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DEPARTMENT OF VETERANS AFFAIRS LEASES: IS 

THE VA OVERPAYING FOR LEASED MEDICAL 

FACILITIES? 

(114–54) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND 

EMERGENCY MANAGEMENT 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

SEPTEMBER 28, 2016 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

Available online at: http://www.gpo.gov/fdsys/browse/ 

committee.action?chamber=house&committee=transportation 

(II) 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

BILL SHUSTER, Pennsylvania, Chairman 

DON YOUNG, Alaska 

JOHN J. DUNCAN, JR., Tennessee, 

Vice Chair 

JOHN L. MICA, Florida 

FRANK A. LOBIONDO, New Jersey 

SAM GRAVES, Missouri 

CANDICE S. MILLER, Michigan 

DUNCAN HUNTER, California 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

LOU BARLETTA, Pennsylvania 

BLAKE FARENTHOLD, Texas 

BOB GIBBS, Ohio 

RICHARD L. HANNA, New York 

DANIEL WEBSTER, Florida 

JEFF DENHAM, California 

REID J. RIBBLE, Wisconsin 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

SCOTT PERRY, Pennsylvania 

RODNEY DAVIS, Illinois 

MARK SANFORD, South Carolina 

ROB WOODALL, Georgia 

TODD ROKITA, Indiana 

JOHN KATKO, New York 

BRIAN BABIN, Texas 

CRESENT HARDY, Nevada 

RYAN A. COSTELLO, Pennsylvania 

GARRET GRAVES, Louisiana 

MIMI WALTERS, California 

BARBARA COMSTOCK, Virginia 

CARLOS CURBELO, Florida 

DAVID ROUZER, North Carolina 

LEE M. ZELDIN, New York 

MIKE BOST, Illinois 

PETER A. DEFAZIO, Oregon 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

EDDIE BERNICE JOHNSON, Texas 

ELIJAH E. CUMMINGS, Maryland 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

STEVE COHEN, Tennessee 

ALBIO SIRES, New Jersey 

DONNA F. EDWARDS, Maryland 

JOHN GARAMENDI, California 

ANDRE ́ CARSON, Indiana 

JANICE HAHN, California 

RICHARD M. NOLAN, Minnesota 

ANN KIRKPATRICK, Arizona 

DINA TITUS, Nevada 

SEAN PATRICK MALONEY, New York 

ELIZABETH H. ESTY, Connecticut 

LOIS FRANKEL, Florida 

CHERI BUSTOS, Illinois 

JARED HUFFMAN, California 

JULIA BROWNLEY, California 

SUBCOMMITTEE ON ECONOMIC DEVELOPMENT, PUBLIC BUILDINGS, AND EMERGENCY

MANAGEMENT

LOU BARLETTA, Pennsylvania, Chairman 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

SCOTT PERRY, Pennsylvania 

RYAN A. COSTELLO, Pennsylvania 

BARBARA COMSTOCK, Virginia 

CARLOS CURBELO, Florida 

DAVID ROUZER, North Carolina 

BILL SHUSTER, Pennsylvania (Ex Officio) 

ANDRE ́ CARSON, Indiana 

ELEANOR HOLMES NORTON, District of 

Columbia 

ALBIO SIRES, New Jersey 

DONNA F. EDWARDS, Maryland 

DINA TITUS, Nevada 

PETER A. DEFAZIO, Oregon (Ex Officio) 

VACANCY 

(III) 

CONTENTS Page 

Summary of Subject Matter .................................................................................... iv 

TESTIMONY 

Rebecca Shea, Acting Director, Physical Infrastructure Issues, U.S. Government Accountability Office .................................................................................. 3 

James M. Sullivan, Director of the Office of Asset Enterprise Management, 

U.S. Department of Veterans Affairs ................................................................. 3 

Chris Wisner, Assistant Commissioner for Leasing, Public Buildings Service, 

U.S. General Services Administration ................................................................ 3 

PREPARED STATEMENTS SUBMITTED BY WITNESSES 

Rebecca Shea ............................................................................................................ 25 

James M. Sullivan ................................................................................................... 39 

Chris Wisner ............................................................................................................ 56 

SUBMISSIONS FOR THE RECORD 

James M. Sullivan, Director of the Office of Asset Enterprise Management, 

U.S. Department of Veterans Affairs, responses to questions for the record 

from the following Representatives: 

Hon. Mark Meadows of North Carolina ......................................................... 47 

Hon. David Rouzer of North Carolina ............................................................ 52 

iv 


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v 


Insert offset folio 2 here 21647.002
vi 


Insert offset folio 3 here 21647.003
vii 


Insert offset folio 4 here 21647.004
(1) 

DEPARTMENT OF VETERANS AFFAIRS 

LEASES: IS THE VA OVERPAYING FOR 

LEASED MEDICAL FACILITIES? 

