[Senate Hearing 114-282]
[From the U.S. Government Publishing Office]
S. Hrg. 114-282
FIELD HEARING ON DENVER REPLACEMENT MEDICAL CENTER
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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
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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
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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
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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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