic lease has 
been submitted for approval in the FY 2014 Strategic Capital Investment 
Process to address rural areas; anticipated location is Marfa, TX 
(approximately 194 miles from El Paso, TX).
      Contracts are being developed with community hospitals to 
provide overflow for inpatient and outpatient needs. Contract 
development began the week of April 4, 2011. Statements of Work have 
been developed and are in the process of being sent to Contracting for 
further processing.
Attachment A

    Department of                      Memorandum
    Veterans Affairs

    Date MAR 3 0 2012

    From: Acting Executive Director, Office of Construction & 
Facilities Management (003C)

    Subj: Requirement for Integrated Master Schedules and Cost Risk 
Analysis

    To:Regional Directors and Project Managers

    1. The GAO issued a report in December 2009 recommending that VA 
implement integrated master schedules and conduct a cost risk analysis 
for each major construction project. VA accepted these recommendations.
    2. In addition, VA initiated project management training for VA 
Project Managers. This training addresses the need and methods for 
developing integrated master schedules and conducting cost risk 
analysis. Over 50 percent of CFM's assigned Project Managers have 
achieved certification in this training.
    3. VAFM has been studying the issue of adding risk management and 
integrated schedules to the standard process for the last 2 years. The 
Project Management Plan included chapters for risk management and 
schedules. In light of these actions Integrated Master Schedules shall 
be created for all projects that obtained initial funding in Fiscal 
Years (FY) 11 or FY 12. These schedules will contain planning 
activities and milestones for procurement, design, construction, 
medical equipment procurement, and activation. The schedules shall be 
completed by the Project Manager and submitted to the Office of 
Programs and Plans (003C6) not later than June 29, 2012. Specific 
implementation instructions will be issued by (003C6) within 10 days of 
this directive
    4. Integrated Master Schedules shall be created for all projects 
that obtained initial funding in FY 11 or 12. These schedules will 
contain planning activities and milestones for procurement, design, 
construction, medical equipment procurement, and activation. Projects 
that obtained initial funding prior to FY 11 will have a truncated 
integrated master schedule developed based on the stage of the project. 
All projects with at least 75 percent of all construction complete are 
exempt from this requirement. For projects with less than 75 percent of 
all construction complete, the schedules will be created by the Project 
Manager. The Integrated Master Schedules will be completed by Project 
Managers and submitted to (003C6) not later than June 29, 2012. 
Specific implementation instructions will be issued by (003C6) within 
10 days.
    5. Project cost risk analysis will be conducted for all projects in 
the FY 12 and FY 13 budgets. The analysis will be conducted by Cost 
Estimating Service. However, I expect each Project Manager to work with 
the Cost Estimating Service to obtain the completed analysis not later 
than June 1, 2012. Project Managers will submit the cost risk analysis 
to (003C6) for review by June 1, 2012. Specific implementation 
instructions will be issued by (003C6) within 10 days.
    6. Control of our construction projects is extremely important. 
These tools, while allowing leadership a view into the development of 
the project, are designed to assist you in managing your work 
activities. I strongly encourage each of you to use these tools to help 
us to more quickly deliver a quality product that serves the 
Department's needs and provides quality services to our Veterans.

    Robert L. Neary, Jr.

Attachment B


----------------------------------------------------------------------------------------------------------------
                                                                       Approp.
                                                                      Available        FY(s)
          Location                 Description       Authorization   Through  FY    Authorized        Status
                                                                        2012
----------------------------------------------------------------------------------------------------------------
Syracuse, NY \1\                Spinal Cord Injury          77,700        92,469           2007                CO
                                      (SCI) Center
----------------------------------------------------------------------------------------------------------------
Tampa, FL \3\                           Polytrauma         231,500       231,500           2008                CO
                                   Expansion & Bed
                                     Tower Upgrade
----------------------------------------------------------------------------------------------------------------
Walla Walla, WA                    Multi-Specialty          71,400        71,400           2010                CO
                                              Care
----------------------------------------------------------------------------------------------------------------
West Los Angeles, CA                       Seismic          35,500        35,500           2012                CD
                                 Corrections of 12
                                         Buildings
----------------------------------------------------------------------------------------------------------------
\1\ Authorization extended under P.L. 109-461. Notification letter sent to the Committees in November 2011 of
  intent to exceed 10 percent of the authorized amount.
\2\ Orlando, FL project was authorized for $656,800,000; available funding is $665,400,000 and is within the 10%
  allowance per Title 38, Section 8104.
\3\ Included under P.L. 110-252 in 2008.
\4\ Long Beach, CA project was authorized for $117,845,000; available funding is $129,545,000, and is within the
  10% allowance per Title 38, Section 8104.
\5\ San Antonio, TX Ward Upgrades and Expansion project was authorized for $19,100,000; available funding is
  $20,994,000 and is within the 10% allowance per Title 38, Section 8104.

