[Senate Report 109-328]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 592
109th Congress                                                   Report
                                 SENATE
 2d Session                                                     109-328

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

 
TO AUTHORIZE MAJOR MEDICAL FACILITY PROJECTS AND MAJOR MEDICAL FACILITY 
  LEASES FOR THE DEPARTMENT OF VETERANS AFFAIRS FOR FISCAL YEARS 2006 
                              THROUGH 2009

                                _______
                                

               September 6, 2006.--Ordered to be printed

                                _______
                                

   Mr. Craig, from the Committee on Veterans' Affairs, submitted the 
                               following

                              R E P O R T

                   [To accompany S. 3421 as amended]

    The Committee on Veterans' Affairs (hereinafter, ``the 
Committee''), to which was referred the bill (S. 3421) to 
authorize major medical facility projects and major medical 
facility leases for the Department of Veterans Affairs for 
fiscal years 2006 and 2007, and for other purposes, having 
considered the same, reports favorably thereon with a technical 
amendment, and recommends that the bill, as amended, do pass.

                              INTRODUCTION

    On June 6, 2006, Committee Chairman Larry E. Craig 
introduced S. 3421, to authorize major medical facility 
projects and major medical facility leases for the Department 
of Veterans Affairs for fiscal years 2006 through 2009, and for 
other purposes. The bill, as introduced, would have: authorized 
fiscal year 2006 major medical facility projects; extended the 
authorization and VA's authority to enter into contracts for 
major medical facility construction projects authorized in 
Public Law 108-170 under the Capital Asset Realignment for 
Enhanced Services (hereinafter ``CARES'') process through 
September 30, 2009; and authorized fiscal years 2006 and 2007 
major medical facility leases. The bill was referred to the 
Committee on Veterans' Affairs.

                           COMMITTEE HEARINGS

    Earlier, on April 6, 2006, the Committee held hearings on 
VA's proposals for construction and lease authorization. 
Testimony was heard from: The Honorable Wayne Allard, United 
States Senator, Colorado; The Honorable Mel Martinez, United 
States Senator, Florida; The Honorable Bill Nelson, United 
States Senator, Florida; Dr. Jonathan Perlin, MD, VA Under 
Secretary for Health; and Mr. Dennis Cullinan, Director, 
National Legislative Service, Veterans of Foreign Wars of the 
United States.

                           COMMITTEE MEETING

    After carefully reviewing the testimony from the foregoing 
hearing, the Committee met in open session on June 22, 2006, to 
consider S. 3421. Senator Murray offered an amendment that 
would have authorized six additional construction projects in 
FY 2007 in American Lake, WA; Columbia, MO; Fayetteville, AR; 
Milwaukee, WI; St. Louis, MO; and San Juan, PR. Senator Murray 
expressed discontent that these projects were not included in 
S. 3421, noting that they had been requested by the 
administration and approved through VA's CARES process. Senator 
Murray also expressed her belief in the immediate necessity of 
the seismic upgrades at the American Lake facility, as well as 
the San Juan facility.
    Chairman Craig did not dispute the importance of these, or 
any other projects not included in S. 3421, but he expressed 
his frustration at what has become a convoluted process for 
forward movement on major construction projects. He went on to 
explain that there are currently VA construction projects that 
have been authorized but not appropriated, appropriated but not 
authorized, and projects that are in need of additional 
appropriations and authorizations in order to be completed. 
Chairman Craig stated that he wants to bring order to VA's 
convoluted approach to construction. He believes that waiting 
to begin authorizing new projects until construction projects 
that have already begun are completed will bring needed order 
to the process.
    The Committee then voted on Senator Murray's amendment. The 
amendment failed on a 6-8 vote. The Committee then voted by 
voice vote to report favorably S. 3421, as amended by an 
amendment offered by Committee Chairman Craig. Committee Member 
Patty Murray of Washington requested that she be recorded as 
opposed to S. 3421.

               SUMMARY OF THE COMMITTEE BILL AS REPORTED

    S. 3421 as reported (hereinafter the ``Committee bill''), 
consists of, as noted on page 18, no changes to current law, 
and is summarized below:
          1. Authorize Fiscal Year 2006 major medical facility 
        projects in New Orleans, LA; Biloxi, MS; and Denver, 
        CO. The New Orleans project is authorized as a 
        collaborative effort consistent with the New Orleans 
        Collaborative Opportunities Study Group Report (section 
        1);
          2. Extend the period during which VA is authorized to 
        enter into contracts for major medical facility 
        construction projects originally authorized as CARES 
        projects by Public Law 108-170 (section 2);
          3. Authorize Fiscal Year 2006 major medical facility 
        leases (section 3); and
          4. Authorize Fiscal Year 2007 major medical facility 
        leases (section 4).

