    [Senate Hearing 114-282]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-282

               FIELD HEARING ON DENVER REPLACEMENT MEDICAL CENTER

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

                                    HEARING

                                   BEFORE THE

                         COMMITTEE ON VETERANS' AFFAIRS
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 APRIL 24, 2015

                                   __________

           Printed for the use of the Committee on Veterans' Affairs

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

             Available via the World Wide Web: http://www.fdsys.gov

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                         COMMITTEE ON VETERANS' AFFAIRS

                       Johnny Isakson, Georgia, Chairman
    Jerry Moran, Kansas                  Richard Blumenthal, Connecticut,
    John Boozman, Arkansas                   Ranking Member
    Dean Heller, Nevada                  Patty Murray, Washington
    Bill Cassidy, Louisiana              Bernard Sanders, (I) Vermont
    Mike Rounds, South Dakota            Sherrod Brown, Ohio
    Thom Tillis, North Carolina          Jon Tester, Montana
    Dan Sullivan, Alaska                 Mazie Hirono, Hawaii
                                         Joe Manchin III, West Virginia
                           Tom Bowman, Staff Director
                     John Kruse, Democratic Staff Director

                                C O N T E N T S

                                  ----------

                                 April 24, 2015
                                    SENATORS

                                                                       Page
    Isakson, Hon. Johnny, Chairman, U.S. Senator from Georgia........     1
    Blumenthal, Hon. Richard, Ranking Member, U.S. Senator from
      Connecticut....................................................     2
    Bennet, Hon. Michael F., U.S. Senator from Colorado..............    27
        Prepared statement...........................................    27
        Rogoff, Bernie, Commissioner, Veterans Affairs, City of
          Aurora; letter.............................................    28
    Gardner, Hon. Cory, U.S. Senator from Colorado...................    31
    Rounds, Hon. Mike, U.S. Senator from South Dakota................    48

                                REPRESENTATIVES

    Perlmutter, Hon. Ed, U.S. Representative from Colorado's 7th
      District.......................................................    32
    Coffman, Hon. Mike, U.S. Representative from Colorado's 6th
      District.......................................................    33

                                   WITNESSES

    Goldstein, Mark, Director, Physical Infrastructure Issues, U.S.
      Government Accountability Office...............................     3
        Prepared statement...........................................     5
        Response to posthearing questions submitted by Hon. Richard
          Blumenthal.................................................    35
    Rylant, Steve, President, United Veterans Committee of Colorado..    19
        Prepared statement...........................................    21
    Robinson, William ``Robby,'' Chairman, Colorado Board of Veterans
      Affairs........................................................    23
        Prepared statement...........................................    24
    Gibson, Sloan D., Deputy Secretary, U.S. Department of Veterans
      Affairs........................................................    35
        Prepared statement...........................................    37
        Response to posthearing questions submitted by Hon. Richard
          Blumenthal.................................................    56
    Caldwell, Lloyd C., P.E., Director of Military Programs, U.S.
      Army Corps of Engineers, U.S. Department of the Army...........    41
        Prepared statement...........................................    43
        Response to posthearing questions submitted by Hon. Richard
          Blumenthal.................................................    57

               FIELD HEARING ON DENVER REPLACEMENT MEDICAL CENTER

                                  ----------

                             FRIDAY, APRIL 24, 2015

                                           U.S. Senate,
                                Committee on Veterans' Affairs,
                                                            Aurora, CO.
        The Committee met, pursuant to notice, at 1:32 p.m. in City
    Council Chambers, Aurora Municipal Center, 15151 E. Alameda
    Parkway, Hon. Johnny Isakson, Chairman of the Committee,
    presiding.
        Present: Senators Isakson, Rounds, and Blumenthal.
        Also present: Senators Gardner and Bennet; and
    Representatives Coffman and Perlmutter.

               OPENING STATEMENT OF HON. JOHNNY ISAKSON,
                  CHAIRMAN, U.S. SENATOR FROM GEORGIA

        Chairman Isakson. I call this meeting of the U.S. Senate
    Committee on Veterans' Affairs to order.
        I want to, first of all, thank the city of Aurora and all
    the citizens of Colorado for their hospitality. We had a great
    visit today. I appreciate being in your great State. I wish we
    could take your weather back to Washington, D.C.
        We are here today for two reasons. Michael Bennet from the
    U.S. Senate and Cory Gardner from the U.S. Senate issued an
    invitation for us to come to Colorado almost immediately upon
    Senator Blumenthal and I being selected chairman and ranking
    member of the Veterans' Affairs Committee. We have been very
    well versed by them and read everything we could read about the
    problems at the VA hospital in Denver, but we wanted to be here
    firsthand at their invitation.
        The second reason we are here is this. When I was chosen
    chairman, I told the Members of the Committee that we had no
    more solemn obligation to the veterans of the United States of
    America than to see to it that they got the benefits and the
    treatment they deserve. They risk their lives and limbs for us.
    We need to do no less than the same for them.
        I pledged, rather than sitting in Washington behind a dais,
    we would go to the cities and the towns and the places where
    the veterans are and where the problems are, holding the VA
    accountable to see to it we deliver the very best possible
    service we could deliver.
        We have been to Wisconsin to look at the problem with the
    over-prescription of opiates. We have been to Arizona, looking
    at the problems that began with the Phoenix hospital where
    consults were canceled, veterans lost appointments and veterans
    died. Now we are here today in Colorado to look at the problems
    with the cost overruns of 427 percent from its inception on the
    veterans' hospital that is pending here in Aurora, CO.
        We are here to get the answers as to why we are where we
    are, what we need to do to get to where we need to be, and see
    to it we fulfill our promise to our veterans and this hospital
    is completed, but also that the VA and those people in the VA
    who need to be held accountable for getting us to where we are,
    are held accountable. As chairman of the Committee, I pledge my
    complete support to the other members of the Senate and the
    House to do exactly that.
        The format of the meeting today is my brief opening
    statement, which you just heard. I will turn to Richard
    Blumenthal from Connecticut in 1 second as ranking member, and
    then we will go straight to our testimony from our first panel.
    Then after that, each Member of the Senate and the House
    members that are here today will be able to ask questions or
    make statements after the testimony of our first panel. Then we
    will go to our second panel, Sloan Gibson from the VA, later
    on.
        I now turn it over to Ranking Member Richard Blumenthal
    from the great State of Connecticut.

      STATEMENT OF HON. RICHARD BLUMENTHAL, RANKING MEMBER, U.S.
                        SENATOR FROM CONNECTICUT

        Senator Blumenthal. Thank you, Mr. Chairman, and thank you
    to the Colorado delegation, our colleagues, Senator Bennet and
    our good friend Senator Gardner, for being here and for
    inviting us.
        We are here at a really critical turning point in this
    project. The question is, will the Nation fulfill its
    commitment to our veterans, not only the veterans of Colorado
    and the Rocky Mountain States but of Connecticut and Georgia
    and all around the country?
        The debacle in Aurora--it is a financial and fiscal
    catastrophe--has to be addressed, and it must be addressed
    positively in finding a path forward, whatever the most
    practical alternatives are to funding completion of this
    project. Right now there is no clear path forward.
        There also has to be accountability. The public officials
    and private-sector actors who bear blame must be held
    accountable. There must be some financial accountability and
    perhaps discipline.
        Part of our goal has to be imposing or finding a way to
    impose that accountability in a way that has not happened
    before. We thought there was going to be accountability after
    the cooking of books and delayed treatment times, but so far I
    am unconvinced there has been that accountability in that
    instance. I remain unconvinced that there is a path forward
    here, that all the alternatives have been explored, and I want
    to see the quality of care, the caliber of health treatment
    that our veterans need and deserve. I also want it done without
    sacrificing care elsewhere in the country.
        The VA has submitted to us a proposal for how to deal with
    that funding. It means deferring or delaying indefinitely
    construction and maintenance elsewhere in the country,
    including Georgia, Connecticut, and South Dakota. In fact, in
    the vast majority of States where our colleagues are going to
    be very reluctant to go back to their constituents and their
    veterans and say you must sacrifice.
        I think a path forward on funding has to be found.
        Thank you, Mr. Chairman.
        Chairman Isakson. Before I go to our panelists, I want to
    make sure to acknowledge the other members of the panel who are
    here and their role in this meeting.
        Senator Mike Rounds from the great State of South Dakota,
    thank you.
        He made a long trip to be here, and he is making a long
    trip home tonight. I appreciate him as a Committee Member and a
    good friend being here.
        Welcome Congressman Perlmutter. With a name like Isakson,
    you would think I could pronounce a name like that.
        Congressman Coffman, thank you for being here.
        Senator Gardner, and obviously Senator Bennet I recognized,
    and Senator Blumenthal I have recognized as well. I think that
    covers all of us.
        With that said, we have two of our three panelists who are
    here. One of our panelists, Mr. Robinson, had a family
    emergency and he will either be late or may not be able to
    attend. So, we are going to go immediately to Mr. Goldstein. He
    is the Director of Physical Infrastructure Issues at the
    Government Accountability Office in Washington, D.C. We
    appreciate your being here today.
        Next we will hear from Steve Rylant, President of the
    United Veterans Committee of Colorado. We are grateful that you
    are here today.
        Mr. Goldstein, we will start with you. Please try to hold
    your remarks to about 5 minutes, if you can.

    STATEMENT OF MARK GOLDSTEIN, DIRECTOR, PHYSICAL INFRASTRUCTURE
                ISSUES, GOVERNMENT ACCOUNTABILITY OFFICE

        Mr. Goldstein. Thank you, Mr. Chairman, Ranking Member
    Blumenthal, and Members of the Committee. I am pleased to be
    here today to discuss information from GAO's April 2013 report
    regarding the construction of new major Department of Veterans
    Affairs medical facilities. That report examined VA's actions
    to address cost increases and schedule delays at four of its
    largest and most expensive major medical facility construction
    projects in Denver, Orlando, New Orleans, and Las Vegas.
        At the time of our review, VA had 50 major medical facility
    projects underway, including new construction and renovation of
    existing medical facilities, at a cost of more than $12
    billion.
        My statement today discusses VA construction management
    issues, specifically: one, the extent to which the cost,
    schedule, and scope for the four selected medical facility
    projects changed since this information was first submitted to
    VA's authorizing committees and the reasons for these changes;
    two, actions VA has taken to improve its construction
    management practices; and three, VA's response to
    recommendations in our report for the agency to further improve
    its management of the costs, schedule, and scope of these
    projects.
        This testimony is based on our April 2013 report. It is
    also based on our May 2013, April 2014, and January 2015
    testimonies on this topic, as well as selected updates that we
    received from VA. These selected updates include information on
    the status of VA's major medical center projects in Las Vegas,
    Orlando, New Orleans, and Denver.
        In April 2013, GAO found the cost substantially increased
    and schedules were delayed for VA's largest medical facility
    construction projects. In comparison with initial estimates,
    the cost increases for these four projects now range from 66
    percent to 427 percent, and delays range from 14 to 86 months.
        Since the 2013 report, some of the projects have
    experienced further cost increases and delays because of design
    issues. For example, as of April 2015, the cost for the Denver
    project increased by nearly $930 million, and the completion
    date for this project is unknown.
        In its April 2013 report, GAO found that VA had taken some
    actions since 2012 to address problems managing major
    construction projects. Specifically, VA established a
    construction review council in April 2012 to oversee the
    Department's development and execution of its real property
    programs. VA also took steps to implement a new project
    delivery method called Integrated Design and Construction,
    which involves a construction contractor early in the design
    process to identify any potential problems early and speed the
    construction process.
        However, in Denver, the VA did not implement this method
    early enough to garner the full benefits of having a contractor
    early in the design phase.
        VA has taken actions to implement the recommendations in
    GAO's April 2013 report. In that report, GAO identified
    systemic reasons that contributed to overall schedule delays
    and cost increases at one or more of the four reviewed projects
    and recommended ways the VA could improve its management of the
    construction of major medical facilities.
        In response, the VA has: one, issued guidance on assigning
    medical equipment planners to major medical facility projects
    who will be responsible for matching the equipment needed for
    the facility in order to avoid late design changes leading to
    cost increases and delays; two, developed and disseminated
    procedures for communicating to contractors early to find roles
    and responsibilities of the VA officials who manage major
    medical facility projects to avoid confusion that can affect
    the relationship between VA and the contractor; and three, it
    has issued a handbook for construction contract modifications
    that includes milestones for completing processing of
    modifications based on their dollar value, and it has taken
    other actions to streamline the change order process to avoid
    project delays.
        While VA has implemented these recommendations, we do not
    have a good idea at this point in time of their impact and how
    effective they have been. Many of these are going to take time
    to show improvements, especially for ongoing construction
    projects, and depends on several issues, including the
    relationship between VA and its contractors.
        Mr. Chairman, that concludes my opening remarks. I would be
    happy to respond to questions that you and the members have.
    Thank you.
        [The prepared statement of Mr. Goldstein follows:]
          Prepared Statement of Mark L. Goldstein, Director, Physical
          Infrastructure Issues, U.S. Government Accountability Office

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

         Chairman Isakson. Thank you very much, Mr. Goldstein.
        Mr. Rylant.