WEDNESDAY, SEPTEMBER 28, 2016 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ECONOMIC DEVELOPMENT, 

PUBLIC BUILDINGS, AND EMERGENCY MANAGEMENT, 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:34 a.m., in room 

2253, Rayburn House Office Building, Hon. Lou Barletta (Chairman of the subcommittee) presiding. 

Mr. BARLETTA. The subcommittee will come to order. I want to 

thank the witnesses from the Government Accountability Office, 

the Department of Veterans Affairs [VA], and the General Services 

Administration [GSA] for being here today. 

The purpose of today’s hearing is to make sure medical facilities 

are delivered quickly and cost effectively so that our veterans can 

receive the medical care that they require. Now, the Transportation 

and Infrastructure Committee is involved because the Public Buildings Act requires all leases over $2.85 million to be authorized by 

our committee and the Senate Environment and Public Works 

Committee. 

Now, GSA can delegate this leasing authority to other agencies, 

but it cannot waive the requirement for congressional authorization. Providing quality health care to our veterans is my top concern. Our men and women in uniform put their lives on the line 

to protect our country and our freedoms. Medical facilities, whether 

owned or leased, are a critical part of delivering healthcare services. Unfortunately, the VA has struggled greatly to require health 

care facilities on time, on budget, and in compliance with the law. 

The VA’s new Colorado hospital is so far over budget and behind 

schedule that the Army Corps of Engineers has had to take over 

management of the project. And the VA’s leasing program has been 

too slow and out of compliance with the Public Buildings Act and 

the most basic Government accounting rules. 

Both the GAO and the VA inspector general have detailed a history of VA’s mismanagement of its real estate. In fact, in a 2012 

letter from the House Veterans’ Affairs Committee to the VA, the 

committee expressed concerns about the ways that the VA’s seven 

healthcare clinic leases passed in 2009. In 2013, the inspector general reported VA’s management of timeliness and costs in the 

healthcare clinic lease procurement process has not been effective. 

2 

On top of all this, the Congressional Budget Office at OMB 

raised serious questions about how the VA has been accounting 

and budgeting for these leases. Unfortunately, as highlighted at 

our July hearing, many agencies with leasing authority, outside of 

GSA, do not understand the legal limits of their authority. We have 

seen agencies like the SEC and the Commodity Futures Trading 

Commission find themselves in serious trouble because of this. Exceeding the legal limitations can result in Anti-Deficiency Act violations, which have criminal penalties and significant project delays. 

In 2013 and 2014, OMB raised serious questions whether the VA 

had, in fact, exceeded its leasing authority. As a result, the administration directed the GSA to step in. GSA must ensure the VA’s 

leases are properly authorized and do not violate the Anti-Deficiency Act. 

On September 12, 2014, the committee officially received a letter 

from the VA requesting approval of six leases for their healthcare 

clinics, recognizing projects over GSA’s threshold of $2.85 million 

required this committee’s approval. The committee approved them 

5 days later despite having to gather updated information to evaluate costs. 

It has now been 2 years since this committee approved those six 

leases, and we have not received any new prospectuses for 

healthcare clinics since then. We understand there are eight additional leases requiring our authorization that were included among 

the 27 leases in the 2014 Choice Act. Because of this committee’s 

role in approving these leases, the committee, along with the Veterans’ Affairs Committee, requested GAO conduct a review of the 

VA healthcare clinic leasing. 

Specifically, the GAO examined a few key areas. One, the criteria 

VA uses to determine whether to lease or own medical facilities. 

Two, the accuracy of VA’s cost estimates for projects. And, three, 

how the VA is aligning its leasing process with that of the GSA. 

Today, we want to hear what improvements have been made and 

what still needs to be done to make sure that the VA medical 

leases are cost effective and comply with the law. 

We also want to receive updates on the previous six projects we 

authorized in 2014 and a timetable on when we will receive the additional eight. With all the issues the VA is grappling with to ensure our veterans are served in a timely manner, the VA should 

take full advantage of the opportunity to leverage GSA’s real estate 

expertise. 