    1999 projects were authorized in P.L. 105-368. 2002 projects were 
authorized in P.L. 107-135. 2004 and 2005 projects were authorized 
under P.L. 108-170, which expired September 30, 2006. Projects 
authorized in P.L. 108-170 that did not have construction awards prior 
to the expiration date required reauthorization. 2004 and 2005 projects 
with expired authorization were reauthorized in P.L. 109-461, as well 
as the 2006 and 2007 projects. Atlanta, GA was authorized in P.L. 110-
168. The 2009 projects were authorized in P.L. 110-387. Walla Walla, 
WA, was authorized by P.L. 111-98 in 2010. All other 2010 projects were 
authorized in P.L. 111-163. 2011 projects were authorized in P.L. 111-
275. 2012 projects were authorized in P.L. 112-37.
Attachment C

                   THE SECRETARY OF VETERANS AFFAIRS 
                              WASHINGTON 
                           November 14, 2011

    The Honorable Tim Johnson Chairman
    Subcommittee on Military Construction,
      Veterans Affairs, and Related Agencies
    Committee on Appropriations
    United States Senate
    Washington, DC 20510

    Dear Mr. Chairman:

    The purpose of this letter is to notify you that in accordance with 
38 U.S.C. Section 8104 (c), the Department of Veterans Affairs (VA) is 
providing notification of the intent to obligate funding in excess of 
10 percent of the original authorized project amount of $77.7 million 
for Phase II of the Spinal Cord Injury/Disease (SCl/D) Center project 
at the VA Medical Center in Syracuse, New York. The current total 
funding to date for the project is $85.4 million. Additional funds in 
the amount of $5 million needed to complete this project will be 
provided from the Major Construction Working Reserve.
    The SCl/D project includes a new supply processing and distribution 
(SPD) department to support seven new operating rooms. The original 
plans for the SPD used 2008 criteria. A newly revised SPD design 
criterion was issued in 2010 and included many significant changes. SPD 
provides for the sterilization of medical instrumentation and other 
products utilized in surgery. It is critical that the latest criteria 
for SPD be available to ensure patient safety. An estimated $2 million 
will be needed to support design and construction costs to complete the 
modified SPD.
    Phase II, the Addition for SCl/D Center, is 75 percent complete. 
While the new construction associated with the project is nearly 
complete, there is a significant renovation phase to follow and 
insufficient contingency funds remain on hand to cover unanticipated 
modifications that may be required during the renovation phase. 
Historically, renovation has a higher risk of unforeseen changes than 
new construction. The additional funds will permit completion of the 
renovation work in accordance with the original requirements. An 
additional $2 million is needed for construction contingency. An 
estimated $1 million will be utilized to contract for necessary 
construction management service support.
    This notification has been sent to the appropriate leadership of 
the House and Senate Committees on Appropriations.

    Sincerely,

    Eric K. Shinseki

    [This letter was also sent from Eric K. Shinseki to the following 
individuals:]

    The Honorable John Culberson
    Chairman
    Subcommittee on Military Construction,
      Veterans Affairs, and Related Agencies
    Committee on Appropriations
    U.S. House of Representatives
    Washington, DC 20515

    The Honorable Mark Kirk
    Ranking Member
    Subcommittee on Military Construction,
        Veterans Affairs, and Related Agencies
    Committee on Appropriations
    United States Senate
    Washington, DC 20510

    The Honorable Sanford D. Bishop, Jr.
    Ranking Member
    Subcommittee on Military Construction,
        Veterans Affairs, and Related Agencies
    Committee on Appropriations
    U.S. House of Representatives
    Washington, DC 20515

Attachment D

    See the following pages.

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