                       BACKGROUND AND DISCUSSION

Section 1. Authorization of fiscal year 2006 major medical facility 
        projects

    Section 8104 of title 38, United States Code, requires 
statutory authorization for all VA major medical facility 
construction projects (defined as those which cost more than $7 
million) prior to the appropriation or expenditure of funds. 
Three projects warrant immediate Fiscal Year (hereinafter 
``FY'') 2006 authorization: New Orleans, LA; Biloxi, MS; and 
Denver, CO.
    The New Orleans project received $75,000,000 in FY 2006 
budget authority in Public Law (hereinafter ``P.L.'') 109-148, 
the emergency legislation that includes, in Divison B, funding 
for Hurricane Katrina recovery. The New Orleans Collaborative 
Opportunities Study Group continues to determine the most 
efficient and cost-effective manner to provide health care 
services to veterans in the New Orleans service area. 
Currently, there is no fully functional hospital infrastructure 
or fully staffed VA hospital facility in the city of New 
Orleans. The total cost associated with the restoration/
replacement of the New Orleans VA Medical Center facility is 
estimated at $636,000,000.
    In May 2004, former Secretary of Veterans Affairs, Anthony 
Principi issued his decision to among other things, follow 
generally the CARES Commission's recommendation to consolidate 
the services provided at the Gulfport VAMC to the Biloxi VAMC. 
Prior to Hurricane Katrina, VA was developing plans for reuse 
or divestment of the Gulfport campus, and plans for major 
construction to modernize patient care facilities at the Biloxi 
campus and opportunities for coordination and sharing with 
Keesler Air Force Base (hereinafter ``AFB'') were underway.
    Damage to the Gulfport VAMC from Hurricane Katrina in 
August 2005 was beyond repair. The Biloxi campus also sustained 
significant damage. The Biloxi project authorized in Section 1 
will accelerate the restoration of the hospital at Biloxi and 
will consolidate and co-locate all clinical and administrative 
functions of the two-division medical center at the Biloxi VAMC 
campus. The project received $17,500,000 in FY 2006 budget 
authority and an additional $295,500,000 in budget authority in 
the FY 2006 Emergency Supplemental Appropriation Act, P.L. 109-
148. This project includes the campus consolidation initiative, 
as well as a separate CARES initiative to build a new Blind 
Rehabilitation Center on the Biloxi VAMC campus. The 
consolidation achieves the objectives of CARES to realign and 
decrease the amount of infrastructure maintained and operated 
by VA by 383,868 gross square feet at Gulfport.
    The total acquisition cost for a replacement medical center 
facility at Denver, Colorado, has been estimated in VA's FY 
2006 budget request at approximately $621,000,000. In addition 
to construction, project costs also include equipment, 
activation, and land acquisition. The project received 
$30,000,000 in FY 2004 appropriations. VA asserts that project 
cost estimates have grown as a result of larger than predicted 
inflation in health care construction costs, and that the 
addition of several mental health programs, as well as having 
received a polytrauma site designation, have increased the 
project costs. The Committee bill authorizes $52,000,000, the 
amount VA estimates is needed to enter into an agreement to 
purchase a site for the replacement medical center. Any 
additional obligation of funding on the Denver project will 
require additional authorization.

Section 2. Extension of authorization for major medical facility 
        construction projects authorized under capital asset 
        realignment initiative

