Capitol Visitor Center: Priority Attention Needed to Manage	 
Schedules and Contracts (17-MAY-05, GAO-05-714T).		 
                                                                 
Approved in the late 1990s, the Capitol Visitor Center (CVC) is  
the largest project on the Capitol grounds in over 140 years. Its
purposes are to provide greater security for all persons working 
in or visiting the U.S. Capitol and to enhance the educational	 
experience of visitors who have come to learn about Congress and 
the Capitol building. When completed, this three-story, 	 
underground facility, located on the east side of the Capitol, is
designed to be a seamless addition to the Capitol complex that	 
does not detract from the appearance of the Capitol or its	 
historic landscaping. According to current plans, it will include
theaters, an auditorium, exhibit space, a service tunnel for	 
truck loading and deliveries, storage, and additional space for  
use by the House and Senate. This testimony discusses the	 
Architect of the Capitol's (AOC) management of the project's	 
schedules and contracts; the project's estimated costs, including
risks and uncertainties; worker safety issues; and AOC's monthly 
reporting to Congress on the project. This testimony also	 
discusses recommendations that we have made in previous testimony
and briefings and the actions AOC has taken in response.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-714T					        
    ACCNO:   A24279						        
  TITLE:     Capitol Visitor Center: Priority Attention Needed to     
Manage Schedules and Contracts					 
     DATE:   05/17/2005 
  SUBJECT:   Construction (process)				 
	     Construction contracts				 
	     Construction costs 				 
	     Construction workers				 
	     Contract administration				 
	     Contract oversight 				 
	     Cost analysis					 
	     Cost overruns					 
	     Data integrity					 
	     Facility management				 
	     Financial management				 
	     Government facility construction			 
	     Occupational safety				 
	     Schedule slippages 				 
	     Capitol Visitor Center Project			 

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GAO-05-714T

                 United States Government Accountability Office

GAO Testimony

Before the Subcommittee on the Legislative Branch, Committee on
Appropriations, U.S. Senate

For Release on Delivery

Expected at 10:30 a.m. EDT CAPITOL VISITOR

Tuesday, May 17, 2005

CENTER

          Priority Attention Needed to Manage Schedules and Contracts

Statement of David M. Walker Comptroller General of the United States

GAO-05-714T

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss GAO's ongoing work on the
progress of the Capitol Visitor Center (CVC) project. As you know, we have
been performing this work in response to requests from members of the
Capitol Preservation Commission (CPC) and as directed by the Conference
Report to the Omnibus Consolidated and Emergency Supplemental
Appropriations Act, 1999 (House Conference Report 105825) and the
Conference Report on the Legislative Branch Appropriations Act, 2004
(House Conference Report 108-279).

Approved in the late 1990s, CVC is the largest project on the Capitol
grounds in over 140 years. Its purposes are to provide greater security
for all persons working in or visiting the U.S. Capitol and to enhance the
educational experience of visitors who have come to learn about Congress
and the Capitol building. When completed, this three-story, underground
facility, located on the east side of the Capitol, is designed to be a
seamless addition to the Capitol complex that does not detract from the
appearance of the Capitol or its historic landscaping. According to
current plans, it will include theaters, an auditorium, exhibit space, a
service tunnel for truck loading and deliveries, storage, and additional
space for use by the House and Senate.

In my testimony today, I will discuss the Architect of the Capitol's (AOC)
management of the project's schedules and contracts; the project's
estimated costs, including risks and uncertainties; worker safety issues;
and AOC's monthly reporting to Congress on the project. I will also
discuss recommendations that we have made in previous testimony and
briefings and the actions AOC has taken in response. We testified on this
topic before the Subcommittee on the Legislative Branch, House Committee
on Appropriations, in July 2003,1 and we have periodically briefed
congressional representatives, the CVC project executive, and the
Architect of the Capitol since then.

My statement is based on our monitoring of the CVC project, which included
reviewing monthly status reports, contract files, schedules, contractors'
cost estimates, other organizations' construction management policies and
procedures, industry best practices, and data for construction

1GAO, Capitol Visitor Center: Current Status of Schedule and Estimated
Cost, GAO-03-1014T (Washington, D.C.: July 15, 2003.

projects compiled by the Construction Industry Institute and the Bureau of
Labor Statistics. We have attended regularly scheduled meetings on the CVC
project's progress; observed construction work at the site; and discussed
management, procurement, and safety issues with AOC, contractor personnel,
as well as experienced construction and contract management personnel at
other organizations. Additionally, we obtained expert assistance in
analyzing construction project costs and schedules from KPMG, Hulett &
Associates, and the Defense Contract Audit Agency (DCAA). We did not
perform an audit; rather, we performed our work to assist Congress in
conducting its oversight activities.