    STATEMENT OF STEVE RYLANT, PRESIDENT, UNITED VETERANS COMMITTEE
                              OF COLORADO

        Mr. Rylant. Thank you, Mr. Chairman and Members of the
    Committee, for the opportunity to testify on an issue that is
    so very important to the veterans of Colorado and the
    surrounding States.
        My name is Steve Rylant, and I am the President of the
    United Veterans Committee of Colorado, also known as UVC, a
    coalition of over 50 different veterans' service organizations
    including the Veterans of Foreign Wars, the American Legion,
    the Disabled American Veterans, the Paralyzed Veterans of
    America, and many others. Our organization works to support
    legislation on veterans on the Federal and State level that
    benefit veterans.
        The need for this replacement hospital goes back many
    years. I became closely involved in 2007 when VA Secretary Peak
    told us they had a new plan to lease 3 or 4 floors of the
    University of Colorado Medical Center for around $300 million
    to replace the current facility. We told him that was not
    acceptable. The veterans deserve a standalone full service
    hospital and medical center. When Eric Shinseki became the VA
    Secretary in 2009, he agreed.
        We had a groundbreaking in August 2009. The VA accepted the
    bid from Kiewit-Turner in October 2010. The VA and Kiewit-
    Turner spent a year negotiating a contract. The UVC told the VA
    that they needed to get a contact signed and start construction
    or we would bring our shovels on Veterans Day 2011 and start
    digging the hole for them. I have a pin that I wear that is a
    shovel with the letters BTDT, ``Build The Damn Thing.'' A week
    before Veterans Day the VA and KT signed the contract and we
    had a celebration.
        Construction began January 2012, two-and-a-half years after
    the groundbreaking. From that day on, we have been meeting with
    the VA, with Kiewit-Turner, and with the Colorado congressional
    delegation.
        In July 2013, Kiewit-Turner filed a complaint in the U.S.
    Civilian Board of Contract Appeals that the construction design
    that they had received from the VA could not be completed with
    the $600 million authorized by Congress and that it would take
    at least a billion dollars.
        In May 2014, Eric Shinseki resigned as Secretary of the VA
    and VA Secretary Robert McDonald and Deputy Secretary Sloan
    Gibson were confirmed. They had a big job ahead of them, as we
    well knew.
        This past December, the U.S. Board of Contract Appeals
    ruled in favor of Kiewit-Turner and found the VA in material
    breach of the contract. Since Kiewit-Turner no longer had a
    valid contract to build the facility, they shut down the
    project. When that happened, 1,100 workers scrambled to find
    other projects to replace this one to keep their people
    employed. Another delay.
        Deputy Secretary of the VA Sloan Gibson came to Denver and
    met with the UVC and leadership of many of our member
    organizations and told us that Kiewit-Turner required three
    things to restart the project: the U.S. Army Corps of Engineers
    must take over administration of the project; that they be paid
    a sum of money that they had put into the project to keep it
    going; and that they needed a bridge contract on a cost
    reimbursable basis with the VA until the U.S. Army Corps of
    Engineers could negotiate and sign a contract. Deputy Secretary
    Gibson agreed, and KT started the project.
        The next delay. The subcontractors have not come back to
    the project because they no longer trust the VA and Kiewit-
    Turner to not shut down the project again. Only 700 of the
    original 1,100 have come back, and this is causing new delays.
    They are waiting to see Congress pass authorization and
    appropriation bills so the Corps can negotiate a completion
    contract with KT. When that happens, they will come back to the
    project. That is why it is so important to get this facility
    completed.
        There is a serious problem of backlog for veterans to get
    appointments with the VA doctors and clinicians. It is not a
    scheduling problem. The schedulers can only schedule
    appointments when there is a room available and a doctor
    available. Getting the medical center completed will begin to
    solve the problem of shortage of patient and examination rooms.
        That is only half of the problem. One of the proposals we
    have heard is to finance the completion of the medical center
    by taking away all bonuses for 3 years until the medical center
    is completed. Because of government regulations, the VA cannot
    pay the doctors and nurses salaries that are competitive with
    the private sector. They make up the difference with bonuses.
    If you take away the bonuses of the doctors and nurses, we
    could have a mass exodus of doctors. When that happens, we have
    a much worse problem. The schedulers will have rooms to
    schedule, but no doctors to schedule. We cannot allow that to
    happen.
        In conclusion, this situation is not the fault of the
    veterans. The UVC unanimously approved a position 3 years ago,
    and it continues today. We do not take sides with the VA, or
    Kiewit-Turner, or Congress, or now the U.S. Army Corps of
    Engineers. We want the replacement Eastern Colorado health care
    system built. We want it built with quality. We want it built
    in the shortest time possible. We want it built by veterans.
    Like the shovel pin says that I wear, ``BTDT,'' build the damn
    thing.
        My written testimony has some more, and I am more than
    happy to discuss anything you would like me to. Thank you for
    the opportunity to testify, and I am available for any
    questions you may have.
        [The prepared statement of Mr. Rylant follows:]
        Prepared Statement of Steve Rylant, President, United Veterans
                             Committee of Colorado
        My name is Steve Rylant and I am the President of the United
    Veterans Committee of Colorado, a coalition of over 50 Veterans Service
    Organizations including the Veterans of Foreign Wars, The American
    Legion, The Disabled American Veterans, The Paralyzed Veterans of
    America and many others. Our organization works to support, testify and
    help get legislation passed on the Federal Level, and the State Level,
    that benefit veterans.
        The need for this replacement VA Regional Medical Center goes back
    many years. I first became involved in 2007 when VA Secretary James
    Peak told us they had a new plan to lease 3 or 4 floors of the
    University of Colorado Medical Center for around 300 Million Dollars to
    replace the current facility. We strongly told him that would not be
    acceptable. The veterans deserve a stand alone full service Hospital
    and medical center.
        When Eric Shinseki became the VA Secretary in 2009, he agreed. We
    had a ground breaking in August 2009. The VA put out a call for bids,
    accepted the bid from Kiewit Turner in October 2010. The VA and Kiewit
    Turner spent a year negotiating a contract. The UVC and its members
    told the VA that they needed to get a contact signed and start
    construction or we would bring our shovels on Veterans Day 2011, and
    start digging the hole for them. I have a pin that I wear that is a
    shovel with the letters BTDT. Build The Damn Thing! A week before that
    Veterans Day the VA and KT signed the contract and we had a celebration
    Construction began January 2012, Two and a half Years after the ground
    breaking! From that day on we have kept a close eye on what has been
    going on, meeting with the VA, with Kiewit Turner, and with the
    Colorado Congressional Delegation.
        There have been many other delays since that time as a result of
    the VA not approving change orders in a timely manner and
    subcontractors not getting paid for the work they had been completed
    for 4 to 6 months after the change order work was finished.
        July 2013 Kiewit Turner filed a complain in the United States
    Civilian Board of Contract Appeals that the construction design that
    they had received from the VA could not be completed with the 600
    Million authorized by Congress and that it would take at least a
    billion dollars.
        A hearing by the House Committee on Veterans Affairs was conducted
    in Denver in April 2014 and Glenn Hagstrom, then Chief of Acquisition
    and Construction, testified that the VA did not need any additional
    funding from Congress and that they would win the litigation and KT
    would have to build the VA Medical Facility with the 600 Million
    already authorized. That was ridiculous!
        In May 2014 Eric Shinseki resigned as Secretary of the VA and
    subsequently VA Secretary Robert McDonald and Deputy Secretary Sloan
    Gibson were confirmed. They had a Big Job ahead of them, as we will
    knew.
        This past December, the United States Civilian Board of Contract
    Appeals ruled in favor of Kiewit Turner and found the VA in material
    breach of the contract. Since Kiewit Turner no longer had a valid
    contract to build the facility, they shut down the Project. When that
    happened, just weeks before Christmas, the subcontractors with about
    1,100 workers on the project had to scramble to find other projects to
    replace this one to keep their people employed. Another delay
        Deputy Secretary of the VA Sloan Gibson, within a week of the
    decision, came to Denver and met with the UVC and leadership of many of
    our members, and told us that Kiewit Turner required three things to
    restart the project. The US Army Corp of Engineers must take over
    administration of the Project, that they be paid a sum of money that KT
    put into the project to keep it going, and that they needed a bridge
    contract on a cost reimbursable basis with the VA until the US Army
    Corp of Engineers could negotiate and sign a construction completion
    contract. Deputy Secretary Gibson told us that he was going to agree to
    all of those requirements the next day in a meeting with Kiewit Turner,
    which he did.
        Kiewit Turner restarted the project and started working to get the
    subcontractors back to work on the construction.
        Then the next delay, The subcontractors have not come back to the
    Project because they no longer trust the VA and Kiewit Turner to not
    shut down the project. only 700 of the original 1,100 have come back to
    the project, and this is causing new delays. They are waiting to see
    Congress pass Authorization and Appropriation bills so the Corp can
    negotiate a completion contract with Kiewit Turner before they will
    come back to the project.
        So to your two questions in the letter inviting me to testify on
    behalf of Colorado's Veterans. There is a serious problem of back log
    for veterans to get appointments with the VA Doctors and Clinicians. It
    is not a scheduling problem. The schedulers can only schedule
    appointments when there is a room available and a doctor available.
    Getting the Medical Center completed will begin to solve the problem of
    shortage of patient and examination rooms. The completion of the
    facility will solve the first part of the equation.
        But that is only half of the problem. One of the ways we have heard
    suggested to finance the completion of the Medical Center was to take
    away all bonuses for three years until the Medical Center is completed.
    Because of government regulations, the VA cannot pay the doctors and
    nurses salaries that are competitive with the private sector. They make
    up the difference with bonuses. If you take away the bonuses of the
    Doctors and Nurses, we could have a mass exodus of highly qualified and
    professional people. If that happens, then the problem of access will
    be worse! The schedulers will have rooms to schedule, but no doctors to
    schedule to examine the veterans in those nice new rooms. We can not
    allow that to happen.
        The delays have obviously negatively impacted the veterans that
    need access to VA Health care with wait times that are totally
    unacceptable, and the Deputy Secretary has publicly acknowledged that
    it is unacceptable.
        Prior to my retirement in 2008 I was a project manager for General
    Electric. What I have seen here is alarming because of that experience,
    but not surprising. I have some thoughts on future projects and how to
    control the costs and delivery times and would be happy to discuss them
    with you.
        In conclusion, this situation is not the fault of the Veterans, The
    United Veterans Committee of Colorado unanimously approved a position
    three years ago, and it continues today. We do not take sides with the
    VA, or Kiewit Turner, or Congress, or now the US Army Corp of
    Engineers. We want the replacement Eastern Colorado Regional Medical
    Center Built! We want it built with Quality! We want it built in the
    shortest time possible! And we want it built by Veterans. Like the
    shovel pin says, BTDT, Build The Damn Thing.

        Thank you for the opportunity to testify and I am available for any
    questions you may have.

        Chairman Isakson. Thank you very much, Mr. Rylant.
        Mr. Robinson, please come forward. We understand you had an
    emergency, and we are sorry. I hope everything is OK. We
    appreciate you making it here quickly, and we would love to
    hear your testimony within 5 minutes.

      STATEMENT OF WILLIAM ``ROBBY'' ROBINSON, CHAIRMAN, COLORADO
                       BOARD OF VETERANS AFFAIRS

        Mr. Robinson. My apologies, Mr. Chairman, and I appreciate
    the opportunity to be here.
        I am William ``Robby'' Robinson, and I am the serving
    Chairman of the Colorado Board of Veterans Affairs, which is a
    seven-member board appointed by the Governor to advise and
    assist the Department of Military and Veterans Affairs, the
    Governor, and the General Assembly on issues affecting
    veterans.
        I would like to note that there are several past members of
    the board here in our presence today.
        The board monitors key issues among the State's veterans,
    and I can tell you that the concern over the progress on the
    medical center remains among the top four issues, which also
    includes claims and appeals processing, homelessness, and
    access to care from our many rural communities.
        We have been monitoring as a board the progress on a new
    medical center since 1999, virtually since the inception of the
    whole idea. It was obvious that a new facility was required,
    and we were pleased that the Department of Veterans Affairs
    recognized the requirement and began searching for places to
    build a new medical center.
        I think it is a bit ironic that we are sitting here in
    Aurora this month of 2015, which was originally about the time
    the facility was supposed to be opened. We know, of course,
    that it is only about halfway finished right now.
        The Board of Veterans Affairs has monitored the
    construction process and the interaction of veterans'
    representatives with the VA and Kiewit-Turner in nearly all
    aspects of the design and construction. The delays have
    disappointed the veterans who worked hard to bring it to
    reality. I think more importantly, the delays have led to
    continued reliance on the old facility which, by its very size
    and age, limits access to timely appointments and procedures,
    as well as patient care. That impacts veterans all over
    Colorado and many in adjacent States that are and will be
    served by the Denver VA medical facility.
        We are very concerned about the challenges facing the VA as
    they try to complete the new medical center. We hope that all
    the parties involved can work together productively and
    cooperatively to complete the project expeditiously.
        The Colorado Board of Veterans Affairs stands ready to
    assist in any way we can. Thank you, Mr. Chairman.
        [The prepared statement of Mr. Robinson follows:]
          Prepared Statement of William ``Robby'' Robinson, Chairman,
                       Colorado Board of Veterans Affairs
        The Board of Veterans Affairs is a seven member board appointed by
    the Governor to advise and assist the Department of Military and
    Veterans Affairs, the Governor, and the General Assembly on issues
    affecting veterans. I would note that several past members of the Board
    are also here today.
        We have been monitoring progress on a new veterans' medical center
    since 1999. It was obvious that a new facility was required and we were
    pleased that the Department of Veterans Affairs recognized the
    requirement and began searching for places to build a new medical
    center. It is ironic that we sit here in Aurora today discussing
    construction of the facility when originally it was supposed to be
    opened about now. The Board of Veterans Affairs has monitored the
    construction process and the interaction of veterans' representatives
    with the VA and Kiewit-Turner in nearly all aspects of the design and
    construction. The delays have disappointed the veterans who worked hard
    to bring it to reality. More importantly, the delays have led to
    continued reliance on the old facility which by its very size and age
    limits access to timely appointments and procedures as well as patient
    care. That impacts veterans all over Colorado and many in adjacent
    states that are and will be served by the Denver VA.
        We are very concerned about the challenges facing the VA as they
    try to complete the new medical center. We hope that all parties
    involved can work together productively and cooperatively to complete
    the project expeditiously.

        The Board of Veterans Affairs stands ready to assist in any way
    that we can.