    In Section 221 of Public Law 108-170, VA was authorized to 
carry out any major medical facility construction project 
consistent with the final CARES decision of the Secretary of 
Veterans Affairs. However, the authority of VA to enter into 
contract to carry out projects under that law expires September 
30, 2006. Section 2 of the Committee bill contains a list of 
eighteen major medical facility construction projects that were 
authorized as part of the final CARES decision, but for which 
it is unlikely that contract awards will be accomplished by 
September 30, 2006. A description of each of these projects 
appears below and is also included in the Department's 5-Year 
Capital Plan.
    The construction of an outpatient clinic and regional 
office at the Department of Veterans Affairs Medical Center in 
Anchorage, Alaska received $11,760,000 in FY 2004 for design 
and an additional $63,510,000 in FY 2006 to complete phase 2 
construction. The total acquisition cost is $75,270,000, the 
amount that is reauthorized in this measure.
    The consolidation of the clinical and administrative 
function of the Department of Veterans Affairs Medical Center 
in Cleveland, Ohio, and the Department of Veterans Affairs 
Medical Center in Brecksville, Ohio, received $15,000,000 in FY 
2004 budget authority for design and $87,300,000 in FY 2006 
budget authority to complete the project, for an estimated 
total cost of $102,300,000. The total is reauthorized in this 
measure, so that the project can continue without interruption 
toward an estimated March 2009 completion.
    Construction of the Extended Care Building at the 
Department of Veterans Affairs Medical Center in Des Moines 
received $25,000,000 in FY 2005 budget authority, its total 
acquisition cost. The project is fully reauthorized in this 
measure so that it may continue without interruption toward an 
estimated February 2008 completion.
    The renovation of 46,000 gross square feet of patient wards 
at the Department of Veterans Affairs Medical Center in Durham 
received FY 2004 budget authority for its total acquisition 
cost, $9,100,000. The project is fully reauthorized in this 
measure so that it may continue without interruption toward an 
estimated December 2008 completion.
    The correction of patient privacy deficiencies at the 
Department of Veterans Affairs Medical Center in Gainesville 
received $8,800,000 in FY 2004 budget authority and $76,400,000 
in FY 2006 budget authority, to complete phase 2 construction, 
representing its total acquisition cost of approximately 
$85,200,000. The project is fully reauthorized in this measure 
so that it may continue without interruption toward an 
estimated June 2009 completion.
    The 7th and 8th Floor Wards Modernization at the Department 
of Veterans Affairs Medical Center in Indianapolis received 
$27,400,000 in FY 2004 budget authority, representing its total 
acquisition cost. The project is fully reauthorized in this 
measure so that it may continue without interruption toward an 
estimated December 2007 completion.
    The construction of a new medical center facility at the 
Department of Veterans Affairs Medical Center in Las Vegas 
received $60,000,000 in FY 2004 budget authority for design and 
land purchase, and $199,000,000 in FY 2006 budget authority. An 
additional $147,000,000 in appropriated funds must be requested 
by VA and is required to complete construction, for a total 
acquisition cost of approximately $406,000,000. The project is 
fully reauthorized in this measure. Although this project will 
close significant service delivery gaps identified in the CARES 
process, full funding has not yet been requested by VA, and no 
target completion date has been identified.
    Construction of an Ambulatory Surgery/Outpatient Diagnostic 
Support Center in the Gulf South Submarket of Veterans 
Integrated Service Network (hereinafter ``VISN'') 8 and 
completion of Phase 1 land purchase in Lee County, Florida, 
received $6,510,000 in FY 2005 budget authority. The total 
acquisition cost is estimated at $65,100,000. The project is 
fully reauthorized in this measure. Although this project will 
accommodate a growing market share for the veteran population 
in this VISN 8 submarket whose needs are not currently being 
met, VA has not yet requested the remaining $58,590,000 
necessary to complete the project, and no target completion 
date has been identified.
    The seismic corrections at the Long Beach VA Medical Center 
received $10,300,000 in FY 2004 budget authority for design. VA 
has requested $97,545,000 in FY 2007 budget authority to 
complete the project, for a total acquisition cost of 
approximately $107,900,000. The project is fully reauthorized 
in this measure.
    The seismic corrections at the Los Angeles VA Medical 
Center received $8,000,000 in Fiscal Year 2005 budget authority 
to complete phase 1 design, with a total estimated acquisition 
cost of approximately $79,900,000. The project is fully 
reauthorized in this measure. Although this structure has not 
been significantly modified since it was built in 1976 and its 
seismic performance was evaluated according to the requirements 
of the 2001 California Building Code, VA has not yet requested 
the remaining $71,900,000 necessary to complete the project, 
and no target completion date has been identified.
    Construction of the new medical center facility in the 
Orlando area, received $25,000,000 in FY 2004 budget authority 
to complete phase 1 design, with an estimated total acquisition 
cost of $347,700,000. The project is fully reauthorized in this 
measure. Although this project will resolve the CARES VISN 8 
Central Market Acute Care Planning Initiative Gap by increasing 
access by nearly 35%, VA has not yet requested the remaining 
$322,700,000 necessary to complete the project, and no target 
completion date has been identified.
    The consolidation of services at the Highland Drive 
division of the Pittsburgh Health Care system with University 
Drive and H. John Heinz III progressive care divisions in 
Pittsburgh received $20,000,000 in FY 2004 and an additional 
$82,500,000 in FY 2006 budget authority to complete phase 2 
construction. This project requires an additional $86,705,000 
for completion, with an estimated total acquisition cost of 
approximately $189,205,000. The project is fully reauthorized 
in this measure. This consolidation project will provide state-
of-the-art care and reduce operating expenses, therefore 
realigning those assets to enhance services, and it may also 
include a component that would improve benefits service 
delivery. Yet, VA has not requested the necessary funds to 
complete the project, and no target completion date has been 
set.
    The construction of 26,000 new square feet and the 
renovations of approximately 62,800 square feet at the San 
Antonio VA Medical Center received $19,100,000 in FY 2004, the 
estimated project cost. The upgrade and expansion project is 
fully reauthorized in this bill, and is slated for a January 
2010 completion date.
    The seismic corrections in the main hospital building of 
the San Juan VA Medical Center are necessary to comply with VA 
seismic and immediate occupancy standards. The project received 
$15,000,000 in FY 2005 budget authority, and requires 
$130,200,000 in order to complete the project. This legislation 
fully reauthorizes the project at its estimated cost of 
$142,200,000. VA has not requested the necessary funds to 
complete the project.
    Construction of a Spinal Cord Injury Center at the Syracuse 
VA Medical Center received $53,900,000 in FY 2005 budget 
authority. This is the total estimated cost associated with the 
project, which is fully reauthorized in this measure. The 
construction is scheduled for August 2009 completion.
    The Spinal Cord Injury Extended Care addition at the Tampa 
VA Medical Center received $7,100,000 in FY 2005 budget 
authority. This project, which is funded entirely, is scheduled 
for a March 2007 completion.
    The Blind Rehabilitation and Psychiatric Bed renovation and 
new construction project at the Temple VA Medical Center 
received $56,000,000, the total estimated cost associated with 
the project, in FY 2005 budget authority. This project is fully 
reauthorized in this measure, and no estimated completion date 
has been identified.