Before I summarize our principal observations and recommendations for
moving forward, let me briefly set the stage. As previously noted, AOC is
managing and has overall responsibility for this complex project, but a
construction management firm, Gilbane Building Company, is providing a
range of construction management services in support of AOC, including
coordinating the activities of the major construction contractors,
monitoring worker safety, and providing AOC with status information for
reporting to Congress. AOC is implementing the project in two phases, or
sequences. In June 2002, it awarded the sequence 1 contract for the
excavation and structural work to Centex Construction Company, and in
April 2003, it awarded the sequence 2 contract for mechanical, electrical,
plumbing and interior finishing work to Manhattan Construction Company.

In summary, the CVC project is taking about 2 years longer than planned
and is expected to cost between about $522 million and $559 million-
significantly more than originally estimated. The majority of delays and
cost increases were largely outside AOC's control, but weaknesses in AOC's
schedule and contract management contributed to a portion of the delays
and cost overruns. Of the project's estimated cost increase, about $147
million is due to scope changes, such as the addition of the House and
Senate expansion spaces; about $45 million to other factors also outside
or largely outside AOC's control, such as higher than expected bid prices
on the sequence 2 contract; and about $58 million to factors more within
AOC's control, such as delays. Also, our analysis of CVC worker safety
data showed that the injury and illness rate for 2003 was about 50 percent
higher for CVC than for comparable construction sites and that the rate
for 2004 was about 30 percent higher than the rate for 2003. Finally, a
number of AOC's monthly reports to Congress have not accurately reflected
the status of the project's construction schedules and costs and have
transmitted inaccurate worker safety data. This has led to certain
"expectation gaps" within Congress.

Enhanced Schedule Management Needed

AOC has taken a number of actions to improve its management of the
project; however, these actions have not yet fully corrected all
identified problems. To help prevent further schedule delays, control cost
growth, and enhance worker safety, AOC urgently needs to give priority
attention to managing the project's construction schedules and contracts,
including those contract provisions that address worker safety. These
actions are imperative if further cost growth, schedule delays, and worker
safety problems are to be avoided. AOC also needs to see that it reports
accurate information to Congress on the project. Furthermore, decisions by
Congress will have to be made regarding the additional funding needed to
complete construction and address any risks and uncertainties that arise.

According to AOC, the entire base project is about 60 percent complete.2
Except for some punch-list items, such as fixing water leaks, construction
work under the sequence 1 contract is now complete. This work includes the
basic structure, the truck and Library of Congress tunnels, and the East
Front interface. AOC and its contractors also completed work associated
with the Inauguration. Work has started on the sequence 2 contract,
including fitting out and finishing the basic structure and the Library of
Congress tunnel and constructing the utility tunnel and space for the
exhibits. AOC has just made contractual arrangements for fitting out and
finishing the Senate and House expansion spaces and is now procuring the
House Connector tunnel and the connection between the Library of Congress
tunnel and the Jefferson building.

AOC's scheduled completion date for CVC is now September 2006, nearly 20
months later than originally planned. We believe, given past problems and
future risks and uncertainties, that the completion date may be delayed
until sometime between December 2006 and March 2007. Additionally, AOC's
scheduled completion date for the interior of the House and Senate
expansion spaces is March 2007.

The project's schedule delays are due in part to scope changes, design
changes, and unforeseen conditions beyond AOC's control (e.g., adding

2The base project includes a finished visitor center shell and core, an
extended loading dock service tunnel, exterior finishes, improvements to
the East Plaza, construction of unfinished House and Senate expansion
space shell, exhibits, technical security systems, a utility tunnel, and a
connecting tunnel to the Library of Congress. The base project does not
include other items, such as finishing the House and Senate expansion
space and certain security-related enhancements.

the Senate and House expansion spaces and encountering underground
obstructions). However, factors more within AOC's control also contributed
to the delays. First, the original schedule was overly optimistic. Second,
AOC has had difficulty obtaining acceptable, contractually required
schedules from its contractors, such as a master summary schedule from its
construction management contractor. In addition, AOC and its contractors
did not adhere to contract provisions designed for effective schedule
management, including those calling for monthly progress review meetings
and schedule updates and revisions. AOC and its construction management
contractor also had difficulty coordinating the work of the sequence 1 and
2 contractors and did not systematically track and document delays and
their causes as they occurred or apportion time and costs to the
appropriate parties on a timely basis. Additionally, AOC has not yet
reached full agreement with CPC on the extent to which construction must
be completed before the facility can be opened to the public, and AOC has
not yet developed an overall summary schedule that links the completion of
construction with the steps necessary to prepare CVC for facility
operations. Finally, AOC needs to fully implement our recommendation that
it develop plans to mitigate the project's remaining risks and
uncertainties, such as shortages in the supply of stone or skilled stone
workers, unforeseen conditions associated with the remaining underground
tunnels, and commissioning the building in the allotted time.