        Chairman Isakson. Thank you, Mr. Robinson. Thank you for
    your testimony, and thank you for your service to the people of
    Colorado and to the country.
        What we are going to do is each Member is going to ask a
    question, and time permitting we will have a second round of
    questions as well. I will ask the first one.
        Mr. Rylant, when you responded to the question about paying
    for the overruns at the VA hospital here in Denver by docking
    the pay of some of the employees in the Veterans
    Administration, your response was that it is already hard to
    hire people for the VA because of what is paid in their salary
    schedule, and if we had discipline in the VA by lowering the
    pay of anybody, that they might not come to work. Is that
    right?
        Mr. Rylant. That is my understanding. I have talked to
    several VA doctors here, and I believe that the doctors and
    nurses and all the people in the VA hospital really are
    interested in helping veterans. They seem to be more dedicated
    to veterans than civilian hospitals are to civilian patients.
        But there comes a point, the civilian hospitals can offer a
    lot more money to those doctors than the VA can. If I am wrong,
    somebody please tell me that. It is my understanding that they
    make up the difference to keep them there through bonuses, and
    also the opportunities for research, which is why the research
    facility at this health center is so important, because that
    helps bring doctors and nurses into the system.
        Chairman Isakson. I am going to cut you off because we are
    going to try to keep things moving.
        Mr. Rylant. OK.
        Chairman Isakson. I think your point is well taken and you
    are right, but I want to make a point here. When you talk to
    the VA about discipline within the VA in terms of
    accountability for work that is done that is not done well or
    poorly--and I am not talking about nurses and doctors, I am
    talking about construction superintendents and people building
    buildings--you are oftentimes told, oh, we cannot fire anybody.
    If we fire somebody, we cannot get anybody to come to work for
    us for fear of being fired. Therefore, you have an agency that
    is incestuous in terms of less than peak performance.
        So, while I agree about nurses, doctors, and physicians and
    accountability and how you would be very careful in taking
    their bonus away, I think there is got to be some system, an
    improved system of accountability in the administration of the
    VA, to hold people who are responsible for jobs taking place.
        When Mr. Goldstein testified a minute ago that there are
    $12 billion in projects under construction at VA, $4 billion of
    that $12 billion is in New Orleans, Las Vegas, Denver, and
    Orlando. Those projects, between the three or four of them, are
    66 percent, 147 percent, 427 percent, and 80 percent in cost
    overruns. There is a consistent failure of the VA to be able to
    manage its money in construction or manage projects without
    them running over.
        So, I just want to make the point that while your point may
    be well taken on those delivering the services--the physicians
    and the doctors and the nurses--somebody has got to be in
    charge, and somebody who is in charge has got to be held
    accountable for responsibilities that they take in construction
    management and cost of construction projects.
        Mr. Rylant. May I briefly respond?
        Chairman Isakson. Briefly.
        Mr. Rylant. We are in complete agreement. Veterans are also
    citizens and taxpayers, and we do not want our money wasted,
    absolutely. If you have selected to have bonuses taken away
    from the senior management that have done the mismanaging and
    so forth, we are in complete agreement with that. We just would
    not want it to be across-the-board wipeout of bonuses that
    would hurt people at the lower levels that were not responsible
    for the things that happened. We completely agree with you.
        Chairman Isakson. Thank you for your testimony.
        Senator Blumenthal.
        Senator Blumenthal. Thanks, Mr. Chairman.
        Thank you to Mr. Rylant and Mr. Robinson for your service
    to our Nation, and thank you for being here today.
        Thank you, Mr. Goldstein, for the work that you have done
    over the years in holding agencies of the Federal Government
    accountable.
        In this instance, I find your report, even though it is
    somewhat dated, to be absolutely staggering when it talks about
    some of the numbers the Chairman has mentioned. The sheer fact
    that there have been cost overruns in VA construction projects
    of $2.4 billion, and they are still counting, is unacceptable.
    I guess my question is, should the VA be out of the
    construction business?
        It is not easy to construct a complex and costly building
    of this type. People spend their whole lives figuring out how
    to do it, and maybe the Corps of Engineers should be empowered
    to do the VA's construction management since that is its
    business and it has a longstanding and distinguished record in
    this area. Would taxpayers not be better served? That is my
    question.
        Mr. Goldstein. Senator, of the 50 projects that we looked
    at, in addition to these four, we found that roughly half of
    them had cost increases or schedule increases. In the
    appendices to the report that you mentioned, for all 50 of the
    projects, half of them had cost increases, half of them had
    schedule increases.
        So clearly there is a problem at VA that goes, frankly,
    beyond Denver and beyond the four major projects. It goes to
    the entire construction program.
        Whether you decide that VA should continue constructing
    hospitals is really a policy question not well suited for the
    GAO. However, I would say that regardless of whether you allow
    VA to do it or the Army Corps, if you do decide to have VA do
    it, obviously capacity has to be instilled into the agency,
    into the Department to be able to do it. If you look at the
    record--and I have spent some time now looking at what happened
    there--three things come to mind throughout: a lack of
    planning, a lack of communication, and a lack of oversight.
    Those three things are critical to whoever is going to manage
    these programs.
        I am not sure it is a silver bullet to just take it away
    from VA. It may be something you need to do in the short term
    in order to get this job done. I understand that. But capacity
    would be the critical----
        Senator Blumenthal. But your testimony and your reports and
    your work indicates deep-seated institutional failings.
        Mr. Goldstein. Absolutely.
        Senator Blumenthal. We cannot take down the construction
    shelves that have been built in Aurora for the hospital
    facility there. We cannot just start all over again. But, we
    can start over with the VA and adopt a different system so as
    to avoid these kind of systemic failings. They are systematic
    failings in the VA's construction history. They may do some
    things very well, but construction, apparently, is not one of
    them. Thank you.
        Mr. Goldstein. Yes, sir.
        Chairman Isakson. Senator Mike Rounds of South Dakota.
        Senator Rounds. Thank you, Mr. Chairman.
        Gentlemen, thank you for your service to our country.
        Mr. Goldstein, I want to go specifically to this project in
    particular. I have had the opportunity to review your report,
    and sometimes we try to oversimplify; you did not. You went
    through this pretty specifically. What I was trying to do,
    then, was turn around and put it back into something that we
    can share as far as what the basic challenges are here.
        I appreciate the way you have laid out the three specific
    broad categories in which you saw failings. In this particular
    case it would appear--and I would just like it if you think I
    am on the right track or not--it would appear that the original
    estimate was never correct to begin with in terms of what the
    cost would be. Second of all, the late change over to the
    integrated design construction approach late in the game harmed
    rather than helped the process. Finally, there appeared to be
    literally no effective and efficient change order process that
    could efficiently get those changes necessary in a project this
    size in for approval and back out again so our contractors
    could get paid on a timely basis.
        Am I on the right track?
        Mr. Goldstein. You are right on all three counts, Senator.
    Yes, sir.
        Senator Rounds. Thank you, sir.
        Thank you, Mr. Chairman.
        Chairman Isakson. Thank you, Senator Rounds.
        Senator Bennet.

                 STATEMENT OF HON. MICHAEL F. BENNET,
                       U.S. SENATOR FROM COLORADO

        Senator Bennet. Thank you, Mr. Chairman.
        I know that we have to decide whether we are going to give
    an opening statement or ask a question. So I would ask that my
    opening statement be included in the record.
        Chairman Isakson. Without objection.
        Senator Bennet. Thank you, Mr. Chairman.
        [The prepared statement of Sen. Bennet follows:]
        Prepared Statement of Hon. Michael F. Bennet, U.S. Senator from
                                    Colorado
        Chairman Isakson and Ranking Member Blumenthal, thank you for your
    attention to this important project.
        And, thank you for traveling to Denver to see and hear first-hand
    what its completion means for our veterans in Colorado and across the
    Rocky Mountain region.
        Now that you've seen the structure and heard from our veterans here
    in Colorado, I'm sure you understand why our delegation has been so
    outraged and frustrated by this process, and also why we're adamant
    that this hospital is completed.
        There is no other option.
        Bottom line: those most hurt by the VA's negligence and
    mismanagement are our veterans and our taxpayers who have lost faith in
    the VA to complete this project.
        In the words of Steve Rylant and the UVC--``BTDT''--Build The Damn
    Thing.
        There is also much work to be done to ensure that the mistakes that
    were made on the Denver replacement facility never happen again--
    especially since lessons learned from previous VA construction projects
    were not applied to this project.
        That must change.
        We owe that to our veterans and to the taxpayers.
        The story of this Denver replacement facility should have been
    about the government improving the delivery of care to our veterans,
    instead of how feckless and shortsighted it can be.
        The delegation here today looks forward to working with our
    colleagues in Congress and our partners in the Rocky Mountain region to
    do just that.

        Chairman, we will work with you, our veterans and the other Members
    of the Committee to find a solution that completes the hospital so
    veterans can access the care they have been promised.
        Thank you.

        Senator Bennet. I would also ask to put in the record a
    letter that was sent August 9, 2013, to the Inspector General
    of the Veterans Affairs Commission from Bernie Rogoff, the
    Commissioner of Veterans Affairs for the city of Aurora.
        Chairman Isakson. Without objection.
        [The information referred to follows:]

      Letter from Bernie Rogoff, Commissioner, Veterans Affairs, City of
     Aurora submitted by Hon. Michael F. Bennet, U.S. Senator from Colorado

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Bennet. He has still not received an answer to that
    letter. I hope the fact that it is now in the record means he
    will receive an answer to that letter.
        I want to thank you both, Mr. Chairman and the Ranking
    Member from Connecticut. Senator Gardner and I are well aware
    of the importance you attach to the oversight of the VA
    hospital, but your willingness to hold this hearing in
    Colorado--it is very unusual not to have it in Washington--is a
    real demonstration and testament to your seriousness, and it
    honors Colorado's veterans and the veterans of the Rocky
    Mountain West. On their behalf, I want to thank you very much
    for being here.
        I would also like to thank the veterans that are here today
    because we wanted to hold this hearing here so you could be
    here. And in that spirit I guess I would start by asking Mr.
    Rylant and Mr. Robinson, if they would like to comment, what
    the state and condition of the VA hospital is that our veterans
    are using right now in Colorado. In other words, why do we need
    this new veterans' hospital, and what efforts did your
    organizations take and have you taken to alert the VA to the
    challenges that have been occurring out at the Aurora site?
        Mr. Rylant, why do not we start with you?
        Mr. Rylant. In reference to the need, the doctors and
    nurses and----
        Senator Bennet. I am sorry to interrupt, but also include
    in the need access to care by the rural veterans as well.
        Mr. Rylant. OK. The doctors and nurses and staff at the
    present medical facility work hard with what they have, but it
    is an ancient hospital. It has been built on. I mean, the times
    that I have had to go there and find a room, I go through halls
    trying to figure out where I am supposed to go.
        One specific instance. A good friend of mine--and if I said
    his name, I am sure you would know who I was talking about--has
    developed cancer as a result of Agent Orange exposure in
    Vietnam. The hospitals work very hard to help him, and he tells
    me that they are doing a great job of taking care of him as
    quickly as they possibly can.
        But, he had an appointment to have an MRI, and the day of
    his appointment when he went, they had a shortage of people to
    do that. There were four veterans in wheelchairs waiting in the
    hallway to get into the MRI room. That is just not acceptable.
    If you went to a civilian hospital and saw that, heads would
    roll.
        So, we need the new hospital and medical facility to take
    care of people, the veterans who have sacrificed so much, to
    take care of them in a dignified manner. Also, in this hospital
    we are going to have spinal injury facilities. I believe it is
    30 spinal injury beds, which we have needed for a long time. If
    somebody has got a spinal injury, they have got to go to San
    Diego or other places.
        A friend of mine right now is in San Diego getting a spinal
    injury problem taken care of that he has had for years and
    years and years. He would not have to go to San Diego if this
    hospital was built. He would be able to stay here with his
    family and get it taken care of. Those are just a couple of
    personal examples.
        Prior to my retiring in 2008, I was a project manager for
    General Electric. Kiewit-Turner, when they started
    construction, they started having briefings for the UVC to let
    us know what is going on. As I learned about the change order
    process and the design-to-build process, as a project manager,
    I guess I was not surprised but I was horrified.
        When I was a project manager, we had a specific design to
    build. I knew exactly what we had to build. We also had a
    specific date that we had to complete it on, and if we did not
    complete it on that date, we had late delivery penalties. If we
    delivered early, we had early bonuses.
        The change order process that I worked with, we first gave
    a written proposal of scope, cost, and any delay in time that
    would cost the project, and we did not do anything until we had
    a signed document from the customer that he agreed to the
    scope, he agreed to the price he would pay, and he agreed to
    the change in the delivery date.
        What I saw in the process here, Kiewit-Turner would propose
    a change and the VA would say, OK, go ahead and do the change
    and we will decide how much we are going to pay you. That is
    crazy. I do not know how I would have functioned as a project
    manager. There was never a specific date. It just kept floating
    out there, and there was no accountability to KT of when they
    had to have it built. I think they have been working hard to
    get it done because they need to minimize their costs. But the
    moving target of an end date has been horrible.
        I have been attending meetings with their activation
    committee that has to buy equipment to put in there, and they
    have got to schedule delivery of that equipment. If they buy it
    too early, it is going to be out of warranty before it ever
    gets used. The activation committee has had horrible problems
    trying to plan their part of it because they do not know when
    it is going to be built, and we do not know when it is going to
    be built.
        Does that kind of answer your question?
        Senator Bennet. It more than kind of answers my question.
        Chairman Isakson. I will inject there two things. One is on
    the spinal cord injury. We have a distinguished Vietnam veteran
    who is in the audience today who has already consulted with me
    before the meeting about the need to pay attention to the needs
    of veterans with disabilities in the planning process of our
    facilities, and we are going to do that, I promise you.
        Mr. Robinson, you might have a comment? Please try to keep
    your answers a little bit more brief, if you can.
        Mr. Robinson. I will echo from personal experience much of
    what he said, but not as chairman of the board. We work for the
    Governor, and this is fundamentally a Federal issue. We stand
    ready to assist in any way we can.
        My personal experience at the VA has resulted in the fact
    that I do not go to the VA anymore, for several reasons. They
    are too antiquated. They are too small, which leads to, in
    orthopedics for instance, waiting 2-3 months in specialty care
    to get an appointment; that is after you go through your
    primary care physician. It took me 7 months to have a simple
    scoping of my ankle done.
        I have had several procedures there. I look around and I
    say I have access to other care. I have TRICARE. Now I have
    Medicare and TRICARE for life. I am not going to jam up their
    system over there by being one more person who has access to
    outside health care who has to go to the VA and wait so long
    but, more importantly, give the access to other veterans who do
    not have anything but the VA.
        That facility and the limited ORs and the limited exam
    rooms really creates a burden on the veterans. Where does the
    State come in to play a role? Well, this board administers
    about a $1 million grant program that goes to veterans,
    provided by the taxpayers of Colorado through the tobacco fund
    settlement, but also another $1 million we provided. You would
    be amazed at how much of that money goes for transport of rural
    veterans into the hospital system here, and how much of it goes
    for homelessness and the other projects we mentioned. Part of
    that is because the Denver VA just cannot handle all the
    medical issues and the appointments and what-not, nor the
    transportation requirements.
        So, that is what the State has done to kind of fill some of
    the gaps.
        Chairman Isakson. Senator Gardner?

                    STATEMENT OF HON. CORY GARDNER,
                       U.S. SENATOR FROM COLORADO

        Senator Gardner. Thank you, Mr. Chairman, and to Senator
    Blumenthal and Senator Rounds from the Veterans' Affairs
    Committee, thank you for coming to Denver today to be a part of
    this, to see the work that has taken place and to see the work
    that needs to be done.
        Believe it or not, it does look a lot more like 50 percent
    completed than the last time they told us it was 50 percent
    completed.
        I had the opportunity to travel to Afghanistan and the
    Middle East 2 weeks ago. I met with a young 19-year-old soldier
    from Brighton, CO, and all the way from Colorado to Afghanistan
    we talked about what was happening with the veterans' hospital,
    the VA hospital here in Colorado. The last thing a 19-year-old
    soldier ought to be worrying about while he is on the
    frontlines is what is happening with his care on the home
    front.
        Mr. Goldstein, we have seen the report here that you have
    laid out before us. We know there are ongoing conversations
    that you are having with the Veterans Administration. What
    concerns you? What surprises are there? What things are you
    looking out for as we try to solidify an agreement on what is
    now a $1.73 billion project?
        Mr. Goldstein. I think, Senator, that we would continue to
    be concerned about the overall management of the project and
    the relationship between the Army Corps and VA to ensure that
    lines of communication and oversight and accountability between
    those two organizations as they go forward are effective. At
    the end of the day, this is still a VA project. VA is still
    accountable for the results. I would hate to see accountability
    for this project be dissipated by yet a new arrangement that VA
    uses in order to achieve its results.
        That is something that I would be most concerned about
    right now, is making sure that that process works and that
    people who are going to do this are still held accountable for
    it, if you all decide to go down that road.
        Senator Gardner. Thank you, Mr. Chairman.
        Chairman Isakson. Let me just comment. You can rest assured
    that this Committee and the U.S. Senate is going to see to it
    that that does not happen. I mean, this testimony, the visit
    today, your testimony and all that we have learned, it is
    absolutely incumbent, no excuses, that we are going to get the
    project done, get it done right, and hold the VA accountable. I
    do not care what kind of contractual arrangement they make with
    anybody. It is their baby, it is their responsibility, and we
    are going to hold them accountable for it, you can count on
    that.
        Let us see. Congressman Perlmutter? I almost got it right.