I look forward to hearing more from our witnesses on these 

issues. Thank you. 

I now call on the ranking member. Before that, I ask unanimous 

consent that Members not on this subcommittee be permitted to sit 

with the subcommittee at today’s hearing, offer testimony, and ask 

questions. So be it. 

And now I call on the ranking member of the subcommittee, Mr. 

Carson, for a brief opening statement. 

Mr. CARSON. Thank you, Chairman Barletta, and thank you for 

your leadership. 

Prior to 2014, the VA used their own real estate authority to sign 

leases for medical facilities. However, the VA in consultation with 

the Office of Management and Budget, later determined that it did 

3 

not have legal authority necessarily to enter into multiyear leases. 

The VA now relies on GSA’s authority to execute these leases. In 

2014, this committee approved six prospectuses submitted by GSA 

on behalf of the VA. These six medical facility leases were the first 

of their kind to be approved by the committee. 

Now, typically, these facilities include mental health clinics, readjustment counseling centers, research, and other types of clinical 

spaces. Because the VA is working with the GSA to execute these 

leases, they have now come before this committee for approval. Although we approved the first six leases, Chairman Barletta and I 

and members of the Veterans’ Affairs Committee thought it was 

appropriate to request GAO’s study to the VA’s choices in managing its real property assets. 

While we want to support the VA’s efforts to provide essential 

health care to our country’s veterans, it is also important that this 

committee have some assurances that the VA is managing its real 

estate assets as efficiently as possible. Every dollar saved in a real 

estate transaction is a dollar that can be redirected to supportive 

services for veterans, an important priority for every Member of 

Congress. 

I look forward to today’s testimony from the VA, GSA, and GAO 

on how this program is being managed and how improvements can 

be made going forward. 

Thank you, Chairman. I yield back. 

Mr. BARLETTA. Thank you. 

On our panel today we have Ms. Rebecca Shea, Acting Director 

of Physical Infrastructure Issues, Government Accountability Office; Mr. James M. Sullivan, Director of the Office of Asset Enterprise Management, United States Department of Veterans Affairs; 

and Mr. Chris Wisner, Assistant Commissioner for Leasing, Public 

Buildings Service, General Services Administration. 

I ask unanimous consent that our witnesses’ full statements be 

included in the record. 

Without objection, so ordered. 

Each of you is now recognized for 5 minutes. And, Ms. Shea, you 

may proceed. 

TESTIMONY OF REBECCA SHEA, ACTING DIRECTOR, PHYSICAL 

INFRASTRUCTURE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE; JAMES M. SULLIVAN, DIRECTOR OF THE 

OFFICE OF ASSET ENTERPRISE MANAGEMENT, U.S. DEPARTMENT OF VETERANS AFFAIRS; AND CHRIS WISNER, ASSISTANT COMMISSIONER FOR LEASING, PUBLIC BUILDINGS 

SERVICE, U.S. GENERAL SERVICES ADMINISTRATION 

Ms. SHEA. Thank you. Good morning, Chairman Barletta, Ranking Member Carson, and members of the subcommittee. I am 

pleased to be here today to talk about GAO’s review of VA’s practices for leasing major medical facilities. VA operates the largest 

healthcare network in the U.S. with over 2,700 facilities, nearly 

half of which are leased. Many of VA’s facilities are aging, and to 

replace them and expand access to veterans, VA has increasingly 

turned to leasing rather than construction and ownership to provide these important services to veterans. 

4 

Over the past 10 years, the number of medical facilities leased 

by VA grew to just under 1,300 facilities, 57 of these were major 

medical facility leases, spaces with average annual rent in excess 

of $1 million. 

Today, I will discuss our June 2016 report, the focused on factors 

affecting VA’s decisions, cost estimating process, and alignment 

with GSA requirements. 

Turning, first, to the factors effecting VA’s leasing decisions, we 

found that VA leases major medical facilities, because leasing can 

more quickly result in a finished facility and because it provides 

VA flexibility to relocate at the end of the lease term, which is limited to 20 years. In fact, VA cited flexibility to move in all of its 

major medical lease proposals since 2015, including some in which 

VA estimated the construction of its own facility would be less costly. 

According to VA, moving supports changing priorities such as 

meeting requirements for veterans access and changing security 

and compliance standards. As we have noted in our past work, disposing of federally owned facilities can be difficult, suggesting a 

certain level of support for VA’s argument for this flexibility. However, VA does not assess whether or how it has actually benefited 

from this flexibility when justifying its leases. 