We have made numerous recommendations to improve schedule management, and
AOC has taken actions to implement most of them. We believe, however, that
both AOC and its construction management contractor will need to sustain
their attention and apply additional effort to managing the project's
schedule, as well as fully implement our recommendations, to help keep the
project on track and as close to budget as possible. More specifically,
AOC needs to give priority attention to:

o  	obtaining and maintaining acceptable project schedules, including
reassessing the times allotted for completing sequence 2 work;

o  	aggressively monitoring and managing contractors' adherence to the
schedule, including documenting and addressing the causes of delays;

o  developing and implementing risk mitigation plans;

o  	reaching agreement on what project elements must be complete before
CVC can open to the public; and

Stronger Contract Management Needed

preparing a summary schedule, as Congress requested, that integrates the
major steps needed to complete CVC construction with the steps necessary
to prepare for operations.

AOC is relying on contractors to design, build, and help manage CVC's
construction and help prepare for its operation. AOC has obligated over
$350 million for contracts and contract modifications for these
activities. We found that AOC needed to take additional steps to ensure
that it was (1) receiving reasonable prices for proposed contract
modifications, (2) obtaining adequate support for contractors' requests
for reimbursement of incurred costs, (3) adequately overseeing its
contractors' performance, and (4) taking appropriate steps to see that
contractual work is not done before it is appropriately authorized under
contractual arrangements.

o  	Initially, AOC was not preparing independent government estimates as
part of its price analyses for proposed modifications to the two major
contracts. In early 2004, AOC hired an employee for the CVC staff with
contract management experience, and AOC has improved its capacity to
obtain reasonable prices by, among other things, preparing government
estimates as part of its effort to evaluate the reasonableness of prices
offered by the contractors for the proposed modifications.

o  	Although most CVC work is being done under fixed price contracts, for
which payment is not based on incurred costs, AOC has received or is
anticipating requests for reimbursement of over $30 million in costs that
the contractors say they incurred because of delays.3 In addition, AOC has
awarded some contract modifications for unpriced work that will require
reliable information on incurred costs. According to the Defense Contract
Audit Agency, several concerns relating to the contractors' accounting
systems need to be addressed to ensure the reliability of the contractors'
incurred cost information.

o  	AOC has continued to experience difficulty getting fully acceptable
performance from contractors. For example, as of April 30, 2005, the
construction management contractor had not provided an acceptable master
schedule identifying appropriate links between tasks and key milestones,
and it has not been providing AOC with accurate safety data for an
extended period of time. Similarly, one of AOC's major construction

3Reimbursements for the costs of non-weather-related delays not
attributable to the contractor are standard practice in the construction
industry.

contractors had not corrected recurring safety concerns over an extended
period.

o  One of AOC's CVC consultants began work several months before AOC

had awarded a contract to it authorizing the work. AOC agreed to take
action to prevent this type of problem from recurring. We have made
several recommendations to enhance AOC's contract management. AOC has
generally agreed and taken action to implement these recommendations. For
example, it has enhanced its capacity to review cost-related data
submitted by contractors with requests for reimbursement based on incurred
costs, and it has better evaluated its construction management
contractor's performance and taken action to obtain improvements. To help
prevent further schedule delays and control cost growth, AOC needs to
aggressively manage its contractors' performance, particularly in the
areas of managing schedules and obtaining reasonable prices on contractual
actions, and continue to ensure that contractors' requests for payment
based on incurred costs are adequately evaluated. It also needs to ensure
that its contractors report accurate safety data and promptly act to
correct safety concerns.

We currently estimate that the cost to complete the construction of the
CVC project, including proposed additions to its scope, is about $522
million without any allowance for risks and uncertainties.4 Of this
amount, $483.7 million has been provided to date.5 In November 2004, we
estimated that the cost to complete the scope of work approved at that
time was likely to be about $515 million, without an allowance for risks
and uncertainties. Since November 2004, AOC and the U.S. Capitol Police
have proposed about $7 million in scope changes that we included in our

Project Costs and Funding Provided as of May 2005

4Our November 2004 estimate of $515 million was similar to AOC's estimate
based on work done by one of its consultants; however, except for the $4.2
million in additional scope items, AOC has not requested funds to cover
risks and uncertainties provided for in our $44 million.