                   STATEMENT OF HON. ED PERLMUTTER,
           U.S. REPRESENTATIVE FROM COLORADO'S 7TH DISTRICTn

        Mr. Perlmutter. You got it right, Mr. Chairman. Thank you,
    and thanks to the panel for allowing us to participate in this,
    and thanks to the city of Aurora for sharing their municipal
    chambers.
        As you heard from Mr. Robinson, we are now on our third
    administration: the Clinton Administration, the Bush
    Administration, and the Obama Administration. We have been
    through at least seven secretaries. At least six senators have
    dealt with this, starting with Senator Ben Campbell, Senator
    Wayne Allard, Senator Ken Salazar, Senator Mark Udall, and the
    two senators from Colorado sitting here today. I think we are
    on the fifth Member of Congress that is had some level of
    participation in this, and it is something that we have all
    wanted to see built. It should have been a reward to our
    veterans. Instead we have all been embarrassed by how this has
    proceeded. But even being embarrassed, all of us still have
    resolve to get this done and to provide the services to our
    veterans.
        You mentioned Arty Guerro over there. Arty was one of the
    driving forces, along with many of the other vets in this
    chamber today, to get this done, because we have not had a
    spinal cord unit of any kind for ages and ages.
        I would like to say to Mr. Goldstein, if you go back to
    1999, you probably would see 1,000 percent increase in cost of
    this thing. We need to keep moving. These delays certainly do
    not help.
        In your study, did you figure out how much is cost overruns
    due to increases in prices from when we did the original
    groundbreaking in 2009? Was that part of your study at all?
        Mr. Goldstein. We looked generally at the cost increases
    and schedule delays overall. We did not break it down into the
    specific reasons beyond that and attribute cost to individual
    pieces of it, sir.
        Mr. Perlmutter. Did you----
        Mr. Goldstein. That would be more like an audit.
        Mr. Perlmutter. Did your office look at the initial
    contract that was drawn up between the general contractor and
    the VA for the initial construction at the original price of
    about $600 million? Did you analyze that at all?
        Mr. Goldstein. I do not know if we analyzed it or not, sir.
    I would have to go back and look.
        Mr. Perlmutter. Obviously, this is something that has been
    on the drawing board, and I would just want one little thing.
    Secretary Gibson came out in June of last year. We all met at
    the old facility. All of us--Senator Gardner, Representative
    Coffman, Senator Bennet and I, and a number of others--got on
    an elevator over there, and it immediately dropped a foot, and
    we had to climb out of the elevator to then walk up steps,
    which was no problem. My point being the hospital serves, but
    it is undergone benign neglect since at least 1999.
        Chairman Isakson. Congressman Coffman.

       STATEMENT OF HON. MIKE COFFMAN, U.S. REPRESENTATIVE FROM
                        COLORADO'S 6TH DISTRICT

        Mr. Coffman. Thank you, Mr. Chairman. Thank you so much for
    coming out to the State of Colorado, and your colleagues, our
    counterparts in the U.S. Senate. We deeply appreciate you being
    here.
        As a combat veteran and as a taxpayer, I could not be more
    offended by what has occurred by the leadership of the Veterans
    Administration on building this project, that our veterans in
    this region have earned the right to state-of-the-art health
    care that they are not receiving because of construction delays
    and out-of-control costs on this hospital.
        The core function of VA is the delivery of health care and
    benefits. They are clearly not a construction entity.
        Mr. Goldstein, you in your report, I will tell you what
    amazes me, that Senator Bennet, Congressman Perlmutter, and
    Senator Gardner and myself had repeated meetings with the VA
    after this report was issued in April 2013. I have been on the
    Veterans Committee since January 2013, and before I even got on
    the Veterans Committee, the House Veterans Committee of the
    Congress of the United States requested this study to be done
    by the GAO. It said that this hospital was hundreds of millions
    of dollars over budget and knew it was behind schedule in 2013.
    That is your analysis. Yet we had meeting after meeting with
    the VA where, quite frankly, we were lied to. We were lied to
    again and again and again.
        My question to you is that even before this report, the
    GAO, probably for the last three decades, had been looking at
    VA construction and had been sounding the alarm about problems
    in terms of cost overruns and schedule delays, and I wonder if
    you could comment on that.
        Mr. Goldstein. We have issued a number of reports over the
    years to get to that very issue of delays, cost increases, and
    problems in the management of the VA construction program. That
    is correct.
        Mr. Coffman. I believe in your report, and when I put
    forward legislation in 2013, passed in 2014 after this report
    came out, because one thing you referenced in this report,
    although you did not make it a specific recommendation because
    I think you said that was a positive question, was that the
    Army Corps of Engineers has built similar projects for the
    Department of Defense, and I think you also referenced--I am
    trying to remember the name of the Army Corps of Engineers
    counterpart for the U.S. Navy.
        Mr. Goldstein. The Naval Engineering Command.
        Mr. Coffman. Right, that both these organizations have
    built similar projects for the Department of Defense on
    schedule, on budget. In the four projects that you mentioned
    here that were ongoing at the time, the four major construction
    projects, again each hundreds of millions of dollars over
    budget and years behind schedule, I wonder if you could comment
    on that.
        Mr. Goldstein. They were, sir. They were over budget and
    had multiple delays for a number of reasons. The principal
    reason for all of them included incomplete designs, change
    order processing delays, construction and approval delays, cost
    of material increases, and risk-based pricing. Because of the
    processes and the management of VA, the subcontractors and
    contractors were bidding up and asking for prices because they
    knew there would be problems associated with the program. All
    of those factors led to the delays and to the cost increases
    generally in all those projects. Some were specific, of course,
    to Denver or Orlando and the like. Yet, those overall problems
    were in each one of the projects we looked at.
        Mr. Coffman. I firmly believe that the VA has to focus on
    its core mission, and its core mission is delivering health
    care benefits and delivering claims processing and other
    benefits to the men and women who have served this country in
    uniform, and I think we have got to get this hospital built.
    There is no question about that. But in that process, this cost
    has got to come out of VA's hide. In part, that is going to be
    bonus money.
        There is got to be an outside investigation. VA cannot be
    entrusted to do their own investigation.
        Third, they must be stripped of their management
    construction authority on major construction projects going
    forward.
        With that, Mr. Chairman, I yield back.
        Chairman Isakson. Thank you very much.
        While we switch to the second panel, let me thank Mr.
    Goldstein, Mr. Rylant, and Mr. Robinson for your sacrifice,
    your time, and your service to the country.
        As Sloan Gibson and Mr. Caldwell are making their way
    forward I want to ask Mr. Perlmutter to do me a favor.
        Arty Guerro, Vietnam decorated veteran, lost the use of
    your legs from Vietnam--is that correct?--48 years ago.
        Mr. Guerro. Forty-eight years ago. Yes, sir.
        Chairman Isakson. We are contemporaries, you and I. We are
    of the same vintage and the same age. I want you to know I had
    a coin struck when I became chairman of the Committee that has
    got an acronym on it, ``IDWIC.'' That stands for ``I Do What I
    Can.'' That is the way a guy named Second Lieutenant Noah
    Harris used to email me from the battlefront in Iraq when he
    would send me updates on how he was doing, right up until the
    day before he died, which was the last email I got.
        I want Congressman Perlmutter to present this medal to you,
    Arty, as a token of our appreciation, from the Senate Veterans'
    Affairs Committee, for all your work and sacrifice, and for
    representing all that veterans have done for the United States
    of America. [Applause.]
        Chairman Isakson. It does not get any better than that.
        Thank you very much, Arty.
                                    ------

     Response to Posthearing Question Submitted by Hon. Richard Blumenthal
    to Mark Goldstein, Director, Physical Infrastructure Issues, Government
                             Accountability Office
        Question 1.  GAO's written testimony mentions VA's use of a
    Construction Review Council to assume oversight and accountability
    roles relative to VA's real property programs. In the April 15, 2015
    House Committee on Veterans Affairs hearing on VA construction, Deputy
    Secretary Gibson testified that the Council had not met since he was
    sworn in, and he believed that it ``diffuses responsibility.'' Do other
    Agencies have bodies that play a role similar to the Construction
    Review Council, and are there best practices in this area?
        Response. We have not done work regarding whether other agencies
    have a council of high level officials, such as VA's Construction
    Review Council, that serves as the single point of oversight and
    performance accountability for the planning, budgeting, execution, and
    delivery of property capital-asset program. However, we have identified
    leading practices for performing these functions based on OMB and GAO
    guidance.\1\ For example, before choosing to purchase or construct a
    capital asset, agencies should carefully consider a wide range of
    alternatives. In addition, agencies should establish and follow a
    formal process for senior management to review and approve proposed
    capital assets. Further, after a construction project is implemented an
    evaluation team, composed of individuals not directly involved in a
    project should determine how accurately the project meets the
    objectives, expected benefits, and the strategic goals of the agency
    and indicate the extent to which the agency's decisionmaking processes
    are sustaining or improving the success rate of capital investments.
    ---------------------------------------------------------------------------
        \1\ Office of Management and Budget, Supplement to Circular No. A-
    11: Capital Programming Guide (Washington, DC: July 2012). GAO,
    Executive Guide: Leading Practices in Capital Decision-Making, GAO/
    AIMD-99-32 (Washington, DC: December 1998). GAO, Federal Courthouses:
    Recommended Construction Projects Should Be Evaluated under New Capital
    Planning Process, GAO-13-263 (Washington, DC: April 2013)

        Chairman Isakson. On our second panel we will hear first
    from the Hon. Sloan Gibson, Deputy Secretary of the U.S.
    Department of Veterans Affairs, and then from Lloyd C.
    Caldwell, the Director of Military Programs, U.S. Army Corps of
    Engineers.
        I believe, Mr. Gibson, you are accompanied by Stella
    Fiotes. Is that right? Is that the right pronunciation?
        Mr. Gibson. That is right. Yes, sir.
        Chairman Isakson. I have been messing up ``Perlmutter'' all
    day long, so I wanted to get that right.
        And Dennis Milsten.
        Deputy Secretary, the floor is yours for no more than 5
    minutes.

       STATEMENT OF HON. SLOAN D. GIBSON, DEPUTY SECRETARY, U.S.
     DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY STELLA FIOTES,
       EXECUTIVE DIRECTOR, OFFICE OF CONSTRUCTION AND MANAGEMENT
    FACILITIES; AND DENNIS MILSTEN, DIRECTOR OF OPERATIONS, OFFICE
               OF CONSTRUCTION AND MANAGEMENT FACILITIES

