[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]







  BUILDING VA'S FUTURE: CONFRONTING PERSISTENT CHALLENGES IN VA MAJOR 
                    CONSTRUCTION AND LEASE PROGRAMS

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

                                HEARING

                               before the

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

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                      WEDNESDAY, NOVEMBER 20, 2013

                               __________

                           Serial No. 113-46

                               __________

       Printed for the use of the Committee on Veterans' Affairs







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                     COMMITTEE ON VETERANS' AFFAIRS

                     JEFF MILLER, Florida, Chairman

DOUG LAMBORN, Colorado               MICHAEL H. MICHAUD, Maine, Ranking
GUS M. BILIRAKIS, Florida            CORRINE BROWN, Florida
DAVID P. ROE, Tennessee              MARK TAKANO, California
BILL FLORES, Texas                   JULIA BROWNLEY, California
JEFF DENHAM, California              DINA TITUS, Nevada
JON RUNYAN, New Jersey               ANN KIRKPATRICK, Arizona
DAN BENISHEK, Michigan               RAUL RUIZ, California
TIM HUELSKAMP, Kansas                GLORIA NEGRETE MCLEOD, California
MARK E. AMODEI, Nevada               ANN M. KUSTER, New Hampshire
MIKE COFFMAN, Colorado               BETO O'ROURKE, Texas
BRAD R. WENSTRUP, Ohio               TIMOTHY J. WALZ, Minnesota
PAUL COOK, California
JACKIE WALORSKI, Indiana

                       Jon Towers, Staff Director

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                            C O N T E N T S

                               __________

                           November 20, 2013

                                                                   Page

Building VA's Future: Confronting Persistent Challenges In VA 
  Major Construction And Lease Programs..........................     1

                           OPENING STATEMENTS

Hon. Jeff Miller, Chairman,......................................     1
    Prepared Statement of Chairman Miller........................    27
Hon. Michael H. Michaud, Ranking Minority Member.................     2
    Prepared Statement of Hon. Michaud...........................    27
Hon. Corrine Brown, U.S. House of Representatives, Prepared 
  Statement only.................................................    28

                               WITNESSES

Linda Halliday, Assistant Inspector General for Audits and 
  Evaluations....................................................     2
    Prepared Statement of Ms. Halliday...........................    28
    Accompanied by:

      Maureen Regan, Counselor to the Inspector General, Office 
          of the Inspector General, U.S. Department of Veterans 
          Affairs
Llyod Caldwell, P.E., Director of Military Programs, U.S. Army 
  Corps of Engineers.............................................     4
    Prepared Statement of Mr. Caldwell...........................    33
Glenn D. Haggstrom, Principal Executive Director, Office of 
  Acquisitions, Logistics, and Construction, U.S. Department of 
  Veterans Affairs...............................................     5
    Prepared Statement of Mr. Haggstrom..........................    36
    Accompanied by:

      Stella Fiotes, Executive Director, Office of Construction 
          and Facilities Management, U.S. Department of Veterans' 
          Affairs

                        STATEMENT FOR THE RECORD

Veterans of Foreign Wars.........................................    39
Disabled American Veterans.......................................    41
The American Legion..............................................    46

                        QUESTIONS FOR THE RECORD

Letter and Questions From: HVAC, To: VA..........................    48
Responses From: VA, To: HVAC.....................................    51

 
  BUILDING VA'S FUTURE: CONFRONTING PERSISTENT CHALLENGES IN VA MAJOR 
                    CONSTRUCTION AND LEASE PROGRAMS

                      Wednesday, November 20, 2013

                     U.S. House of Representatives,
                            Committee on Veterans' Affairs,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 9:38 a.m., in 
Room 334, Cannon House Office Building, Hon. Jeff Miller 
[Chairman of the Committee] presiding.
    Present: Representatives Miller, Lamborn, Bilirakis, Roe, 
Flores, Denham, Runyan, Benishek, Huelskamp, Coffman, Wenstrup, 
Cook, Walorski, Michaud, Brown, Brownley, Titus, Kirkpatrick, 
Ruiz, Negrete McLeod, Kuster, O'Rourke, and Walz.
    Also present: Representative Mica.

              OPENING STATEMENT OF CHAIRMAN MILLER

    The Chairman. The Committee will now come to order. Welcome 
to today's Full Committee hearing, Building VA's Future: 
Confronting Persistent Challenges in VA's Major Construction 
and Lease Programs.
    As some of you may know, in just about an hour we are going 
to recognize 33 Native American tribes and bestow the 
Congressional Gold Medal upon the heroic and selfless Native 
American Code Talkers who provided invaluable secure 
communication to Allied powers during World Wars I and II. 
Their courage, dedication, and honorable service enabled 
countless lives to be saved and victory to be done.
    In the interest of conducting today's business in 
sufficient time to allow both Committee Members and members of 
the audience today to participate in honoring and celebrating 
these brave men and women, I will submit my opening statement 
for the record.
    However, before I yield to the Ranking Member I do want to 
note that we have just authorized 27 major medical facility 
leases per the department's request for the fiscal years 2013 
and 2014. At today's hearing we will address serious 
deficiencies in VA's planning, design, and construction of 
lease projects that were authorized in 2009. VA should be on 
notice that the approval of H.R. 3521 in no way holds the 
department harmless for the mismanagement of major construction 
and facility leases that continues today. Moving forward I 
expect the department to take immediate corrective actions to 
address the serious issues that have plagued the construction 
and the leasing programs so that the important projects that we 
have just authorized do not experience the same delays and cost 
overruns we have seen in the past. And now I yield to our 
Ranking Member Mr. Michaud of Maine for any opening statements 
that he may have.

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

          OPENING STATEMENT OF HON. MICHAEL H. MICHAUD

    Mr. Michaud. Thank you, Mr. Chairman. I would ask unanimous 
consent my opening remarks be submitted for the record.

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

    The Chairman. Without objection.
    Mr. Michaud. I yield back the balance of my time.
    The Chairman. Thank you very much.
    First I want to welcome our first and only panel of 
witnesses today. Thank you for coming. Joining us from the VA 
Inspector General is Linda Halliday. If you would, please come 
forward? The Assistant Inspector for Audits and Evaluations, 
Ms. Halliday is accompanied by Maureen Regan, Counselor to the 
Inspector General. We are also joined by Lloyd Caldwell, the 
Director of Military Programs, for the U.S. Army Corps of 
Engineers. From the VA we are joined by Glenn Haggstrom, the 
Principal Executive Director for the Office of Acquisitions, 
Logistics, and Construction. Mr. Haggstrom is accompanied by 
Stella Fiotes, the Executive Director of the Office of 
Construction and Facilities Management. Thank you all for being 
here today. Ms. Halliday, we will begin with you. You may 
proceed with your testimony. You are recognized for five 
minutes.

 STATEMENTS OF LINDA HALLIDAY, ASSISTANT INSPECTOR GENERAL FOR 
 AUDITS AND EVALUATIONS, OFFICE OF THE INSPECTOR GENERAL, U.S. 
 DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY MAUREEN REGAN, 
  COUNSELOR TO THE INSPECTOR GENERAL, OFFICE OF THE INSPECTOR 
 GENERAL, U.S. DEPARTMENT OF VETERANS AFFAIRS; LLOYD CALDWELL, 
    P.E., DIRECTOR OF MILITARY PROGRAMS, U.S. ARMY CORPS OF 
    ENGINEERS; AND GLENN D. HAGGSTROM, PRINCIPAL EXECUTIVE 
 DIRECTOR, OFFICE OF ACQUISITIONS, LOGISTICS AND CONSTRUCTION, 
  U.S. DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY STELLA 
    FIOTES, EXECUTIVE DIRECTOR, OFFICE OF CONSTRUCTION AND 
   FACILITIES MANAGEMENT, U.S. DEPARTMENT OF VETERANS AFFAIRS

                  STATEMENT OF LINDA HALLIDAY

    Ms. Halliday. Mr. Chairman and Members of the Committee, 
thank you for the opportunity to testify today on the results 
of VA Inspector General's work related to VA's construction and 
lease programs. With me today is Ms. Maureen Regan, the 
Counselor to the Inspector General and the Director of the IG's 
Office of Contract Review.
    OIG reviews of VA's minor construction program, health care 
center leasing and activation process, and selected major 
construction process have disclosed a pattern of poor 
oversight, ineffective planning, and mismanagement of capital 
assets in VA. We reported in 2012 that VA has not effectively 
managed the capital asset planning process to ensure minor 
construction projects are not changed significantly after 
approval, or that leased facilities are the right size and in 
the right location to ensure they are fully utilized. In our 
2012 review of VA's minor construction program we found that 
VHA had integrated the design and construction of seven of 30 
minor construction programs into three combined projects, which 
the exceeded the minor construction spending limitation of $10 
million. Three other projects of the 30 we reviewed were 
inappropriately supplemented with medical facility funds, also 
known as non-recurring maintenance funds.
    These projects had little if any project planning or 
oversight. The improper mixing of minor construction with NRM 
funding was due to premature approval of poorly planned and 
inadequately developed contracts for medical facility design 
and construction.
    To address the Committee's interest in the management of 
VA's health care center lease procurement process, our review 
found no health care centers had been built despite VA's 
original target completion of June, 2012. Congress authorized 
approximately $150 million for seven HCC facility activations. 
We also reported that VA could not provide accurate information 
on HCC spending into April, 2013 because central cost tracking 
was not in place to ensure the transparency or accuracy of 
reporting all HCC expenditures.
    Further, the review of an anonymous complaint received in 
March, 2013 involving the lease for the Butler, Pennsylvania 
Healthcare Center led to the cancellation of the lease.
    We noted instances where facilities were leased and 
constructed, and then stood empty and underutilized. And some 
of VA's construction projects, although they were properly 
authorized, were executed over budget and delivered well past 
their anticipated completion date.
    To serve veterans in both New Orleans, Louisiana, and 
Orlando, Florida, VA is constructing two new medical centers. 
Our review of the financing and budgeting for the construction 
of the medical center in New Orleans found nothing 
substantially wrong. However, we noted excessive delays and 
slippage. Most of it was due to the delivery of the site from 
the City of New Orleans, and the need to remediate the 
hazardous substances identified after the site was transferred 
to and accepted by VA. To mitigate the construction delays VA 
was adjusting the construction activities to meet the 
completion deadline. In the VA Medical Center in Orlando, we 
reviewed the contract change orders amounting to over $9.6 
million. After a thorough review we questioned about 30 percent 
of these costs. Lack of supporting documentation, inclusion of 
costs not associated in the work ordered, and overstatement of 
proposed costs were quickly brought to the attention of the VA 
contracting officer and negotiations were held to ensure VA was 
going to pay only what it was owed.
    Our reports have motivated VA to review its minor 
construction policies and procedures. VA now ensures its 
construction programs managers better track and monitor project 
timeliness and cost as well as routinely compare approved 
designs with project scope to better manage changes. But given 
the practices in the past, such as ineffectively monitoring 
projects, untimely executive of leases, and inaccurately 
calculating program costs and savings, VA is not recognizing 
the full potential of its construction program. VA needs better 
oversight, improved capital planning, and stricter asset 
management to gain assurance that it can address construction 
and lease challenges more effectively. With good management and 
stewardship there are opportunities to avoid cost increases and 
schedule delays.
    Efforts to ensure the adequacy of its processes, especially 
the project management process and oversight, will help reduce 
the examples like the ones highlighted in our statement. 
Regardless, budget performance and schedule risks are inherent 
in any effort to deliver construction projects. Further 
planning and managing capital assets to align with veterans' 
health care needs and new medical treatment changing how and 
where care is provided is a challenge. Thus, risk management 
and mitigation must be effectively addressed throughout the 
life of construction projects.
    Mr. Chairman, this concludes my statement today. Maureen 
Regan and I will be pleased to answer question on our 
respective work.

    [The prepared statement of Linda Halliday appears in the 
Appendix]

    The Chairman. The Committee thanks you for your testimony. 
Mr. Caldwell, you are recognized for five minutes.

                  STATEMENT OF LLOYD CALDWELL

    Mr. Caldwell. Mr. Chairman and Members of the Committee, as 
the Director of Military Programs for the U.S. Army Corps of 
Engineers, I provide leadership for the Execution of the Corps' 
engineering and construction programs worldwide to include our 
support for other agencies. I am pleased to be with you today. 
And I will address our approach to delivering construction, 
specifically the construction of medical facilities.
    The Department of Defense construction program uses 
designated construction agents, of which the Corps of Engineers 
is one. The construction agents procure and execute the 
delivery of DoD infrastructure. The Corps has a long history of 
executing some of the Nation's most challenging construction 
programs, both in our military missions as well as in our civil 
works responsibilities. We deliver a full range of medical 
facilities for the Department of Defense, to include hospitals.
    Regardless of the nature of a facility, the Corps has 
developed and refined processes and capabilities for design and 
construction. We think of four fundamental elements to deliver 
successful projects. One, learning what is needed. In that 
case, early involvement by the Corps with the project's using 
agency to understand and assist the requirement's development, 
preferably in their planning and programming process. Two, 
planning the work. That is engaging stakeholders to align 
scope, budget, and schedule. Three, executing the procurement. 
A team effort that concerns all stakeholders from design 
through construction. And four, managing the execution. A 
governance approach that requires oversight from the job site 
to Corps leadership.
    Throughout the process we manage scope, cost, and schedule 
objectives. We integrate actions and we evaluate issues and 
risks with our partners in the process to address and resolve 
them.
    Budget and schedule risks are inherent in executing 
construction projects, and medical facilities are among the 
most complex facilities for which we manage design and 
construction. They require close, frequent coordination with a 
large number of stakeholders. They are subject to changing 
requirements during construction, often due to evolving medical 
technology. We maintain a medical center of expertise to assist 
the Office of Defense Health Affairs and to ensure unique 
medical functions are properly included in the larger project 
delivery process.
    The Corps, as part of its interagency support, also has an 
established relationship with the Department of Veterans 
Affairs, providing support for a range of facility construction 
and maintenance requirements. The Economy Act and our 2007 
Interagency Memorandum of Agreement provide authority and basis 
for the Corps and the VA's collaborative work. Our Corps 
headquarters works with the VA's Office of Construction and 
Facility Management. Our Corps regional offices have developed 
relationship with the 23 Veterans Integrated Service Network 
offices. In the past two years the Corps has managed work at 74 
VA facilities.
    We are currently assisting the VA to develop and implement 
an enterprise construction oversight capability, and we are 
collaborating with the VA to provide training opportunities.
    We value our support to the VA and to the veterans of the 
Nation. We are pleased with the excellent working relationship 
that exists between our agencies.
    Thank you, Mr. Chairman, for inviting the Corps to testify 
in this matter. I am pleased to answer your and the other 
Members' questions.

    [The prepared statement of Lloyd Caldwell appears in the 
Appendix]

    The Chairman. Thank you, Mr. Caldwell, for your testimony. 
Mr. Haggstrom, welcome and you are now recognized for your 
testimony for five minutes.

                STATEMENT OF GLENN D. HAGGSTROM

    Mr. Haggstrom. Chairman Miller, Ranking Member Michaud, 
distinguished Members of the Committee, I am pleased to appear 
here today to update the Committee on the Department of 
Veterans Affairs' continuing efforts to improve the management 
and timely execution of major construction and leased projects. 
Joining me this morning is Ms. Stella Fiotes, Executive 
Director of the Office of Construction and Facilities 
Management. I will provide a brief oral statement and request 
that my full statement be included in the record.
    The Chairman. Without objection.
    Mr. Haggstrom. The department's facility programs are an 
integral part of our ongoing mission to care for and 
memorialize our Nation's veterans. The department is committed 
to meeting our responsibility to design, build, and deliver 
quality facilities as tools to meet the demand for access to 
health care and benefits. VA continues to improve its real 
property portfolio, providing state of the art facilities that 
meet the needs of veterans, allowing for the highest standard 
of service. We have taken on the challenge of updating our 
aging infrastructure to meet increased workload demands, 
changing patient demographics, and services delivered closer to 
where veterans live.
    In the past five years VA has delivered 75 major 
construction projects valued at over $3 billion that include 
the new medical center complex in Las Vegas, cemeteries, 
polytrauma facilities, spinal cord injury centers, a blind 
rehabilitation center, and community living centers. We 
continue work on 55 major construction projects valued at 
approximately $13 billion.
    The department has also opened 180 leased medical 
facilities, 50 of which are considered major leases.
    We have taken steps to improve the management and oversight 
of major construction projects which include implementing the 
recommendations from the Government Accountability Office, and 
the department's Construction Review Council. VA took 
aggressive action on the recommendations in the April, 2013 GAO 
report and all recommendations have since been closed.
    Additionally, we have implemented actions addressing the 
four major challenge areas as identified by the Construction 
Review Council which is chaired by the Secretary of Veterans 
Affairs. These include recommendations to improve the 
development of requirements, design quality, funding, and 
program management and automation.
    Unfortunately the department's major leasing program was 
not authorized by Congress for fiscal year 2013 as a result of 
the Congressional Budget Office's change in the budgetary 
treatment of the program. We are hopeful that for fiscal year 
2014 authorization will be reinstated by Congress, permitting 
the department's current request for 27 projects that will 
serve the needs of approximately 340,000 to move forward.
    In preparation of executing a future major leasing program 
should it be authorized, and to improve the current ongoing 
program, VA is in the process of addressing recommendations in 
the October, 2013 OIG report. These actions will be applied to 
future major leasing actions should authorization be restored.
    VA has a strong history of delivering facilities to serve 
veterans. The way the Office of Construction and Facilities 
Management is doing business today has changed significantly 
since the Orlando, Denver, and New Orleans projects were 
undertaken. The recommendations made from previous reports have 
resulted in positive changes and are being applied to the 
entire program, including the next two proposed major medical 
center replacement projects located in Louisville, Kentucky and 
Omaha, Nebraska.
    Our focus on ensuring well defined requirements and 
acquisition strategies that meet the project needs; assessing 
project risk; assuring timely project and contract 
administration; partnering with our construction and design 
contractors; early involvement of the medical equipment 
planning and procurement teams; applying the department's 
acquisition program management framework to our projects; and 
engaging in executive level onsite project reviews, along with 
monthly updates to the Committee on key projects, has led to 
improvements and transparency in our program. All these actions 
will help to ensure the department's future capital program is 
delivered on time and within budget.
    Thank you for the opportunity to testify before the 
Committee today. We look forward to answering any questions the 
Committee may have.

    [The prepared statement of Glenn D. Haggstrom appears in 
the Appendix]

    The Chairman. Thank you much, Mr. Haggstrom, for your 
testimony on behalf of the department. We did just report 
favorably to the full House H.R. 3521, which does in fact 
authorize the 27 leases. Of course we have to have a full House 
vote, and then the Senate will have to act, but get ready. They 
are coming.
    Mr. Haggstrom. Thank you very much, Mr. Chairman.
    The Chairman. To the Corps of Engineers, what we are going 
to do, if we can, we are going to do two two-minute rounds so 
that we can try to get everybody in, including myself. So if 
you would start the clock?
    Of the six Department of Defense leases, or medical 
facilities listed in your written statement as ongoing or as 
having been recently completed by the Corps, how many of the 
projects are currently or are completed on budget and on time?
    Mr. Caldwell. Mr. Chairman, your question is directed to 
the Corps and you are referring to leases? And----
    The Chairman. No, no, I corrected. Facilities, take the 
lease, the word lease out. The Department of Defense medical 
facilities listed in your written statement, how many of those 
either are on time, on budget, or were completed on time or on 
budget?
    Mr. Caldwell. Sir, I can get you specific numbers. But 
virtually all of those are completed with some time growth and 
some cost growth. We generally----
    The Chairman. That means they are not on time and they are 
not on budget?
    Mr. Caldwell. Sir it means that we anticipate and 
understand that there is risk associated and unknowns 
associated with construction. We anticipate a five percent cost 
growth on projects, including medical projects, and provide 
that in the programmed amount for the projects. And we endeavor 
to operate within that five percent. On the whole our 
experience is that we are operating within that five percent.
    The Chairman. So you do plan on that five percent?
    Mr. Caldwell. Yes sir, we do.
    The Chairman. Mr. Haggstrom, explain to us why four years 
after it was issued the department is still in the process of 
implementing recommendations by the GAO made in 2009 concerning 
VA's major construction programs?
    Mr. Haggstrom. Mr. Chairman, to the best of my knowledge we 
have implemented the recommendations from the GAO report in 
2009. And among them were the importance of doing a risk 
assessment for both the cost and schedule. And shortly after 
the report was issued in the future projects that we are 
undertaking that was one of the major changes that we work very 
closely now with our architect and engineer firm of record on 
the project to accomplish that.
    Subsequent to moving forward with the new projects we did 
go back and we started the process on older projects that we 
had started prior to the issuance of that report.
    The Chairman. Thank you. Could I ask GAO if you concur with 
Mr. Haggstrom's statement in regards to VA fully responding?
    Ms. Halliday. Based on our reviews we would think that 
while they might be responding, the implementation has not been 
sufficient.
    The Chairman. Thank you. Mr. Michaud? Ms. Brown?
    Ms. Brown. Thank you. Since I only have two minutes I am 
going to ask that my statement be placed in the record.
    The Chairman. Always.