5Public Law 108-447, enacted in December 2004, provided that up to $10.6
million could be transferred from funds appropriated for Capitol Buildings
operations and maintenance to CVC upon the approval of the House and
Senate Committees on Appropriations. In March 2005, AOC requested that
about $4 million of these funds be transferred to CVC, including some
funds for construction-related work, such as design of the gift shop
space. As of May 12, the House Committee had not yet approved this
transfer, and none of the $10.6 million has been included in the $483.7
million figure above.

current estimate, bringing it to $522 million.6 However, the project
continues to face risks and uncertainties, such as unforeseen conditions,
scope gaps and changes, and possible further delays.7 To provide for
these, we estimated in November 2004 that an additional $44 million would
likely be needed, bringing our estimate of the total cost to about $559
million. We continue to believe that this estimate of the project's total
costs is appropriate. We have not increased our allowance for risks and
uncertainties in response to the recent requests for $7 million in scope
changes because we consider such changes among the risks and uncertainties
that the project faced in November.

Over the years, CVC construction costs have increased considerably. Most
of these costs were outside or largely outside AOC's control, but other
costs were more within its control. About $147 million of the cost
increase was due to changes in the project's scope, many of which were for
security enhancements following September 11 and the anthrax attacks in
October 2001. Congress added the House and Senate expansion spaces and the
Library of Congress tunnel to the project's scope after the original
project's cost was estimated; similarly, the Department of Defense
recommended and funded an air filtration system for the facility. Other
factors also outside or largely outside AOC's control contributed about
$45 million to the increase. For example, bid prices for the sequence 1
and 2 contracts exceeded budgeted costs, and unforeseen field conditions,
such as underground obstructions, necessitated additional work. Finally,
factors more within AOC's control accounted for about $58 million of the
expected additional project costs. For example, the project experienced
significant delays during sequence 1, and we expect AOC will incur
additional costs in the future because we believe the sequence 2 work will
not be done by AOC's September 2006 completion date; slow decisionmaking
by AOC also contributed to higher costs.

In its fiscal year 2006 budget request, AOC asked Congress for an
additional $36.9 million for CVC construction. AOC believes this amount

6Last week, Congress enacted legislation that provided the additional
funding requested by the Capitol Police for security monitoring. Public
Law 109-13, Emergency Supplemental Appropriations for Defense, the Global
War on Terror, and Tsunami Relief, 2005 (May 11, 2005).

7Other risks and uncertainties that continue to face the project include,
but are not limited to, shortages in the supply of stone and skilled stone
workers, possible additional requirements for life safety or security
changes, unknown operator requirements, and contractor coordination
issues.

will be sufficient to complete the project's construction and, if
approved, will bring the total funding provided for the project to $520.6
million. AOC's request includes the $4.2 million for potential additions
to the project's scope (e.g., congressional seals, an orientation film,
and backpack storage space), but does not include $1.7 million for the air
filtration system--an amount that AOC thought it would not need and
returned to DOD, but that we believe AOC will still likely need. AOC
believes that it could obtain these funds from DOD if needed. Thus, with a
$1.7 million increase for the air filtration system, the total estimated
cost to complete the project's construction would be the $522.3 million
cited above without provision for risks and uncertainties.8

To continue to move the project forward, Congress will have to consider
the additional funding AOC has requested for fiscal year 2006 to complete
the project, including the $4.2 million in additional scope items. Through
effective risk mitigation, as we have recommended, and effective
implementation of our other recommendations for enhancing schedule and
contract management, AOC may be able to avoid some of the $44 million that
we allowed for risks and uncertainties. However, given the project's
complexity and the additional requests for funds already made and
anticipated, we believe AOC will likely need much of this $44 million even
with effective implementation of our recommendations. Already, it appears
that AOC may need additional funds for sequence 2 changes in fiscal year
2005. For example, as of April 30, 2005, AOC had identified proposed
changes to the sequence 2 contract that it considered necessary and
expected to cost about $13.8 million. This sum is about $700,000 less than
the $14.5 million AOC has available during fiscal year 2005 for sequence 2
changes.