        Mr. Gibson. Yes, sir. The current situation is totally----
        Chairman Isakson. Make sure your mic is on.
        Mr. Gibson. There is no switch here. I am relying on
    somebody else to switch it on.
        Chairman Isakson. You are OK.
        Mr. Gibson. The current situation is totally unacceptable.
    The VA made mistakes on this project. I apologize again. This
    must not happen another time, not on my watch or in the longer-
    term future at VA.
        Our priorities are to finish the project, make the best use
    of resources, and put in place sound construction management
    processes to ensure it never happens again.
        That means embracing lessons learned. It means taking
    meaningful corrective actions. Some of the improvements are
    already in place: requiring major medical construction projects
    to achieve at least 35 percent design prior to establishing
    cost estimates or schedules, or requesting funds; implementing
    a rigorous requirements control process; institutionalizing a
    project review board, similar to that used by the Corps of
    Engineers' district offices; conducting pre-construction
    reviews of major construction projects; a private construction
    management firm evaluates design and engineering factors; and
    integrating medical equipment planners into construction
    project teams from concept through activation.
        In addition to these measures already in place, the Corps
    of Engineers is conducting a broader examination of the VA's
    largest construction projects, and we expect that report next
    month.
        An independent third-party organization is also conducting
    a comprehensive assessment of VA's entire construction program
    as part of the Choice Act legislation and will report their
    findings to Congress by September of this year. We will use the
    findings of the Corps' report and the independent third-party
    assessment to further strengthen VA's construction management
    practices. In the future, VA believes the Corps should be
    designated as construction agent for our largest medical
    facility projects.
        The Denver project has a long history. Let me briefly cover
    two major decision points that I believe led us to where we are
    today.
        In 2009, we hired an architect-engineer joint venture to
    complete a design with an estimated cost of $583 million. VA's
    acquisition strategy for the project was to complete 100
    percent design and then solicit proposals to build. VA, in a
    misguided effort to get work under way, changed strategies to a
    contract mechanism known as integrated design and construct,
    the idea being to bring the contractor on board early to
    participate in the design.
        In August 2010, VA entered into contract with Kiewit-Turner
    to perform design constructability and cost reviews, with an
    option to award facility construction. KT maintained that the
    project could not be built for the established cost. Under
    pressure to move the project forward, VA and the contractor
    executed an option to construct the project in November 2011.
    This option committed VA to deliver a design that could be
    built for $583 million.
        These two watershed events, the selection of the IDC
    contract form and VA's commitment to deliver a design that
    could be built for less than $600 million, were both critically
    flawed. VA's legal interpretation of these two agreements, and
    our ensuing litigation strategy, also compounded these errors.
        In July 2013, KT filed a complaint with the Civilian Board
    of Contract Appeals, and in December VA was found in breach of
    the contract for failure to provide a design that met the
    contract price. I would be remiss in my testimony if I did not
    take particular note of the commitment that Kiewit-Turner has
    to this project and the quality of work that KT and their
    subcontractors have completed over the life of the project. I
    think the fact that Peter Davoren has--who are both sitting
    here today present at this hearing is an indication of their
    commitment to this project and their desire to see veterans
    being served at this facility.
        That brings us to where we are today. After analysis by the
    Corps of Engineers, we informed Congress that the total
    estimated cost of the facility will be $1.73 billion, which
    includes the Corps' estimate of $700 million to complete
    construction. The total would require an authorization increase
    of $930 million and additional funding of $830 million.
        After consulting with our partners, reviewing the status of
    the project, considering cost, risk, scope and scale, and time
    required, we believe the best option for veterans and for
    taxpayers is to contract with KT to complete the project,
    leveraging the 100 percent design, KT's knowledge of the
    project, presence on the site, and existing subcontractor
    relationships.
        Now we must work with this Committee and others to secure
    funding. We have proposed funding the cost by using a portion
    of the $5 billion provided for minor construction and non-
    recurring maintenance in the Choice Act, and we look forward to
    discussing that proposal and other options with the Committee.
        We know that accountability is also central to ensuring
    that VA never repeats the mistakes that led to these delays and
    cost overruns. As stated earlier, I believe two critical
    decisions led to the current situation, decisions made in 2010
    and 2011. None of the people who were in positions of
    responsibility for the project during this critical time are
    still in these positions. In fact, only one still remains at
    VA.
        Our administrative investigation board is still under way,
    and I have also asked our IG to conduct a formal investigation
    of all aspects of the Denver project. I will continue to pursue
    accountability actions wherever evidence supports it.
        All that said, when completed, the Denver facility will be
    a tremendous resource for veterans and their family members in
    Eastern Colorado and throughout the Rocky Mountain area, an
    exceptional Level 1A facility.
        Thank you, Mr. Chairman. We look forward to answering your
    questions.
        [The prepared statement of Mr. Gibson follows:]
         Prepared Statement of Hon. Sloan D. Gibson, Deputy Secretary,
                      U.S. Department of Veterans Affairs
        Good morning, Mr. Chairman and Members of the Committee. Thank you
    for the opportunity to update the Committee on the status of the
    construction of the replacement medical center in Denver. I am
    accompanied today by Ms. Stella Fiotes, Executive Director, and Mr.
    Dennis Milsten, Director of Operations, of the VA Office of
    Construction and Facilities Management.
        The Department's main priority regarding the Denver project is to
    complete the facility without further delay, and to do that while
    delivering the best possible value to taxpayers given the difficult
    circumstances. Our commitment to completing this project, which is
    intended to serve over 390,000 Colorado Veterans and their families,
    has never wavered, and current VA medical facilities and programs in
    the area continue to ensure that no Veterans or their families go
    unserved.
                                   background
        I think it is important to review the events that brought us to
    where we are today. I would like to highlight some key events that
    directly shaped the current status of the project.
        The replacement of the existing Denver VA Medical Center began as
    an idea between the University of Colorado and VA to construct a shared
    facility. The project went through a protracted development period that
    included a concept to build a shared facility with the Department of
    Defense. VA requested design funds in fiscal year (FY) 2004, with an
    estimated project budget of $328.5 million. In 2004, then VA Secretary
    Principi set forth the requirement for a stand-alone VA facility on the
    Fitzsimmons campus. VA developed a plan for a 1.4 million square foot
    facility in 2006, then revised that plan to 945 thousand square feet,
    and subsequently requested appropriations for an $800 million project
    in 2010 with final funding being requested and received in 2012.
        VA retained the services of an architect engineer firm (AE) to
    complete a design with an Estimated Construction Cost at Award (ECCA)
    of $582 million. The original acquisition strategy for the project was
    to complete 100 percent design and then solicit construction proposals
    to build the project. This strategy was changed to use a different
    contract mechanism, known in the Industry as ``Early Contractor
    Involvement,'' to bring the contractor onboard early to participate in
    the design. This change in acquisition strategy, intended to expedite
    project delivery by overlapping early phases of construction with
    completion of the design, was a decisive moment in the life of the
    project. The timing and appropriateness of this specific delivery
    method underlie many of the ensuing issues with the management of the
    project. VA entered into a contract in August 2010 with Kiewit-Turner
    (KT) to perform design, constructability, and cost reviews. This
    contract also provided an option to award the construction of the
    facility to the contractor.
        At the time of the 2010 contract award, the design had progressed
    to a point that limited the opportunity for the contractor to influence
    the design and cost. The contractor provided pre-construction services
    and amid attempts at cost reconciliation with the designer, the
    contractor maintained that the project was over budget and could not be
    built for the established ECCA. The parties negotiated for a period of
    approximately six months to arrive at a construction contract price but
    differences remained. Feeling the need to finally get to construction
    award for the project, VA and the contractor executed an option on
    November 11, 2011, to build the replacement hospital, which became
    known as Supplemental Agreement 07 (SA-07). The total design was not
    100 percent complete at the time; it was at what was deemed an
    ``enhanced design development or roughly 65% stage.'' SA-07 stated that
    VA would ensure that the design produced would meet the ECCA of $582.8
    million and that the contractor, KT, would build the project at the
    firm target price of $604 million, which included pre-construction
    services and additional items. This was the next and probably most
    critical point in the project's evolution. VA's promise to ensure that
    the design produced met the ECCA became the centerpiece of diverging
    interpretation and conflicts between VA and the contractor. Course
    correction opportunities were missed because of the fundamentally
    different interpretation of SA-07, poor project and contract
    management, and the increasingly strained relationships among the
    parties.
        KT filed a complaint with the Civilian Board of Contract Appeals
    (CBCA) in July 2013 that further cemented the differing perspectives on
    the interpretation of the contract and ultimately the cost of the
    project. Despite the less-than-optimal business environment during the
    year-and-a-half of litigation, construction quality and progress were
    maintained. In December 2014, VA was found in breach of contract for
    failure to provide a design that met the ECCA, and KT began to
    demobilize from the project site. VA entered into immediate
    negotiations with KT to stop the demobilization, recognizing the
    hospital was approximately 50 percent complete. Subsequently, VA
    entered into an interim agreement with KT to continue the project, and
    with the United States Army Corps of Engineers (USACE) to assess the
    project, and to manage all the pre-award activity related to the
    follow-on contract. VA intends to enter into a separate agreement with
    USACE to execute a new construction contract and to complete the
    facility once we have obtained the necessary authorization and funding.
                  options and costs for completion of project
        After the decision by the CBCA, VA identified two primary courses
    of action. The first was to allow KT to continue demobilizing and have
    VA assume maintenance of the site, update the construction contract
    documents, and re-compete the contract for the remaining work. The
    second option was to re-establish a contractual relationship with KT
    for continued construction of the medical center. The option to re-
    compete the project represented a potential 18- to 22-month delay,
    involving closeout of the existing contract and development and award
    of a new contract to finish the job. While this work was ongoing, VA
    would also need to engage several contractors to maintain the site and
    preserve the work accomplished to date. In addition, VA would have to
    recognize the bidding climate for this project would not be
    advantageous, and a premium would be applied by subcontractors to cover
    perceived risk. These factors would have served to increase both the
    length of time to complete the project and its ultimate cost.
        The second option of retaining KT leveraged their current knowledge
    of the project, presence on the site, and existing relationships with
    subcontractors. It reduced delays that could have impacted construction
    warranties and provided the best option for protecting the existing
    construction. Finally, resuming work with KT put over 600 workers back
    on the job, and also best protected the significant investment already
    made in this project. In the days immediately following the
    demobilization, this option represented the clearest path to achieving
    the two main goals stated above. For this reason, it is the path that
    VA chose.
        On March 17, 2015, VA notified Congress that the total estimated
    cost for the Denver Replacement Medical Center project would be $1.73
    billion. This is an authorization increase of $930 million to complete
    the project and requires additional funding of $830 million. The new
    authorization level reflects input from USACE on the required cost to
    complete the project. USACE has had access to all design documents and
    VA staff relative to the Denver project. The USACE team included
    subject matter experts in cost contracting, acquisition, construction
    management, design management, and cost engineering. The team also
    looked at the cost to administer the construction. USACE was provided
    access to all estimates of construction, cost paid to-date, and
    modifications executed. USACE also examined the original contract as
    well as the interim contract to assess cost and completion progress.
        USACE used all this information to form their assessment of the
    cost to complete the effort. Their estimate included a contingency and
    cost to manage the construction. USACE estimates a need for an
    additional $700 million following the close out of the original and
    interim contracts. USACE has established a June 2015 target to award a
    new contract for the completion effort.
        VA added the cost necessary to continue the interim contract
    through June 2015, additional funds for closing out the original
    contract and funds for completing the Post Traumatic Stress Disorder
    residential treatment facility. This totaled $130 million in addition
    to USACE's construction completion estimate. The money currently on the
    project of $899.8 million, plus the $700 million and the $130 million,
    drive the $1.73 billion estimate for the project.
        Now, we must work with this Committee and others to secure funding.
    We have proposed funding the increased cost by requesting authority to
    use funds provided to VA in The Veterans Access, Choice, and
    Accountability Act.
        The Act provided $5 billion in mandatory funding to increase health
    care staffing and improve physical infrastructure. We propose adjusting
    that language to enable VA to redirect a portion of this funding toward
    the remaining requirements to complete the Denver project. We will
    forward to the Committee an updated spend plan for the $5 billion that
    shows how this proposed change would impact the allocations for other
    VA programs. We believe this is the best approach among the difficult
    choices before us.
        This hospital complex is an important part of VA infrastructure,
    and completing it will improve access to care for over 390,000 Colorado
    veterans. The development of this new, state-of-the-art medical center
    will enhance Veteran health care capabilities in the Eastern Rockies by
    ensuring every patient receives the fullest complement of clinical
    services. The expansion of Mental Health services will meet a projected
    workload increase of 16% over the next 20 years support VA's targeted
    goal of improving Veteran wellness and economic security. Clinical
    education will also be significantly enhanced by increasing space to
    match clinical need and patient demand.
                                 accountability
        VA established an Administrative Investigation Board to look at the
    actions and processes that resulted in the current situation and the
    employees responsible for those actions and decisions. At this
    juncture, while the investigation is ongoing, it is premature for VA to
    identify who may be subject to appropriate disciplinary action. VA
    intends to hold any individuals found to have acted negligently
    accountable for their actions. As previously discussed during the
    hearing in January 2015, USACE is also conducting a broader, detailed
    examination of VA's major construction program to identify gaps and
    improve management processes, structures, and controls in project
    oversight and delivery. We expect USACE to complete their review and
    report their findings in May 2015. In the interim, we changed the
    reporting structure within the Department so that the Office of
    Construction and Facilities Management reports directly to me to ensure
    continued visibility and accountability in real time.
        In addition to the review of the four large hospital projects by
    USACE, an independent third-party organization is conducting a
    comprehensive assessment of the entire VA construction program as part
    of the Choice Act legislation and will report their findings to
    Congress by September 2015.
                         the future of va construction
        Over the past two years, VA has significantly changed the way it
    conducts business, but more work remains to be done. Unfortunately,
    many of these changes were too late to affect the Denver project.
        To help ensure that previous challenges are not repeated and to
    lead improvements in the management and execution of our capital asset
    program as we move forward, VA will continue to adopt best-management
    practices and controls including:

         Incorporating integrated master planning is essential to
    ensure that the planned acquisition closes the identified gaps in
    service and corrects facility deficiencies.
         Requiring major medical construction projects must achieve
    at least 35-percent design prior to cost and schedule information being
    published and construction funds requested.
         Implementing a deliberate requirements control process,
    where major acquisition milestones are identified to review scope and
    cost changes based on the approved budget and scope. Any significant
    changes in project scope or cost need to be approved by the Secretary
    prior to submission to Congress.
         Institutionalizing a Project Review Board (PRB). VA worked
    with USACE to establish a PRB for VA that is similar to the structure
    at the USACE District Offices. The PRB regularly provides management
    with metrics and insight to indicate if/when a project requires
    executive input or guidance.
         Using a Project Management Plan to outline a plan for
    accomplishing the acquisition from planning to activation to ensure
    clear communication throughout the project.
         Establishing of VA Activation Office to ensure the
    integration of the facility activation into the construction process
    for timely facility openings.
         Conducting pre-construction reviews--Major construction
    projects must undergo a ``constructability'' review by a private
    construction management firm to evaluate design and engineering factors
    that facilitate ease of construction and ensure project value.
         Integrating Medical Equipment Planners into the
    construction project teams--Each major construction project will employ
    medical equipment planners on the project team from concept design
    through activation.

        These improvements are being applied to our ongoing and upcoming
    major construction projects. Depending on the stage of development,
    some projects like the Denver Replacement Medical Center did not
    benefit from many of these improvements.
        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 rehabilitation centers;
    spinal cord injury centers; a blind rehabilitation center; and
    community living centers. The New Orleans replacement facility is
    currently on schedule, and is anticipated to be completed in the fall
    of 2016. This is not to diminish our serious concerns over the mistakes
    that led to the current situation on the Denver project, but only to
    emphasize that we have successfully managed numerous projects through
    our major construction program. VA takes full responsibility for the
    situation in Denver, and we will continue to review our major
    construction program and the details of this project to improve our
    performance. We must ensure these mistakes never happen again. Not only
    will we rigorously apply the best practices above and those included in
    the Corps' report, we look forward to receiving the independent study
    directed by The Choice Act. We will work with the Independent
    Commission established by Congress under the Choice act to provide a
    comprehensive proposal for the future of VA's construction program.
        In closing, each day, VA is moving toward its goal of improving and
    streamlining our processes to increase access to our Veterans and their
    families. I am personally committed to doing what is right for Colorado
    veterans, and completing the Denver project without further delay and
    to do that while delivering the best possible value to taxpayers given
    the difficult circumstances.

        Mr. Chairman, this concludes my statement. Thank you for the
    opportunity to testify before the Committee today. My colleagues and I
    would be pleased to respond to questions from you and Members of the
    Committee.

        Chairman Isakson. Thank you, Deputy Secretary Gibson.
        Mr. Caldwell, am I correct that you all are there in
    support; you are not to testify?
        Mr. Milsten. Yes, sir. Correct.
        Chairman Isakson. OK.
        Mr. Caldwell, welcome.