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

    Ms. Brown. Thank you. Let me just say that this is, Ms. 
Halliday, you mentioned New Orleans that I am very familiar 
with, I have been there twice, and you mentioned Orlando. But I 
was not clear on your feedback as far as Orlando. Because I 
thought maybe you made a mistake and you were still talking 
about New Orleans when you should have been talking about 
Orlando. Would you take a look at that in your statement?
    I have been, with the Chairman, to Orlando several times. 
This project is over 25 years old, and I have been here 21 
years, and we are still working on it. I will be there. I asked 
my staff to drive by there and we do, and for the past, what, 
three months? We are still at 84 percent completion. I will be 
there Monday. I am going to not only drive by but I am going to 
stop. I want to know what is the problem? Why is it that we 
cannot complete the Orlando project? It is in my area. I was 
very instrumental in getting the authorization and the full 
funding.
    Now I know everybody wants to go down and do the right 
thing. But I want to know why is it that we cannot go down and 
do the right thing, and help those veterans in Central Florida? 
Please?
    Mr. Haggstrom. Ms. Brown, first of all I would like to make 
it very clear that we agree with you, that the project has 
taken too long to do. And there have been inherent problems 
which the VA has addressed in the past several years.
    I do want to make it clear though to the Committee that in 
no case has any veteran who has been enrolled in the veterans 
health care system has gone untreated for any maladies or any 
issues that they have with regards to their health. The medical 
center director down there Tim Liezert has done an excellent 
job.
    The Chairman. I think you might want, you are talking about 
Orlando area.
    MR. Haggstrom. I am talking about Orlando, sir.
    Ms. Brown. Yes.
    Mr. Haggstrom. Tim Liezert, who is the medical center 
director has done an excellent job in balancing the needs of 
what the veterans require. And we continue to do so.
    With regards to the executive of this project there, it 
early on was inherent. We had some problems. And VA moved 
quickly to address those problems. The issue here now is with 
contractor performance. And VA has taken every opportunity, as 
the Chairman has often asked me to do, to partner with our 
prime contractor in an effort to move this forward. But when 
you go down there and you look at the project, there are 
inherent problems with scheduling, the number of workers on the 
job to do this, the quality of the workmanship. And it goes on 
and on and on. And currently VA is taking every opportunity to 
exercise our rights to ensure that the contractor moves 
forward.
    Ms. Brown. Well can you tell me why it is that we have not 
had any advancement in the completion in the last three months? 
You know, I review the reports and it is stuck at 84 percent.
    Anyway, Mr. Chairman, perhaps I can get the answers to my 
question in writing. But I will be there Monday.
    The Chairman. Thank you very much, Ms. Brown. And if you 
would like to submit a question for the record I am sure Mr. 
Haggstrom would be glad to answer it. Dr. Roe?
    Mr. Roe. Ms. Brown, I would recommend you go every Monday. 
I believe I would. We have been building major projects since 
the pyramids. And there is nothing magic about building this. I 
have been involved in building two hospitals from the ground 
up, and one a little bit, and several medical office buildings, 
schools, you name it as a public official. And you decide what 
you have, what your budget is, what you can pay for in the 
private sector, what you allocate or appropriate in the public 
sector. You get an architect, you design it, you bid it out, 
and as you stated there will be some cost adjustments, things 
you run across when you are building something you did not 
anticipate. Everybody understand that.
    But we are reinventing the wheel here. And especially in 
hospitals, I get a little frustrated, and I certainly share Ms. 
Brown's frustration, is it, and I did this with schools. It is 
a great deal for architects when you redesign every school 
differently. And I realize every footpad is slightly different, 
the topography is a little different. But when you are building 
hospitals an operating room for the most part is an operating 
room, and a patient care room is basically a patient care room, 
and a laboratory is a laboratory. I have been in hundreds of 
them over my career. Why would you not cookie cutter, build 
something, basically why could you not do that? The VA is going 
to build a hospital, two more facilities. They are going to be 
redesigned from the ground up to look something different. You 
are going to pay a lot of money doing that. Why would there not 
be just a standard that you could change a little bit? And 
instead of going four floors, three floors, but essentially a 
layout like that instead of reinventing the wheel each time you 
do that?
    Mr. Haggstrom. Mr. Roe, while the department does not have 
and use definitive designs, much like the Department of Defense 
does for many of their projects, we do have standardization 
across the department in terms of how we relate the various 
functions of a medical facility and so forth. I would ask Ms. 
Fiotes if she would to comment on that, as that is part of her 
responsibility in CFM, to work these standard module designs 
with our clients.
    Mr. Roe. Well excuse me, not to interrupt but it is not 
working too well. Because we had the builders up here, what Mr. 
Chairman, a year ago, or something, and the contractors are 
begging for mercy. I mean, things have been changed, and here, 
and they were asking us to help. I have never seen that in my 
life, where, the first time, only time in five years that I 
have been here that the contractor actually came up and asked 
for some help from Congress. I yield back my time, Mr. 
Chairman, I am over time.
    The Chairman. Thank you. Ms. Fiotes, if you would take his 
question for the record we would appreciate that.
    Ms. Fiotes. I will do that, Mr. Chairman.
    The Chairman. Mr. Michaud?
    Mr. Michaud. Thank you, Mr. Chairman. This is for the 
Inspector General. Repeatedly, the IG and the GAO has pointed 
out serious issues with mismanagement, overage, delays in 
construction within the VA system. What is your opinion 
regarding moving the authority for major construction from VA 
to the Corps of Engineers?
    Ms. Halliday. I would be concerned with the lack of control 
that VA would have. I think communications is most important in 
defining construction needs and marrying up what is actually 
being implemented as part of the project. At this point I 
understand that the processes are not well defined as to how 
that would operate, and who would have what responsibility. And 
I think that before you would make a move of that magnitude you 
have to look at that. A transfer of authority could entail 
creating some duplicity of capabilities within VA and render 
some of our workers nonproductive because the work transfers. 
We have had significant problems, although not with the Army 
Corps of Engineers, on the management of interagency 
agreements. The lack of control, the lack of transparency, the 
lack of ability to manage issues as they arise has been very 
problematic across VA. And this would be handled very 
similarly. So there are definitive risks that have to be 
managed. If communications breaks down between the Army Corps 
and VA then you know you are going to have problems with the 
construction site.
    The Chairman. Dr. Benishek?
    Mr. Benishek. Thank you, Mr. Chairman. Ms. Halliday, was 
there a, did you give us a number that there was like design 
changes in every single one of these projects that you 
described in your report?
    Ms. Halliday. The number I gave comes from a statistical 
sample of 30 projects that we looked at. So I did not quantify 
the number.
    Mr. Benishek. I am kind of concerned about the idea of if 
you have a, you are planning for a five percent cost overrun 
from the very beginning it sounds like, Mr. Haggstrom. I mean 
I, I mean I have done some construction projects as well like 
Dr. Roe talked about and you know, we sort of like to hold our 
contractors' feet to the fire. You know? The contractors will 
say, well, you change the specifications, you know, halfway 
through the project it is going to cost you more. I have seen 
that. But I find it surprising that you are going to add five 
percent to the cost sort of automatically. I mean, how do you 
justify that?
    Mr. Haggstrom. Mr. Benishek, I think you will find that is 
standard practice in the construction industry. And when you 
say exceed cost, when you look at the past five years when VA 
has delivered 75 major construction projects for the use of our 
veterans at over $3 billion, 95 percent of those were delivered 
within cost. Because when you look at the cost and how we do 
the programming for a major construction project we take into 
account as part of the appropriation and authorization request 
that there will be change orders associated with construction. 
That has been validated both by the Office of the Inspector 
General and the GAO.
    Mr. Benishek. Well that sort of gets back to my question 
from the IG's. I mean, once you have a design you are supposed 
to stick to it. I mean, you have to have the design done first 
and not have excessive amounts of change orders. I mean, that 
is what I was sort of getting to----
    Mr. Haggstrom. You are absolutely correct.
    Mr. Benishek. --excessive change orders make things more 
expensive.
    Mr. Haggstrom. And that is one of the things that the 
department has done in this past year as part of the forensics 
in looking at our program. Is that we found that when we had 
gone to Congress previously we did not have a well defined set 
of requirements and we have made major changes in that, in how 
we approach that. And the very fact that before we would 
approach Congress for either an authorization or appropriation 
we would achieve a 35 percent level of design. And I believe 
this is very similar to the way the Department of Defense, and 
the Corps of Engineers, and the Naval Facilities Engineering 
Command works in submission of their military construction 
program. So we are taking a close look at that and the best 
practices----
    Mr. Benishek. Could you just forward the changes that you 
have made in your----
    Mr. Haggstrom. Certainly, sir. We have provided to the 
Committee the report out from the Secretary's Construction 
Review Council. And that is available to the Committee. If you 
do not have it we will again forward it to you.
    Mr. Benishek. Thank you. I am out of time.
    The Chairman. For the members' information, GAO report says 
as of November, 2012 the cost increases for projects ranged 
from 59 percent to 144 percent, with a total increase of nearly 
$1.5 billion, and the average increase of approximately $366 
million. The delays in these projects range from 14 to 74 
months, resulting in an average delay of 35 months per project. 
Ms. Brownley?
    Ms. Brownley. Thank you, Mr. Chair. I actually wanted to 
follow up with your original line of questioning. And to the 
IG, so in answering the chair's question you said that you had 
not seen a marked improvement since you gave your report on the 
overall management of design and construction with the VA. So 
what do you suggest now? What would be your suggestions?
    Ms. Halliday. The reason I made that comment is the new 
control with regards to really defining and putting final stamp 
of approval on the project scope, have not been in place long 
enough to assess implementation of those controls. It is 
premature at this point. I think it is a good control. I think 
it is appropriate to look at construction contracts that way 
but I just do not have any evidence that the control will work 
as intended at this stage.
    Ms. Brownley. Thank you. And Mr. Haggstrom, you talked 
about 95 percent success. What is the percentage when you 
calculate the cost of change orders into your overall cost? How 
do you calculate that? What is the amount for change orders in 
an overall cost scheme?
    Mr. Haggstrom. Just as Mr. Caldwell said the way the Corps 
calculates those contingency funds is, VA calculates them in a 
similar way accounting for approximately five percent of the 
cost of the project.
    Ms. Brownley. Well just the numbers do not seem to add up 
to me. But I do not understand why, and I think that is what we 
need to determine. I will yield back.
    The Chairman. If again, and I apologize, but Mr. Haggstrom 
are you saying that all of your projects, major construction in 
particular, that every one of them has met the original budget?
    Mr. Haggstrom. Of the 75 projects, sir, only four did we 
come back to Congress to ask for an increase in an 
authorization or an appropriation. All other projects were 
delivered within the appropriated amount, that is correct.
    The Chairman. And the major projects that are existing now? 
How many have you come back asking for additional funds?
    Mr. Haggstrom. With regards to Orlando, Denver, or New 
Orleans?
    The Chairman. Correct.
    Mr. Haggstrom. None.
    The Chairman. Will you be?
    Mr. Haggstrom. Not as far as I know.
    The Chairman. Okay.
    Mr. Haggstrom. Right now the way we look at it we are on 
track.
    The Chairman. Thank you. Mr. Coffman?
    Mr. Coffman. Thank you, Mr. Chairman. Mr. Caldwell, has the 
VA contacted the Army Corps of Engineers for assistance on the 
projects in Orlando, Aurora, or New Orleans?
    Mr. Caldwell. Sir, I am not aware of all of those projects. 
I can tell you that in Orlando, yes, we have provided support 
to them in terms of providing estimate evaluations as well as 
schedule evaluations, and providing advice regarding some of 
the contract administration matters that they are dealing with.
    Mr. Coffman. Can you speak to some of the, I think the 
subject came up by the IG about interagency work. And I wonder 
if you could give examples of some other agencies outside of, 
say, the Department of Defense that you do work for?
    Mr. Caldwell. I have a list of probably 12 other Federal 
agencies that we provide support to. The total value of the 
support that we provided in fiscal year 2013 was about $1.3 
billion spread across a number of Federal agencies. The 
Environmental Protection Agency, the Department of State, 
USAID, the Department of Transportation. So I could go on and 
name a number of those that we have done that. And that 
support, I should point out, ranges from consultation, where we 
have some technical expertise that we can advise them, all the 
way to actually managing the execution of projects.
    Mr. Coffman. Okay. Could the Army Corps of Engineers aid 
and assist those projects if the VA requested help? The 
projects that the VA has?
    Mr. Caldwell. We would be pleased to work with the VA for 
anything they think that we could assist with. I should point 
out, when you say those projects, if what you are referring to 
is projects that are underway and have some challenges 
currently associated with them, there is some question there 
about whether we could step in and make a difference in that 
project. What we could do is to assess the conditions and 
provide some consultation to VA in that regard.
    Mr. Coffman. Okay. But going forward you could do, you 
could do projects for the VA as you do for other agencies, 
could you not?
    Mr. Caldwell. Yes sir, we could do that in a support role, 
much like a construction agent role, yes.
    Mr. Coffman. Thank you, Mr. Chairman. Just one final point, 
and that is that I think if we go back to the GAO report of 
April 30 of this year I think it stated that the Army Corps of 
Engineers projects were consistently within schedule, within 
budget, and that the VA projects were consistently not within 
schedule and not within the budget. I yield back.
    The Chairman. Ms. Titus?
    Ms. Titus. Thank you, Mr. Chairman. I have some questions 
about how the VA deals with predictions of growth in 
populations that they serve. I represent an area in Southern 
Nevada that had unprecedented growth for over a decade and as 
we move away from the recession we see that growth coming back 
in Southern Nevada and across the Southwest with a large number 
of veterans moving to those areas. I wonder what the VA does to 
predict the movement of veterans when you are considering 
construction projects to be sure they are in line with future 
needs, not just at one snapshot in time? I would ask that to 
Mr. Haggstrom. And then Ms. Halliday, I would ask you if in 
terms of future construction has your office done any work to 
kind of look at whether the VA is effectively predicting and 
reacting to those potential demographic changes?
    Mr. Haggstrom. With regards to how the department goes 
about developing the requirements, while I am not deeply 
involved in that there are many databases that both VHA and 
other offices within the department use that track veterans, 
track veterans' enrollments, and those kinds of things. 
Certainly I would be happy to take that question for the record 
and we can get you a more detailed answer.
    Ms. Titus. Thank you. Ms. Halliday?
    Ms. Halliday. My office has looked at the National Cemetery 
Administration, how they are approaching and planning for rural 
veterans to be served as well as urban veterans. I do not have 
a report at this time. I expect to issue a report shortly. And 
NCA has agreed essentially with the OIG to change its 
definitions so that there is a clear focus on rural veterans.
    Ms. Titus. Well that is fine for rural veterans. I am 
curious to see about if you have any plans or any ability to 
move resources or change construction goals? If someplace, say, 
is losing a population and someplace is gaining one? But if you 
all would look at that and get back to me, I thank you, Mr. 
Chairman, and yield back.
    The Chairman. Thank you, Ms. Titus. Ms. Kirkpatrick?
    Mrs. Kirkpatrick. First of all, I thank the Chairman and 
Ranking Member for continuing to have these hearings delving 
into the construction problems at the VA. And I applaud the VA 
for creating the Construction Review Council, that is a step in 
the right direction. But it has been exactly a year since they 
came up with their recommendations and Mr. Haggstrom I would 
like to know what your timeline is for implementing those 
recommendations? It is a little amazing to me that not only 
have they not been implemented by apparently there are not 
instructions to implement. So would you please address that?
    Mr. Haggstrom. Congresswoman, all those recommendations 
have been implemented. We have briefed the Secretary on that 
earlier this year. We told him what we did. We laid out the 
program for him. He concurred with it. We moved forward. When--
--
    Mrs. Kirkpatrick. Well I am sorry to interrupt but 
apparently not----
    Mr. Haggstrom. --the costing we did achieve that major 
milestone with the submission of the fiscal year 2013 program. 
We had design to 35 percent.
    Mrs. Kirkpatrick. Let me ask the Inspector General. In the 
report that we have in our record here it says those have not 
been implemented. Are you changing your report?
    Ms. Halliday. We have not provided oversight of that since 
it is such a new change. In preparation for this hearing I 
tried to get the decisions that came from the council to look 
at those clearly to see about the implementation and we were 
unable to do that.
    Mrs. Kirkpatrick. Can you tell us why?
    Ms. Halliday. There are briefing slides with regards to the 
Committee meeting to discuss the issues with construction. What 
we had a hard time doing was determining those decisions that 
were made based on those discussions so we could track the 
related implementation. We were certainly scheduling that for 
oversight.
    Mrs. Kirkpatrick. Okay. I yield back my time. But I am very 
concerned about the disconnect with that.
    The Chairman. Mr. Ruiz+
    Mr. Ruiz. Thank you, Mr. Chairman. Mr. Haggstrom, what are 
your internal data measures to measure your success in 
accomplishing your milestones?
    Mr. Haggstrom. Mr. Ruiz, we are very focused on metrics in 
how we look at our program with regards to cost, schedule, and 
performance, and quality of what our contractors are putting in 
place?
    Mr. Ruiz. Can you give me three of your top examples of 
data driven measurements of success that you follow? Your top 
three priorities?
    Mr. Haggstrom. Cost, schedule, and performance. Those are 
our top three. Those----
    Mr. Ruiz. So how do you measure, how do you measure 
performance?
    Mr. Haggstrom. We measure performance against a schedule.
    Mr. Ruiz. If it is done on schedule?
    Mr. Haggstrom. If it is done in accordance with what we 
call the master schedule.
    Mr. Ruiz. Okay.
    Mr. Haggstrom. That is applied against all major 
construction programs.
    Mr. Ruiz. So that is one. Can you give me two other very 
specific examples of how you measure success?
    Mr. Haggstrom. The cost. Are we remaining within the 
authorization and the appropriated cost. As we go through the 
project we look at that through earned value management. And 
when we, again, we look at schedule. Is the contractor 
complying with the schedule that they provide us at the onset? 
And we look at performance in terms of quality, and the number 
of workers on the job, and is that job being accomplished as it 
should be to meet the standards of the VA? Mr. Ruiz. What are 
your top two poorest performing construction projects right 
now?
    Mr. Haggstrom. Right now we are having a great deal of 
difficulty with the contractor in Orlando. And quite frankly 
with the other projects we are still within the acceptable 
limitations that we have set for ourselves. Orlando is the 
major project with regards to schedule.
    Mr. Ruiz. Okay. And so what are those obstacles? What are 
those problems? And what are you doing to mitigate them?
    Mr. Haggstrom. When you look at in the future what we have 
put in place from the Construction Review Council I go back to 
the whole essence of a successful construction program is 
predicated on a clear definition of what the requirements are. 
And taking those requirements and translating them into a 
design that we can move forward with and have the assurances 
that at that point in the design there should be little to few 
changes in the future as we go forward with it. At that point 
in time we have developed a schedule for the execution of the 
program and also a very, very accurate cost in terms of what 
the overall cost of the program would be.
    Mr. Ruiz. If you fail in achieving your data driven 
measurements for success what are your plans to correct that?
    Mr. Haggstrom. We work very closely with the contractor. We 
find ways to bring them back on schedule. How can we do that? 
How can we support them? We can look at value engineering in 
terms if costs start to exceed what they are. Are there things 
that we can do within the scope of the project that could 
potentially save money?
    Mr. Ruiz. And how are you informing your veterans regarding 
whether or not you are achieving those successes, that are 
reliant on that facility to open? Are you being transparent 
with your----
    Mr. Haggstrom. I believe we are. I know the medical centers 
have very robust programs at their respective locations where 
we have ongoing construction that continually meet with the 
veterans service organizations and the veterans in the area to 
keep them informed on the status of the project and where we 
are going.
    Mr. Ruiz. Thank you.
    The Chairman. Thank you, Mr. Ruiz. Ms. Negrete McLeod?
    Mrs. Negrete McLeod. Thank you, Mr. Chair. To Mr. 
Haggstrom, thank you for attending today's hearing. The VA 
hospital at Loma Linda is the main hospital where veterans 
from, you have four Members on this Committee that get serviced 
by that. Mr. Cook, Mr. Takano, Mr. Ruiz, and myself, that is 
where they all seek treatment. In the OIG report the health 
center lease for Loma Linda was not awarded until a few months 
ago. What were the issues at Loma Linda that led to the lease 
not being finalized until this year when it was authorized in 
2009?
    Mr. Haggstrom. Congresswoman, when you look at these leases 
and the execution of the leases I will say very up front that 
there was a very aggressive timeline when these leases were 
submitted to Congress. As part of the OIG report we were 
charged with developing a reasonable timeline to achieve these 
leases and in doing so we worked closely with our client. So 
when you look at a major lease in terms of these seven HCC 
leases, and the process that we go through to secure the land 
and then the developer, we are looking at a life cycle 
acquisition time of approximately 61 months.
    When you take a look at the Loma Linda lease specifically 
there was a 46-month duration from the time it was authorized 
to the time that we signed the lease with the developer. 
However, when you look at that and you take into account things 
that were beyond the VA's control, there were 21 months within 
that whole process where we were going through negotiations 
with the city and the developer that took the excessive amount 
of time.
    So if you start to normalize these leases, these seven 
leases, you will come back to the fact that taking out those 
things that VA had no control of we were very much within the 
timeline of what we would say is approximately 26 months from 
the time we were soliciting an offer for land to the time we 
signed a lease with the developer.
    The Chairman. Mr. O'Rourke?
    Mr. O'Rourke. Thank you, Mr. Chair. And I want to thank you 
and the Ranking Member for keeping this Committee focused on 
performance and accountability at the VA. I really appreciate 
that.
    And for Mr. Haggstrom, it was interesting to read the VFW's 
statement for today's hearing, where they note that we will 
need to invest over $23 billion over the next ten years to 
complete our SCIP projects. At current requested funding levels 
it will take more than 67 years to complete our ten-year plan. 
The proposed veterans hospital in El Paso is number 79 on the 
list so I have got some deep concerns, given everything that we 
heard today, given past reports by the GAO and the OIG. What 
can, to cut to the quick, what can we do to move ourselves up 
on that list? What is the essential core criteria used to 
determine where a proposed hospital ranks on that list?
    Mr. Haggstrom. Mr. O'Rourke, the department uses the 
strategic capital investment planning process as part of 
helping to define what the most urgent and pressing needs of 
the department are. I would ask Ms. Fiotes if she would 
comment. She is part of the SCIP board that reviews these 
projects.
    Mr. O'Rourke. Great. And before you do, let me add 
something to the questions and remarks made by Ms. Titus. In El 
Paso you have more than 80,000 veterans who are underserved by 
the existing clinic. You have had Fort Bliss, which has gone 
from 8,000 active duty soldiers six years ago perhaps when 
these lists were first made, to 33,000 active duty soldiers. 
And you also have an underutilization of the current VA because 
it is inadequate. And sometimes that underutilization is used 
as an argument for our placement on the list. So with that in 
mind, what can we do to make a better case to you and other 
members of the SCIP board?
    Ms. Fiotes. Congressman, the SCIP board reviews projects 
that are scored in a very data driven way based on a lot of the 
things that you mentioned.
    Mr. O'Rourke. Is utilization a part of that?
    MS. Fiotes. Utilization is part of it. The movement of 
populations, the projected workloads, the existing 
infrastructure, all these things come into bear. And ultimately 
the projects are scored using the basic criteria of ensuring 
safety and security at our facilities, meeting department 
initiatives, fixing what we have, right sizing the inventory, 
providing value of our investment, and finally increasing 
access. Those are major criteria. They have several 
subcriteria. It is very data driven. It is very objective. And 
when those projects get presented to the SCIP board the medical 
centers and the Veterans Integrated Service Networks have the 
opportunity to argue their case, if you will, or plead their 
case. It is very objective, very data driven. I would say that 
the numbers fall out where they fall out.
    Mr. O'Rourke. Before I yield back, would you commit to 
meeting with me to discuss that issue of utilization and make 
sure that you all have all the data as you make these 
objective, data driven decisions?
    MS. Fiotes. And I would ask in that case to also be 
accompanied by my colleague who actually runs the SCIP from a 
different office from our office. I participate on the board 
but----
    Mr. O'Rourke. Thank you. I look forward to doing that. Mr. 
Chair, I yield back.
    The Chairman. Thank you very much. Also Members, Dr. Roe 
has said that he will stay and continue to chair this for those 
who may want to stay and have second round of questions. Mr. 
Walz, you are recognized.
    Mr. Walz. Thank you Chairman and Ranking Member. And I 
encourage you to continue to ride herd on this issue because it 
is a challenge and great points have been brought up. Ms. 
Halliday, I would just like to comment since I have come to 
Congress I have been an unabashed fan of the IG's office and 
the work you do never ceases to impress. I am grateful for 
that. It helps us do our job better and it helps your partners 
in VA do their job better. So thank you for that.
    Again, I think Mr. O'Rourke brought up a good point, Mr. 
Haggstrom. This is a big undertaking. The independent budget he 
was speaking of estimates that we provided about 25 percent of 
the funding. But I have to be honest with you, I would be hard 
pressed to provide more right now under the circumstances where 
we are having some of these challenges. I am absolutely 
convinced the VA does things, many things, incredibly well, 
world class level. I have yet to be convinced that building 
hospitals is one of them. And that is a challenge for me 
because I know how important they are.
    And just one specific question. And I like Dr. Ruiz getting 
at some of the specifics in this. Each VA officials who manages 
a major construction project, what are their defined roles and 
responsibilities in the change order process? How does that 
work?
    Mr. Haggstrom. Congressman, we have taken the change order 
process very seriously as a result of the GAO report and issues 
we have dealt with our contractor in Denver. I would ask Ms. 
Fiotes, she has been leading the initiative to look at how we 
do change orders, streamline that process, and be more 
effective in our ways that we do them.
    Ms. Fiotes. Congressman, there are several parties involved 
in reviews of change orders. And change orders fall into three 
basic categories. They are usually errors or omissions in the 
design, they are unforeseen conditions, or they are owner 
requested changes. And it is part of the nature of 
construction, that change orders will arise in all three areas.
    Involved parties, the resident engineers who review the 
change orders for technical merit; our architect, engineer, and 
construction management consultants who review for cost 
validity and help us come up with our cost estimate; and 
ultimately the contracting officer who then negotiates the 
proposed change order with the contractor who submitted it. 
Many times it goes back and forth several times. Those are the 
parties and the key roles and responsibilities, if you will.
    We did assess that our change order process, while there 
was guidance in several places it was not really consistent and 
consolidated in one place. We have proceeded since then to 
issue a handbook for our project managers and project 
executives so that they all follow a consistent process. We 
have inserted timelines to ensure the timeliness of the review 
of the change orders. We found that some change orders, either 
because the contractor was not pushing or because they just 
were not as critical, just fell by the wayside and were stale.
    Mr. Walz. Okay. My time is going to be up. But I cannot 
help get a really, really strong feeling that we are being told 
everything seems pretty good and on track and going in pretty 
much the norm, and the numbers, as one of my colleagues said, I 
am having a hard time matching these up. So I may wait around 
for another round. Thank you.
    The Chairman. Thank you, Mr. Walz. Members, we have been 
joined by Mr. Mica from the east coast of Florida, who many of 
his veterans are in fact served by the hospital that is being 
constructed in Orlando. And I would like to ask unanimous 
consent that he be allowed to participate in the questions. 
Without objection, so ordered. And Mr. Mica is recognized for a 
round of questions. And Dr. Roe, if you would take the chair?
    Mr. Mica. Thank you, Mr. Chairman, and thank you this 
Committee for its continued vigilance and pursuit particularly 
on the construction side of VA hospitals and medical 
facilities. Looking at some of the delays and problems we have 
had, as you know we have had some serious problems in Orlando. 
And I think it was cited in the testimony that I heard that 
that is one of the roughest.
    We had sent from Central Florida delegation a letter 
regarding payments. Part of the problem we have in Orlando is 
the VA has kept changing the design, some of the requirements, 
and vendors are not being paid. When the vendors are not being 
paid we have had at least one go under and we have had others 
that are in serious financial situations because tens of 
millions of dollars has not been paid. Can anyone respond to 
what we are doing? Is that Mr., I cannot see without my 
classes, Mr. Haggstrom?
    Mr. Haggstrom. Yes. Mr. Mica, that was the case initially 
back in 2012, early 2012. At that point in time the VA sat down 
with both the contractor and the AE firms and addressed many of 
the issues that the contractor had brought forth. We had asked 
the contractor to prioritize those issues, where in the design 
and the construction drawings did they have questions that they 
felt they needed additional information?
    Mr. Mica. Well some were pretty simple. I mean, I was in 
the development business, built nothing as big as the VA but a 
simple, well it sounds simple, but if you have a toilet and it 
is floor mounted and you change the specs to wall mount it 
after you have put the plumbing in the floor and you have to 
change it to the wall, and support that, the plumber actually 
took me and showed me what had been drawn and then what was the 
new requirement and was having trouble getting paid for it. I 
mean, these are simple things where we need to get a quick 
resolution. You are telling me now that that has been the case?
    Mr. Haggstrom. When we execute a change order with the 
contractor, the contractor may come to us with a proposal. The 
government will then pursue looking at an independent----
    Mr. Mica. Well just look at that one. Let us----
    Mr. Haggstrom. --we will always provide a level----
    Mr. Mica. Look at that one and get back with me, if you 
can, and tell me if that contractor has been made whole? I do 
not have too much time, I know, this clock goes pretty fast 
here. You are going to open the nursing home, 120-bed facility 
next month?
    Mr. Haggstrom. That is correct, sir.
    Mr. Mica. What about the domiciliary, 60-bed unit?
    Mr. Haggstrom. I believe the domiciliary is scheduled to 
open in either January or February.
    Mr. Mica. Okay. And it looks like, what can you tell the 
Committee as to the time of opening the hospital itself?
    Mr. Haggstrom. Currently the legal extended completion date 
on the hospital was this past August. We issued Brasfield and 
Gorrie a show cause notice----
    Mr. Mica. No I----
    Mr. Haggstrom. --which they then provided us a recovery 
schedule and they told us April of 2014.
    Mr. Mica. And you think we can hold to that?
    Mr. Haggstrom. Brasfield and Gorrie, every month when they 
have submitted us an updated schedule has continued to slip the 
hospital and currently they are now projecting they would not 
be complete until September of 2014.
    Mr. Mica. September of 2014? Okay. And part of that I heard 
is issues with the electrical contractor. Can you get back to 
me or the Committee and for the record what the issues are? I 
want them in the record. Do you leave this open for a week or 
ten days? Whatever? And let us know what the issues are so I 
have some record of what you are telling me, and what they are 
telling us, is the issue right now. Can you do that?
    Mr. Haggstrom. We would be pleased to do that.
    Mr. Mica. Okay. Thank you. There are other questions. And 
if you would, I chair an Investigative Oversight Subcommittee, 
Government Operations Subcommittee. I would like a listing of 
all of your current VA properties that are vacant or 
underutilized. That is facilities vacant, buildings, we will 
get the specifics to you. And if you could provide it to the 
Committee, and also a copy to me? Because we are looking across 
the entire spectrum of the Federal government for underutilized 
buildings, facilities, properties, assets that we are sitting 
on. Thank you and I yield back.
    Mr. Roe. [Presiding] Thank you, Mr. Mica. I now yield three 
minutes to Mr. O'Rourke.
    Mr. O'Rourke. Thank you, Mr. Chair. I want to join Mr. Walz 
in commending the work of the OIG. In addition to holding 
monthly town hall meetings I hold a quarterly town hall meeting 
just for veterans in El Paso. And we will get anywhere from 200 
to 300 veterans who attend those meetings. And my entire 
presentation is driven from OIG findings in seven key areas. 
And one of them that we look at is access. And right now the 
score for the El Paso VHA is 39 percent. And that is below the 
VISN, it is below the national average. And it is part of what 
I was bringing to the attention of Mr. Haggstrom, is that we 
have an access problem. We are very far down on the list to 
have it addressed in any meaningful, comprehensive way. I fear 
that one of the criteria that is being used right now in terms 
of utilization is perhaps being misscored and not taking into 
account the broader picture. From your experience in the OIG's 
office, can you provide any direction to me in my office and 
how we pursue that? Or to the VA and how they can improve their 
scoring to take into account issues like those brought up by 
Ms. Titus and myself, and other underutilized and underserved 
areas?
    Ms. Halliday. At this point we would have to spend more 
oversight on that. It becomes a little bit subjective with how 
you score projects. Our focus had been on the rural health 
veterans and were they getting served appropriately and looking 
at how rural health veterans were defined made a big difference 
between that and the general population. And I see that the 
National Cemetery is agreeing to start applying a methodology 
that we have actually presented to them so that they can ensure 
they do not have gaps in service delivery. The next step, of 
course, is to look at the bigger picture of access to VA 
medical care. But I do not have specific answers for you right 
now.
    Mr. O'Rourke. I would love to have the opportunity to speak 
with you about that and see if that is something that the OIG 
has either data on already or would be interested in pursuing 
in the future. And as I said earlier, one of the things that we 
would ask that you perhaps consider or look at is when our 
community historically has approached the VA about the need for 
a full service hospital we are met with this underutilization 
argument, that not enough of your veterans are registered with 
or are using that. And we see that as a circular argument, in 
that the care has been insufficient and so veterans are opting 
not the take that. So I appreciate that and I will yield back 
to the chair.
    Mr. Roe. I thank the gentleman for yielding. Mr. Coffman?
    Mr. Coffman. Thank you, Mr. Chairman. Let me just say first 
that I think that the VA has, the Veterans Administration, has 
a comparative advantage when it comes to running cemeteries 
over the Department of the Army. And I think that the 
Department of the Army's Corps of Engineers, the Army Corps of 
Engineers, has a comparative advantage when it comes to doing 
construction projects. So maybe we can switch these functions 
around to which organization does a better job in a given area.
    Mr. Haggstrom, according to the testimony of Mr. Caldwell 
of the Army Corps the VA has the authority to work with the 
Army Corps on construction projects. Has the VA formally worked 
with the Corps on the current major projects in Orlando, 
Aurora, and New Orleans?
    Mr. Haggstrom. Mr. Coffman, I do know we have a partnership 
with the Corps. We have, as Mr. Caldwell said, worked 
extensively with them on the Orlando project with regard to 
accessing some of their expertise when it came to looking at 
cost and scheduling.
    I also believe that as we entered into the Denver and New 
Orleans project we tapped into the Corps' expertise with 
regards to the type of contract we were using, an integrated 
design and construct contract. Since it was relatively new 
acquisition vehicle to the department we did ask the Corps to 
come take a look at the contract and do an assessment and 
provide us some feedback on that.
    Mr. Coffman. Given the fact that according to a GAO study 
on April 30 of this year the Aurora project is I believe 144 
percent over budget and in fact is more so than any other 
project that you are working on, why have you not been more, 
shown more initiative in terms of reaching out to the Army 
Corps of Engineers to help assist on the Aurora project?
    Mr. Haggstrom. With regards to the GAO report, VA disagreed 
and it is in our response to the GAO in the way they calculated 
those costs. They looked at the cost from the inception when it 
was in the infancy and planning stages to ultimately what it 
was appropriately and authorized for. And they have taken all 
that and they said that is a cost growth. When we look at it 
what we are working on, we requested $800 million in 
authorization and appropriation from the Congress, they 
provided that, and we are within that authorization and 
appropriation in executing this project.
    Mr. Coffman. Where are you at right now, I understand that 
the general contractor or the prime contractor is appealing the 
cost. And your cost estimate I believe is $604 million for the 
Aurora project and the contractor is saying that it is going to 
cost over $1 billion to build the project. Where is that at? I 
understand there is a dispute resolution going on right now on 
that?
    Mr. Haggstrom. There is, Mr. Coffman. Currently it is in 
the Civilian Contract Board of Appeals. There is a series of 
meetings that will take place over the course of I believe the 
next seven to eight months where the Contracting Board will 
look at both the submissions from the contractor and the 
department and make a decision.
    Mr. Coffman. Thank you, Mr. Chairman. I yield back.
    Mr. Roe. Thank the gentleman. Ms. Brownley, you are 
recognized.
    Ms. Brownley. Thank you, Mr. Chair. I wanted to ask Ms. 
Halliday, it seems in this hearing that the chair's data points 
with regards to projects and cost overruns and timeliness does 
not add up to VA's testimony with regards to such a large 
percentage is on time and on cost. Can you help me and the 
Committee to understand the differences here and how we 
reconcile this?
    Ms. Halliday. In most of our oversight we have problems 
actually getting assurance that we have full costing through 
the projects. I think I am on record as saying that there is a 
problem with not being able to track the full expenditures for 
the health care systems, for example, the seven HCCs that VA 
was trying to do. This is systemic. It goes across the 
department in the inability to really track all expenditures. 
So you definitely are going to have variables between what was 
originally estimated and what the actual costs were. Maureen 
Regan, who handles our contract oversight, looked specifically 
at the Orlando Medical Center and had found that almost 30 
percent of the expenditures she looked at on change orders 
could not be validated or appeared inappropriate charges and 
claims from the contractor. I think that is something that 
happens in the normal course of business but with good 
processes and tracking of expenditures you can sort this out. 
Unfortunately VA does not have those systems to really track 
expenditures on a per project basis and ensure it gets all of 
its expenditures accounted for.
    Ms. Brownley. And does the Army Corps have a way to track 
costs?
    Mr. Caldwell. Ma'am, we do. And it is important to 
understand that especially with medical facilities you may have 
sources of funds which are from different appropriations that 
come together. So when Mr. Haggstrom talks about the cost of a 
facility as I think of that I am thinking of what amount has 
been authorized by Congress for that project. There may be 
other funds that are required for the initial outfitting of the 
contents of the facility as well. And so, when someone looks at 
a facility to try to sort out what the cost is, the question 
becomes which numbers are they looking at and for what 
purposes?
    Ms. Brownley. I understand. I just think it is certainly 
frustrating from my perspective that, at least what the IG is 
saying is, that there is really not a way within the VA to 
fully track the costs of a project. And that seems to be 
fundamentally problematic to me, that the scope and size of the 
projects that we are trying to undertake here, the importance 
of these facilities to our veterans, and our inability really 
to be able to track these costs. I mean, it just seems really 
honestly unbelievable to me in a way. And I think that it is 
something that we need to fully understand. And I understand 
large agencies have systemic problems. I understand that. But 
we must address the issue. And I think it must be fixed. I 
mean, this is fundamental to any major construction project is 
that we should be able to track the costs. And our job 
partially is in oversight. And if it cannot be done then I do 
not know how we will ever get our arms around some of these 
issues. Thank you, Mr. Chair.
    Mr. Roe. Thank you for yielding. Ms. McLeod, you are 
recognized for three minutes.
    Mrs. Negrete McLeod. Thank you, Mr. Chair. For Mr. 
Haggstrom, what office was responsible for the management of 
the seven health care center leases that have failed to come to 
fruition? It is hard for me to believe that the prospectus were 
allowed to be published in the budget books. Someone should 
have known that the timeline was unrealistic. Would you please 
walk me through the process as it existed then and as it exists 
now? Thank you.
    Mr. Haggstrom. Congresswoman, this is a joint effort 
between the Veterans Health Administration and Ms. Fiotes' 
office, the Office of Construction and Facilities Management. 
If I could ask Ms. Fiotes to comment on that. Well, let me take 
that. Better yet, when we look at this the VHA looks at the 
databases that the department has in terms of the needs of the 
veterans, where they are, what type of health care needs are 
there. They will then come forward now through the SCIP process 
that was effective in 2013 to put this requirement as part of 
the overall portfolio needs of the department in moving forward 
of what the health care requirements are.
    These seven projects were undertaken prior to the SCIP 
process, including the large leased projects. So they come to 
us with a requirement in terms of size, location, those types 
of things. We then work with them to put a package together 
that we normally do what we call a two-step procurement. Step 
one being putting a solicitation for offer out to the area for 
landholders who may be interested in selling their land to a 
developer for future development. Once we look at that we come 
to an understanding of is it in the defined area that we are 
asking for? And also very importantly we do due diligence with 
respect to Federal requirements and environmental requirements 
at looking at that land to ensure that there is no 
contamination on it.
    We then enter into negotiations with that landholder and we 
reach what we call an assignable title. That assignable title 
is never taken in VA's name. All it is is an agreement to the 
purchase price of that land and then once a developer is 
brought on board the developer will take title and pay the 
landowner.
    Step two is to find a developer who will actually do the 
final design and construction and potentially hold the lease on 
that facility into the future.
    Mrs. Negrete McLeod. I yield back.
    Mr. Roe. Thank you for yielding. First of all I want to, I 
will ask just a couple of questions, yield myself a few 
minutes. In some levity the Coliseum in Rome was built in eight 
years. Admittedly they did not have the EPA and a few things 
they have now, but they did get that construction project done 
from the ground up in eight years. It looks like that is far 
going to surpass Orlando if it ever gets done. So I know that 
you are here. I appreciate what you are doing. I know that 
folks are trying to get the right thing done and get these 
projects done for veterans. Because the goal, as Mr. O'Rourke 
clearly pointed out, is to take care of veterans. I mean, that 
is the only reason for us to be here. And we need to do that in 
the most efficient way we can because there is not an endless, 
bottomless pit of money.
    And I can assure you, and Ms. Brownley brought this up, 
these cost overruns, the last project that I dealt with myself 
personally was a $20-something million office building we 
built, our practice built. I can assure you there were not cost 
overruns because I signed my name to a note at a bank. It was 
me they were going to come after if we had those cost overruns. 
And I can assure you we got in under budget and on time. And I 
can assure you that the people involved in paying that note 
back were paying attention. And Mr. O'Rourke pointed out, and I 
think he is absolutely correct, is that we need to pay more 
attention here on the VA Committee if we do not have systems in 
place that pay attention. And again, I am trying to get my arms 
around what the Chairman read out just a minute ago before he 
left, what the GAO found were costs substantially increased and 
schedules were delayed. It sounds like, when I listen to the 
testimony, that everything is going along fine. But then I read 
this, as of November, 2012 the cost increases for these 
projects, that is Denver, Colorado, Las Vegas, Nevada, New 
Orleans, Louisiana, and Orlando, Florida, the cost increases of 
these projects range from 59 to 144 percent, which is a lot, 
with a total cost increase of nearly $1.5 billion. So we just 
appropriated more money which then kept you within the budget. 
So I guess you can say that those projects were on budget. And 
an average increase of approximately $366 million, these delays 
were 14 months to 74 months, and an average of 35 months, and 
so on. He has read that before.
    I guess what I am going to ask you all is are, and the IG, 
are the metrics in place now to prevent an Orlando or a New 
Orleans or a Denver again? Are the metrics there so it will not 
happen? I know this would not have happened and did not happen 
in any of the projects that I have been involved in, numerous 
projects, that I was keeping my eye on the project, too.
    Ms. Halliday. Dr. Roe, we believe that the metrics are in 
place but I think there are other factors that really cone into 
play. And one is the reliance that both the Army Corps of 
Engineers and VA will have to contract to get these facilities 
stood up. So I would like to give Maureen Regan an opportunity 
here to speak on her review of Orlando. Because many of the 
problems that came about in Orlando were a direct result of the 
performance of the primary contractor.
    Mr. Roe. Okay.
    Ms. Regan. Thank you. I will first say we have not 
published anything on Orlando. We did get complaints from a lot 
of subcontractors who said they were not paid and I think some 
of the names actually came from the Committee for people for me 
to call. And I talked to all of them. And we do want to look at 
that issue, that a lot of them did not get paid. They did go 
under. I think I heard 15 companies went bankrupt because they 
were not paid. We had difficulty finding some of them.
    But one of the issues I learned was a lot of them were not 
direct subcontractors to Brasfield and Gorrie. Some were subs 
to subs to subs. When I talked, in at least one case, with one 
particular type of service, I did talk to the actual sub. And 
he said he got paid everything, and he paid his subs. We do 
intend to go in and look at it. But we had determined that the 
first thing was to get the building built. And if we are in 
there, asking for records, interviewing people, and taking up 
people's time, that is going to delay the project even more. 
Because at this point we were not even sure in talking to the 
subs whether or not the change orders had been submitted to VA 
for payment.
    So a lot of issues come up in these projects that you do 
not exactly anticipate at the time. And one of them in this 
case was a lot of the subs walked off the job because they were 
not getting paid. Then you have to get new subs to come in. We 
did review two change orders in Orlando that Brasfield and 
Gorrie had submitted. And I can say we had a difficult time 
getting the review of those change orders done because we could 
not get the records we needed from Brasfield and Gorrie and one 
of their large subs to do the review. And that is the reviews 
we found about a 30 percent overcharge.
    Mr. Roe. I think that is perfectly acceptable behavior. If 
I am a sub and the only thing I have got to sell are my skills 
and time that I walk off the job if nobody is paying me for it. 
I mean, I think that is perfectly reasonable for them to do 
that. Because they have lost that time they cannot get back, 
and their equipment and all that they have used, they have 
lost.
    So I, hopefully this is an isolated situation. And what I 
would like to see going forward is a white paper, maybe from 
the IG, a one-pager so that we on the Committee here can have 
an idea going forward, and this, maybe the VA can help us out 
with this, going forward what those metrics are. And I know we 
hired a project manager for any project that the City did, that 
we hired as our person on the site to be there everyday looking 
at that project to be sure it was going along as advertised. 
And there are penalties in there, in most contracts, that if 
you get done early, you get a reward. If you are late, there 
are penalties. And that is a incentive to get the project done 
on time and on schedule. But you cannot completely come in, 
like he said, and pull a toilet out of the wall, and say that 
you have plumbed it into the floor, and now you want it in the 
wall for whatever reason. I cannot imagine why that was 
important. But anyway, it was, and here is this poor guy who is 
not getting paid.
    So I want to ask if Mr. O'Rourke has any closing comments?
    Mr. O'Rourke. Mr. Chair, just briefly I want to thank the 
Office of the OIG, the Corps, and the VA for being here. And I 
think that it is the nature of these hearings that we are going 
to focus on where we have problems. And I know that there are 
so many things that you do well. And I would be remiss if I did 
not thank you on behalf of the veterans that I serve for the 
facilities that we do have that are working, and the projects 
that you have executed successfully.
    But the urgency from me, and I think you are hearing it 
from many other members, is that we have the projects that we 
focused on today that are taking far too long, almost ten years 
in the case of Denver. And you think about those veterans whose 
care we are deferring, for example in El Paso, number 79 on the 
list. If we cannot execute these, what does it mean for their 
hopes or their, you know, do not know how long it is going to 
take us, their children's or their grandchildren's hopes that 
we are going to have adequate access in VA care in El Paso.
    So I look forward to working with you constructively in a 
partnership to find out how we do a better job in exercising 
oversight and managing the resources and are authorized and 
appropriated. And then also holding you accountable and working 
collaboratively, and in some cases creatively, to find other 
ways, maybe better ways, to do these projects in the future.
    So I thank you for your participation, I thank the chair 
for yielding, and I will yield back.
    Mr. Roe. I thank the gentleman for yielding. And I want to 
thank you all, both on the oversight and investigation part and 
on the VA part, for trying to get these facilities done, and 
the Corps of Engineers for getting these done in a timely 
fashion so we can take care of veterans. That is our purpose, 
our only reason for being here. Thank you all the Committee, I 
appreciate your time, and this hearing with no further comment 
is adjourned.