Section 3

    Section 8104 of title 38, U.S.C., requires statutory 
authorization for all VA major medical facility leases (defined 
as those which cost more than $600,000 annually) prior to the 
appropriation or expenditure of funds. Three leases require 
authorization for FY 2006: Baltimore; Evansville; and Smith 
County.
    The Baltimore outpatient clinic lease proposes the 
acquisition of approximately 132,300 square feet of space in 
proximity to the existing Baltimore VAMC in order to meet 
projected space gaps for the primary care, mental health, 
specialty care, and research. The lease is fully authorized in 
the measure for $10,908,000.
    The Evansville outpatient clinic lease would allow for the 
acquisition of approximately 126,000 square feet of space that 
will replace and expand the existing Evansville lease that 
expires on November 20, 2008. The lease is part of an 
aggressive strategy to correct severe space deficiencies 
identified during the CARES process at the Marion VAMC. The 
bill fully authorizes the lease for $8,988,600.
    The Smith County/Tyler outpatient clinic lease would allow 
for the acquisition of approximately 72,760 square feet of 
space for activation of a comprehensive outpatient clinic that 
will provide primary, specialty, and mental health care 
services in Smith County/Tyler market area. The bill fully 
authorizes the lease for $5,093,200.

Section 4

    S. 3421 also includes five leases for FY 2007 requiring 
authorization [in accordance with 38 U.S.C. 8104].
    The Austin outpatient and specialty care clinic lease 
proposes the acquisition of approximately 85,000 square feet of 
space in the area to relocate and expand outpatient specialty 
care services. Doing so will free space in the existing south 
Austin outpatient clinic for primary and mental health 
expansion. The lease is fully authorized in the measure for 
$6,162,500.
    The Lowell outpatient clinic lease expires on March 14, 
2008. This project will lease approximately 35,000 square feet 
of outpatient clinic space which now exists and would fill a 
CARES-identified gap in access to care. The bill fully 
authorizes the lease for $2,520,000.
    The Grand Rapids outpatient clinic lease would allow for 
the acquisition of approximately 65,800 square feet to correct 
space deficiencies. The lease will maintain outpatient medical 
care for the veterans residing in western Michigan. The current 
clinic is fifty-eight percent undersized, and based on CARES 
workload projections will be seventy six percent undersize by 
2011. The bill fully authorizes the lease for $4,409,000.
    VA operates a number of small clinics in the Las Vegas 
area, which continues to experience some of the highest growth 
rates in the country. A number of these leases expire between 
October 2008 and June 2009. The Las Vegas project will lease 
approximately 109,200 square feet for up to four primary care 
and mental health clinics in the metropolitan area. The bill 
fully authorizes the lease for $8,518,000.
    The Parma outpatient clinic lease will replace the current 
primary care clinic at the Brecksville Division of the 
Cleveland VA medical center with a new 74,000 square foot 
clinic in Parma. This project is part of the larger 
consolidation at the Wade Park Division of the Cleveland VAMC, 
which is expected to save approximately 23 million dollars 
annually in operating costs. The bill fully authorizes the 
lease for $5,032,000.

               CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

    In compliance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate, the Committee, based on 
information supplied by the Congressional Budget Office 
(hereinafter, ``CBO''), estimates that enactment of the 
Committee bill would, relative to current law, authorize the 
appropriation of $998 million for three projects in 2006, $1.75 
billion for 18 projects in 2007, and $52 million for the 
leasing of eight clinics in 2006 and 2007.
    CBO estimates that implementing S. 3421 would cost $78 
million in 2007 and about $1.8 billion over the 2007-2011 
period, assuming appropriation of the necessary amounts. No 
additional spending in fiscal year 2006 is estimated since the 
year is nearly completed. Enacting the bill would not affect 
direct spending or receipts.
    S. 3421 contains no intergovernmental or private-sector 
mandates and would impose no costs on state, local, or tribal 
governments.
    The cost estimate provided by CBO, setting forth a detailed 
breakdown of costs, follows:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, August 3, 2006.
Hon. Larry E. Craig,
Chairman, Committee on Veterans' Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 3421, a bill to 
authorize major medical facility projects and major medical 
facility leases for the Department of Veterans Affairs for 
fiscal years 2006 and 2007, and for other purposes.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Michelle S. 
Patterson.
            Sincerely,
                                          Donald B. Marron,
                                                   Acting Director.
    Enclosure.