      STATEMENT OF LLOYD C. CALDWELL, P.E., DIRECTOR OF MILITARY
    PROGRAMS, U.S. ARMY CORPS OF ENGINEERS, U.S. DEPARTMENT OF THE
                                  ARMY

        Mr. Caldwell. Thank you, Chairman Isakson.
        Chairman Isakson. I know you are a good man because you
    married a Georgia girl. [Laughter.]
        Mr. Caldwell. Yes, sir, and she keeps me straight, that is
    for sure. Thank you.
        Thank you, Chairman Isakson, Senator Blumenthal, Members of
    the Committee and congressmen. We appreciate the opportunity to
    appear before you on behalf of LTG Thomas Bostick, the Chief of
    Engineers.
        My job with the Corps of Engineers is the application of
    our engineering and construction capability in support of
    defense agencies and other agencies that we may support.
        The Corps recognizes the importance of the service of the
    members of the Armed Forces and the service of our veterans in
    sustaining the strength of our Nation. The Corps has
    significant construction management capabilities and experience
    in delivering medical facilities, primarily for the Department
    of Defense, but also with other agencies.
        Today I will address the actions we are taking in
    partnership with the Department of Veterans Affairs to complete
    the construction of the Denver hospital and otherwise assist
    them with their construction program.
        The Department of Defense construction program utilizes
    designated construction agents, of which the Corps of Engineers
    is one. Earlier someone mentioned NAFEC, the Naval Facilities
    Engineering Command, which is also one. These agencies procure
    and execute the design and construction of projects to deliver
    the Department of Defense infrastructure requirements, as
    authorized by law.
        Interagency collaboration is an important element of the
    Corps' work, and the Corps provides interagency support to non-
    defense agencies as well as part of our service to the Nation.
    The Economy Act provides the necessary authority for the Corps
    to assist the VA with any construction requirements, from minor
    to major construction, to include completion of the Denver
    hospital.
        There are currently three lines of effort associated with
    the Corps' support to the VA's major construction program,
    which includes completing the Denver hospital project as the
    construction agent. We are also undertaking a review to
    identify lessons learned from the Denver hospital project and
    three other major projects, the Las Vegas, the Orlando, and the
    New Orleans projects. Finally, we are engaging with the VA
    leadership in discussion regarding the application of best
    practices and other application and execution of their program.
        In December 2014, the VA and the Corps entered into an
    Economy Act agreement to allow the Corps to assist the Denver
    project. Beginning in January, we had a number of technical
    experts visit the site and assess the completed work and the
    design documents. We later modified that agreement to provide
    funding and authority to prepare for the award of a new
    contract to complete the construction. Currently we are working
    with the VA on a new agreement that would allow the Corps to
    actually award a contract and to manage the contract when that
    action is authorized by Congress.
        Our teams of professionals have made progress to formulate
    a new construction contract. We have identified the preferred
    course of acquisition. In February, we issued a Notice of
    Intent to industry of our intent to negotiate and award a sole-
    source contract to Kiewit-Turner. That gave industry the
    opportunity to comment on our plan of action. We have recently
    achieved approval per the Federal acquisition regulation from
    appropriate Army acquisition authorities to proceed in this
    manner, and we began discussions just this week with the senior
    leadership of Kiewit-Turner to prepare for the negotiations of
    that new contract.
        As we work toward a new contract award, we will continue to
    assess the developments on this project and the detailed
    requirements, taking into account the fact that the
    construction is continuing under an interim separate VA
    contract with Kiewit-Turner. The Corps provided a preliminary
    estimate for completing construction at Denver, which was one
    component of the increased authorization requirements reported
    to Congress by the VA. The VA included the Corps' estimate,
    along with other VA costs, for the project. Meanwhile, we are
    developing an independent estimate that will be suitable for
    our negotiation of the new contract.
        As the actions for the new contract are proceeding, the
    Corps is also advising the VA on the management of the interim
    contract with Kiewit-Turner. The interim contract permits
    continued progress on the project while the Corps prepares to
    assume construction agent responsibilities. Although the Corps
    will assume a lead role in the construction of the Denver
    hospital, the VA remains the project proponent and is still
    responsible for project requirements, for resourcing, and for
    facility transition to full operation.
        In partnership with the VA, and in partnership with Kiewit-
    Turner, and by using the Corps of Engineers' project delivery
    process, we are confident that the Corps can complete the
    construction of the Denver hospital in a most effective way.
        Concerning the Corps' review of the four major medical
    projects--Denver, New Orleans, Las Vegas, and Orlando--the
    purpose of that review is to assess the management processes
    which were then used by the VA and which they may then use to
    assess their organizational structure, processes, and controls.
    The scope of our effort is an analysis of the current
    techniques and procedures used by the VA for these projects,
    and we will compare those with how the Corps of Engineers
    conducts its business with the Department of Defense process
    for executing major medical infrastructure projects. That
    review is under way, and the objective is to provide a report
    to the VA in May.
        We have other projects not related to the Denver hospital
    that we continue to execute for the VA. That association
    predated the existing challenges. We are committed to working
    with the VA as construction agent to complete this project, as
    well as future projects, as may be appropriate.
        Mr. Chairman, that concludes my statement. I will be glad
    to answer questions that you may have.
        [The prepared statement of Mr. Caldwell follows:]
       Prepared Statement of Lloyd C. Caldwell, P.E., U.S. Army Corps of
                     Engineers, U.S. Department of the Army
        Mr. Chairman and Members of the Committee, thank you for the
    opportunity to appear before you on behalf of Lieutenant General Thomas
    Bostick, the Chief of Engineers. I provide leadership for execution of
    the U.S. Army Corps of Engineers (Corps) engineering and construction
    programs in support of the Department of Defense (DOD) and other
    agencies of the Federal Government.
        The Corps fully recognizes the importance of the service of members
    of the Armed Forces 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 the technical capabilities we provide, from
    consultation to delivery of infrastructure. The Corps has significant
    construction management capabilities and experience delivering medical
    facilities for our servicemembers and veterans.
        DOD's construction program utilizes designated Construction Agents,
    of which the Corps is one, that procure and execute design and
    construction of projects to deliver the Department's infrastructure
    requirements authorized by law. The Corps is also known for the Civil
    Works projects it executes for the Nation, and the Corps' capabilities
    are perhaps uniquely developed to deliver both defense and non-defense
    infrastructure. 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. The Economy Act (31 U.S.C. 1535) provides
    the necessary authority for the Corps to assist the VA with any
    construction requirements, from minor to major construction.
        Today, we have been asked by the Committee to testify on the
    subject of the Denver Replacement Medical Center in Aurora, Colorado
    (Denver Hospital), including the Corps' review of the original and
    interim contracts and the completion estimate. We have also been asked
    to address the Corps' review of the Department of Veterans Affairs (VA)
    major construction program and recommendations to improve project
    oversight and delivery.
        There are currently three lines of effort associated with the
    Corps' support to the VA's major construction program. One is the
    completion of the Denver Hospital project as the construction agent.
    Another is a review of management processes from the Denver Hospital
    and three other major projects, which may be used by VA to assess their
    organizational structure, processes and controls. The third is
    discussion with VA leadership regarding best practices and how we may
    help support major project execution in their future program.
        In December 2014, the VA and the Corps entered into an Economy Act
    agreement to allow the Corps to assess the Denver Hospital construction
    project. Subsequent modifications to this agreement have provided
    funding and the authority to prepare for the award of a new Corps
    contract to complete the construction. We are currently working with VA
    to develop a new agreement that would allow the Corps to award the new
    contract and transition the construction agent responsibility to the
    Corps to manage the new contract. Beginning in January, we had a number
    of technical experts on site to assess the completed work and contract
    documents. Subsequently those and other teams of professionals,
    including from the Northwestern Division, Omaha District, Huntsville
    Engineering and Support Center, and Corps Headquarters are undertaking
    the steps that will lead to award of the new construction contract as
    well as to managing the contract through to completion. We have
    identified a preferred course for acquisition, and in February we
    issued a Notice of Intent to negotiate and award a sole source contract
    to Kiewit-Turner, and we have requested approval for the acquisition
    strategy. As we work toward a new contract award, we continue to assess
    the detailed requirements of this project, taking into account the fact
    that construction is continuing under a separate VA contract with
    Kiewit-Turner.
        The Corps provided a preliminary estimate for completing
    construction at Denver, which was one component of the increased
    authorization requirements reported to Congress by the VA. The VA
    combined the Corps' estimate with other VA costs for completing the
    project. The preliminary estimate was appropriate to inform the
    increased authorization requirements. Meanwhile, we are developing an
    independent estimate suitable for negotiation of the new contract.
        As the actions for a new Corps contract are proceeding, the Corps
    is also advising the VA on the management of the VA's interim
    construction contract with Kiewit-Turner. This approach continues
    progress on the project while the Corps prepares to assume construction
    agent responsibilities.
        While the Corps will assume the lead role in the construction of
    the Denver Hospital, the VA, as the project proponent, will remain
    responsible for project requirements, resourcing and facility
    transition to full operations. By using our project delivery process,
    we are confident that the Corps, acting as the Construction Agent, can
    complete construction of the Denver Hospital for VA and our veterans.
        Concerning the Corps' review of VA's four major medical projects,
    the purpose is to review management processes, which may be used by VA
    to assess their organizational structure, processes and controls. The
    scope of the Corps effort is an analysis of current VA techniques and
    procedures utilized in executing construction of their major hospitals
    compared to procedures used by the Corps in executing major medical
    infrastructure projects. The construction projects under review include
    the medical facilities at New Orleans, Las Vegas, and Orlando, in
    addition to the Denver Hospital. The review is underway with the
    objective to provide a report to VA in May. There are no findings and
    conclusions currently to report.
        In regard to the third line of effort, we have assisted the VA to
    establish a project review process for major projects.
        In other efforts, which predate our involvement with the Denver
    Hospital project, we provide assistance to VA to execute multiple minor
    construction and non-recurring maintenance projects for the Veterans
    Integrated Service Networks and the VA's National Cemetery
    Administration. We are committed to work with VA to complete the Denver
    Hospital, to continue our partnership and to collaborate on future
    major construction projects.

        Mr. Chairman, this concludes my statement. Thank you for allowing
    me to be here today to discuss the Corps' capabilities and our work to
    assist VA. I would be happy to answer any questions you or other
    Members may have.

        Chairman Isakson. Thank you very much, Mr. Caldwell.
        Secretary Gibson, you made the comment that all those that
    had a responsibility for the problems at the Denver VA are no
    longer working on that project. Is that correct?
        Mr. Gibson. That is correct. Those directly responsible,
    yes.
        Chairman Isakson. Is it true that the principal person
    responsible earlier retired with a full pension? Correct?
        Mr. Gibson. In fact, I believe most of the people that were
    involved in the project retired.
        Chairman Isakson. They either retired or they were
    transferred within the agency. Is that correct?
        Mr. Gibson. There is one individual that still works at the
    agency. He was the project executive at the time. He was moved
    from this project, assumed a position without supervisory
    responsibilities at a lower grade.
        Chairman Isakson. My point is that Secretary McDonald told
    us he had made 700 personnel moves in his first year as
    Secretary. Eleven of those were terminations. All the rest of
    them, 689 of them, were transfers, early retirements or things
    of that nature.
        The reason we are always given for accountability being
    difficult is that you cannot really fire anybody in the Federal
    Government. Well, you can, for cause. It would seem to me, in
    places where you are talking about hundreds of millions or
    billions of dollars, there are causes there that contributed to
    the losses of the taxpayer, and there ought to be
    accountability more than somebody taking a pension and retiring
    or transferring within the agency. That is just my statement.
    Since you are not answering that statement, I am going to put a
    question in.
        Mr. Gibson. I agree with that sentiment precisely.
        Chairman Isakson. We will probably make it one out of two
    because here is my next observation. Senator Blumenthal,
    Congressman Coffman----
        Senator Bennet. Can I just say, nothing else in Washington
    runs as well as this Committee runs under this chairman. So, we
    are grateful for the example.
        Chairman Isakson. Congressman Coffman made reference to
    some consequences for people in terms of how we pay for this
    overrun at the Denver VA. The ranking member has made a number
    of comments about it--let me just give you an observation.
        I am sitting in the Committee and the VA comes to me and
    says we have got a $930 million overrun on top of a $600
    million overrun, we need to find some way to pay for it, we are
    going to take it out of Veterans Choice, that is our solution.
        I am going to ask you two questions. How much in the
    administrative budget of the VA did you first look for to find
    that money? Number 1. Number 2, if you are going to take it out
    of Veterans Choice, who are you going to penalize and how are
    you going to fix them when their problem comes up?
        I will give you one good example. If you go through the
    Fiscal Year 2015 budget for the administrative offices of the
    VA, there is an increase of 73 FTE and $66 million in 1 year
    for personnel. That is some money that should be available for
    a contribution toward the $930 million. That is number 1.
        Number 2. If, in fact, the Corps of Engineers is going to
    take over construction and this thing is going to be out of
    your hair, I do not know why you need $53,874,000 for
    acquisition, logistics, and construction. You might need some
    of it, but you are certainly not going to need all of it. That
    money ought to be going to the overruns, and that is where you
    need to find as much of the money as you can, not in penalizing
    veterans from the program Congress passed to try to improve
    their access to VA health care. That was a statement, not a
    question. However, if you want to respond, you can.
        Mr. Gibson. I would like to respond, Mr. Chairman. We will
    take a look at those specific areas that you have raised. I
    would tell you, if there was ever a time when VA had the
    ability to go reach inside its organization and scrape out
    additional resources for any particular purpose, this is not
    the time.
        We have been working for almost a year now to do everything
    possible to accelerate care for veterans. We have hired 8,000
    additional staff in VHA over the last 12 months. We have got
    emergency leasing activity going on at locations around the
    country in order to be able to provide additional access to
    care. We had nothing in our 2015 budget for the new Hepatitis C
    protocol, and we were able to go in and find $700 million that
    we pulled over in there which, frankly, we are about to run out
    of. So, we are trying to figure out how to be able to bridge
    the period until the 2016 budget to continue to provide that
    Hepatitis C care.
        Last, while we have not done a good job of executing the
    Choice Program, per se, we have seen an explosion in referrals
    of veterans to VA care in the community, as opposed to allowing
    them to continue to wait.
        All of these things done to try to accelerate access to
    care. Historically, what VA did, my view is we managed to a
    budget, and what we are shifting to is managing to veterans'
    requirements, managing to the needs of the people that we are
    serving, and that is what is happening right now, and that is
    why we do not find ourselves in a situation where we have got
    buckets of money sitting in different places that we can go
    scrape together to come up with a meaningful impact on that
    $830 million.
        Chairman Isakson. I apologize to the Committee, but I want
    to finish the thought.
        Mr. Gibson. Yes, sir.
        Chairman Isakson. We have got maybe 2 months to come up
    with the money or else there is going to be a slowdown in
    construction further or a stop altogether at the site.
        Mr. Gibson. Yes, sir. I think we have less than that.
        Chairman Isakson. To me, that is unacceptable.
        Mr. Gibson. It is unacceptable to us.
        Chairman Isakson. It is equally unacceptable if there is
    that much of an emergency and half of the Senate committee came
    all the way across the country to hold this hearing. When we go
    back to Washington, having heard what you heard today and what
    I heard today, and knowing what your plans are in terms of
    turning things over to the Corps of Engineers, and we see a
    request that comes in for that money that has some source of
    finding that money within the VA's budget, if you can find $700
    million for Hepatitis C on your own volition--and I am not
    penalizing, that is a good thing to do--there is probably some
    more money somewhere else.
        Every contribution that comes from an existing spent dollar
    rather than a new dollar we have to borrow from China is really
    important to me.
        Excuse me, Senator Blumenthal, and I apologize for taking
    more time than I should have.
        Senator Blumenthal. Thank you, Mr. Chairman. Again, I want
    to thank all of my colleagues, particularly the Colorado
    delegation, for focusing not only today, not only this year,
    but over a long period of time on these issues, and we are here
    because of your advocacy.
        Second, I want to thank Mr. Guerro for being here today and
    for his long-time advocacy, because I think you personify the
    kind of fight that many of our veterans sustain day in and day
    out, year in and year out, so that their brothers and sisters
    can have the kind of care they deserve.
        In that spirit, I would just like to ask all the veterans
    who are here today to please raise your hand so that we can
    acknowledge you and thank you for your service. Thank you.
    [Applause.]
        Senator Blumenthal. I have got a couple of quick questions
    for you, Mr. Gibson. I would like you to commit to me that you
    will undertake a complete overhaul of construction practices
    and systems in the VA, including considering, in effect,
    delegating that authority to the Corps of Engineers or some
    other similar organization. I have not reached any conclusions
    about whether it should be done, but I want a commitment that
    you will undertake reform of the system.
        Mr. Gibson. You have that commitment. The good news is that
    a substantial portion of it has already been completed.
        Senator Blumenthal. Well, I do not want to hear about what
    has been completed. I want to hear about what is going to
    happen, because----
        Mr. Gibson. Part of it is what will continue to happen.
        Senator Blumenthal. Great.
        Mr. Gibson. Understood and----
        Senator Blumenthal. We are here to make sure things go
    right in the future, but also for the sake of transparency, so
    that people understand where the fault lies and what is going
    to be done in the future. In that spirit I would ask that you
    make available to the Committee and to the public the Jones/
    Lang/LaSalle report that was done examining alternatives. That
    has not yet been made public.
        Mr. Gibson. We will do that. We just received the report
    the day I gave it to you. That was the day I received it, so
    the day before. We will make that available.
        Senator Blumenthal. All of the cost estimates of specific
    components going into the overruns that have occurred so far as
    the Corps of Engineers is analyzing them, and all of the
    components, the specific numbers, how they are attributed to
    the additional costs that will be incurred. We spoke about this
    earlier today, and I think that the Corps of Engineers has
    committed to do it. To the extent they are under your control,
    I would like you to make available those documents.
        Mr. Gibson. To the extent that those amounts can be
    determined, we will do that.
        Senator Blumenthal. Well, they need to be determined.
    Otherwise, it is more of the same. ``Well, we will make it up
    as we go along.'' If you are building a house, any of us in
    this room, you do not go into it and say, well, we will figure
    out the cost after we are three-quarters of the way through. We
    need to know with some certainty and finality, when we make a
    decision about whether to give you this money, whether it is
    going to be what is necessary. So, I would like a commitment
    that you make those numbers available as soon as possible.
        Mr. Gibson. We will make the numbers necessary, as much as
    we can, of the $830 million. The portion that I was referring
    to was the ability to somehow disaggregate the components of
    the added cost to the facility. As you heard Peter Davoren
    mention earlier today, the essence of the issue was VA's
    failure to acknowledge what it was going to cost to build in
    the first place.
        Senator Blumenthal. I would like your commitment also that
    you will make available all the relevant documents relating to
    whistleblowers, when their complaints were filed, what the
    responses were, and what you are going to do, in effect, to
    correct any wrong that has been done unjustly and unfairly.
        Mr. Gibson. I believe you are referring to the 2012
    whistleblower related to this particular project. Is that
    correct?
        Senator Blumenthal. Correct.
        Mr. Gibson. We will do that. There is a pending action
    before the Merit System Protection Board, but we will do that
    in a manner that is appropriate and protects that
    confidentiality.
        Senator Blumenthal. I would like your commitment that you
    will support an outside investigation. I know that there is an
    AIB, an IG. For those who do not know, an Administrative
    Investigation Board, the Inspector General. By the way, the
    Inspector General has involved the FBI, but the Inspector
    General is still the one responsible for investigating the
    Phoenix delays, and we have yet to receive a report from the
    IG, not yet done. I have complained about the amount of time
    that it has taken, and my questions--your predecessor I asked
    about when that report would be done, and we still have no
    guarantee that it will be done.
        I am asking for your commitment that we will see a request
    from you for an outside investigation, likely the Department of
    Justice.
        Mr. Gibson. You asked that I would support it. I agree that
    I will support the request.
        Senator Blumenthal. Thank you.
        Finally, I would like a commitment that you will respond to
    other requests for documents that we will be submitting. I do
    not want to go through the list now because I do not want to
    take the time of my colleagues to cull them out. I think that
    this document, for example, this document is a list of the
    projects that would be deferred or delayed indefinitely from
    around the country if the $1 billion is taken from the Choice
    Program. I do not want to speak for any of my colleagues, and
    they are all affected, the majority of my colleagues in the
    U.S. Senate, by what will happen if the $1 billion is taken
    from the Choice Program, but I know in West Haven, Connecticut,
    that this project on primary care facility upgrades has been
    delayed for years and years and years, and I do not want to see
    it delayed again. I do not want to see any veterans across the
    country have to sacrifice because of the incompetence, or
    worse, on the part of past VA administrations.
        I agree with the Chairman that we need to find an
    alternative path. Thank you.
        Chairman Isakson. Senator Rounds.