    [Whereupon, at 11:02 a.m., the Committee was adjourned.]












                            A P P E N D I X

                              ----------                              

            Prepared Statement of Hon. Jeff Miller, Chairman
    Good morning, and welcome to today's Full Committee hearing, 
``Building VA's Future: Confronting Persistent Challenges in VA Major 
Construction and Lease Programs.''
    Today's hearing is the fifth oversight hearing this Committee has 
conducted in the last three years concerning serious issues with the 
Department of Veterans Affairs' (VA's) real property capital asset 
program - particularly the many failures and deficiencies that have 
plagued VA's major medical facility construction and leasing 
initiatives and led to significant cost increases and substantial 
delays in many important medical center projects.
    Though the Department claims to be aware of the many problems 
plaguing its construction and capital asset programs and taking initial 
steps to correct many of the issues we have identified, cause for 
serious concern remains.
    In a report released earlier this year on VA construction, the 
Government Accountability Office (GAO) found that, though VA has made 
some improvements, VA's major medical facility projects continue to 
experience cost increases and schedule delays similar to those that GAO 
had identified in 2009.
    Similarly alarming, the VA Inspector General is going to testify 
this morning that they have seen a persistent ``pattern of ineffective 
VA capital planning and asset management'' over the past several years.
    As I have said before, 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.
    We cannot continue to keep them waiting.
    Thank you.