                              Worker Safety Issues

Because the number of construction workers at the CVC site is soon
expected to increase significantly, worker safety will continue to be an
important issue during the remainder of the project. Our review of worker
safety issues found that the construction management contractor's monthly
CVC progress reports contained some inaccurate data for key measures of
worker safety, including injuries and illnesses and lost time. For
example, the contractor reported 3 lost-time incidents for 2004, but

8Essentially, AOC's $36.9 million fiscal year 2006 budget request was
consistent with our $515.1 million estimated cost at completion except
that it included $4.2 million for the additional scope items and excluded
the $1.7 million for filtration-$517.6 million less $4.2 million plus $1.7
million equals $515.1 million.

our analysis identified 45 such incidents. These inaccuracies resulted in
both overstatements and understatements of rates.9 For instance, the
contractor reported a rate of 6.3 injuries and illnesses for April 2004,
whereas our analysis identified 12.5.10 The construction management
contractor attributed the inaccuracies to key data missing from its
calculations, unawareness of a formula change that began in 2002,
mathematical errors, and poor communication with the major construction
contractors.

According to our analysis, the rates for injuries and illnesses and for
lost time were higher for CVC than for comparable construction sites. For
2003, the injury and illness rate was about 50 percent higher, and the
losttime rate was about 160 percent higher.11 Additionally, both the
numbers and the rates for injuries and illnesses and for lost time
worsened from 2003 to 2004. For example, the injury and illness rate
increased from 9.1 in 2003 to 12.2 in 2004, and the lost-time rate
increased from 8.1 to 10.4. AOC and its contractors have taken some
actions to promote and manage safety on the site, such as conducting
monthly safety audits and making recommendations to improve safety.
However, at the time of our review, neither AOC nor its construction
management contractor had analyzed the results of the monthly safety
audits to identify trends or concerns, and neither had reviewed the safety
audit findings in conjunction with the injury and illness data. Our
analysis of key safety audit data for the first 10 months of 2004
identified about 700 safety concerns, the most frequent of which was
inadequate protection against falls. Furthermore, AOC had not fully
exercised its authority to have the contractors take corrective actions to
address recurring safety concerns.

9The Bureau of Labor Statistics (BLS) calculates the number of
injury/illness incidents per 100 full-time workers as follows: (N/EH) x
200,000, where (N) = number of injuries/illnesses, (EH) = total hours
worked by all employees during the calendar year, and 200,000 = base for
100 equivalent full-time workers (working 40 hours per week, 50 weeks per
year). BLS calculates the number of lost-time incidents per 100 full-time
workers as follows: (LT/EH) x 200,000 where (LT) = cases of (1) days away
from work, (2) restricted work or (3) work transfer, (EH) = number of
employee hours for the desired period and 200,000 = base for 100
equivalent full-time workers (working 40 hours per week, 50 weeks per
year).

10In early 2005, the major contractors provided us with updated data for
injuries and illnesses and lost time in 2004. We used these data to
recalculate the 2004 rates. For example, the monthly rate for injuries and
illnesses in April 2004 increased to 15.7.

11The CVC rates are sensitive to small variations in the number of
injuries, illnesses, or losttime incidents for a given year.

Reporting to Congress

We recommended that, to improve safety and reporting, AOC ensure the
collection and reporting of accurate injury and illness and lost-time
data, work with its contractors to develop a mechanism for analyzing the
data and identifying corrective actions, and more fully exercise its
authority to take appropriate enforcement actions when warranted. AOC
agreed with our recommendations and initiated corrective actions. However,
follow-up work that we did in early 2005 at AOC's request indicated the
corrective actions had not yet fully eliminated errors in reporting. AOC
agreed that continued action on our recommendations was essential.

Both AOC and its construction management contractor prepare monthly
progress reports on CVC. AOC relies heavily on its contractor for the
information it puts into its own reports, which it sends to Congress. We
have found that AOC's reports have sometimes failed to identify problems,
such as cost increases and schedule delays. This has resulted in certain
"expectation gaps" within Congress. We have suggested to AOC that its
reports could be more helpful to Congress if, for example, they discussed
critical issues facing the project and important upcoming decisions. AOC
has been making improvements to its monthly reports and has agreed to
continue doing so.

Mr. Chairman, this completes my prepared statement. We would be happy to
answer questions that you and other Subcommittee Members may have.

Contact and	For further information about this testimony, please contact
Bernard Ungar at (202)512-4232 or Terrell Dorn at (202) 512-6923. Other
key

Acknowledgments 	contributors to this testimony include Shirley Abel,
Timothy DiNapoli, Brett Fallavollita, Jeanette Franzel, Jackie Hamilton,
Bradley James, David Merrill, Scott Riback, Susan Tindall, and Kris
Trueblood.

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