     STATEMENT OF HON. MIKE ROUNDS, U.S. SENATOR FROM SOUTH DAKOTA

        Senator Rounds. Thank you, Mr. Chairman. My comments and my
    questions are going to be very brief.
        To Mr. Gibson, I remember the first time when you and I met
    was the same time that Secretary McDonald was in, and the
    Chairman made it very clear that we as a committee wanted you
    to be successful. We wanted you and the Veterans Administration
    to succeed, and I thought this is coming from a Republican
    chairman to a member of the Administration saying we want you
    to be successful, and I thought that is what this is all about.
        I heard the Chairman say here today one of the most
    important things that we can do here is to find the resources
    to build this project, to get this project done. I support him
    in that. We will find a way. The project is not going to hang
    out there and it will get done.
        In looking at it, I thought about this. You have not been
    with the VA that long. You came in at a time literally when the
    pond was already full of alligators, and you and the new
    Secretary agreed to walk into the middle of it to help take
    care of things and make things right again, and I admire you
    for that, and I thank you for that. We want you to be
    successful, and we want you to drain the pond. This pond has
    got a lot of alligators in it. Construction projects that are
    out there right now are one more alligator you do not need.
        I am just curious. There are some folks that do this all
    the time, and I know that part of the process here is you would
    like to see--and we talked about it at lunch today, and I asked
    you then, why do you want to take on the challenge of
    continuing to try to build projects when the expertise could be
    found and laid out on a regular basis by people that deal with
    these things all the time and do them without the kinds of
    problems that I believe you have run into here, that you found
    when you walked in.
        What does the VA bring to the table that should convince us
    that you should be the responsible party for construction
    projects in the future?
        Mr. Gibson. First of all, I will reiterate my commitment
    that we want to work with the Corps, have the Corps work as our
    construction agent on our largest, most complex projects.
        As I mentioned in our earlier discussion, we look at the 15
    or so projects that are categorized as active as we look over
    the next 3 years. Five of those are already substantially under
    way. Of the remaining ten, we are prepared to send seven of
    those, some of which are actually under $250 million, to work
    with the Corps because we feel like that is what makes the most
    sense in those cases. That represents 86 percent of the dollars
    of that prospective construction.
        In the meantime, we have got somewhere on the order of 50
    major construction projects that we are in the middle of, all
    over the country. We have got to see those construction
    projects through to conclusion.
        As you look at VA's vast infrastructure that includes--I
    cannot even tell you how many buildings, with an average age of
    50 years or so, what you find are not only requirements to
    complete non-recurring maintenance but minor construction
    projects that enhance those facilities. It is our knowledge of
    those requirements----
        Senator Rounds. I do not disagree that you should, for
    maintenance and so forth. I get that. I understand your desire
    to try to be a part of finishing. But long term, and that is
    what we are talking about--we are not going to fix all the
    problems in a matter of 18 months. But long term, what does the
    VA bring to the table?
        The reason I ask is because one of the major issues here,
    even the sizes of the rooms had to be upgraded because you did
    not know how big the equipment was that was going to be put in
    it to begin with. It seems to me that if you are one of the
    providers of the services to buy this equipment, you ought to
    at least be able to bring that kind of expertise up front, and
    it was not included.
        Mr. Gibson. I am not following the last point, sir.
        Senator Rounds. The medical equipment that was required
    within the rooms themselves, as I look back at the reports and
    some of the problems that were found, I am not sure which one
    of the panelists provided that information, but you had to
    expand the size of the rooms just to fit the medical equipment
    in.
        Mr. Gibson. We agree with that point completely, and that
    is one of the reasons why we now include medical equipment
    planners at the very beginning of our process. We did not do
    that in the past.
        Senator Rounds. Thank you, sir.
        Mr. Gibson. Yes, sir.
        Chairman Isakson. Senator Bennet.
        Senator Bennet. Thank you, Mr. Chairman.
        I listened carefully to my colleague from Connecticut's
    points, and observations from the Chairman earlier and we may
    not have complete agreement on how to find this money to pay
    for this project and to finish this project, but I do think we
    have complete agreement that we need to find the money and that
    we will finish the project. I am very, very grateful because
    you do not need to do that. Thank you.
        Mr. Secretary, it will take me a minute to get through my
    question, and I am optimistic we are going to get it done. What
    is so depressing about today for me is how predictable it is
    that we were going to end up here in this kind of conversation,
    and I think I speak on behalf of all of my colleagues when I
    say that.
        You said that the fundamental fatal error, the first error
    was picking a number that was too low for this project. The
    very first time I went to the site and stood there on the same
    floor where we were meeting today, and nothing was yet even
    constructed, there were designs, there was a picture I saw of
    what is now called the concourse and what was then called the
    spine. The person who worked for me who was actually with me
    that day and with whom I would worked in the city, in the
    County of Denver on various projects, took one look at that and
    said there is no way they are going to be able to build this
    project for the estimated cost--not an expert in construction,
    but an expert in common sense.
        In 2014, in May I think of 2014, in desperation for not
    having been heard, I wrote a letter. I wrote it myself, just as
    the veterans did here, to the preceding Secretary of the VA
    pointing out all of the things I would been hearing from our
    veterans and from the contractor, and with my colleagues who
    are up here today. Among other things, I observed that the VA's
    position at that time, in 2014--that is before you got there,
    and I want everybody in this room to know that--was that 46
    percent of the building had been built. That was the VA's
    position. The contractor's position was that 25 percent had
    been built. The VA's position of 46 percent was based on the
    fact that 46 percent of the money had been spent. There is not
    a person here, whatever project they were working on, who would
    say it is 46 percent built because we spent 46 percent of the
    money. It is laughable.
        As I said in my letter to Secretary Shinseki, any passerby
    would know that it is not 46 percent built. Today we learned
    that it is actually 50 percent complete. In the following year,
    somehow we have reached an incremental 4 percent. Obviously,
    the 46 percent was wrong. It was obviously wrong when I wrote
    the letter. Any school kid could have told the Veterans
    Secretary that.
        Then the legal position of the VA hardened, and the
    position was, over and over again to the delegation, they have
    to build this thing for $660 million, that is our position,
    even though every single person up here, including some who
    actually are lawyers, who know what they are talking about on
    this stuff, told them that they were going to lose the lawsuit.
    It was patently obvious that they were going to lose the
    lawsuit. In fact, you did lose the lawsuit, by a lot, not by a
    little. That is what enabled the contractor, who I think has
    done a good job on this project and on so many other projects
    in Colorado, to have to walk off the project until they knew
    what the budgeting was going to be.
        What I want to know is, when you consider the fact that for
    three or more years the congressional delegation made it clear
    that it was wildly off track, and we now know that your own
    employees, some of them, said there was no way you were going
    to build it for what you said you were going to build it. When
    the contractor was telling you we cannot build it for what you
    are telling us you are going to build it, and you are putting
    out of business subcontractors here in the State of Colorado
    because of your unwillingness to pay the overages--and again, I
    am talking about the VA, not you--your unwillingness to pay the
    overages of these change orders, how is it possible that an
    institution could be that immune to that level of information
    and that arrogant about what it was doing? What are we going to
    do at the VA to ensure that that never happens again? Because
    that is not about building a building. That is about having a
    culture of disrespect, a culture that does not actually believe
    in service to our veterans here in Colorado, and a culture that
    is unwilling to learn from what were obvious facts.
        Mr. Gibson. Is that it?
        Senator Bennet. That is it. Did I leave anything out?
        Mr. Gibson. I cannot think of anything that you might have
    left out, and I do not know that I would change a single word
    of what you said.
        I think my perception, my personal perception, what I saw
    as I transitioned into the organization, what was a--you might
    call it an insular organization. It was not kind of an open and
    transparent organization. I hope you have sensed in the last 10
    or 12 months a difference in the tenor and tone of
    communication and openness and the interest in other views and
    other opinions, and the willingness to embrace those other
    views and other opinions, the realization that we cannot
    accomplish what we want to accomplish without partnering with
    other organizations.
        I would tell you, when I came in the door, I have known
    Peter Davoren for years. I have known Jim Clark, whose firm is
    building the hospital in New Orleans, and I have known Jim
    Gorey and his dad, Miller Gorey, for 20-some-odd years, who
    built Orlando. The first thing I said when I got on the ground
    was this is a relationship business. I need to reach out and
    interact with these folks. We have got to get this back on
    track; But the mindset was no. That was the mindset at the
    time. That has changed.
        In June 2014, in the first week of my tenure, the first
    week or two, I reached out to all three of those contractors,
    and now I have open communication with them regularly.
        Chairman Isakson. For the benefit of the three remaining
    members who have not asked questions, I am going to move on, if
    that is OK, because we have plane connections that are
    important.
        Senator Bennet. Thank you.
        Chairman Isakson. Sorry to cut off the senior senator from
    Colorado, but I think I just did. [Laughter.]
        Senator Gardner.
        Senator Gardner. Thank you, Mr. Chairman.
        To the Deputy Secretary, thank you for being here.
        I look out to the participants today in the auditorium, and
    I have known many of them for decades now. There are city
    council members. There are veterans here, opinion leaders,
    policymakers. But I have got to be honest. Some of the veterans
    that kicked off this project in 1999 are not looking as good
    today as they were then, a little bit older, a little bit
    grayer. Some of them have oxygen that they never were on.
        They started this project in 1999 in good faith, and I
    honestly believe that you are trying in good faith to get this
    done. This hearing is about answers. It is about answers
    looking forward, and it is about answers to make sure that what
    happened to put us here is prevented, never happens again.
        Mr. Gibson. Yes, sir.
        Senator Gardner. So, while we look out and see the veterans
    here, we know we have an obligation to finish it so that they
    can see their work done, so that they can see their promises
    fulfilled.
        I have two questions. Is there any cost, litigation,
    project, construction, new information, is there anything out
    there that can still surprise us?
        Mr. Gibson. As it relates to Denver, or in construction
    generally?
        Senator Gardner. As it relates to the construction of the
    Denver hospital.
        Mr. Gibson. Pardon me?
        Senator Gardner. As it relates to Denver and the
    construction of the Denver hospital.
        Mr. Gibson. There is nothing else. We are in the process,
    have been in the process since probably January, of amicably
    resolving the claims both that KT had made, but also the claims
    of the subcontractor, and we have been working methodically
    through those. The residual amount of that is part of what we
    requested in the $130 million that will allow us to resolve the
    last of those claims before the Corps takes over the project so
    it is a complete new start.
        There is nothing else that I am aware of.
        Senator Gardner. No surprises?
        Mr. Gibson. No, sir.
        Senator Gardner. The last question I have is this. In
    August, I believe, of 2014, testimony at the State capitol
    before myself and Congressman Coffman, Glenn Haggstrom, then
    the chief of acquisition--I am reading from Steve Rylant's
    testimony today--Glenn Haggstrom, then chief of acquisition and
    construction, testified that the VA did not need any additional
    information from Congress, any additional funding from
    Congress, and that they would win the litigation and KT would
    have to build the VA medical facility with the $600 million
    already authorized. That is the quote from Mr. Rylant's
    testimony today.
        Who approved Mr. Haggstrom's testimony?
        Mr. Gibson. I do not know the answer to that question, but
    I will pursue an answer to the question. I will tell you that
    was consistent with what VA's legal posture was at the time.
    Not an excuse for it, because it was profoundly wrong.
        Senator Gardner. I guess we still have to get an answer of
    when legal posture and when the truth can actually prevail.
        Mr. Gibson. I think the truth prevailed in December when
    the Board of Contract Appeals issued their decision. Somebody
    else said it. I think Congressman Perlmutter is the one who
    said it to me the first time, ``you couldn't have lost any
    worse.'' That is when the truth came out, which made it very
    clear, and that is what you heard me reiterate in my opening
    remarks. This is on us, no mistake.
        Senator Gardner. Mr. Chairman, thank you.
        Chairman Isakson. Congressman Perlmutter.
        Mr. Perlmutter. Thank you, Mr. Chairman. Again, thanks to
    the Senate Committee for taking the time to come out here.
        I do want to say that since December/January, I have heard
    among the Corps, the VA, and the contractor that what was a
    horrible working relationship last year, the year before, the
    year before that, that there is a positive, good working
    relationship, and I want to thank you for that.
        The senators have expressed everything that I have been
    feeling and thinking. We recognize that you are sitting in the
    hot seat, you have stepped into something that is been very
    difficult to resolve, you are working at it. We appreciate
    that.
        The big question is, why do you want to keep doing this? I
    am just putting it out there rhetorically like he did, OK? You
    have other priorities and responsibilities, and I just
    appreciate your taking the bull by the horns. I thank the Corps
    for jumping into this. This was not really in your agenda more
    than 3 months ago.
        I appreciate the senators for listening and taking this so
    seriously because this is a mess, it is a big mess, and we have
    got to straighten it out. Thank you.
        Chairman Isakson. Thank you Congressman Perlmutter, and
    thanks for participating in the hearing today.
        We will end with----
        Mr. Coffman. Mr. Chairman, can I----
        Chairman Isakson. I was saying, we are going to end by
    hearing from Congressman Coffman.
        Mr. Gibson. Please. I have been waiting to hear Congressman
    Coffman's questions since the inception. [Laughter.]
        Senator Blumenthal. In the course of Representative
    Coffman's questioning, I may have to leave to catch a plane. I
    hope you will forgive me. But I want to thank again the
    Chairman, the Colorado delegation, our colleague Senator
    Rounds; and, Mr. Gibson, thank you for your service to our
    Nation.
        Mr. Gibson. Yes, sir.
        Senator Blumenthal. I know you have a history of service in
    uniform and now in the VA, and a family history of service in
    World War II. So, thank you for being here today, and also Mr.
    Caldwell.
        I just want to join in the remarks made by Senator Bennet.
    We will get it done. We owe it to the brave veterans and heroes
    of the Rocky Mountain States to make sure that their needs are
    served, and needs of veterans across the country as well. Thank
    you very much.
        Thank you, Mr. Chairman. Sorry to abandon you.
        Chairman Isakson. Congressman Coffman.
        Mr. Coffman. Thank you, Mr. Chairman.
        This GAO report from April 2013, Mr. Milsten, when did you
    read this report?
        Mr. Milsten. Shortly after it was published. Actually, I
    would have read the draft also.
        Mr. Coffman. Ms. Fiotes, when did you read this report?
        Ms. Fiotes. Approximately the same time.
        Mr. Coffman. Mr. Gibson, when did you read this report?
        Mr. Gibson. I read the report--actually, the first time
    might have been before I was confirmed. Subsequently, I have
    been in and out of the report as I transitioned into the
    Department.
        Mr. Coffman. This report showed that this project was just
    totally out of control. This report showed that it was being
    mismanaged. This report showed that it was way behind schedule.
    This report showed that it was hundreds of millions of dollars
    over budget. I got on the House Veterans' Committee in January
    2013, and the Committee had requested this report before I even
    got on it. This was certainly public knowledge.
        What action did you take relative to this report, Mr.
    Milsten?
        Mr. Milsten. One of the things we did relative to all of
    the reports that we received--and this report in 2013 had its
    basis in 2009--we instituted the requirements package that says
    at 35 percent, 65 percent, and before we work construction now
    we do a requirements. We check to make sure that the project
    has not grown in scope, it stays in budget, it stays in the
    requirements. This was not done until----
        Mr. Coffman. You have been working on this project, Ms.
    Fiotes. You have been working on this project, too. Am I right?
        Ms. Fiotes. I am sorry?
        Mr. Coffman. You have been working on this project, too. Am
    I correct?
        Ms. Fiotes. I have the oversight of this project.
        Mr. Coffman. How is it that, Mr. Gibson, you are saying
    there is only one person remaining that has been working on
    this project when we have two people sitting across from us
    today that have been in the meetings with this congressional
    delegation multiple times?
        Mr. Gibson. The point that I made, sir, was that the two
    crucial decisions that got us to where we are today were made
    in 2010 and 2011, and all the people that were involved in the
    project in any kind of a direct role, all but one are gone
    from----
        Mr. Coffman. So, Mr. Haggstrom, who remained on the project
    all the way up until there was a complete stoppage of work on
    the project, because the general contractor--his remedy in
    terms of prevailing in court--was allowed to walk from the
    project, which they did. They refused to come back on the
    project until one of the conditions met was that you would be
    replaced by the Army Corps of Engineers on the project after a
    transitional period.
        Now, Glenn Haggstrom was ultimately in charge--am I
    correct?--on this project.
        Mr. Gibson. He was the executive director----
        Mr. Coffman. He got a bonus during the very time that this
    report came out. Can you share with us the criteria for the
    bonus, getting a bonus on a project that was hundreds of
    millions of dollars over budget and years behind schedule? And
    not just this project; he was responsible for four projects
    that were all in the same category.
        Mr. Gibson. He did not get a bonus on my watch, and I
    cannot tell you what the criteria were prior to that.
        Mr. Coffman. You know, why were you telling the members of
    this Colorado congressional delegation, all the way up until
    the decision came down from the court, that this project could
    be built for $640 million?
        Mr. Gibson. Why was he telling you that?
        Mr. Coffman. Why was the VA telling us? I met with
    Secretary McDonald just after he was confirmed, and he
    reiterated to me that this project could be built for $640
    million despite this report.
        Mr. Gibson. I cannot explain that statement.
        Mr. Coffman. You know, let me tell you that I think what
    you heard from the members certainly of the Senate Veterans
    Committee who are here today, from Senator Bennet and Senator
    Gardner, and I believe Congressman Perlmutter, as well as
    myself, is that your core responsibilities are to deliver
    health care benefits and other benefits that our veterans have
    earned, and you are not a construction management entity. In my
    view, you cannot be trusted, as I have said before, to build a
    lemonade stand, let alone a major hospital. So, you have got to
    extricate yourself from that business, and the folks with their
    fingerprints on these projects now need to find another line of
    work.
        I just think that this is just more of the same. Your
    predecessor and the predecessor before and the predecessor
    before have all been before Congress and said we can make this
    better, we can make this work, and it never has. Unfortunately,
    I do not believe it ever can.
        With that, Mr. Chairman, I want to thank you so much for
    holding this hearing today, and I yield back.
        Chairman Isakson. Thank you, Congressman Coffman.
        Let me just observe this. This has been a great hearing. I
    have attended a lot of hearings. I think everybody stuck to the
    point, and I want to thank our witnesses and each Member of
    Congress and the Senate.
        Nine days ago I, and I think most everybody else in this
    room, wrote a check to the U.S. Treasury. It was painful. It
    was my money that I had worked hard to earn. Let the record
    show that sometimes we waste money in Washington, but sometimes
    we are willing to come and hold people accountable when things
    go wrong, and that is what we are trying to do here.
        We want to see to it that this hospital is finished, it is
    finished efficiently and effectively and without any more cost
    overruns, and see to it the lesson learned in Denver is not
    replicated again somewhere else because we forgot about it,
    because another Secretary came in or another congressman got
    elected or another Senate chairman came in. We are going to
    make this a permanent and indelible lesson to be learned for
    not just the Veterans Administration but for all the
    government.
        For those of you who served in the military or have sons
    and daughters who did, God bless you and thank you for that,
    and God bless the United States of America.
        This hearing stands adjourned, with the record open for 7
    days.
        [Whereupon, at 3:13 p.m., the hearing was adjourned.]
                                    ------