                                 
             Prepared Statement of Hon. Michael H. Michaud
    Thank you, Mr. Chairman, for holding this hearing today.
    Providing veterans timely, quality health care in a safe 
environment is a focus of this Committee and one I stand firmly behind.
    We have authorized and appropriated billions of dollars for the 
Department of Veterans Affairs construction programs over the past 
decade. It is important that we provide vigilant oversight on the 
resulting process of building and leasing of VA facilities.
    Just this year, we have held three hearings on the VA's 
construction program and processes. In May, a Subcommittee on Oversight 
and Investigations hearing examined the VA's construction policy. In 
June, the Full Committee examined VA's capital investment options. And 
today, we are examining the persistent challenges VA faces in their 
Major Medical Facility and Lease Programs.
    As you know, there have been multiple reviews conducted by the 
Office of Inspector General, the Government Accountability Office, and 
this Committee, on VA's ability to manage a construction portfolio 
efficiently and effectively.
    Unfortunately, most of those reviews have repeatedly pointed out 
serious issues of mismanagement, lack of oversight, overages on 
expenditures, delays in construction, and multiple instances of 
insufficient guidance.
    In efforts to manage their construction programs, VA deployed the 
Capital Asset Realignment for Enhanced Services, or CARES process, more 
than a decade ago. Most recently, the Strategic Capital Investment 
Plan, or SCIP, was introduced to formulate VA's construction budget for 
Fiscal Year 2012. SCIP is a 10 year plan that integrates all capital 
investment planning across the three administrations.
    It seems, however, that even though VA has a plan, they struggle to 
execute it.
    For example, in October of this year, the Inspector General 
released a report on VA's management of the seven Health Care Center 
Leases that were authorized in P.L. 111-82.
    We were told by VA that these Health Centers would be up and 
running by 2012. To date, according to the VA IG report, only three of 
the seven leases have been awarded and none are operational. 
Additionally, I understand that cost overruns and delays have plagued 
the process.
    Mr. Chairman, I am very concerned. First, I am concerned that the 
Committee is not getting accurate information from the onset, and so I 
have to question for what are we authorizing these funds?
    Secondly, the veteran community is constantly being let down when a 
promised facility is not delivered on time.
    I consider it a major disservice to the veterans who rely on VA to 
provide needed and very important health care services.
    I hope we hear today from VA what they are going to do to address 
past problems and delays, how they are going to get things back on 
track, and what can be done to avoid similar problems in the future.
    Thank you Mr. Chairman and I yield back my time.

                                 
                Prepared Statement of Hon. Corrine Brown
    Thank you, Mr. Chairman and Mr. Ranking Member, for calling this 
hearing today.
    When the process started to authorize a new Medical Center for the 
region, Central Florida had been waiting for a hospital for over 25 
years. I first started representing this area in Congress 21 years ago. 
I brought Jesse Brown, then Secretary for Veterans Affairs to the area 
and to show him how important this is. This facility will increase the 
treatment options for Central Florida veterans.
    I did not think it would take so long to finish the facility. I 
have looked at the fact sheets the VA has sent out for the last three 
months and the facility has been stuck at 84% percent complete. July-
84%; August-84%; September 84%.
    I don't understand what could be taking so long that there has been 
no advancement in the completion of the facility for the last 3 months.
    I have my staff drive by there every so often and it appears there 
is no work going on.
    The veterans of the Central Florida cannot wait any longer for a 
full Medical Center to be built. Once again we are having a Full 
Committee hearing on construction. I am surprised, to say the least, 
that after we had the first hearing in March of last year, we are 
having yet another hearing on the same facility.
    This is not about politics anymore. We must build this facility for 
the veterans of Central Florida.

                                 
                Prepared Statement of Linda A. Halliday
    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to testify on the results of the Office of Inspector 
General's (OIG) work related to the Department of Veterans Affairs (VA) 
construction and lease programs. Our focus will be on a recently 
released OIG report on health care centers, including issues related to 
a health care center in Butler, Pennsylvania, and a facility in 
Cleveland, Ohio, as well as OIG reports over the past 2 years related 
to the Veterans Health Administration's (VHA) management of its Minor 
Construction Program, VA's execution and utilization of capital assets 
in Marion County, Florida, and information regarding the new VA medical 
centers (VAMCs) under construction in New Orleans, Louisiana, and 
Orlando, Florida. I am accompanied today by Ms. Maureen Regan, 
Counselor to the Inspector General.
BACKGROUND
    VA uses a Strategic Capital Investment Plan (SCIP) to prioritize 
its major construction, minor construction, non-recurring maintenance, 
and lease projects. SCIP's objective is to produce an annual 
consolidated list of capital projects that significantly reduce 
identified performance gaps in veterans' access, workload and 
utilization, safety, space, and facility conditions over a 10-year 
period. SCIP is used to ensure that VA's strategic performance planning 
efforts address the needs of VA's three Administrations, VHA, the 
Veterans Benefits Administration, and the National Cemetery 
Administration.
    The OIG has completed reviews that disclosed a pattern of 
ineffective VA capital planning and asset management. Our reporting has 
shown that VA has not effectively managed the capital asset planning 
process to ensure that minor construction projects are not combined or 
otherwise significantly changed after approval, or that leased 
facilities are of the right size and in the right location to ensure 
they are fully utilized. In addition, VA has not effectively executed 
authorized construction and lease projects to ensure they are completed 
timely and within budget. Until these issues are addressed, VA will not 
have assurance that it is timely and cost-effectively acquiring health 
care facilities to serve the needs of its veteran population.
HEALTH CARE CENTER LEASE MANAGEMENT
    In October 2013, we reported that VA's management of timeliness and 
costs in the Health Care Center (HCC) lease procurement process was 
ineffective. \1\ As of August 2013, only four of seven leases had been 
awarded and no HCCs had been built, despite VA's target completion date 
of June 2012. Congress authorized approximately $150 million for the 
HCC facility activations.
---------------------------------------------------------------------------
    \1\ Review of Management of Health Care Center Leases, October 22, 
2013.
---------------------------------------------------------------------------
    We found the following deficiencies:

      Lack of Guidance - VA did not meet the aggressive 
milestones it set for HCC activation and occupancy due to a lack of 
specific guidance for this new initiative. The existing VA handbook did 
not cover lease projects with such high annual costs as those of the 
new HCCs.
      Inaccurate Milestones - VA used identical milestones for 
completing the seven HCCs even though the projects varied in size and 
budget. VA planned 32 total months for completing the seven HCCs, with 
annual lease costs ranging from $3.8 million to $16.2 million. Also, VA 
used a two-step process that separated land acquisition and contractor 
selection into different phases and should have lengthened each overall 
lease acquisition by 8 to 9 months.
      Lack of Documentation - Documentation was unavailable to 
support whether VA adequately assessed the feasibility of accomplishing 
the HCCs in the aggressive 32-month time frame promised. Given the lack 
of progress to date and the inadequate planning documentation, it will 
take far more time than Congress anticipated for VA to award and 
activate the seven leases.
      Lack of Central Tracking - VA could not provide accurate 
information on HCC spending into April 2013. According to VA officials, 
central cost tracking was not in place to ensure transparency and 
accurate reporting on all HCC expenditures. During our audit work, VA 
officials provided various estimates, ranging from about $4.6 million 
to $5.1 million, on the costs to prepare for HCC lease awards, but we 
could not gain reasonable assurance that this figure represents a 
complete accounting of HCC costs. \2\ Until effective central cost 
tracking is instituted, expenditures to acquire the HCC leases will 
remain unclear.
---------------------------------------------------------------------------
    \2\ These costs include architecture-engineer services, due 
diligence services such as environmental studies and title 
verification, and land options contracts.

    We made recommendations to the Principal Executive Director, Office 
of Acquisition, Logistics, and Construction (OALC), and the Under 
---------------------------------------------------------------------------
Secretary for Health to:

      Establish adequate guidance for management of the 
procurement process of large-scale build-to-lease facilities.
      Provide realistic and justifiable timelines for HCC 
completion.
      Ensure HCC project analyses and key decisions are 
supported and documented.
      Establish central cost tracking to ensure transparency 
and accurate reporting on HCC expenditures.

    They both concurred with our recommendations. We consider the 
corrective action plans submitted to be acceptable and we will follow 
up on their implementation.
Butler, Pennsylvania Health Care Center Lease
    In response to an anonymous complaint received in late March 2013, 
the OIG's Office of Contract Review conducted a review of the proposal 
submitted by Westar Development Company, LLC, for the contract of the 
lease to develop an HCC in Butler, Pennsylvania. The complainant 
alleged that Westar was actually conducting business for entities 
created and controlled by Mr. Michael Forlani who was suspended from 
doing business with VA in December 2011. In 2012, he pled guilty to 
bribery and racketeering charges, and on April 1, 2013, was sentenced 
to 97 months in Federal prison.
    On May 31, 2012, VA awarded a 20-year lease to Westar for the 
Butler, PA, HCC. The total value of the lease was $151 million. Mr. 
Robert J. Berryhill submitted the proposal as the Senior Vice President 
of Westar and listed Mr. Samuel E. Calabrese as the President of 
Westar. On April 3, 2013, a criminal information was filed in the U.S. 
District Court for the Northern District of Ohio against Mr. Berryhill 
charging him with five counts of mail fraud, two counts of wire fraud, 
one count of false impersonation of a Federal officer, and one count of 
aggravated identity theft. On April 23, 2013, he pleaded guilty and on 
July 30, 2013, Mr. Berryhill was sentenced to more than 6 years in 
prison.
    Our review substantiated the initial allegation. The land proposed 
by Westar had been purchased by or through individuals and entities 
affiliated with Mr. Forlani. In addition, Mr. Calabrese was currently 
employed by one of the suspended entities and provided consulting 
services to another. We also determined that the proposal submitted by 
Westar was replete with false and misleading representations that were 
relied on by VA when evaluating the proposal and making the award. 
These false representations resulted in points being awarded to Westar 
during the technical evaluation. We found:

      Westar was not a veteran-owned business as claimed.
      Westar grossly misrepresented its past performance and 
experience and that of its team members.
      Westar did not have an agreement with the general 
contractor identified in the proposal.
      Westar identified team members with whom there was no 
formal arrangement.

    On June 13, 2013, we issued a Management Advisory Memorandum to 
OALC. In response, VA issued a stop work order and on August 9, 2013, 
terminated the contract for cause. In addition, VA has proposed the 
debarment of Westar, Mr. Berryhill, Mr. Calabrese, VA Butler Partners, 
LLC, and VA Butler Partners Holdings, LLC.
    At the request of OALC's Executive Director, we have continued our 
review to determine who, if anyone, should be held accountable within 
VA. We expect to issue the results of that review in December 2013.
Brecksville, Ohio, Enhanced Use Lease
    In December 2011, the OIG's Office of Contract Review initiated a 
review of the Enhanced Use Lease (EUL) between VA's Office of Asset 
Management and Veterans Development, LLC (VetDev). The EUL was entered 
into as part of VA's consolidation of the Cleveland, Ohio, campuses 
located in Brecksville and the Wade Park area of Cleveland, Ohio. VA's 
EUL authority allows VA to lease underutilized property to private 
developers. Under the EUL with VetDev, VA leased the Brecksville campus 
to VetDev for a one-time cash payment of $2 million and in-kind 
consideration of not less than $4 million. The ``in-kind'' 
consideration was space provided at no cost to VA in an administrative 
building and a parking garage that VetDev constructed adjacent to the 
Wade Park campus and leased back to VA. The package also included 
payment to VetDev for care provided to veterans in a domiciliary that 
VetDev built adjacent to the Wade Park campus. Payments for the space 
and domiciliary care are paid under service agreements entered into as 
part of the EUL.
    We determined that the decision to completely vacate and close the 
Brecksville campus and consolidate to the Wade Park campus was not in 
VA's best interest because:

      There was insufficient space at Wade Park to transfer all 
services provided at Brecksville which resulted in increased costs to 
VA to lease off-campus space.
      The estimated reported cost savings associated with the 
consolidation were not supported.
      VA is overpaying VetDev for space and services at Wade 
Park.
      There is an increase in security risk to VA employees and 
patients at the leased space at Wade Park.

    We concluded that the service agreements associated with the EUL 
were used to circumvent the leasing procurement process. The use of a 
service agreement for the domiciliary was of particular concern because 
it did not include any ``in-kind'' consideration for the EUL and 
included patient care services provided by a subcontractor, Volunteers 
of America, which was reimbursed on a per patient per day basis, not as 
a lease for space. Contracting out domiciliary services is inconsistent 
with VA policy.
    As previously noted, the criminal charges against Mr. Forlani 
included bribes made to obtain an interest in the property adjacent to 
the Wade Park campus on which the two buildings and garage were 
constructed as well as preferential tax breaks. In addition, 
interactions between Mr. Forlani and the Director of the Cleveland 
Health Care System at the time, Mr. William Montague, resulted in 
criminal charges filed against Mr. Montague in June of this year.
VHA'S MINOR CONSTRUCTION PROGRAM
    In response to a request from the Committee on Appropriations, U.S. 
House of Representatives, we reviewed the organizational structure, 
procedures, and financial controls VHA used to manage its minor 
construction projects. \3\ We reported that VHA's Minor Construction 
Program lacked adequate internal controls for oversight of individual 
projects as a means of ensuring proper use of minor construction funds. 
We found that VHA did not ensure that medical facility funding was 
consistently used to supplement minor construction projects. In 
addition, VHA did not ensure adequate monitoring of minor construction 
project schedules and expenditures.
---------------------------------------------------------------------------
    \3\ Review of VHA's Minor Construction Program, December 17, 2012.
---------------------------------------------------------------------------
Proper Use of Minor Construction Funding
    VHA integrated design and construction work for 7 of 30 minor 
construction projects into 3 combined projects that exceeded the $10 
million minor construction spending limit. As a result, we reported 
that VHA violated the Anti-Deficiency Act in five of seven projects. We 
also found that 3 of 30 projects were inappropriately supplemented with 
medical facility funds and project monitoring was ineffective. A third 
combined project was in the process of being awarded; however, when the 
OIG notified VHA of a potential Anti-Deficiency Act violation, VHA 
suspended these projects during the award process.
    This improper use of minor construction funding occurred because 
Office of Capital Asset Management and Support (OCAMS) and Veterans 
Integrated Service Network (VISN) officials did not effectively oversee 
project execution and OCAMS fully funded individual projects prior to 
medical facilities developing contract solicitations for design and 
construction. Once funding was provided to medical facilities, OCAMS 
and VISNs were dependent on the facilities to self-report changes in 
project scope during the contract solicitation process. This resulted 
in OCAMS and VISNs not being fully aware of project scope changes in 
the contract solicitation process for design and construction.
    According to an OCAMS official, VHA was strongly encouraged to 
outsource design and construction contract management to the U.S. Army 
Corps of Engineers (USACE) at medical facilities where contracting 
resources were scarce. USACE managed 13 of the 30 projects we reviewed. 
Typically, after OCAMS officials approved minor construction projects, 
USACE managed project execution. USACE was responsible for integrating 
the design and construction of five of the seven minor construction 
projects we identified as being improperly combined into two major 
construction projects.
    According to VHA officials, OCAMS maintained no control over 
project scope once funding was allotted and did not even review the 
construction contract solicitation prepared by the USACE's contracting 
officer. Further, at one VA medical facility, project engineers 
responsible for the facility's minor construction projects did not have 
copies of the USACE contracts signed on the medical facility's behalf. 
This condition heightened construction risks and limited oversight and 
control of construction costs and change orders.
Medical Facility Funding and Minor Construction Projects
    Our report also disclosed that 3 of the 30 minor construction 
projects we reviewed were supplemented with medical facility funding. 
These three projects received $24.4 million in minor construction and 
$14.6 million from medical facility funds. When adding funding from 
both appropriations together, two of the three projects exceeded the 
$10 million spending limit for minor construction projects.
    VA medical facilities did not follow non-recurring maintenance 
(NRM) policy limiting the use of medical facility funding to supplement 
minor construction projects and limiting renovation projects to 
$500,000. OCAMS provided guidance in September 2008 and again in 
September 2010 to VA medical facilities on the allowable uses of minor 
construction and NRM funds based on draft Handbooks that had not been 
officially issued. These draft Handbooks defined the limits of minor 
construction projects and expanded NRM to include projects that 
renovated and modernized existing facility square footage between 
$500,000 and $10 million.
Monitoring of Minor Construction Projects
    OCAMS and VISN officials did not routinely monitor minor 
construction project schedules and financial performance. Rather, OCAMS 
assigned responsibility to VA medical facility project engineers to 
monitor the projects and notify OCAMS if significant changes occurred 
or additional project funding was required. The draft minor 
construction program Handbook required OCAMS to create Minor Program 
Review Teams to perform quarterly reviews of project schedules and 
financial performance at selected sites. However, we found no evidence 
that the Minor Program Review Teams were formed and instead that 
internal program reviews were performed. As a result, VHA lacked the 
ability to effectively identify projects with cost overruns, 
significant schedule slippages, or significant construction scope 
changes in a timely manner and take corrective actions when necessary.
Recommendations
    To address these issues, we recommended the Under Secretary for 
Health publish Minor Construction Program policy, develop procedures to 
ensure projects are executed within their approved scope, and determine 
whether other combined minor construction projects violated the Anti-
Deficiency Act. VHA also needed to implement a mechanism to ensure 
medical facility funding is not used to supplement minor construction 
projects, ensure program reviews are performed, and strengthen project 
tracking reports. The Under Secretary for Health concurred with our 
findings and recommendations, and provided action plans to address our 
recommendations. In November 2012, VHA finalized and published policy 
for the Minor Construction Program. VHA has new procedures requiring 
that design documents be compared to approved project scopes prior to 
funding transactions being performed. As of today, one of the six 
recommendations remains open.
The Villages Outpatient Clinic, Marion County, Florida
    In August 2012, we reviewed allegations received through the OIG 
Hotline that The Villages Outpatient Clinic (OPC) was underutilized 
during the first 18 months the facility was open. \4\ The 53,000-
square-foot, multi-specialty facility opened in October 2010 and was 
expected to provide up to 120,000 primary care, mental health, and 
specialty care visits per year. Congress approved funding of about $1.5 
million per year for the next 20 years.
---------------------------------------------------------------------------
    \4\ Review of Alleged Mismanagement of The Villages Outpatient 
Clinic, Marion County, Florida, August 7, 2012.
---------------------------------------------------------------------------
    Our review disclosed that The Villages OPC was not used to provide 
primary care, mental health, and specialty care as planned. In 
particular, The Villages OPC did not use the surgical suite between the 
time the facility opened in October 2010 and August 2012. The surgical 
suite consisted of four fully equipped operating rooms and three 
gastrointestinal procedure rooms. The surgical suite and procedure 
rooms shared a common, eight-bed surgical recovery area, which was also 
fully equipped but hardly ever used. We determined The Villages OPC was 
likely to achieve only 41 percent of primary care, 34 percent of mental 
health care, and 24 percent of specialty care visits planned for FY 
2012.
    Underutilization of The Villages OPC occurred because of a lack of 
oversight over the planning and operations of the facility. 
Specifically, VISN 8 did not adequately monitor it on an ongoing basis 
as required by VHA policy to determine whether the facility was meeting 
the business purposes, goals, and objectives presented in the project 
proposal. North Florida/South Georgia Veterans Health System (the 
Health System) officials did not effectively determine the overall 
demand for medical care or the types of specialty services needed most 
in the geographical area where The Villages OPC was located. Health 
System officials also could not document that the demand justified the 
size of the OPC, or that the specific health care needs of local 
veterans justified each of the 13 specialty services planned in the 
proposal.
    As a result, the Health System spent almost $2 million 
inefficiently on facility and equipment costs as well as on staff 
salaries and benefits. We conservatively estimated that between October 
2010 and April 2012, the Health System incurred about $1 million in 
costs for equipment, approximately $668,000 in salaries and benefits 
for three surgeons, and about $263,000 for facility space that was not 
fully utilized. These funds represented a lost opportunity to provide 
veterans with additional access to medical care in an underserved 
geographic area.
    We recommended that the VA Sunshine Healthcare Network Director 
conduct a thorough utilization review of The Villages Outpatient Clinic 
to ensure facility resources efficiently target the medical needs of 
the most underserved veterans. Further, the Network Director should 
determine whether to relocate the unused nuclear medicine machine to 
another VA medical facility. The VA Sunshine Healthcare Network 
Director agreed with our finding and recommendations. The Villages OPC 
began phasing in use of the operating room suite in June 2012. In 
addition, the North Florida/South Georgia Veterans Health System has 
finalized plans to move the Single Photon Emission Computed Tomography 
machine to Gainesville, Florida, to improve utilization. We closed the 
recommendations in our report in August 2013.
CONSTRUCTION OF THE NEW ORLEANS VA MEDICAL CENTER
    According to VA officials, this project is the largest single 
construction project currently underway in the Department. In December 
2011, the then Chairman of the Subcommittee on Oversight and 
Investigations, Committee on Veterans' Affairs, U.S. House of 
Representatives, requested that the OIG provide information related to 
construction of the New Orleans VAMC to include reviewing the financing 
and budgeting of construction for the New Orleans VAMC and to examine 
plans to remove fuel tanks buried at the construction site.
    Our review of VA's expenditures did not identify substantive issues 
with VA's stewardship of the project. At the time of our review 
(February 2012), VA had obligated $359 million (36 percent) and 
expended $105 million (11 percent) of the $995 million appropriated for 
the New Orleans VAMC. This was due to delays in the City of New Orleans 
delivering the site to VA and a need for additional VA remediation of 
hazardous substances that was identified after site transfer in April 
2011. \5\ VA has preliminary plans to mitigate delays by adjusting 
construction activities and if necessary compensating contractors 
negatively impacted by delays outside of their control in the 
construction phase of the project.
---------------------------------------------------------------------------
    \5\ Delays totaled approximately 26 months. VA officials attributed 
17 months due to the delay in transferring the site and 9 months for 
the unanticipated need for additional remediation of hazardous 
substances identified after site transfer.
---------------------------------------------------------------------------
CONSTRUCTION OF THE ORLANDO VA MEDICAL CENTER
    At the request of VA acquisition officials and pursuant to VA 
Acquisition Regulations, the OIG's Office of Contract Review completed 
reviews of two construction change orders related to the Orlando VAMC 
construction project. The change orders were from contractors and 
subcontractors seeking compensation from VA for $9.6 million. Our 
reviews questioned $2.9 million (30 percent).
    For the first change order valued at $4.46 million, we questioned 
$1.8 million due to differences between proposed versus actual costs, 
lack of supporting documentation for proposed costs, and the inclusion 
of costs for specific individuals whose efforts were unrelated to the 
scope of the change order. The second change order was valued at $5.15 
million and we questioned $1.1 million related to an overstatement of 
the proposed costs, the inclusion of costs unrelated to the change 
order, and lack of supporting documentation for the proposed costs. We 
reported these questioned costs to the VA contracting officer for use 
in negotiating payment with the contractors and subcontractors.
CONCLUSION
    Without effective capital asset management, VA officials have not 
been able to ensure authorized leased projects are completed timely and 
within budget, minor construction projects are not combined or 
otherwise significantly changed after approval, leased facilities are 
the right size and the right location to ensure they are fully utilized 
once completed, or authorized lease projects are completed timely and 
within budget. Until these issues are addressed, VA will continue to 
lack assurance that it is timely and cost-effectively acquiring health 
care facilities to serve the needs of veterans.
    Mr. Chairman, and Members of the Committee, this concludes my 
statement today. We will be pleased to answer any questions you may 
have.