S. 3421--A bill to authorize major medical facility projects and major 
        medical facility leases for the Department of Veterans Affairs 
        for fiscal years 2006 and 2007, and for other purposes

    Summary: S. 3421 would authorize funding for the 
construction, renovation, improvement or leasing of over two 
dozen medical facilities by the Department of Veterans Affairs 
(VA). The bill would specifically authorize the appropriation 
of $998 million for three projects in 2006, $1.75 billion for 
18 projects in 2007, and $52 million for the leasing of eight 
clinics in 2006 and 2007.
    CBO estimates that implementing S. 3421 would cost $78 
million in 2007 and about $1.8 billion over the 2007-2011 
period, assuming appropriation of the necessary amounts. (We 
estimate no additional spending in fiscal year 2006 since the 
year is nearly completed. Most of the 2006 funding authorized 
by S. 3421 has already been appropriated.) Enacting the bill 
would not affect direct spending or receipts.
    S. 3421 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated Cost to the Federal Government: The estimated 
budgetary impact of S. 3421 is shown in the following table. 
This estimate assumes the legislation will be enacted near the 
end of fiscal year 2006, that the necessary funds for 
implementing the bill will be provided each year, and that 
outlays will follow historical spending patterns for existing 
or similar programs. The costs of this legislation fall within 
budget function 700 (veterans benefits and services).

----------------------------------------------------------------------------------------------------------------
                                                                     By fiscal year, in millions of dollars--
                                                                 -----------------------------------------------
                                                                   2006    2007    2008    2009    2010    2011
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION

Spending Under Current Law for Major Construction of Veterans
 Medical Facilities:
    Budget Authority............................................   1,583       0       0       0       0       0
    Estimated Outlays...........................................     167     412     504     499     273     128
Proposed Changes:
    Estimated Authorization Level...............................      52   1,813      20      20      20      20
    Estimated Outlays...........................................       0      78     481     637     460     188
Spending Under S. 3421:
    Estimated Authorization Level...............................   1,646   1,802      20      20      20      20
    Estimated Outlays...........................................     167     490     985   1,136     733     316
----------------------------------------------------------------------------------------------------------------

    Basis of estimate: S. 3421 contains provisions that would 
authorize appropriations for major construction and the leasing 
of medical facilities by VA. CBO estimates that implementing 
these provisions would cost $78 million in 2007 and about $1.8 
billion over the 2007-2011 period, assuming appropriation of 
the authorized amounts.

                    MAJOR MEDICAL FACILITY PROJECTS

    Section 2 would authorize the construction, renovation, 
repairs and upgrades of 18 medical facilities across the 
country. Projects range from the construction of a new medical 
center facility in Las Vegas to the expansion of the Spinal 
Cord Injury Center in Tampa. The bill would authorize $1.75 
billion in 2007 for these projects.
    Section 1 would authorize the appropriation of $998 million 
for three projects in 2006, though most of this funding has 
already been appropriated. In 2004, $30 million was 
appropriated for the replacement of a medical center in Denver, 
and S. 3421 would authorize an additional $52 million for 2006, 
much of which would be used to acquire the necessary land.
    Section 1 also would authorize the restoration or 
replacement of two medical centers damaged by Hurricane 
Katrina, for which most of the necessary funding has already 
been appropriated. Public Law 109-148 provided $75 million for 
the planning of a replacement facility in New Orleans, and 
Public Law 109-234 appropriated $550 million for construction 
on this project. Based on VA's current estimate of the total 
construction costs of $636 million, CBO estimates that the bill 
would authorize the appropriation of an additional $11 million 
for the New Orleans medical center. (That amount is included in 
the estimated authorization level for 2007 in the above table.)
    Public Law 109-148 provided almost $293 million for the 
restoration of the Biloxi, Mississippi, medical center, and 
Public Law 109-234 appropriated almost $36 million for the 
clean-up of this center (along with another nearby medical 
facility). Based on VA's current estimate of the total costs of 
$310 million, CBO estimates no more funds would need to be 
appropriated to restore the Biloxi medical center.
    CBO estimates that implementing these two sections would 
cost $77 million in 2007 and about $1.7 million over the 2007-
2011 period, assuming appropriation of the authorized amounts.