    Response to Posthearing Questions submitted by Hon. Richard Blumenthal
    to Hon. Sloan D. Gibson, Deputy Secretary, U.S. Department of Veterans
                                    Affairs
        Question 1.  The Civilian Board of Contract Appeals, GAO, and the
    Army Corps of Engineers all have found that VA faced issues with design
    completeness on the replacement Denver VA Medical Center. These
    challenges led to issues with change order management, and delays in
    procuring subcontractor work.

        a. Who at VA was responsible for quality control when it comes to
    reviewing facility designs?
        Response. In general, the Project Manager and Contracting Officer,
    along with subject matter experts, are responsible for quality control
    reviews of each project's design. Additionally, the Department of
    Veterans Affairs (VA) employs the use of a third party peer architect/
    engineer (A/E) firm for technical reviews throughout the design
    process. In the future, the United States Army Corps of Engineers
    (USACE) will be the construction agent for the Department of Veterans
    Affairs projects over $250 million.

        b. What is the process VA utilizes to review designs and ensure
    they meet Federal and user standards, and how can it be improved to
    avoid challenges in the future?
        Response. The Department of Veterans Affairs (VA) reviews major
    projects at three stages during the design process: 1) schematic design
    (35%); 2) design development (65%); and 3) construction documents
    (95%). The review team comprises VA medical center staff, Construction
    and Facilities Management (CFM) staff (including engineering staff,
    cost estimators, and scheduling staff), along with private sector peer
    reviewers (at the construction documents (95%) review). All comments
    are gathered, reconciled, and recorded in the United States Army Corps
    of Engineers review system known as Dr. Checks, for response and
    resolution by the design team professionals. As part of the design
    review, VA has since mandated an independent third-party
    constructability review at the completion of each design phase, which
    ensures an efficient and effective construction process.

        Question 2.  Many parties have provided cost estimates for this
    project, yet VA took little to no action to evaluate them fully or
    determine what changes could be made to stay within the budget.

        a. How do you plan to add more rigor to the Department's cost
    estimation policies and practices?
        Response. As part of the three stages of the design process, VA has
    partnered with the USACE to implement a management review process that
    re-examines the scope and cost estimates for construction projects to
    assure the scope and cost remain within the established budget for each
    project. This management review includes a review of the estimated cost
    by CFM cost estimators, and will assure there is alignment between all
    estimates and the budget before the design is allowed to proceed to the
    next phase. In this way, VA can assure reconciliation of ALL estimates
    prepared for the project. As part of the partnership with USACE, they
    provided two experts to assist VA in developing the internal VA review
    process.

        b. VA's testimony notes that it is now doing constructability
    reviews from outside contractors. The initial contract awarded to
    Kiewit-Turner was for site work and preconstruction services to assist
    the design team on this project. Please explain how preconstruction
    services on this project differ from the constructability reviews that
    are now being conducted.
        Response. In general, there are minimal functional differences
    between the preconstruction services provided by Kiewit-Turner (KT) and
    the independent constructability reviews.
        While these reviews are a standard practice under an Integrated
    Design and Construct (IDC) contract--which allows the award of the
    construction to the company that served as the construction management
    agent and provided the constructability review--they were previously
    not required for all major construction projects. Additionally, VA now
    requires the independent reviews be conducted at each phase of design
    and each review will require management reviews to assure
    reconciliation between the cost estimates.

        Question 3.  Please explain the legal basis upon which VA
    interpreted that the contractor had agreed to a fixed, target price on
    this project.
        Response. The legal basis supporting VA's interpretation that the
    contractor had agreed to a fixed, target price on the project is due to
    the fixed-price incentive contract between VA and KT pursuant to FAR
    16.403-2; 52.216-17. A fixed-price incentive contract is a fixed-price
    contract that provides for adjusting profit and establishing the final
    contract price by applying a formula. The formula is based on the
    relationship between the total final negotiated cost and the total
    target cost. The contract modification known as SA-007, that both VA
    and KT signed, was the document that finalized the profit adjustment
    formula and the other elements key to the fixed-price incentive
    contract including the firm target price ($604,087,179.00) and the
    ceiling price ($610,087,179.00). That is the modification that KT
    signed and through which it agreed to build the project for the target
    price of $604M not to exceed the ceiling price of $610M. The ceiling
    price is the maximum that may be paid to the contractor. The purpose of
    fixed-price incentive contracts is to motivate the contractor to earn
    more compensation by achieving better performance and controlling
    costs. Thus, in this contract, the incentive for KT was to build the
    design as close to the firm target price as possible in order to
    maximize its profit.

        Question 4.  What accountability measures are being taken as a
    result of the misinterpretation of SA-007, the agreement that set out
    terms of agreement between VA and Kiewit-Turner?
        Response. The ongoing VA Administrative Investigation Board (AIB)
    has been charged with evaluating SA-007 and will make specific findings
    with respect to the roles various VA employees played in its
    negotiation, execution, and interpretation.

        Question 5.  The use of early contractor involvement project
    management models can result in savings, but only if the contractor is
    involved at the beginning of the design process. One of the biggest
    cost drivers on this project was the decision to switch from design-
    bid-build to an early contractor involvement model after design had
    been underway for some time and the first round of design documents had
    already been submitted. Who at VA made the decision to switch project
    management methods after the design was so complete, and what were the
    reasons cited to justify that change at the time?
        Response. The ongoing VA AIB has been charged with determining how
    and why an IDC (Integrated Design and Construct) contract vehicle was
    chosen for this project and will make specific findings with respect to
    the roles various VA employees played in that decision. Most of the key
    personnel associated with the use of the IDC contract for this project
    are no longer employed by the VA. However, some retired VA employees
    have agreed to be interviewed by the AIB, which should help shed light
    on some of these early contracting decisions.
                                     ______

    Response to Posthearing Questions Submitted by Hon. Richard Blumenthal
     to Lloyd C. Caldwell, P.E., Director of Military Programs, U.S. Army
                Corps of Engineers, U.S. Department of the Army
        Question 1.  The Civilian Board of Contract Appeals ruling noted
    that when proposed changes were approved, the designer of record
    refused to incorporate them into the design, and even though the
    independent project manager asked, VA did not require the designer to
    take appropriate action. This made building a challenge, and likely
    complicated the Army Corp's efforts to review this project. When the
    Army Corps assumes construction agent responsibilities for this
    project, what plans will be in place to ensure that changes are
    incorporated into design and progress is tracked?
        Response. The Army Corps of Engineers has a well documented process
    for change order management, which includes steps for identifying,
    approving, communicating and documenting or incorporating required
    changes into the contractual documents. On-Site Corps Representatives
    have different responsibilities and authorities and play a key role in
    managing and implementing the change order process. We will use the
    Corps of Engineers Resident Management System to track and manage all
    Change Orders, both discretionary and mandatory. The Corps of Engineers
    understands that if the process of identifying, approving,
    communicating and documenting changes is disorderly or disrupted, there
    is potential for schedule and cost impact as well as impact on the
    working relationship between the Government and the contractor.

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