                                 
                Prepared Statement of Lloyd C. Caldwell
    Mr. Chairman and Members of the Committee, I am Lloyd Caldwell, 
Director of Military Programs for the U.S. Army Corps of Engineers 
(Corps). I provide leadership for execution of the Corps' engineering 
and construction programs in support of the Department of Defense 
(DOD), other agencies of the Federal Government in the United States 
and around the globe. Lieutenant General Thomas Bostick, Chief of 
Engineers, leads the Corps. Thank you for the opportunity to testify 
here today.
    The Corps fully recognizes the importance of the service of members 
of the armed forces, the support of their families, and the service of 
our veterans, in sustaining the strength of our Nation. We understand 
the vital link between the goals of their service and missions and the 
technical capabilities we provide, from consultation to delivery of 
infrastructure. Members of our team have had the opportunity these past 
several months to engage some of your staff members as they have 
conducted fact-finding on the Corps' construction capabilities and 
experience with delivering medical facilities. Today we have been asked 
by the committee to address our approach to delivering construction; 
more specifically construction of medical facilities.
    DOD's construction program utilizes designated construction agents, 
of which the Corps is one; who procure and execute design and 
construction of projects to deliver the Department's infrastructure 
requirements authorized by law. All construction is acquired by 
contracting with the private sector. The Corps is also known for the 
Civil Works mission it provides for the Nation, and the Corps' 
capabilities are perhaps uniquely developed to fulfill both military 
and civil engineering responsibilities. Interagency collaboration is an 
important element of the Corps' work, and the Corps provides 
interagency support as a part of its service to the Nation.
    My testimony will address the Corps' project delivery process, with 
specific attention to medical facility construction and the interagency 
relationship with the Department of Veterans Affairs (VA). First, I 
will provide an overview of the principles and processes our teams use 
as they plan and execute the projects that we undertake. That will be 
followed by a discussion of the relationship the Corps has with the VA 
and how we support their mission through the work we do on their behalf 
across the Nation.
CONSTRUCTION PROCESS
    The Corps has a long history of executing some of the Nation's most 
challenging construction projects and programs, whether through our 
military missions or Civil Works responsibilities. The past 12 years 
have been especially demanding as we have simultaneously provided 
support to operations in Iraq, Afghanistan and to DOD as it transforms 
and realigns. During this period, the Corps completed 2,165 military 
construction projects with a value of $50.3 billion. The Corps has 
delivered, or is in the process of designing and constructing, a full 
range of medical facilities for DOD, to include very large hospitals 
valued near a billion dollars, and capable of delivering world-class 
medical services. A summary of some of the recently completed and 
ongoing Corps work of significant medical facilities follows.


----------------------------------------------------------------------------------------------------------------
            Location                               Description                      Delivery      Authorization
----------------------------------------------------------------------------------------------------------------
              Fort Belvoir, VA                        New Hospital completed             2011    $1.03 billion
----------------------------------------------------------------------------------------------------------------
          Fort Sam Houston, TX                   Hospital Addition completed             2011     $802 million
----------------------------------------------------------------------------------------------------------------
                Fort Riley, KS               New Hospital under construction            2014*    $404 million*
----------------------------------------------------------------------------------------------------------------
              Fort Benning, GA               New Hospital under construction            2014*    $350 million*
----------------------------------------------------------------------------------------------------------------
                Fort Bliss, TX               New Hospital under construction            2016*    $966 million*
----------------------------------------------------------------------------------------------------------------
Rhine Ordnance Barracks, Germany             New Hospital under construction            2021*    $990 million*
----------------------------------------------------------------------------------------------------------------
* Planned or scheduled as of November 1, 2013

    The Corps has long sought to lead, adapt, and apply important 
lessons of design and construction in conjunction with our industry 
partners to obtain economical and quality facilities meeting the 
requirements of DOD in a disciplined manner. For example, we applied 
concepts of Evidence Based Design with the DOD Office of Health Affairs 
to guide development of world-class medical facilities, and with the 
DOD Education Activity (DODEA) we developed design concepts for 21st 
Century school facilities.
    Regardless of the nature of the facility, the Corps has developed 
and implemented processes and capabilities for design and construction, 
which have been refined over many years. Our project management 
business process brings together the range of diverse professionals and 
activities required of a successful project, which includes our design, 
construction, acquisition, and project management professionals. 
Success depends upon early involvement to understand the overall 
project objectives and to plan the approach to execute the project from 
design through construction. We think of four fundamental elements to 
deliver successful projects:

    1. Learning what is needed;
    2. Planning the work;
    3. Executing the procurement; and
    4. Managing the execution.

    Each of these elements represents unique skills, involving multi-
disciplined teams who account for project scope, delivery schedule, and 
ultimate cost as team members work collaboratively with one another. 
These basics must be managed concurrently, in a continuous cycle that 
occurs throughout the life of a project.
    The responsibility for programming and budgeting for construction 
projects rests with the service or agency requiring the facility. 
However, the ultimate success of a project depends upon early 
development of the scope and acquisition plans of action, including 
validation of the scope and cost estimates. Learning about a project 
requires early involvement by the Corps with the project-``Using 
Agency'' to understand and assist with development of their 
requirements. We have found the sooner our professionals are involved, 
the greater our ability to deliver a successful project and minimize 
cost or time growth.
    Planning work begins as requirements are being developed. It 
engages all stakeholders and involves more than facility design. We 
also define and align requirements that may compete for cost, scope, or 
schedule objectives. Plans for acquisition, work phasing, and project 
delivery are agreed upon early, and before construction. We will 
determine the project acquisition processes, which will influence the 
design process and development of the solicitation. For medical 
facilities, the medical equipment requirements may be extensive, so 
decisions are made among the team for the manner of acquisition of 
medical equipment.
    Execution is a team effort from design through construction to 
include clinicians and medical service personnel of the Using Agency 
for medical facilities. During construction, we partner with the prime 
contractor and the government management team. Frequent, periodic 
meetings ensure open lines of communication to enable clear 
understanding of what all parties need throughout the project's life.
    A governance approach that involves oversight from the job site to 
Corps leadership ensures early recognition, leadership awareness, and 
decision-maker involvement in resolving problems. A series of 
structured control processes, implemented throughout the organization, 
are designed to identify and evaluate issues with our partners as they 
arise and minimize the time it takes to address and resolve them.
    Training is also a vital component in maintaining professional 
standards and keeping up to date on current practices. We maintain 
educational courses and require or encourage professional credentialing 
in the processes and disciplines required for our mission. We provide 
specialized technical training across a broad range of subjects, 
providing continuous learning, essential to maintain the highest levels 
of expertise in engineering and construction throughout the Corps. We 
also draw heavily from the Defense Acquisition University, its 
certification and continuing educations programs to maintain 
contracting competencies.
    Budget and schedule risk is inherent in executing any construction 
projects, and medical facilities are among the most complex facilities 
we construct and deliver on behalf of DOD. They require close, frequent 
coordination with a large number of stakeholders, often with divergent 
interests and requirements. They require exacting technical design and 
construction standards, both of which must be carefully managed. 
Moreover, they are subject to changing requirements due to evolving 
medical technology - even during construction. We manage the challenges 
posed by those risks, and we seek to minimize the cost and time growth 
risk which complex medical facility construction may face.
    To assure the standards and criteria of the Defense Health Agency, 
and to assist in their planning, we established specialized medical 
infrastructure capabilities and employ them across the enterprise to 
assist us in delivering medical projects. Our Medical Center of 
Expertise at Fort Belvoir, Virginia, applies current specialized 
knowledge to address demanding health care facility requirements. It 
provides a full range of medical facility design, construction, 
outfitting, commissioning, and medical maintenance capabilities that 
support the Defense Health Agency. The Center's staff includes subject 
matter experts in medical facility design and construction, serve as 
technical consultants, and draw on architect-engineer firms experienced 
in medical facility design. They participate in every phase of project 
delivery, from requirements development to project close out, and 
ensure we meet the full range of health care facility standards.
    The Corps has broad experience across its enterprise in 
construction and delivery of medical facilities. Of our forty-three 
local district offices, seventeen of them (40 percent) have significant 
experience in medical facility design, construction, outfitting, 
repair, and maintenance. They have demonstrated the ability to deliver 
this demanding work on time and on budget.
THE CORPS' RELATIONSHIP WITH THE DEPARTMENT OF VETERANS AFFAIRS
    The Corps, as part of its interagency capabilities, has an 
established relationship with the Department of Veterans Affairs (VA), 
providing support for a broad range of facility construction and 
maintenance requirements. Authority for the Corps' work with VA is 
based on the Economy Act, which, coupled with an interagency agreement, 
provides us with sufficient authorities to work collaboratively. During 
2007, the Corps of Engineers and the VA formalized its relationship 
through a Memorandum of Agreement (MOA) for the Corps to provide the VA 
support in the execution of their minor construction and non-recurring 
maintenance needs.
    As veterans started returning home from service in recent 
conflicts, and increased funds to support facilities became available, 
VA leadership drew on this MOA, increasingly asking the Corps to assist 
with its construction needs. Prior to fiscal year 2007, Corps execution 
support to VA was at or below $2 million annually for work for the 
Veterans National Cemetery Administration. In 2007, the workload grew 
to $7 million and quickly began to rise as follows:



----------------------------------------------------------------------------------------------------------------
                      Fiscal Year                                     Execution Amount  ($ millions)
----------------------------------------------------------------------------------------------------------------
                                           2008                                                       14
----------------------------------------------------------------------------------------------------------------
                                           2009                                                      108
----------------------------------------------------------------------------------------------------------------
                                           2010                                                      348
----------------------------------------------------------------------------------------------------------------
                                           2011                                                      377
----------------------------------------------------------------------------------------------------------------
                                           2012                                                      340
----------------------------------------------------------------------------------------------------------------
                                           2013                                                      239
----------------------------------------------------------------------------------------------------------------

    As execution funds have grown over the years so has the 
collaborative relationship between the Corps and VA. Corps Headquarters 
has a good and stable relationship with the VA's Office of Construction 
and Facility Maintenance. Our regional and local offices have also 
developed relationships with each of the 23 Veterans Integrated Service 
Network (VISN) offices around the country; in the most recent two 
years, the Corps managed work at 74 different VA facilities nationwide. 
Whether and how a VISN incorporates the Corps services into its 
projects is at the discretion of each VISN.
    One example of our efforts is the recently completed 30,000 square 
foot expansion of the Grand Junction, Colorado VA Medical Clinic. We 
added a third floor surgery facility to an active facility, including 
operating rooms, intensive care units, and sterile processing areas. 
The project demonstrated our ability to work closely and 
collaboratively. Much of the work was accomplished at night, to 
minimize impacts to the operations. The local VA public affairs office 
provided project related information to the staff - establishing 
expectations and minimizing impacts. When issues arose, VA and Corps 
leaders worked through them, never allowing an impasse to divert from 
their collective goal - completing a vital facility to serve our 
veterans.
    Our relationship is growing; we are currently working together to 
assist VA develop and implement an enterprise construction governance 
capability; we expect to begin this effort within two months. We've 
also collaborated with the VA to provide training opportunities using a 
variety of instructional modes. We expect to assist with construction 
project quality management, schedule analysis and management, and 
project management automated information systems familiarization - all 
within the next four months.
    The Corps plays a unique role in service to the Nation as a 
subordinate command of the Army with expertise in both civil works and 
military infrastructure; we possess unique capabilities and have a long 
history of successfully solving demanding engineering challenges. We 
also acknowledge the solemn duty to care for our veterans and will 
continue to support those efforts with our most capable teams as we 
continue to develop our support and assistance relationships with the 
VA.
    Mr. Chairman, this concludes my statement. Thank you for allowing 
me to be here today to discuss the Corps' construction capabilities. I 
would be happy to answer any questions you or other Members may have.

                                 
              Prepared Statement of Mr. Glenn D. Haggstrom
    Chairman Miller, Ranking Member Michaud, distinguished Members of 
the Committee, we are pleased to appear here this morning to update the 
Committee on the Department of Veterans Affairs' (VA) continuing 
efforts to improve construction procedures and planning processes 
resulting in the timely execution of major construction and leasing 
projects. Joining me this morning is Ms. Stella Fiotes, Executive 
Director, Office of Construction and Facilities Management.
    The Department's infrastructure programs, which include major and 
minor construction, non-recurring maintenance (NRM), and leasing, are 
part of our ongoing mission to care for and memorialize our Nation's 
Veterans. The Department is committed to meeting our responsibility to 
design, build, and deliver quality facilities as tools to meet the 
demand for access to health care and benefits.
    VA continues to improve its real property capital asset portfolio, 
providing state-of- the-art facilities that meet the needs of Veterans, 
allowing for the highest standard of service. We have taken on the 
challenge of updating our aging infrastructure to allow for flexibility 
to meet increased workload demands; changing Veteran patient 
demographics; advances in medical technology; new complex treatment 
protocols and advanced procedures; patient-centered care and services 
delivered closer to where Veterans live; and evolving Federal 
requirements.
    The focus of our testimony today is on VA's major construction and 
leasing program - specifically efforts to improve program execution and 
- to provide you a perspective of how we are delivering VA's important 
major construction projects.
Program Execution
    VA has taken several steps to improve the management and oversight 
of its major construction and lease projects. In 2009, the VA Facility 
Management (VAFM) transformation initiative was established to improve 
planning processes; integrate construction and facility operations; and 
standardize the construction process. Our accomplishments include:

    1. Integrated master planning - VA has adopted an enterprise 
approach to integrated master planning as our business process 
standard. Consistent master planning will standardize requirements 
development, which will minimize design changes.

    2. Systems for project management - VA procured a collaborative 
project management software system in 2012 and is completing phase one 
fielding and will complete fielding in 2014. This software supports 
leases, major construction, and minor construction as well as NRM.

    3. Post occupancy evaluations (POE) - The POE program, piloted in 
2012, is now the business process standard for the major construction 
program, and will expand to the minor construction program in fiscal 
year (FY) 2014. POE evaluates the completed construction to assure 
closure of all gaps and deficiencies noted in the approved project 
scope.

    Further, VA has implemented the findings of the December 2009 
Government Accountability Office's (GAO) report on ``VA Construction: 
VA is Working to Improve Estimates, but Should Analyze Cost and 
Schedule Risks'' and now performs risk analysis for potential cost and 
schedule delays as part of the project design process. VA has also 
implemented and recommended closure of all of the recommendations in 
the May 2013 GAO report ``VA Construction: VA Additional Actions Needed 
to Decrease Delays and Lower Cost of Major Medical-Facility Projects.'' 
These include: adding medical planners to the major construction 
programs to support integration of medical equipment into the 
construction process; consolidating change management guidance for 
construction contracts into an updated, handbook for staff; hiring 
additional staff attorneys to facilitate faster legal reviews of change 
order documents; and hiring additional resident engineers and 
contracting officers to reduce processing time for change orders.
    In April 2012, as a follow on to the VA Facility Management (VAFM) 
initiative, the Secretary of Veterans Affairs established the 
Construction Review Council (CRC) to serve as the single point of 
oversight and performance accountability for the planning, budgeting, 
execution, and management of the Department's real property capital 
asset program. Chaired by the Secretary, the CRC identified challenges 
in four major areas, and through deliberate process improvements VA has 
addressed the following:

    1. Development of Requirements - VA now includes planners in the 
requirements development phase of the project, resulting in full 
requirements development before design commences. Design must advance 
to 35 percent completion prior to requesting major construction funds. 
This assures that full requirements are identified early and are 
designed, estimated, and managed through the construction cycle to 
yield more accurate cost estimates and scopes for VA's budget 
submissions.

    2. Design Quality - VA policy now requires constructability reviews 
as part of every design review. These reviews identify potential design 
errors and omissions prior to construction, allowing the design to be 
corrected, and thereby reducing changes during construction.

    3. Activation - VA has implemented an integrated approach to 
quantify the full activation costs associated with each project in 
order to assure the project construction program is coordinated with 
the development of the information technology (IT) and medical 
equipment budgets and plans. This prioritizes the funding and planning 
necessary for the procurement of medical equipment and IT 
infrastructure, in an effort to synchronize major equipment delivery 
and installation with the construction schedule.

    4. Program Management and Automation - VA has increased the 
education and certification requirements of project managers and has 
deployed collaborative tools for project management to ensure project 
cost, scope, and schedule growth are controlled. VA has also increased 
staffing for the oversight and execution of our construction project 
contracts in response to the size of the current construction program.

    Additionally, we will incorporate the Department's acquisition 
program management framework into the project's acquisition life-cycle. 
This will ensure that acquisition decision milestones identified during 
the design and construction phases of the project are reviewed by the 
acquisition decision authority in determining if the project is in 
compliance with meeting the identified requirements, cost and scope 
before moving on to the next phase.
    Through the CRC and continual review through the acquisition life-
cycle, VA will continue to drive improvements in the management of VA's 
real property capital programs.
    Another key component of our portfolio includes the major leasing 
program. VA is in the process of addressing recommendations in the 
October 2013 OIG report, ``Review of Management of Health Care Center 
Leases.'' OALC and VHA are working together to implement corrective 
actions that will provide project managers additional guidance on 
acquiring build-to-lease facilities; establishing a reasonable timeline 
to award, construct and activate leases; ensuring key decisions and 
supporting analysis is documented; and improving the accuracy of 
expenditures associated with a project.
Major Project Update
    VA bears the responsibility to manage all projects efficiently and 
to be good stewards of the resources entrusted to us by Congress and 
the American people.
    The new Orlando medical center will include 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. VA expects to serve nearly 113,000 Veteran enrollees through 
these facilities. The construction project is 85 percent complete. 
Currently, the prime contractor is projecting a completion date of 
September 2014, which is a slippage from the April 2014 date the 
contractor provided to VA in response to the Show Cause letter VA 
issued in January 2013. VA sent a Supplemental Agreement to the 
contractor to document the April 2014 date; however, the contractor 
declined to sign. While the contractor's performance does not meet our 
expectations, VA continues to work with the contractor as the best way 
to deliver this project to ensure a quality project is delivered to 
meet the needs of Veterans and their families.
    The Denver replacement hospital will include 182 inpatient beds, an 
outpatient clinic, a 30-bed community living center, 30-bed spinal cord 
injury center, and 4-bed blind rehabilitation unit. VA expects to serve 
nearly 66,000 Veteran enrollees through these facilities. The 
construction project is approximately 30 percent complete. VA is now in 
litigation with the contractor regarding the integrated design and 
construction contract. Accordingly, I ask the Chairman's and the 
Committees' understanding that VA will not be able to respond to the 
matters at issue in the litigation as it may compromise the 
governments' legal position. However, the construction is ongoing, and 
VA continues to work with the contractor.
    The New Orleans replacement hospital will include 200 inpatient 
beds, an outpatient clinic, and research, parking, and support 
facilities. VA expects to serve nearly 72,000 Veteran enrollees through 
these facilities. The construction project is approximately 34 percent 
complete. We are working closely with the contractor to arrive at a 
firm-fixed price for the construction.
    VA will continue to apply lessons learned from our current medical 
center projects toward future construction. The next two proposed 
medical center replacement projects are located in Louisville, 
Kentucky, and Omaha, Nebraska where both projects are in the early 
stages of design.
    The Louisville project is planned to include a new 108 bed medical 
center, a Veterans Benefits Administration Regional Office, structured 
parking, and associated campus infrastructure improvements. Schematic 
design solutions are being developed, concurrent with National 
Environmental Protection Act (NEPA) documentation on the 34 acre 
Brownsboro Road site in Louisville.
    The Omaha project is scoped to replace most of the existing campus, 
including a new surgical suite, intensive care unit, bed tower, 
diagnostic and administrative services, energy center and parking 
garages. This project is further in development, having completed all 
required NEPA documentation, and has entered into the Design 
Development phase.
Conclusion
    In FY 2012 and FY 2013, VA delivered over $1.4 billion in 
facilities and continues work on 55 major construction projects valued 
at nearly $13 billion to provide the much needed facilities for our 
Veterans and their families. VA has a strong history of delivering 
facilities to accomplish its mission to serve Veterans. To help ensure 
previous challenges are not repeated and to lead to improvements in the 
management and execution of our capital program as we move forward we 
will focus on:

      ensuring well defined requirements and acquisition 
strategies that meet the project needs;
      assigning additional staff to assure timely project and 
contract administration;
      partnering sessions that include VA, the construction, 
and design contractors;
      early involvement of the medical equipment planning and 
procurement teams;
      applying the acquisition program management framework to 
our projects; and
      engaging in executive level on-site project reviews.

    We continually seek innovative ways to further improve our ability 
to design and construct state-of-the-art facilities for Veterans and 
their families and we regularly engage in forums composed of both the 
private and public sectors that discuss best practices and challenges 
in today's construction industry.
    As we have done this past year we will continue to meet with 
Congressional delegations to discuss their projects, brief the House 
and Senate Veterans' Affairs Staff to keep them apprised of the major 
construction program and provide regular updates to the Congressional 
Committees to ensure they are fully informed on the progress of these 
medical centers. Thank you for the opportunity to testify before the 
committee today. We look forward to answering any questions the 
Committee has regarding these issues.