                     LEASES FOR MEDICAL FACILITIES

    Sections 3 and 4 would authorize the Secretary of VA to 
lease facilities for eight outpatient clinics whose payments, 
together, would not exceed $52 million. (That amount is 
included in the table's estimated authorization level for 
2007.) VA advises that there would be no spending for any of 
these leases until 2009 because all of the facilities would 
have to undergo improvements that would allow them to be used 
as clinics. A lump-sum payment would be made for the cost of 
modifications along with the first year's rent when 
construction is complete.
    Though the bill only authorizes payments for the first 
year, CBO assumes that VA would enter into 20 year agreements 
at an estimated cost of about $20 million a year. Thus, CBO 
estimates that implementing this section would cost $46 million 
in 2009 and $90 million over the 2009-2011 period, assuming 
appropriation of the necessary amounts.
    Intergovernmental and private-sector impact: S. 3421 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Estimate prepared by: Federal Costs: Medical Care: Michelle 
Patterson. Readjustment Benefits: Mike Waters. Compensation, 
Pensions, Burial Benefits and Other Programs: Dwayne M. Wright. 
Housing: Sunita D'Monte. Impact on State, Local, and Tribal 
Governments: Melissa Merrell. Impact on the Private Sector: R. 
Derek Trunkey.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                      REGULATORY IMPACT STATEMENT

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee on Veterans' 
Affairs has made an evaluation of the regulatory impact that 
would be incurred in carrying out the Committee bill. The 
Committee finds that the Committee bill would not entail any 
regulation of individuals or businesses or result in any impact 
on the personal privacy of any individuals and that the 
paperwork resulting from enactment would be minimal.

           *       *       *       *       *       *       *


                 TABULATION OF VOTES CAST IN COMMITTEE

    In compliance with paragraph 7 of rule XXVI of the Standing 
Rules of the Senate, the following is a tabulation of votes 
cast in person or by proxy by members of the Committee on 
Veterans' Affairs at its June 22, 2006, meeting. On that date, 
the Committee, as noted on page 2, considered the Murray 
amendment to add six major construction authorizations. The 
Murray amendment was defeated on a 6-8 vote, with Senators 
Akaka, Rockefeller, Jeffords, Murray, Obama, and Salazar voting 
aye, and Senators Specter, Hutchison, Graham, Burr, Ensign, 
Thune, and Isakson voting nay. The Committee then accepted 
under unanimous consent a Craig amendment to decrease the 
authorized amount for the New Orleans project and to authorize 
the Secretary to carry out the project as a collaborative 
effort consistent with the June 12, 2006 New Orleans 
Collaborative Opportunities Study Group Report.
    The Committee then, by unanimous voice vote, ordered S. 
3421, as amended, a bill to amend Title 38, United States Code, 
to authorize major medical facility projects and major medical 
facility leases for the Department of Veterans Affairs for 
fiscal years 2006 and 2007, and for other purposes, reported 
favorably to the Senate.

           *       *       *       *       *       *       *


                             AGENCY REPORT

    On April 6, 2006, VA's Under Secretary for Health, the 
Honorable Jonathan B. Perlin, MD, appeared before the Committee 
and submitted testimony on the Department of Veterans Affairs' 
construction program and 5 Year Capital Plan, as well as VA's 
portfolio management approach and how the Capital Asset 
Realignment for Enhanced Services (CARES) process and the 
Enhanced-Use Leasing program play an integral role in the 
management of VA's portfolio.

     Statement of Jonathan Perlin, MD, Under Secretary for Health, 
                     Department of Veterans Affairs