                                 
                       Statements For The Record

             VETERANS OF FOREIGN WARS OF THE UNITED STATES
    MR. CHAIRMAN AND MEMBERS OF THE COMMITTEE:

    On behalf of the men and women of the Veterans of Foreign Wars of 
the United States (VFW) and our Auxiliaries, thank you for the 
opportunity to submit our views regarding the Department of Veterans 
Affairs (VA) major construction and capital leasing projects.
    The vastness of VA's capital infrastructure is rarely fully 
visualized or understood. VA currently manages and maintains more than 
5,600 buildings and almost 34,000 acres of land. Although VA has 
decreased the number of critical infrastructure gaps, there remain more 
than 3,900 gaps that will cost between $54 and $66 billion to close, 
including $10 billion in activation costs. \1\
---------------------------------------------------------------------------
    \1\ Department of Veterans Affairs, FY 2013 Budget Submission 
Construction and 10 year Capital Plan, Vol. 4 of 4, February 2012, p. 
8.1-1.
---------------------------------------------------------------------------
Major Construction
    Decades of underfunding has led to a major construction backlog 
that has reached between $19 billion and $ 23.3 billion. There are 
currently 21 Veterans Health Administration (VHA) major construction 
projects that have been partially funded dating back to 2007. In the 
Administration's budget request for FY 2014, VA requested funding for 
only one project. \2\ The total unobligated amount for all currently 
budgeted major construction projects exceeds $2.9 billion. \3\ Yet, the 
total budget proposal for FY 2014 major construction accounts was less 
than $342 million.
---------------------------------------------------------------------------
    \2\ Ibid. p. 8.2-12
    \3\ Ibid. p. 2-49
---------------------------------------------------------------------------
    To finish existing projects and to close current and future gaps, 
VA will need to invest at least $23.2 billion over the next 10 years. 
\4\ At current requested funding levels, it will take more than 67 
years to complete VA's 10-year plan.
---------------------------------------------------------------------------
    \4\ Ibid. p. 1-4
---------------------------------------------------------------------------
    Of VA's 49 current major medical facility construction projects on 
which there is data, 23 are over their initial cost estimate, 21 are at 
cost and five are under cost. These 49 facilities have a total cost 
overrun of $2.9 billion. Some of the changes in cost can be attributed 
to a change in the size of the facility or the scope of care it will 
deliver, but many of these cost overruns are a result of poor 
communication with the general contractors. In addition to cost 
overruns, 24 of the 29 projects that have been initiated have gone past 
their initial estimated completion date, while only five have been 
delivered on time.
    Many of these delays are a result of poor communication between VA 
and the general contractors. Not having defined roles and 
responsibilities for each VA official that manages portions of major 
construction projects, particularly within the change order process, 
causes contractors to get permission from one VA employee only later to 
be denied by a different employee. Failing to place medical equipment 
planners at each major construction site has also led to construction 
errors and change orders that would not have been necessary if the 
planner would have been on site. The lack of a project management plan 
makes it difficult to keep both the contractor and VA on the same page 
during the construction phase.
    The VFW believes VA could improve its major construction projects 
by changing to an architect-led design-build process. VA currently 
employs two project delivery methods: Design-bid-build and design-
build. Design-bid-build project delivery is appropriate for all project 
types. Design-build is generally more effective when the project is of 
a low complexity level. It is critical to evaluate the complexity of 
the project prior to selection of a method of project delivery.
    Design-bid-build is the most common method of project design and 
construction. In this method, an architect is engaged to design the 
project. At the end of the design phase, that same architect prepares a 
complete set of construction documents. Based on these documents, 
contractors are invited to submit a bid for construction of the 
project. A contractor is selected based on this bid and the project is 
constructed. With the design-bid-build process, the architect is 
involved in all phases of the project to insure that the design intent 
and quality of the project is reflected in the delivered facility. In 
this project delivery model, the architect is an advocate for the 
owner.
    The design-build project delivery method attempts to combine the 
design and construction schedules in order to streamline the 
traditional design-bid-build method of project delivery. The goal is to 
minimize the risk to VA and reduce the project delivery schedule. 
Design-build, as used by VA, is broken into two phases. During the 
first phase, an architect is contracted by VA to provide the initial 
design phases of the project, usually through the schematic design 
phase. After the schematic design is completed, VA contracts with a 
contractor to complete the remaining phases of the project. This places 
the contractor as the design builder.
    One particular method of project delivery under the design-build 
model is called contractor-led design-build. Under the contractor-led 
design-build process, the contractor is given a great deal of control 
over how the project is designed and completed. In this method, as used 
by VA, a second architect and design professionals are hired by the 
contractor to complete the remaining design phases and the construction 
documents for the project. With the architect as a subordinate to the 
contractor, rather than an advocate for VA, the contractor may 
sacrifice the quality of material and systems in order to add to his 
own profits at the expense of VA. In addition, much of the research and 
user interface may be omitted, resulting in a facility that does not 
best suit the needs of the patients and staff.
    Use of contractor-led design-build has several inherent problems. A 
shortcut design process reduces the time available to provide a 
complete design. This provides those responsible for project oversight 
inadequate time to review completed plans and specifications. In 
addition, the construction documents often do not provide adequate 
scope for the project, leaving out important details regarding the 
workmanship and/or other desired attributes of the project. This makes 
it difficult to hold the builder accountable for the desired level of 
quality. As a result, a project is often designed as it is being built, 
compromising VA's design standards. Contractor-led design-build forces 
VA to rely on the contractor to properly design a facility that meets 
its needs. In the event that the finished project is not satisfactory, 
VA may have no means to insist on correction of work done improperly 
unless the contractor agrees with VA's assessment. This may force VA to 
go to some form of formal dispute resolution, such as litigation or 
arbitration.
    An alternative method of design-build project delivery is 
architect-led design-build. This model places the architect as the 
project lead rather than the builder. This has many benefits to VA, 
such as ensuring the quality of the project, since the architect 
reports directly to VA. A second benefit to VA is the ability to 
provide tight control over the project budget throughout all stages of 
the project by a single entity. As a result, the architect is able to 
access pricing options during the design process and develop the design 
accordingly.
    Another advantage of architect-led design-build is in the 
procurement process. Since the design and construction team is 
determined before the design of the project commences, the request-for-
proposal process is streamlined. As a result, the project can be 
delivered faster than the traditional design-bid-build process. 
Finally, the architect-led design-build model reduces the number of 
project claims and disputes. It prevents the contractor from ``low-
balling,'' a process in which a contractor submits a very low bid in 
order to win a project and then attempts to make up the deficit by 
negotiating VA change orders along the way.
Health Care Center Leasing
    VA has also fallen behind on awarding the seven health care center 
leases that were authorized by Congress in 2009. Currently, four of the 
seven leases have been awarded, but none of the facilities are 
operational. This has occurred because VA lacks the guidance on how to 
manage the purchase process of projects of this size. Before these 
leases were authorized, VA only had guidance for projects that were 
much smaller in scope. However, they used this guidance to plan the 
site selection and award the contract.
    On October 22, 2013, the VA Office of the Inspector General (IG) 
found that site selection alone should have taken an average of 2.5 
times the length of time as the guidance they were using recommended. 
Additionally, VA could not accurately account for how much has been 
spent to date on the health care center projects, and VA will not be 
able to fully account for costs until an effective central cost tracker 
is put in place.
    The IG provided VA with four recommendations to improve the 
timeliness and cost management issues that resulted from the lack of 
guidance for lease projects of this size. The VA has concurred with the 
recommendations and is in the process of developing the appropriate 
guidance and transparency for future health care center leases.
    The VA has taken steps to improve their major construction and 
health care center leasing projects, but small improvements over a long 
period of time will not be sufficient. If VA cannot drastically improve 
its major construction operations, it may be time for VA to ask for and 
receive assistance from outside its own agency to get its construction 
projects on track. VA and the Department of the Army (DA) currently 
have an Interagency Agreement (IAA) that allows VA to request 
assistance from DA on capital planning, design, engineering, and 
construction management services. It is unclear to what extent VA and 
DA have worked together under this IAA, but it seems it could be 
central in developing and maintaining VA's major construction programs 
in the future.
    Mr. Chairman, this concludes my testimony and I look forward to any 
questions you or the Committee may have.

                                 
                       Disabled American Veterans
    Mr. Chairman and Members of the Committee:

    Thank you for this opportunity to present testimony for the record 
on the views of DAV (Disabled American Veterans) concerning the 
Department of Veterans Affairs (VA) and its capital investment 
programs, including the necessity for Congress to authorize important 
leases for VA community-based outpatient clinics and other necessary 
facilities, and to address other capital asset and construction policy 
issues. This is a very important hearing on a vital subject that in 
many ways has languished for years. We appreciate your conducting it 
today.
    Mr. Chairman, the Committee titled this hearing, ``Building VA's 
Future - Confronting Persistent Challenges in VA Major Construction and 
Lease Programs.'' While this title may seem meaningful, newsworthy or 
topical to the Committee, DAV would differ on your characterization of 
its focus. We believe that, for years, VA's path on capital needs, 
including its proposed leases, has been crystal clear, and only seems 
``challenging'' now because VA persistently has been obstructed by the 
Office of Management and Budget (irrespective of which party controlled 
the Administration) and Congress--including the Budget and 
Appropriations Committees in both chambers--in actually securing the 
resources VA has consistently and clearly identified as necessary to 
keep VA's capital plants and facilities in proper, safe and modern 
condition for the care and treatment of veterans, including members of 
our organization, DAV.
    Over the years, VA has used a variety of techniques and approaches 
to identify and justify necessary capital resources, to sharpen these 
estimates, and to address the doubts and skeptics of VA's true needs. 
Nevertheless, any perfunctory review of the end results of these annual 
efforts would show massive gaps between what was identified by VA 
professionals in the beginning of the process, what the Administration 
asked for, and what was ultimately provided by Congress.
    In plain language, to remain a viable health care system for the 
veterans who need VA today and will unquestionably need it in the 
future, we believe VA now needs a reasonable and sustained flow of 
billions of dollars in major medical facility construction, minor 
construction and maintenance and repair funds.
    The latest projection (based on VA's ``Strategic Capital Investment 
Planning'' (SCIP) process, demonstrates that VA could easily spend over 
$50 billion or more over the next decade in all infrastructure accounts 
to modernize, renovate and replace health care facilities. Some of VA's 
facilities are over 100 years old, and the facility average age is over 
60 years. We estimate that VA's current ``ten year plan'' for 
modernization of capital facilities under the SCIP approach would 
require 67 years or even longer to achieve its goals if Congressional 
funding for these purposes continues at its recently observed pace. We 
are unsure why, even facetiously, VA would entitle the current plan a 
``ten year plan,'' given this outlandish prospect.
    As a partner organization of the Independent Budget, DAV has 
regularly endorsed and recommended annual appropriations for major and 
minor medical capital facility improvements well in excess of what 
Administrations have requested, or that Congresses have provided in 
appropriations. Typically, over this decade, Congress has provided 
about one-fourth, more or less, of the amounts identified by our 
estimates. We believe that, absent sufficient funding, situations such 
as embraced by the title of this hearing are inevitable now, and will 
be repeated well into the future.
    Mr. Chairman, it is no secret that that the IB veterans service 
organizations have always relied on VA's internal estimates in making 
our infrastructure funding recommendations to both the Administration 
and Congress, because we believe professional staff in these VA offices 
and facilities know their programs better than anyone, and are making 
estimates based on intimate knowledge of the system and its needs, 
professional principles associated with capital improvements, and known 
construction standards and costs. If these internal needs are overblown 
or inflated, are the ``experts'' in the Office of Management and Budget 
(OMB) or on Capitol Hill justifying their decisions to gut VA's 
estimates and to fund these programs at lesser levels? How is it that 
VA develops a solid, professional and defensible budget for 
infrastructure, only to have it reduced without any justification or 
explanation? DAV believes this is also an oversight question worth the 
Committee's efforts, to determine how these decisions are made, and by 
whom.
Leased Facilities
    One of VA's cornerstones in capital planning is leasing. Leasing 
community-based facilities is a proven, cost-effective way for VA to 
extend access and provide services without the need to build expensive 
government-owned facilities. Such leased facilities are an important 
element in the future of VA health care, discussed further in this 
testimony, and we appreciate the hoped-for resolution of the paralysis 
that has suspended this key program for over a year. VA's current 
leasing plan calls for a little over $2 billion to be committed to 
leases over the next 10 years. VA leases properties to use for each 
administration within VA, ranging from community-based outpatient 
clinics (CBOC) and a variety of health care centers, to research, 
warehouse space and other valuable uses. The cost of these leases does 
not fall under VA construction accounts, but is accommodated from 
within each administration's or other VA offices' operating accounts. 
\1\
---------------------------------------------------------------------------
    \1\ FY 2012 Budget Submission, Construction and 10 Year Capital 
Plan, February 2011, Vol. 4 of 4, p. 8.2-85.
---------------------------------------------------------------------------
    Well known to this Committee, in a 2012 policy shift, the 
Congressional Budget Office (CBO) changed its accounting practices on 
how major facility leases are to be funded, effectively halting 
Congressional authorization of future VA leases. Currently, there are 
28 major capital leases, totaling nearly $247 million, for which VA had 
requested Congressional authorization. These leases have been in limbo. 
This backlog of leases will only grow as existing leases expire. Lack 
of reauthorization could result in closures of current VA clinics, and 
newly proposed clinics cannot be activated without authorization. 
Inaction will lead to increased costs associated with longer travel 
times or the need to authorize fee-basis care that otherwise would be 
provided through such leased CBOCs. Access to care will also decline as 
veterans will be forced to travel farther and wait longer for the care 
they need.
    We sincerely compliment the Committee and your professional staff 
in working to resolve the lingering dispute of the past year that 
delayed VA in opening new community-based clinics through the well-
established and popular leasing program that has been used to extend VA 
care to hundreds of communities over the past 25 or more years. Over 
that period, Congress improved VA health care access and patient 
satisfaction by authorizing and funding nearly 900 VA community-based 
outpatient clinics, the vast majority having been in leased space 
rather than government-owned facilities. These clinics have provided 
local, convenient and cost-effective primary care for millions of 
veterans.
    While we take no position on which specific community clinics and 
other VA facilities should be authorized in the new draft bill the 
Committee is considering today, we support the bill developed by the 
Chairman and urge its positive consideration by the Committee and the 
full House at the earliest possible date, so that the Senate can act on 
it this year. Millions of veterans already benefit from the cost-
effective and commonsense approach of VA's leasing facilities, and we 
appreciate the hard work of your professional staff in negotiating a 
potential resolution of what appeared only days ago to be an insoluble 
problem, that pitted the CBO against the OMB in a seemingly endless 
dispute about how these clinics should be treated in the budget.
VA ``Challenges,'' or Loss of Talent?
    Another concern you articulated in your invitation letter is VA's 
``persistent challenge'' in managing the construction of several new VA 
medical centers. It is true that until these new facilities were 
authorized, VA had not completed construction of a new VA medical 
center since 1994. In all probability, hundreds of talented architects, 
engineers and other key staff in VA Central Office and facilities who 
had worked within VA in years previous to 1994 to build those 
facilities (Minneapolis, Portland, Baltimore, Richmond, West Palm 
Beach) departed their VA employment, because Congress in its wisdom 
determined not to authorize further VA major medical facilities as 
replacements for VA's aging facilities. We do not blame those 
professionals or VA for these significant resignations and the 
subsequent loss of talent; but we have little doubt that the departures 
of these professionals affected VA's ability to design, manage and 
build VA's newest facilities. They certainly did.
    Mr. Chairman, one of your predecessors as Chairman in effect 
accurately predicted the current situation about six years ago, and 
based his concern on his view that so many of VA's staff who had been 
involved in managing new construction in the 1980's and 1990's had 
departed that he doubted VA would be successful in building new 
facilities that Congress was considering to authorize at that time 
(Denver, Las Vegas, New Orleans and Orlando were specifically 
identified as among his concerns). It is no surprise to DAV today that 
VA has been experiencing difficulties in managing the projects now 
identified by this Committee as being of concern because of poor 
execution and cost overruns. However, we believe VA is making an honest 
and straightforward effort to learn from its past mistakes, and will in 
fact surmount the problems that have surfaced in recent times. The 
suggestion you made in your invitation letter that the Army Corps of 
Engineers or another federal agency could step in and improve this 
complex VA program is an unproven theory, and an unlikely scenario in 
our judgment.
    Considering the example of the Corps, the recently completed 
construction of the Fort Belvoir Army Community Hospital, the Army's 
newest facility and one of the world's most expensive hospitals, was 
managed by the Army Corps of Engineers. That $1.3 billion construction 
project was roundly criticized by outside reviewers for both delays and 
excessive costs, similar to the types of criticisms levied at VA over 
cost overruns at the Orlando and Denver facilities. We do not envision 
an Army Corps of Engineers takeover of VA construction to be in the 
best interests of veterans, or of VA's capital programs. We know of no 
other federal agency with the expertise to build hospitals or other 
types of health care facilities suitable for veterans' care.
    Mr. Chairman, it is important to remember that VA facilities are 
the primary places where our veterans receive their care, and these 
facilities are just as important entities as the physicians, nurses and 
myriad technicians who actually deliver their care. Every effort must 
be made to ensure these facilities remain safe and sufficient 
environments to deliver care to veterans. A VA budget that does not 
adequately identify and fund facility maintenance and construction 
reduces the timeliness and quality of care for veterans.
    As indicated above, VA's most recent iteration of facility planning 
mechanisms is SCIP. SCIP is described by VA as a tool to help VA make 
more informed decisions on its competing capital investment needs, in a 
severely constrained funding environment. One key element that appears 
to be missing from the SCIP criteria is a comprehensive assessment of 
the resources that exist outside of the VA through existing contracts 
and sharing agreements, and how those arrangements may affect VA's need 
for VA-managed facilities. Unlike VA-built and leased space, contracts 
can be amended, cancelled or situated differently to respond to 
demographic changes and needs of veterans. VA-owned facilities are more 
static and inflexible. This is especially relevant and important to VHA 
because VA, Congress and the IBVSOs have increasingly supported 
leveraging community resources to provide accessible care to veterans 
in rural, remote and underserved areas where VA simply cannot justify 
government construction. Without an unambiguous understanding of the 
health care resources that exist outside of VA, the Department is 
greatly challenged to make sound decisions on capital investments and 
right-sizing its inventory for the near-, mid- and long-term planning 
vistas. Another apparent flaw of SCIP is the lack of transparency on 
the costs of VA's future real property priorities that hinders VA's 
ability to make informed decisions. This was among the findings in a 
report that the Government Accountability Office (GAO) issued on 
January 31, 2011, entitled VA Real Property: Realignment Progressing, 
but Greater Transparency about Future Priorities is Needed.
    The IBVSOs fully support the GAO's recommendation to enhance 
transparency by requiring VA to submit an annual report to Congress on 
the results of the SCIP process, subsequent capital planning efforts, 
and details on the costs of future projects. Mr. Chairman, your draft 
bill's inclusion of a new reporting requirement is consistent with the 
need for greater transparency in leased facilities, and we agree with 
the sentiment expressed in the bill. We believe a similar detailed 
annual reporting requirement should be imposed on all VA SCIP-
prioritized projects.
    The IBVSOs also support the inclusion of new criteria that 
considers resources that are available to VHA through existing 
contracts and sharing agreements. We urge a more rigorous analysis by 
VA that informs the priority list of projects in SCIP.
    Quality, accessible health care continues to be the focus for DAV 
and the IBVSOs. To achieve and sustain that goal, large capital 
investments must be made, and should not be avoided or obscured with 
partial funding as is the present case. Presenting a well-articulated, 
transparent capital building plan is important, and a feat that VA has 
actually accomplished fairly consistently, but funding that plan at 
nearly half of the prior year's appropriated level and at a level that 
is only 25 percent of what is needed to close the access, utilization 
and safety gaps is not responsive, and in fact impedes VA's mission to 
care for veterans.
    As indicated above, decades of underfunding by one Administration 
and Congress after another have created a major medical facility 
construction crisis that has reached a scope of $19-$23.3 billion in 
unmet needs. Currently, 21 VHA major construction projects have been 
partially funded by Congress dating back to 2007. In the 
Administration's budget request for the current year (FY 2014, still to 
be enacted by Congress almost two months into the year), VA requested 
funding for only one new project. \2\ The total unobligated amount for 
all currently-budgeted major construction projects exceeds $2.9 
billion. \3\ Yet the total budget proposal for FY 2014 major 
construction accounts was less than $342 million, a small fraction of 
needed funds.
---------------------------------------------------------------------------
    \2\ Ibid. p. 8.2-12
    \3\ Ibid. p. 2-49
---------------------------------------------------------------------------
    As summarized earlier, to complete existing approved projects and 
to close current and future gaps, VA needs to invest at least $23.2 
billion \4\ over the next 10 years. At current requested funding 
levels, it will take more than 67 years to complete VA's ``10-year 
plan.'' In the short term, VA must begin requesting and Congress must 
begin providing funding for major construction at levels that at least 
begin to address this backlog, such as a level of $1 billion or more in 
major construction funding in FY 2015 as a modest down payment on the 
backlog. A funding level of this magnitude would enable VA to close the 
most severe safety gaps and complete funding on the longest-standing 
and previously approved major projects.
---------------------------------------------------------------------------
    \4\ Ibid. p. 1-4
---------------------------------------------------------------------------
Minor Construction Accounts
    To close all the minor construction gaps within a 10-year timeline, 
VA would need to invest between $6.8 billion and $8.3 billion. \5\ For 
several years, VA minor construction was funded at a level to actually 
meet its 10-year goal, and we appreciated that commitment by Congress. 
However, over the past two years (2012-2013), Congress has acceded to 
the Administration's drastic funding reductions in minor construction 
requests. However, VA proposed $715 million in this account for FY 
2014, an amount that comes close to the level needed annually to close 
all gaps within ten years.
---------------------------------------------------------------------------
    \5\ Ibid. p. 1-4
---------------------------------------------------------------------------
    The IBVSOs believe that minor construction accounts can be brought 
back on track by investing approximately $831 million per year over the 
next decade to close existing gaps and prevent an unmanageable 
situation.
    Another unmet and significant challenge for VA in infrastructure is 
associated with VA's national Medical and Prosthetic Research Program. 
An independent analysis commissioned by VA at the behest of the House 
Appropriations Committee, published in 2012 after an unconscionable 
delay, clearly showed a need for VA to invest almost $800 million in 
upgrades, renovations and outright replacements of VA research 
laboratories and associated research facilities. While we realize these 
funds will not materialize immediately given VA's other needs as 
outlined in this testimony, we urge Congress to begin to address needs 
in VA's research program by appropriating new funding for both major 
and minor construction projects, and for additional maintenance, at 
minimum to address the most serious deficiencies identified in the 
research infrastructure report.
Nonrecurring Maintenance Accounts
    Even though non-recurring maintenance (NRM) is funded through VA's 
Medical Facilities Appropriation account, and not through a 
construction appropriation, it, too, is critical to maintenance of VA's 
capital infrastructure. NRM embodies the many small projects that 
together provide for the long-term sustainability and utility of VA 
facilities. NRM projects are one-time repairs, such as modernizing 
mechanical or electrical systems, replacing windows and equipment, and 
preserving or replacing roofs and floors, among other routine 
maintenance needs. Nonrecurring maintenance is a necessary component of 
the care and stewardship of a facility. When managed responsibly, these 
relatively small, periodic investments ensure that the more substantial 
investments of major and minor construction provide real value to 
taxpayers and to veterans as well.
    With ever-shrinking requests from the Administration and compliant 
appropriations from Congress in recent years, VA finds itself slipping 
farther behind in addressing a slew of recognized safety, utilization, 
and access deficits associated with infrastructure. To simply maintain 
VA infrastructure in its current (and often substandard) form, VA's NRM 
appropriations account could easily justify $1.35 billion per year, 
based on the estimated plant replacement value the IBVSOs have 
calculated. The account is currently being funded at $712 million, 
about half of what is needed. Even more funds will be needed to prevent 
the current documented NRM backlog of $19 billion to $23.3 billion from 
growing to more staggering levels. Also, to close the gaps in safety, 
access and utilization, VA will need to invest between $27 and $33 
billion more in major and minor construction, and $2 billion or more in 
leasing.
Plant Replacement Value
    The vastness of VA's capital infrastructure is rarely fully 
visualized or understood. VA currently manages and maintains more than 
5,600 buildings and almost 34,000 acres of land with a plant 
replacement value (PRV) of approximately $45 billion. Although VA has 
worked to reduce the number of critical infrastructure deficits, there 
remain more than 3,900 gaps that will cost between $54 and $66 billion 
to close, including $10 billion in activation costs for new facilities 
that will be needed downstream. \6\
---------------------------------------------------------------------------
    \6\ Department of Veterans Affairs, FY 2013 Budget Submission 
Construction and 10 year Capital Plan, Vol. 4 of 4, February 2012, p. 
8.1-1.
---------------------------------------------------------------------------
    VA is falling behind in closing current NRM safety, utilization and 
access gaps. Just to maintain what VA manages, in the condition that it 
is in, VA's NRM account should be funded at $1.35 billion per year, 
based on the IBVSO estimated PRV. It is currently being funded at about 
one-half of need, at $712 million per year. More funds will need to be 
invested to prevent the $22.4 billion NRM backlog \7\ from growing even 
larger.
---------------------------------------------------------------------------
    \7\ Department of Veterans Affairs, FY 2013 Budget Submission 
Construction and 10 year Capital Plan, Vol. 4 of 4, February 2012, p. 
1-4.
---------------------------------------------------------------------------
    The IBVSOs believe VA should develop a PRV schedule and publish its 
results. Adding the PRV to the SCIP will allow VA to more accurately 
determine the appropriate amount to request for NRM and objectively 
determine when a facility becomes more costly to maintain than to 
replace. Using PRV as a tool, VA can more accurately determine the 
annual funding levels needed for NRM by facility, allowing for the 
reduction in the NRM backlog and fully funding future needs in a way 
that would be the most cost effective. The industry goal for NRM is 
around two percent of the PRV. At that rate, facilities can operate for 
50 years or more without outspending what it would cost to replace 
them. Knowing what percentage of the PRV is being spent will allow 
Congress and VA to take a longer view of capital planning, and to 
visualize when a facility will need to be replaced.
In Conclusion
    Mr. Chairman, in summary, if Administrations and Congresses 
properly fund VA's infrastructure needs into the future, in cognizance 
of this testimony that the work of the IBVSOs represents, and if VA 
adopts some of the important recommendations in the Independent Budget, 
we believe much of VA's deficit in capital infrastructure can be 
addressed, and its methods can be improved. However, due to the decades 
of underfunding that has occurred in addressing VA's capital needs, we 
see no ``quick fix'' to solve VA's current capital crisis. Years of 
benign neglect must be replaced with years of dedicated and predictable 
investments in infrastructure, if Congress intends to ensure that VA 
remains a viable provider of health care services in the future.
    Mr. Chairman and Members of the Committee, this completes DAV's 
testimony, and we appreciate the opportunity to present it for the 
Committee's consideration.