    Mr. Chairman and members of the Committee, good afternoon. 
I am pleased to appear here this afternoon to provide you with 
an overview of the Department of Veterans Affairs' (VA) 
construction program and 5 Year Capital Plan. I will also 
provide information on VA's portfolio management approach and 
how the Capital Asset Realignment for Enhanced Services (CARES) 
process and the Enhanced-Use Leasing program play an integral 
role in the management of VA's portfolio.
    VA has a vast holding of diverse capital assets consisting 
of buildings and real estate, VA-leased buildings, enhanced-use 
leases, and infrastructure. Assets include hospitals, clinics, 
cemeteries, and office buildings. Many of these facilities 
currently are used, managed, and maintained in relation to and 
for promotion of the respective activities of VA's Veterans 
Health Administration (VHA), Veterans Benefits Administration 
(VBA), National Cemetery Administration (NCA), and Staff 
Offices (General Administration). At the close of FY 2005, VA 
held 1,053 operating leases, and owned 5,306 buildings and 
32,527 acres of land. Various construction programs are used to 
fund infrastructure for the Department. Operating dollars fund 
lease requirements and maintenance projects. The major 
construction program provides for constructing, altering, and 
improving any VA facility with a total project cost over $7 
million and the minor construction program funds construction 
activities under $7 million. Two grant programs are also 
utilized for building or improving state veterans cemeteries 
and state nursing homes and domiciliary facilities.
    The VA FY 2007 budget request includes $714 million in 
capital funding. Our request includes $399 million for major 
construction projects, $198 million for minor construction, $85 
million in grants for the construction of state extended care 
facilities, and $32 million in grants for the construction of 
state veterans cemeteries.
    The 2007 request for construction funding for our medical 
facilities is $457 million--$307 million for major construction 
and $150 million for minor construction. These resources will 
be devoted to implementing projects identified in the Capital 
Asset Realignment for Enhanced Services (CARES) program. The 
projects will renovate and modernize VA's health care 
infrastructure and provide greater access to high-quality care 
for veterans. VA also received funds enacted in the Hurricane 
Katrina emergency supplemental funding in late December 2005: 
$293 million to fund a CARES project for a new hospital in 
Biloxi, Mississippi: And $75 million for planning and design 
for the restoration/replacement of the medical center facility 
in New Orleans, Louisiana. To date, including the FY 2007 
budget request, VA has received in excess of $3 billion to 
implement CARES. In addition, VA currently has an emergency 
supplemental request for $600 million before the Congress for 
the construction funding of the restoration/replacement of the 
medical center facility in New Orleans.
    Our FY 2007 major construction request for health care will 
fund the continued development of two medical facility 
projects--$97.5 million to address seismic corrections in Long 
Beach (California); and $52.0 million to continue the work 
necessary to prepare for construction of a new medical center 
facility in Denver (Colorado). In addition, our request for 
major construction funding includes $38.2 million to construct 
a new nursing home care unit and new dietetics space, as well 
as to improve patient and staff safety by correcting seismic, 
fire, and life safety deficiencies at American Lake 
(Washington); $32.5 million for a new spinal cord injury center 
at Milwaukee (Wisconsin); $25.8 million to replace the 
operating room suite at Columbia (Missouri); and $7.0 million 
to design improvements through renovation and new construction 
to reduce underutilized vacant space located at the Jefferson 
Barracks Division campus at St. Louis (Missouri) as well as 
provide land for expansion at the Jefferson Barracks National 
Cemetery.
    We also requested $53.4 million in major construction 
funding and $25.0 million in minor construction resources to 
support our burial program. This includes funds for cemetery 
expansion and improvement at Great Lakes, Michigan ($16.9 
million), Dallas/Ft. Worth, Texas ($13.0 million), and Gerald 
B. H. Solomon, Saratoga, New York ($7.6 million). Our request 
will also provide $2.3 million in design funds to develop 
construction documents for gravesite expansion projects at 
Abraham Lincoln National Cemetery (Illinois) and at Quantico 
National Cemetery (Virginia). In addition, the major 
construction request includes $12 million for the development 
of master plans and the initial design for six new national 
cemeteries in areas directed by the National Cemetery Expansion 
Act of 2003--Bakersfield, California; Birmingham, Alabama; 
Columbia-Greenville, South Carolina; Jacksonville, Florida; 
Sarasota County, Florida; and southeastern Pennsylvania.


                                 CARES


    Former Secretary Anthony Principi formed the Capital Asset 
Realignment for Enhanced Services (CARES) program to conduct a 
``comprehensive, system-wide approach, identifying the demand 
for VA care and projecting into the future the appropriate 
function, size, and location for VA facilities.'' The CARES 
Commission, an independent body, evaluated VA's CARES program 
and submitted findings and recommendations in February of 2004, 
and on May 7, 2004, the Secretary released his CARES Decision 
based on the Commission's findings and recommendations for each 
CARES site. This CARES decision became VA's roadmap into the 
future.
    Since that time, much has been done to move these 
infrastructure improvements forward. Architectural and 
engineering firms have been retained to prepare designs and 11 
construction contracts have been awarded and are underway. An 
additional 13 construction contracts are planned to be awarded 
by the end of this Fiscal Year. These projects bring needed 
improvements for veterans at these locations.
    Public Law 108-170 provided the Secretary with interim 
authority to proceed with CARES approved projects subject to a 
45 day notice to the Committees. This legislation was used to 
provide authorization for the first 30 CARES projects. The 
legislation will sunset on September 30, 2006. Fourteen 
projects authorized under this Public Law are not likely to 
award construction contracts by September 30 and four 
additional projects which will have construction underway will 
have second phases of construction that will begin later. 
Therefore, the Department has requested an extension of that 
authority until September 30, 2009 in the FY 2007 Budget and 5 
Year Capital Plan. Also in need of authorization are three 
projects: Biloxi, Mississippi; Denver, Colorado; and New 
Orleans, Louisiana, for which the Department has identified as 
an immediate need in FY 2006. A request for authorization for 
medical facility leases for FY 2006 and FY 2007 construction 
projects and medical facility leases are also included in the 
budget request and capital plan. In total, VA is requesting 
authorization of $3.7 billion for major medical facility 
projects and $51.6 million for major medical facility leases.


                          5 YEAR CAPITAL PLAN


    The Department's 5 Year Capital Plan is the ultimate 
product of VA's capital investment process, which reflects 
trade-offs between funding the operational expenses for 
existing assets and the acquisition of new assets by the most 
cost-effective and beneficial means. The VA capital plan 
includes the highest priority capital investments that were 
vetted through a comprehensive Department wide capital 
investment process to ensure the assets fully support the 
mission, vision, and goals of the agency. The plan outlines 
VA's implementation of the CARES decisions. The plan also 
includes descriptions of other initiatives and capital asset 
management tools that VA is utilizing to better manage its 
large capital portfolio.
    For FY 2007 the capital plan is published together with the 
Department's construction budget. Combining the two documents 
provides a comprehensive view of the VA construction budget for 
2007 and plans for the future.


                          ENHANCED-USE LEASING


    VA utilizes a capital asset management tool called 
``enhanced-use leasing'' (EU leasing) to better manage its 
vacant and underutilized real property assets. The authority 
was initially authorized in 1991, is codified at 38 U.S.C. 
Sec. Sec. 8161-8169, and currently is set to expire on December 
31, 2011. It permits VA to lease Department-controlled real 
property to private or other public entities for a term not-to-
exceed 75 years. Each lease must be in exchange for ``fair 
consideration'' as determined by the Secretary. Such 
consideration may consist of monetary, and/or ``in-kind'' 
consideration including construction, repair, remodeling, 
improvements, or maintenance services for Department 
facilities, or the provision of office, storage, or other 
usable space.
    The EU leasing program has enabled VA to leverage its 
diverse, underutilized real estate portfolio to generate 
significant revenues. Such revenues are redirected towards the 
healthcare and capital operations of our medical centers, which 
serve our nation's veterans daily. It also has resulted in 
several privately-financed, developed, and operated facilities 
which provide valuable, mission-compatible services to the 
Department and eligible veterans, non-veterans, and VA 
employees. Such facilities and services have included co-
generation energy services, office facilities, parking 
facilities, hospice care, mental health, single-room occupancy 
(homeless shelters), affordable housing, transitional housing, 
low-cost senior housing, and child day care services. Notably, 
VA's varied EU leases also have resulted in a substantial short 
and long-term stimulus for the impacted local, state, and 
federal governments and economies, due to tax revenues, sales, 
and job creation.
    In FY 2005, through its EU lease program, VA received over 
$900,000 worth of in-kind consideration, and $28,000,000 via a 
single payment of monetary consideration. The EU Leasing 
program is a proven method of leveraging VA's diverse real 
estate portfolio and market position.


                   VA'S PORTFOLIO MANAGEMENT APPROACH


    VA utilizes a three-tiered portfolio management approach. 
This approach is the blueprint for VA portfolio management 
nationwide.
    First, VA manages what we have more effectively through 
Federal Real Property Council (FRPC) performance standards as 
well as using unique technology-assisted inventory management 
system. VA is committed to four metrics that set the goals for 
performance. They include the percent of space utilization as 
compared to overall space (owned and direct leased); the 
percent condition index (owned buildings); the ratio of non-
mission-dependent assets to total assets; and lastly the ratio 
of operating costs per gross square foot (GSF) adjusting for 
inflation. These goals are based on the FRPC standards for 
performance measurement in capital portfolio management.
    VA is striving to utilize information technology and 
established capital asset management principles to improve the 
management of its capital resources. VA created the Capital 
Asset Management System (CAMS), an integrated, Department-wide 
system, enabling VA to analyze, monitor, and manage VA's 
portfolio of capital assets. Data are organized and presented 
to strategically monitor performance against capital asset 
goals within and across asset types and VA Administrations 
(VHA, VBA, and NCA).
    Secondly, VA selects prudent capital investments through 
appropriated dollars. VA uses appropriated dollars to manage 
CARES capital investment projects that have proven to be sound 
investments. Each project's performance is measured to ensure 
the best use of our overall portfolio needs. This innovative 
approach has allowed VA to manage underutilized assets in a 
more efficient and cost-effective manner.
    VA's third approach is the use of its enhanced-use leasing 
authority, which has been previously mentioned. Over the past 
14 years VA has awarded 47 projects through the enhanced-use 
leasing authority. An additional 100 initiatives are being 
studied, of which 45 projects are currently active.

Closing
    In summary, Mr. Chairman, the $714 million the VA is 
requesting in FY 2007, in addition to the $293 million provided 
in the Hurricane Katrina emergency supplemental will provide 
the resources necessary for the Department to:
     Continue implementation of the infrastructure 
improvements identified in CARES to insure that facilities are 
available to support the provision of timely, high-quality 
health care to nearly 5.3 million veterans.
     Increase access to our burial program by ensuring 
that nearly 84 percent of veterans will be served by a burial 
option in a national or state veterans cemetery within 75 miles 
of their residence; and
     Provide safe and secure facilities for the 
Department built to current specifications to withstand natural 
and manmade disasters.
    I look forward to working with the members of this 
committee to continue the Department's tradition of providing 
timely, high-quality benefits and services to those who have 
helped defend and preserve freedom around the world. I would be 
pleased to answer any questions the committee may have.

    CHANGES IN EXISTING LAW MADE BY THE COMMITTEE BILL, AS REPORTED

    Pursuant to paragraph 12 of rule XXVI of the Standing Rules 
of the Senate, the Committee finds no changes in existing law 
made by S. 3421 as reported.

                                  
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