                                 
                          The American Legion
    Chairman Miller, Ranking Member Michaud, and distinguished Members 
of the Committee;

    Building a hospital is no easy task - neither is running one for 
that matter. The Department of Veteran Affairs (VA) owns and operates 
more than 1,700 hospitals around the country, with 32 hospitals being 
recognized as ``Top performers'' by The Joint Commission, a not-for-
profit organization that ensures the quality of U.S. health care by its 
intensive evaluation of more than 20,000 health care organizations.
    On behalf of our National Commander and the two and a half million 
members of The American Legion, thank you for inviting us to share our 
views on the VA's major facilities construction program.
    When American Legion National Commander Dellinger testified before 
a joint session of Congress on September 10th 2013, Congressman Coffman 
referred to the Commander's construction background and asked Commander 
Dellinger if he would please offer his comments, based on his personal 
experience in the construction industry, about construction challenges 
that VA was facing in Colorado and other areas. Commander's Dellinger's 
responded ``Maybe the VA should get out of the construction business, 
and do what they do best - take care of our veterans''
    Since September, American Legion leaders and staff have been 
researching and reviewing possible policy changes regarding VA's major 
construction and leasing programs, and will be presenting our findings 
and recommendations to our voting members during our upcoming meeting 
in March 2014. It will be at this meeting that The American Legion will 
decide whether or not to develop and pass a resolution regarding the VA 
construction program.
    As part of our research and investigation, The American Legion met 
with senior officials from The Army Corps of Engineers, The VA Office 
of Acquisition, Logistic & Construction (OALC), and the VA Office of 
Construction and Facilities Management to assess the viability of 
diversifying VA's construction management responsibilities.
    During our evaluation, we found that;

    The Army Corps of Engineers

    b  Is adequately suited to undertake the long-term mission of 
managing VA's construction portfolio
    b  Has a track record that is equal to or better than the federal 
industry standard regarding on-time, on-budget construction projects
    b  Would report directly to VA and not replace OALC
    b  Has worked on VA construction projects in the past
    b  Routinely builds hospitals for the Department of Defense

    The Corps is not without its criticisms, however most of the 
criticisms suffered by the Army Corps of Engineers involve their Civil 
Construction arm and the amount of money Congress has dedicated to 
disaster relief, beach erosion and other civil engineering projects, 
not their construction projects. One note regarding this organization 
is that, there is more transparency and ready access to information 
regarding overhead expenses and actual costs than with private firms as 
the Government Accounting Office has an entire collection of 
assessments and evaluations of The Army Corps of Engineers ready for 
public review. Information about Army Corps can also be found at the 
Congressional Budget Office, The Congressional Research Service, as 
well as other federal research activities and offices.
    It is also important to note that inserting the Army Corps of 
Engineers into the VA construction program would not reduce VA's 
authority or oversight in any way, as VA would always maintain the roll 
of ``customer'' in any future relationship. Another advantage is the 
advocacy role that Army Corps assumes on behalf of VA. In the event of 
cost overruns not covered by the reserve fund, Army Corps takes on the 
responsibility of representing VA before Congress to request additional 
appropriated funds needed to complete the project.
    Based on our initial research, we don't believe that Army Corps 
would be adequate solutions to interject into the troubled projects 
currently in progress, but would have the flexibility and ability to be 
retained as a consultant to help evaluate paths to completion, if 
requested, and their value to VA on future construction projects will 
be the subject of our pending resolutions and recommendations. That 
said; it is also true that the Army Corps of Engineers is routinely 
relied on to offer oversight and advice when federal projects are not 
performing as planned, thus giving Army Corps the reputation of expert 
in the construction management industry.
    While reviewing VA's construction program we found that the VA 
initiated a Construction Review Council (CRC) in April 2012 to serve as 
the single point of oversight and performance accountability for the 
planning, budgeting, execution, and delivery of the VA real property 
capital asset program. It was further explained that the CRC undertook 
a complete review of the Department's real property capital asset 
program life cycle to ensure the phases of the life cycle were properly 
identified and the inputs and outputs of the respective phases were 
achieved to ensure the successful completion of the capital program.
    The council made four recommendations:

    b  Requirements - Complete 35 percent of design prior to submitting 
project for construction funding. Define processes for capturing origin 
requirements, approving requirements, and approving changes to the 
requirements once project development has started. Conduct master 
planning of all VISNs (include all VBA and NCA facilities) and 
integrate plans into the SCIP 10-year plan. Master plans will include 
major projects, leases, minor projects, and non-reoccurring maintenance 
(NRM) construction for all Administrations.
    b  Design Quality - Identify and implement steps to reduce design 
related issues that increase cost and/or delay construction. Improve 
peer review process by including assessment of constructability, using 
construction management firms to augment Architectural/Engineering (A/
E) technical peer review.
    b  Funding - Coordinate SCIP process with budget to assure 
alignment with services and related initiatives. Consider a dedicated 
design fund to allow design to proceed seamlessly from start to finish. 
Recognize and include OI&T costs and activities as part of project cost 
and effort. Consider a separate fund for historic preservation 
activities.
    b  Program Management & Automation - Adhere to common leading 
indicator metrics for construction. Implement new construction 
management software tool. Streamline processes and procedures for 
change orders. Increase professional certifications for program/project 
managers. Link medical equipment procurement to specific construction 
to ensure synchronization.

    Since no new projects have been initiated since the implementation 
of these recommendations, it is not possible to gage what impact, if 
any the recommendations will have on VA's construction program.
    VA has developed a change order handbook since the original one was 
not consistently applied across project sites. In addition, change 
orders below $250,000 will not be submitted to VA Central Office for 
approval which should speed up change orders on the local level.
    While The American Legion is not prepared to make any specific 
recommendations to Congress at this time, we are confident our 
Veteran's Affairs and Rehabilitation Commission, who has oversight of 
this issue, will present their findings and recommendations to The 
American Legion during our Winter Conference, and will then make copies 
of our work, and any future approved resolutions available to this 
committee.
    In conclusion, should this Committee consider any changes to the 
current procurement process of VA construction, The American Legion 
would insist that language be included into any bill that requires any 
contracting agency participating in VA construction activities be 
required to adhere to VA's Vets First contracting policies in 
accordance with Public Law 109-461, and all applicable VA procurement 
policies regarding veteran small business procurement priorities.
    Thank you again for inviting The American's Legion to share our 
views on this important matter.

    For additional information regarding this testimony, please contact 
Mr. Louis Celli at The American Legion's Legislative Division, (202) 
861-2700 or [email protected].

                                 
                        Questions For The Record

                LETTER AND QUESTIONS FROM: HVAC, TO: VA
    January 10, 2014

    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, ``Building 
VA's Future Confronting Persistent Challenges in VA Major Construction 
and Lease Programs'' that took place on November 20, 2013. I would 
appreciate it if you could answer the enclosed hearing questions by the 
close of business on February 28, 2014.

    Committee practice permits the hearing record to remain open to 
permit Members to submit additional questions to the witnesses. 
Attached are additional questions directed to you.

    In preparing your answers to these questions, please provide your 
answers consecutively and single-spaced and include the full text of 
the question you are addressing in bold font. To facilitate the 
printing of the hearing record, please e-mail your response in a Word 
document, to Carol Murray at [email protected] by the close 
of business on February 28, 2014. If you have any questions please 
contact her at 202-225-9756.

    Sincerely,

    MICHAEL H. MICHAUD
    Ranking Member

    MHM:cm
Questions Submitted by Ranking Member Michaud:
    1. The VA Office of Inspector General released a report on October 
22, 2013 titled ``Review of Management of Health Care Center Leases'' 
(VAOIG Report). This report states that ``VA could not provide complete 
financial information on the seven HCCs. VHA delegates funds tracking 
to project-level management at the Veterans Integrated Service Networks 
(VISNs) and RPS. VHA's former Chief Financial Officer said VHA 
headquarters would need to request HCC information from this level to 
compile a complete picture of costs. Although project-level management 
at the VISNs and RPS tracked HCC financial information, neither could 
provide complete data and support regarding total costs incurred to 
procure HCC leases.''

    a. Please provide the Committee with the specific steps taken or 
proposed to be taken by VA to improve its ability to identify and track 
costs associated with the leasing program.

    2. The VAOIG Report states that the VAOIG ``could not identify a 
common fund code across VISNs for each HCC so costs could be 
systematically extracted from VA's Financial Management System. 
Further, RPS personnel could not readily provide complete financial 
information for all HCC expenses. RPS is responsible for the day-to-day 
management of all lease procurement activities from project initiation 
to lease award, including tracking associated expenses.''

    a. What steps, if any, has VA taken to address this concern and 
provide more accurate and complete cost information regarding HCCs and 
other VA construction and lease projects.

    3. In regards to the project-level management of VA construction 
and lease projects:

    a. Please provide the Committee with a detailed explanation 
regarding the project-level management process used at VA, including 
the titles and detailed job descriptions of the project-level 
management.

    b. Please provide the Committee with an explanation of any changes 
that have recently been made or are planned to be made to this process 
in order to provide improved function, control, and transparency to the 
process.

    4. In regards to VA's overall construction and lease program:

    a. Please provide the Committee with updated schematics of the 
Office of Construction and Facilities Management, the Real Property 
Service, and the Office of Acquisition and Logistics. Include the 
position titles and incumbent names for all senior-level positions.

    b. Are there any statutory barriers presently in place that VA 
feels unduly hinders its ability to operate a construction and leasing 
program?

    c. In VA's view, are the problems with VA's construction and lease 
operation that have been identified over the last several years caused 
by too much centralization of this operation, or too little?

    d. Please provide the Committee with a detailed discussion of what 
VA believes to be the advantages, as well as any identified 
disadvantages, to the VA of operating an in-house construction program.

    5. The VAOIG Report states that ``[a]s part of its FY 2008 Asset 
Management Plan, VHA commissioned studies to assess the feasibility of 
leasing facilities in lieu of major construction. VA determined that 
leasing major outpatient clinics, or HCCs, would provide the 
flexibility to increase veterans' accessibility to services and address 
critical outpatient needs without the need for additional major 
construction funding.''

    a. Please provide the Committee with copies of the studies 
referenced.

    6. The VAOIG Report recommended that ``the Under Secretary for 
Health, in coordination with the Executive in Charge of the Office of 
Acquisition, Logistics, and Construction, provide realistic and 
justifiable timelines for award, construction, and activation of the 
Health Care Center leases.''

    VA's response stated that ``[t]he Integrated Master Schedules for 
all major lease procurements, including the Health Care Centers (HCCs), 
are scheduled to be implemented in November 2013. Estimated completion 
date: December 2013'' (emphasis in original).

    a. Have these schedules been implemented? If so, when were they 
implemented?

    b. Please provide a copy of the Integrated Master Schedules.

    c. In VA's view, what specific factors led to not meeting the 
milestones contained in the FY 2010 budget submission for the 
completion of the HCCs?

    d. What were the reasons underlying the decision to establish 
``identical milestone dates for all seven HCC projects outlined in the 
prospectuses submitted to Congress even though the projects varied in 
size?''

    e. Will VA adjust the milestones contained in the Integrated Master 
Schedules to accommodate projects that are larger or more complex that 
the average schedules as shown in the Integrated Master Schedules?

    f. Were there specific factors relating to HCCs that caused the 
process to not meet milestones as compared to the then-existing process 
and guidance regarding CBOCs, including larger CBOCs?

    g. Please provide me with a detailed explanation of the planning 
process, including an estimated timeline, in regards to CBOCs within 
the current SCIP process.

    7. In regards to the VA's Health Care Projection Model (HCPM):

    a. Is information generated by the (HCPM) used within the SCIP 
Process?

    b. If so, please provide the Committee a detailed explanation of 
the types of information provided by the HCPM and at what stage of the 
SCIP process this information is utilized.

    c. In terms of the final decision regarding a project, how much 
weight is accorded information derived from the HCPM?

    8. In previous testimony provided to the Committee, VA stated that 
Vet Centers are placed in locations based upon proximity and 
population.

    a. Are Vet Centers included in the SCIP planning process?

    b. Please describe how proximity and population are determined and 
utilized within the planning process.

    c. Please provide a detailed description of the planning process as 
it relates to determining the need for, and location of, Vet Centers.

    9. VA's written testimony states that it has ``procured a 
collaborative project management software system in 2012 and is 
completing phase one fielding and will complete fielding in 2014.''

    a. Please provide a detailed description of this software, as well 
as a detailed timeline regarding actions taken with regards to this 
software since procurement in 2012.

    b. Please describe to the Committee lessons learned by the VA 
during initial fielding, and how these lessons will be used to better 
manage projects once the software is deployed and fully operational.

    c. Please provide a specific date in 2014 when VA believes that 
this software will be deployed and fully operational.

Rep. Kirkpatrick:
    1. According to the April 2013, GAO Report VA CONSTRUCTION - 
Additional Actions Needed to Decrease Delays and Lower Costs of Major 
Medical-Facility Project, (600-13-302), VA has not yet developed 
specific guidance or instructions on how to implement recommendations 
set forth by the Construction Management Review Council. In his 
testimony, Mr. Haggstrom indicated that all recommendations have been 
implemented:

    a. Please provide the committee with a side-by-side list of the 
recommendations and how/when they were addressed by VA?

    b. If there is a recommendation yet to be implemented, please 
provide a timeline for when it will be completed.

Rep. Brown
    1. In regards to The Orlando VA Medical Center: The last update 
received says the Medical Center will open in August of 2014. What is 
the specific date the facility will open?

    2. Please explain the lack of any progress over the summer of 2013 
on this project? Reference the 84% percent completion rate of the 
facility over the three months of July, August and September.

    3. In previous meetings and briefings, one of the issues brought up 
was that there wasn't enough VA staff on site to oversee the project. 
Has this concern been addressed?

    4. The previous project manager was removed for not following VA 
instructions. How is the new manager working out? Has there been any 
advancement on finishing this project?

    5. Many concerns regarding this project have involved a large 
number of change orders that have been submitted. To date, how many 
change orders have been submitted for the project? Have those leveled 
off? Are there still changes being made to the design of the facility 
at this late date? What are the implications on costs, schedule and 
delivery of these late changes?

    6. Can this facility be opened in stages? The outlying buildings 
are almost complete, except for the landscaping and the food service. 
What can we do to get veterans help tomorrow?

Rep. Negrete McLeod
    1. How many months of delay in awarding the lease for the Loma 
Linda Health Care Center come from finding property owners willing to 
sell?

    2. How many property owners owned the land currently being 
developed for the Loma Linda Health Care Center?

    3. What role did VHA Women Veterans Health Committees and Women 
Veteran Program Managers contribute to the design of the 7 Health Care 
Centers to ensure that they complied with women veteran patient privacy 
standards as stated in VA regulations?
                      RESPONSES FROM: VA, TO: HVAC
Questions for the Record from Ranking Member Michaud

    Question 1: I would like to hear from VA why they believe they are 
the best agency to handle the construction process for their 
facilities?

    VA Response: The Department of Veterans Affairs (VA) has a strong 
history of delivering facilities to serve Veterans. In the past 5 
years, VA has delivered 75 major construction projects valued at over 
$3 billion that includes the new medical center complex in Las Vegas; 
cemeteries; polytrauma rehabilitation centers; spinal cord injury 
centers; a blind rehabilitation center; and community living centers. 
The Department also opened 180 leased medical facilities, 50 of which 
are considered major leases.
    VA has a robust training program that provides Federal Acquisition 
Certification in accordance with Federal standards for its Program/
Project Managers, including those managing VA's major construction 
projects. VA has provided additional training and invested in a two-
year project manager coaching program to further supplement the skills 
and develop project leaders to assure success in the major construction 
program. VA's construction site staff supervisors are required to have 
Federal Acquisition Certification in Contracting (FAC-C). The same or 
equivalent training and certifications are required by other Federal 
agencies such as General Services Administration, the U.S. Army Corps 
of Engineers and Naval Facilities Engineering Command's project 
managers and construction site leaders.
    In 2009, with the establishment of the Office of Acquisition, 
Logistics and Construction, VA initiated a construction best practice 
review as part of its VA Facilities Management Transformation 
Initiative. VA studied best practices in the U.S. Army Corps of 
Engineers, General Service Administration, the Canadian Health Care 
System, Kaiser Permanente, Sutter Health, and others. These studies 
resulted in several initiatives such as the development and fielding of 
an integrated master planning program; reestablishment of the post 
occupancy evaluations; revisions to project execution planning process; 
and the establishment of regional offices to improve project execution 
and customer support. A significant best practice adopted from the 
Department of Defense is the development of designs through concept (or 
35%) before announcing the construction budget, requesting funds and 
timeline for execution. VA continues to learn and share with its 
Federal partners and private industry.
    The way we do business today has changed and will continue to be 
refined as necessary to deliver timely, high- quality facilities. The 
recommendations made from previous reports have resulted in positive 
changes that are being applied to the entire capital program. 
Additionally, Secretary Shinseki's establishment of a Construction 
Review Council (CRC) demonstrates the Department's commitment to 
continued stewardship and delivery of high-quality facilities in 
support of our Nation's Veterans.
    As VA continues to develop one of the most patient-centered and 
innovative care delivery models currently in use anywhere, it needs to 
be able to coordinate and refine facility design in conjunction with 
clinical operations in a seamless manner. Outsourcing contracting, 
design, and construction administration would impose new barriers 
between clinical care delivery and construction project planning, 
design and construction. VA is the best organization to execute its 
construction program as VA's construction project managers and 
construction managers understand VA's mission to deliver the best 
facilities to an ever evolving and advancing medical mission.

    Question 2: What office was responsible for the management of the 7 
Health Care Center Leases that have failed to come to fruition? It is 
hard for me to believe that the prospectuses were allowed to be 
published in the budget books. Someone should have known that the 
timeline was unrealistic. Please walk me through the process as it 
existed then and as it exists now.

    VA Response: VA's Office of Acquisition, Logistics, and 
Construction (OALC) is responsible for the procurement of the Health 
Care Center leases, along with all of VA's major medical leases. While 
the process for procuring these large-scale leases is essentially the 
same (i.e., VA follows the relevant parts of the Federal Acquisition 
Regulation, General Services Acquisition Regulation, VA Acquisition 
Regulation, and all laws and Executive Orders pertaining to leases), VA 
is refining various tools and internal procedures regarding major lease 
procurements.
    For example, VA has refined and clarified the internal roles and 
responsibilities among the various VA offices involved in VA's leasing 
program. OALC has also re-baselined VA's lease procurement estimates to 
reflect improved timeframes for performance. These timeframes have been 
validated against actual projects. OALC is also currently revising the 
leasing handbook that provides guidance, standards, and processes to 
ensure lease projects are reported and administered consistently across 
the Department.
    In order to ensure consistency in the planning process, all leases, 
including Health Care Center leases, are now submitted and reviewed 
through VA's Strategic Capital Investment Planning (SCIP) process, to 
ensure each initiative fulfills medical center gaps for access, 
utilization, and/or space. The SCIP process requires an analysis of 
alternatives for each project proposed for budget consideration, and 
documentation of key decisions.

    Question 3: Your testimony is replete with all of the changes and 
improvements VA has made to the lease and construction processes yet we 
still have failures like the 7 Health Care Center leases. Please 
explain to the Committee why you believe that these changes are 
tangible and have actually improved the process? Why shouldn't we look 
to another agency, such as Corps of Engineers, to build our hospitals 
for us?

    VA Response: In the past 5 years, OALC has successfully completed 
50 major facility leases. VA does not consider its execution of these 
seven Health Care Center (HCC) leases as failures. The Department set 
an extremely aggressive timeline to deliver these projects. Unforeseen 
challenges were encountered during the procurements (i.e., changes in 
the real estate markets, inquiries from interests external to VA, bid 
protests, and difficulty securing suitable property). To date, VA has 
awarded contracts for six of the seven leases, with the seventh lease 
in re-procurement.
    VA's latest process improvements were introduced too late to impact 
these seven HCCs. However, these improvements will have an immediate 
impact on new projects through more effective roles and 
responsibilities, processes, and timelines for delivery. Efforts to 
improve upon these areas will continue, particularly through OALC's 
internal reviews and the CRC.
    With regard to using the Army Corps of Engineers (COE), VA 
evaluates the delivery method for each lease and construction project 
on its merits. One of the delivery strategies includes the utilization 
of the COE when unique health care mission expertise is not required. 
When VA determines that unique health care mission expertise is not 
integral, and the best delivery strategy is to employ another agency, 
such as the COE, this strategy is executed. VA has utilized COE to 
deliver a number of minor construction projects and engaged them in 
supporting VA in the construction of the Orlando, New Orleans, and 
Denver major medical center projects. Additionally, VA is working 
closely with the COE to streamline VA's processes.

    Question 4: If you could design a construction and lease process 
for the Department of Veterans Affairs, what would it look like? Do you 
believe that the big tertiary care facilities are going to be needed in 
the future given the advancements in technology and care delivery?

    VA Response: It is necessary to have a process that is streamlined/
nimble enough such that implementation of the construction plan is 
executed, before changes in technology and care have occurred, that 
make initial design features obsolete. In addition, the underlying 
designs must be as flexible and creative as possible to allow for 
evolutionary changes that minimize future costs. VA is continuously 
reviewing and re-validating all aspects of its construction and leasing 
programs.

    VA has initiated the following:

      Increased the number of planners and defined their role 
in developing requirements based on established gaps in service.
      Increased the technical ability to review designs, thru 
stronger peer review and constructability reviews.
      Established the SCIP process to help prioritize VA's 
capital investment needs and projects and ensure that the underlying 
capital programs meet facility needs.
      Requested authority to expand the Department's enhanced 
use lease authority, and supported the President's proposed Civilian 
Property Realignment Act (CPRA), to add to its toolkit for reducing 
unneeded assets.

    There is a dynamic bi-directional approach to the deployment of 
resources involving tertiary care centers in the Veterans Health 
Administration's (VHA) future. Tertiary care centers will still be 
necessary. `Cutting edge' technology actually drives use of tertiary 
type facilities, due to heavy support service for technology and the 
need for a critical mass of patients for uncommon medical conditions/
treatments, such that practitioners have sufficient case numbers to be 
maximally proficient. As certain established technologies mature, 
movement to secondary level facilities from tertiary care facilities 
does occur. The use of tele-health technologies, however, can 
disseminate the cognitive component of care to primary and secondary 
care level facilities in a virtual manner, which diminishes the drive 
to place tertiary care to lower level facilities. These dynamics will 
continue to re-balance the placement of new technologies over time.

    Question 5: In a recent OIG Report on Health Care Centers, it was 
recommended that the Under Secretary for Health, in coordination with 
Executive in Charge of the Office of Acquisition, Logistics, and 
Construction, ensure supporting analyses and key decision regarding the 
Health Care Center leases are supported and documented. VHA concurred 
and stated that ``all leases, including Health Care Center leases, will 
be submitted and reviewed through the Department of Veterans Affairs 
(VA) Strategic Capital Investment Planning (SCIP) process to ensure 
each initiative fulfills medical center gaps for access, utilization, 
and/or space. However, the FY 2012 10 YR Capital Plan already included 
the seven HCCs in the SCIP process. What caused the SCIP process to 
fail the first time?

    VA Response: The seven HCCs were included in the fiscal year (FY) 
2010 budget submission, prior to the development of the SCIP process. 
The SCIP process was initiated with the FY 2012 budget formulation 
process, to prioritize all new capital investments (e.g., major 
construction, minor construction, leases, and non-recurring maintenance 
projects) based on identified mission needs. As a result of the SCIP 
process, VA has a total picture of need and a prioritized integrated 
list of capital investments.
    All leases since the initiation of SCIP in FY 2012, including any 
proposed HCCs, are submitted and reviewed through VA's SCIP process.

    Question 6: Are Vet Centers included in the SCIP planning process? 
In previous testimony the VA stated that a Vet Center is placed in a 
location based on proximity and population. Can you outline for the 
committee how proximity and population are calculated and the stages of 
the planning process for a Vet Center?

    VA Response:
    The SCIP planning process involves two phases - the validation that 
a proposed capital project will successfully and cost-effectively close 
an identified SCIP gap, and the prioritization of all validated 
projects so that the most necessary projects are pursued first within 
limited resources. All VA leases, including VetCenters, are included in 
the validation phase, which requires an approved SCIP business case for 
any action being proposed. When a VetCenter lease changes location, 
even within the same geographic area, there are many factors taken into 
consideration in the business plan, including Veteran proximity and 
population, cost, access to mass transit, parking, etc. However, the 
VetCenters are not included in the prioritization phase of the SCIP 
planning process. VA's Readjustment Counseling Service (RCS), which 
administers the Vet Centers, does not compete for any capital asset 
funding, as all RCS leases are funded through the RCS Specific Purpose 
funding process.
    In addition to the business case requirements imposed by the SCIP 
process, any new proposed Vet Centers beyond the existing 300 would be 
submitted via an Executive Decision Memorandum to the Under Secretary 
for Health for concurrence and ultimately to the Secretary for his 
review and approval. All Veteran population data that are utilized in 
this decision-making process are obtained directly from the Veteran 
Population Projection Model (currently VetPop 2011), which is 
publically available at www.va.gov/vetdata/. The overall living Veteran 
population by county is the best available data source, since currently 
no data are available from any approved source that shows Veterans who 
served in a combat zone or area of hostility.

    Question 7: How is a Veteran Service Area (VSA) defined? How is it 
calculated?

    VA Response: We do not define nor calculate Veteran Service Areas 
(VSA), and we no longer use this terminology. VHA's health care 
operations are organized into 21 Veterans Integrated Service Networks 
(VISN) which are further broken down into 81 Markets. Each market 
consists of a set of contiguous counties that usually contain at least 
one, and possibly multiple, VA medical centers (VAMC), and their 
associated clinics, which are designed to operate as independent health 
care system. Our strategic planning process is based at the market 
level. Planners, based on the current and projected future health care 
needs of the Veteran population residing within the market, develop the 
appropriate level and location of resources to best meet Veteran needs.

    Question 8: It is the committee's understanding that before the 
SCIP process, the criteria for developing a new CBOC were, among other 
things, space deficits at the parent facility, market penetration, 
population density, medically underserved, etc. What if any criteria 
have changed since the SCIP process was initiated?

    VA Response: The criteria for developing a new Community-Based 
Outpatient Clinic (CBOC) are largely unchanged. Identifying appropriate 
locations to establish VA health care facilities requires extensive 
analysis of multiple factors, including but not limited to:

      Veteran enrollee population;
      Health care demand projections;
      Access guidelines (e.g., drive-time);
      Market penetration;
      Cost-effectiveness;
      Waiting times; and
      Critical space needs.

    Much of the same data and information (access, utilization, space, 
cost-effectiveness) are used to justify and appropriately size projects 
(including CBOCs) in the SCIP process. All SCIP capital projects (major 
construction, minor construction, leases and non-recurring maintenance 
projects) are reviewed, scored, and approved through the VA governance 
process.
    The six SCIP major decision criteria are:

    1) Improve safety and security
    2) Departmental initiatives
    3) Fixing what we have
    4) Increasing access
    5) Right-sizing inventory
    6) Ensure value of investment

    This SCIP process results in a prioritized listing of capital 
projects that is used to inform the annual capital budget request. The 
SCIP decision criteria, priority weights, and the integrated, 
prioritized list are provided to the Secretary for approval each year.

    Question 9: In VA testimony in 2009 to the House Subcommittee on 
Health of the Committee on Veterans' Affairs VA outlined the time from 
the planning stage to setting up a CBOC to the time patients are 
served. It is our understanding that this time frame was before the 
current SCIP process. Under the current SCIP process what is the 
current time frame from planning to clinic activation, can you outline 
to the committee the various planning phases?

    VA Response: VHA's Access Expansion Planning (AEP) process is the 
first stage or phase for establishing CBOCs. Through the AEP process, 
VISNs detail plans - including establishing CBOCs - to meet the 
projected demand and to improve geographic access to primary care and 
mental health services for Veteran enrollees. The AEP process, from the 
call for AEP submissions to Under Secretary for Health's endorsement of 
new sites of care for SCIP process consideration, takes approximately 
four months.
    In a typical year, the SCIP Action Plan Call is sent out within the 
Department in late November/early December, submissions are due late 
January/early February. The Business Case call goes out in March with 
the Final Business Cases due in May/June. The Department submits its 
budget request to OMB in September, and the President's Budget is 
typically released in February, approximately 14 months after the 
initial SCIP Action Plan Call.
    Once authorization and funds have been received, the schedule 
includes 26 months to lease award, 26-30 months for build-out, and 3-6 
months for activation. This timeline does not include unforeseen 
challenges, for example, changes in the real estate markets, political 
interest in site location, bid protests, litigation, and difficulty 
securing suitable property.

    Question 10: In the recent OIG report on HCC's; a HCC is defined as 
``a large scale outpatient clinic positioned to provide all the medical 
services of a hospital, excluding inpatient beds.'' Using this 
definition, is it true that any of your larger CBOCs, are in fact, 
HCCs? What was different about these leases that caused them to be so 
mismanaged? Are they not like any of the other VA Major Medical 
Facility Leases? Please explain.

    VA Response: VA does not consider its execution of these seven HCC 
leases as mismanagement. VA's position is that these leases were not 
inherently different from other large-scale, build-to-suit leased 
facilities. All leases of this size can face unforeseen challenges, for 
example, changes in the real estate markets, bid protests, litigation, 
inquiries from interests external to VA interest in site location, and 
difficulty securing suitable property. To date, VA has awarded 
contracts for six of the seven HCC leases, with the seventh lease in 
re-procurement.
    The VA Office of Inspector General report referenced in question 10 
above, was generated prior to the issuance of the VHA Site 
Classifications and Definitions Handbook (VHA Handbook 1006.02) on 
December 30, 2013. In accordance with this new Handbook, ``A Community-
Based Outpatient Clinic (CBOC) is a VA-operated, VA-funded, or VA-
reimbursed site of care, which is located separate from a VA medical 
center. A CBOC can provide primary, specialty, subspecialty, mental 
health, or any combination of health care delivery services that can be 
appropriately provided in an outpatient setting.'' In accordance with 
this new Handbook, a HCC is defined as: ``A VA-owned, VA-leased, 
contract, or shared clinic operated at least 5 days per week that 
provides primary care, mental health care, on-site specialty services, 
and performs ambulatory surgery and/or invasive procedures which may 
require moderate sedation or general anesthesia.'' The services 
provided by an HCC exceed those of a CBOC by performing ``ambulatory 
surgery and/or invasive procedures which may require moderate sedation 
or general anesthesia.'' A small number of currently open outpatient 
facilities, initially classified as CBOCs, will soon be reclassified as 
HCCs based on the new classification standards.

    Question 11: Can you outline how the Health Care Planning Model 
(HCPM) inputs into the SCIP process? And provide us a copy of this 
year's HCPM?

    VA Response: The HCPM provides a standard 10-step planning tool 
used to proactively evaluate the comprehensive health care needs of 
Veterans within VISN markets and develop strategies to meet those 
needs. The HCPM uses a web-based portal for systematic data analysis. 
Appropriate data sources are built into the portal to maximize the time 
VISNs spend in analysis versus data gathering. Many of the data 
elements that are built-in to the HCPM to project Veteran health care 
(such as access, utilization, and space needs) are the same data 
elements that VISNs use to build their SCIP Action PlansBecause the 
HCPM is a web-based planning tool, it is not possible to provide a copy 
of it.

    Question 12: Please provide the Committee with an updated schematic 
of the Office of Construction and Facilities Management; the Real 
Property Service or RPS; and the Office of Acquisition and Logistics. 
Please include in the schematic a full and detailed description of how 
these offices work together to ensure that the lease and construction 
process is moving forward. Please also include the Veterans Health 
Administration's construction offices that are part of the construction 
process and have responsibility for the construction and lease programs 
for VHA.

    VA Response: The Office of Construction and Facilities Management 
(CFM), Real Property Service (RPS), and the Office of Acquisition and 
Logistics (OAL) all fall under the Office of Acquisition, Logistics and 
Construction (OALC). OAL, as identified in the question, has no role in 
the execution of the Department's construction and leasing programs.
    As part of its overall responsibilities relating to VA's real 
property portfolio, RPS oversees the administration of VA's ``medical 
facility'' lease acquisitions, VA's ``general purpose'' lease 
acquisitions (specifically, those not exceeding a 2,500 square feet of 
space threshold, per a delegation from GSA), and provides support for 
VA space acquisitions conducted through the General Services 
Administration (GSA). RPS, as a part of the Office of Operations, works 
closely with the Office of Facilities Acquisition (OFA) to make VA 
lease awards. OFA develops guidelines and provides technical support to 
properly oversee lease and major construction contracting and 
architect/engineer selection. Both offices report to the Executive 
Director, CFM, who in turn, reports to the Principal Executive 
Director, OALC. CFM executes VA's major construction, leasing, real 
property management, and other capital asset services in support of 
VA's mission, and manages VA's major construction and leasing programs. 
CFM's Executive Director serves as the primary advisor to the Principal 
Executive Director, OALC, and the Secretary of Veterans Affairs 
regarding issues concerning VA's construction, leasing, and real 
property programs.
    In addition to daily interaction between the offices within CFM, 
CFM and its stakeholders (e.g., VA Administrations and Staff Offices) 
work closely together as appropriate throughout the acquisition life 
cycle of the project. Certain stakeholders (e.g., VHA, VBA, and NCA) 
are required to identify their proposed projects and underlying 
requirements, which are then included in the SCIP process for 
evaluation, and potentially, in a subsequent VA budget. CFM's role is 
in the execution of Major Construction projects and leases. CFM also 
assists stakeholders during the planning process to refine the 
requirements of a project.
    Below is a chart indicating the relations between the OALC offices 
mentioned above:



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    The Office of Capital Asset Management Engineering and Support 
(OCAMES) falls under VHA's Assistant Deputy Under Secretary for Health 
for Administrative Operations (ADUSHAO). OCAMES provides the policy, 
funding, budget documentation, and oversight for execution and policy 
compliance for the upfront planning of Major Construction projects and 
Leases and for all aspects of Minor Construction and Non-Recurring 
Maintenance projects. OCAMES collaborates with CFM and the medical 
centers on the execution of Major Construction projects and leases to 
ensure they remain within the approved scope of the project and lease 
as well as meet the needs of a dynamic, modern healthcare environment.

    Question 13: Are you aware of the Building Information Model, or 
BIM, that the Corps uses to simulate designs?

    VA Response: Yes, VA is aware of the Building Information Model 
(BIM). On April 3, 2008, CFM issued a design alert requiring the BIM be 
used on all VA Major projects starting with FY 2009. CFM also released 
a BIM Guide in April 2010, which is being used throughout VA. OALC is 
aware that its BIM guide has also been adopted by the Commonwealth of 
Massachusetts, and the countries of Singapore and Australia.

    Question 14: You mention in testimony that you have procured a 
collaborative project management software system and should be done 
fielding it in 2014. The software supports leases, major construction, 
and minor construction as well as non recurring maintenance. During the 
test phase of this system, what were the lessons learned and how has it 
enhanced your ability to manage projects?

    VA Response: The pilot of the collaborative project management 
software, TRIRIGA, validated that a commercial off-the-shelf product 
could be deployed and used effectively to manage VA construction 
projects. During the pilot phase, VA learned the best method for 
migrating projects from the current software. VA also identified the 
training requirements for VA, contractor, and designer staff to utilize 
the collaborative elements. The software improves accountability for 
project issues and requests for information and submittals, while 
enhancing information sharing between VA and its contractors resulting 
in better outcomes.
Question for the Record from Representative Kirkpatrick
    Question 1: According to the April 2013 GAO report, VA has not yet 
developed specific guidance or instructions on how to implement 
recommendations set forth by the Construction Management Review 
Council. During Mr. Haggstrom's testimony today, he indicated that all 
recommendations have been implemented. Could you please provide a side-
by-side list of the recommendations and how/when they were implemented 
by VA? If there is a tactic yet to be implemented, please provide a 
timeline for when it will be completed.

    VA Response: As of August 2013, the Construction Review Council 
(CRC) recommendations were considered closed with ongoing activities. 
VA's construction program review is an iterative process that will 
continue as VA strives to deliver first- class facilities on time and 
within budget. The table below describes CRC findings and 
recommendations:


----------------------------------------------------------------------------------------------------------------
              CRC Major Finding                                        Action (s) Taken
----------------------------------------------------------------------------------------------------------------
                           Requirements       The recommendation adopted included achievement of the requirement
                                              for 35 percent design completion for complex medical facilities
                                                  prior to requesting construction dollars. This policy was
                                                              initiated with the FY 2013 budget submission.
----------------------------------------------------------------------------------------------------------------
                         Design Quality               The peer review process has been augmented to include
                                              constructability reviews by professional construction management
                                              firms. The first project to conduct a constructability review was
                                                                                            the Orlando SimLearn Center. This is now a standard practice for
                                                               construction projects and is monitored by OALC to ensure it is
                                                                                  completed prior to award.
----------------------------------------------------------------------------------------------------------------
                                Funding       SCIP process is aligned with the budget process. The development
                                              of integrated master schedules allows the projection of activation
                                              funding for medical and IT needs to be forecast. This forecasting
                                                              allows coordination of funding at all levels.
----------------------------------------------------------------------------------------------------------------
                     Project Management        Contracting officers have been assigned on site for hospital
                                              replacement projects and other large major programs. Additional
                                                    attorneys have been hired and assigned to support major
                                              construction. The increased staff reduces the delays and backlogs
                                                                                              experienced. Local change order thresholds for General Counsel
                                              review have been raised on projects with experienced contracting
                                              officers. A change order handbook was developed and fielded to
                                                                              ensure consistent processing.
----------------------------------------------------------------------------------------------------------------

    In addition to the activities described above, VA reviews 
modifications to identify recurring issues and revises the 
specifications for use on future projects. This allows for improvement 
on future designs. The Acquisition Program Management Framework is 
being applied to construction projects to ensure executive level review 
and approval of projects advancing in design. The review will look at 
the quality of the design and all comments will be reviewed to ensure 
designs are correct for construction.
Questions for the Record from Representative Brown
    You talk in your testimony about costs and change orders, but I 
really only have one concern with this hearing. The Orlando VA Medical 
Center.

    Question 1: The last update I have received says the Medical Center 
will open in August of 2014. What is the date the facility will open?

    VA Response: As of December 2013, schedule updates from the 
Department of Veterans Affairs (VA) prime contractor, Brasfield and 
Gorrie (B&G), show a projected construction estimated completion date 
of December 2014. This schedule has continued to slip from the April 
2014 date provided by B&G in their response to VA's Show Cause letter. 
Once construction is complete, the Medical Center will initiate a 3-
phase activation plan that begins with outpatient services and moves 
inpatients in the final phase. The first patients will be seen 120 days 
after final turnover of the entire building to VA.

    Question 2: Please explain the lack of any progress over the summer 
on this project? I refer to the 84% percent completion rate of the 
facility over the three months of July, August and September.

    VA Response: Completed work did not progress significantly due to 
the contractors' lack of productivity and synchronization of trades, 
leading to overall inefficiencies of effort. Although the VA meets 
regularly with the contractor to discuss observations on performance 
and progress, and has consistently provided recommendations regarding 
sequencing of work and staff, the responsibility for ``means and 
methods'' of completing the work remains with the contractor.
    VA is utilizing the current provisions under the Federal 
Acquisition Regulation (FAR) to monitor the contractor, and taking the 
following steps to protect the Government's interest in project 
completion:

      Continue to retain funds for performance delays, Davis-
Bacon wage violations, and work deficiencies;
      No reimbursement for indirect costs beyond May 12, 2013, 
based upon VA Acquisition Regulations; and
      Notify contractor of intent to withhold liquidated 
damages assessed after extended contract completion date of August 8, 
2013..

    Question 3: In previous meetings and briefings, one of the issues 
brought up was that there was not enough VA staff on site to oversee 
the project. How have you addressed this issue?

    VA Response: VA has increased the number of resident engineers, as 
well as added full-time construction management and architect/engineer 
personnel on site in Orlando. These staffing actions occurred over a 
year ago, and OALC's perspective is there is no staffing issue.

    Question 4: The previous project manager was removed due to not 
following the VA instructions. How is the new manager working out? Has 
there been any advancement on finishing this project?

    VA Response: OALC has seen improvements with the change of the 
contractor's personnel. Although the new superintendent's oversight has 
yielded advancements in certain areas, it appears that the contractor's 
insufficient workforce level makes it challenging to achieve 
significant progress in more areas concurrently.

    Question 5: One of the concerns in this project is the large number 
of change orders that have been submitted. Have those leveled off? Are 
there still changes being made to the design of the facility at this 
late date?

    VA Response: As with any project of this size, scope, and 
complexity, changes continue to be identified but have tapered off 
dramatically, as expected. In the past 7 months, there have been, on 
average, only 13 changes initiated by either VA or the contractor a 
month, each with an average value of only $5,100. In each successive 
month during this period, the number of changes has progressively 
decreased. Additionally, since the design of the facility is complete, 
changes at this stage do not impact the design but are changes 
primarily associated with utility connections or field conditions.

    Question 6: Can this facility be opened in stages? I know the 
outlying buildings are almost complete, except for the landscaping and 
the food service. What can we do to get veterans help tomorrow?

    VA Response: Currently health care services are provided to 
Veterans in East Central Florida through six existing CBOCs in Lake 
Baldwin, Viera, Daytona Beach, Kissimmee, Leesburg, and Clermont. 
Complex outpatient and inpatient services are provided at the Tampa VA 
Medical Center (VAMC), Gainesville VAMC, or local community hospital. 
When construction of the new Orlando facility is complete, most of 
these complex outpatient services and inpatient services will be 
provided at the new facility.
    The Orlando construction project includes the development of a 
medical complex on 65 acres in Lake Nona. The project is being executed 
through seven individual and unique contracts. As each of these 
contracts is completed, and space is turned over to VA, the space is 
activated. For instance, the Community Living Center (120-bed Nursing 
Home) was activated in early December. The 60-bed Residential 
Rehabilitation Treatment Program was activated in February. The 
remaining hospital, clinic, diagnostic and therapeutic facility is 
currently being completed under a contract with an estimated completion 
date in December 2014. Once space is turned over to VA by the 
contractor, the activation plan for this space is planned in 3 phases. 
VA has a comprehensive plan to use space quickly and safely as soon as 
the contractor completes the contractual requirements and releases the 
space to VA. In the meantime, VA is providing health care services for 
Veterans at our CBOCs, VA facilities in Tampa or Gainesville; or at one 
of the area community partners.
Questions for the Record from Representative McLeod
    Question 1: How many months of delay in awarding the lease for the 
Loma Linda Health Care Center come from finding property owners willing 
to sell?

    VA Response: VA experienced delays for several reasons, including 
difficulty in locating and securing a preferred site that met the 
advertised criteria; site owners who became unwilling or unable to sell 
their property; and valuation issues where VA and the site owners could 
not reach agreement on a fair market value purchase price for the 
property. Three site surveys were held and multiple sites reviewed 
before a preferred site was secured through an assignable option to 
purchase. The process took approximately 27 months, including about 21 
months of delays as explained above.

    Question 2: How many property owners owned the land currently being 
developed for the Loma Linda Health Care Center?

    VA Response: The Loma Linda Health Care Center is currently being 
developed on land from one owner.

    Question 3: What role did VHA Women Veterans Health Committees and 
Women Veteran Program Managers contribute to the design of the seven 
Health Care Centers to ensure that they complied with women veteran 
patient privacy standards as stated in VA regulations?

    VA Response: The Veterans Health Administration's (VHA) design 
standards for women's clinics were developed in collaboration between 
OALC's Office of Construction and Facilities Management and VHA's 
Women's Health Services. This collaboration in part ensured specific 
women's privacy requirements were fully incorporated into the latest 
design standards to provide a safe environment for women Veterans. 
During the design of each Health Care Center, medical center staff and 
contracted Architect/Engineering firms were required to use VA's design 
standards and requirements as the foundation for developing the design 
documents.

                                 [all]
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