In our June report, we recommended that VA annually assess 

how it has used the flexibility afforded by leasing and provide this 

information to Congress in its annual budget submission. Doing so 

would enhance the transparency of VA’s decisionmaking and provide Congress with important information it needs for authorizing 

and funding decisions. VA agreed and plans to do this moving forward. 

Turning to VA’s cost estimating process for leases, we found VA’s 

process met several but not all of GAO’s standards for reliable cost 

estimates. 

In particular, VA’s process was comprehensive and well-documented, but it did not account for common and sometimes large 

variations between the estimate and actual facility cost. In fact, for 

18 of the 23 leases we reviewed, the actual lease costs were at a 

minimum 15 percent above or below the initially proposed lease 

cost usually because of changes to proposed design. 

For example, actual cost for VA’s San Francisco facility were 26 

percent over the estimated cost while actual cost for the Montgomery, Alabama, facility were 44 percent below the original estimate. Providing Congress with more accurate estimates would support its authorization in funding decisions. 

Accordingly, VA recently issued a new design guide to reduce the 

risk of changes after proposing leases to Congress as well as a lessons-learned study to identify improvements for its cost estimating 

process. However, it is still early, and the success of these initiatives or leases currently in the pipeline will depend on how well VA 

implements them. 

Lastly, we found that VA has made progress meeting GSA requirements for delegated leasing authority. For example, as a result of VA’s new training and management review process, GSA is 

now able to approve VA’s proposals more quickly. However, few of 

VA’s high-cost leases have gone through GSA’s approval process, 

5 

and their complexity can make it more difficult to align with GSA’s 

requirements. 

In closing, VA should begin implementing our recommendations 

by collecting the information it needs to assess how it has used the 

flexibilities afforded by leasing. Doing so will enhance the transparency of VA’s decisionmaking process and provide both VA and 

Congress with data to make the most informed decisions. 

VA should also monitor whether its recent changes such as the 

design guide, lesson learned, and management review process are 

working as intended so they can make timely adjustments if necessary. 

Thank you, Mr. Chairman. This ends my prepared statement, 

and I look forward to your questions. 

Mr. BARLETTA. Thank you for your testimony. 

Mr. Sullivan, you may proceed. 

Mr. SULLIVAN. Good morning, Mr. Chairman Barletta, Ranking 

Member Carson, and members of the subcommittee. I am happy to 

be here today to discuss how VA provides critically needed 

healthcare services to veterans through a wide variety of leased facilities. The Department maintains approximately 155 million 

square feet in more than 6,000 owned buildings as well as 33,000 

acres of land. In addition to our own facilities, VA has approximately 2,000 leased facilities totaling 25 million square feet. 

VA’s portfolio is one of the largest in the Federal Government 

and provides a significant amount of health care to veterans in 

these leased facilities. In our leased facilities, we provide primary 

care, mental health, and specialty services, such as ophthalmology, 

oncology, endocrinology, cardiology, pulmonology, podiatry, neurology, just to name a few. 

We also provide pharmacy services, radiology and imaging and 

same-day outpatient surgery in some of our larger clinics. 

Today, I ask for your support to help provide these services to 

our veterans. VA is requesting the committee’s approval of eight 

pending leases that represent an additional capacity over 1.2 million annual visits to these clinics for our veterans. These eight 

leases are needed to ensure that VA has the right sized facilities 

in place to serve veterans with the right services and in the right 

locations where veterans want them. 

Leasing is a critically important tool that allows VA to provide 

services to veterans. Leasing provides flexibility in lieu of constructing owned assets to meet veterans needs. Leasing enables VA 

to quickly respond to healthcare advances and to adopt important—more importantly, to changing medical technology in order to 

provide state-of-the-art health care to veterans. Meeting the everchanging pace of medical advancement is a constant challenge for 

any medical system, and VA finds that leasing versus owning provides one of the most flexible approaches to meet that challenge. 

Leasing also allows us to rapidly adjust to current and future demographic shifts in changing service demands for our veterans. 

VA clearly doesn’t need more owned legacy assets to address our 

outpatient access needs. We have enough of old and obsolete facilities, we do not want to add any more to our current portfolio. 

For leasing, VA has the ability when these assets become 

unneeded or obsolete or do not meet current medical practices to 

6 

walk away at the end of the lease term. In addition to these 8 

leases we are requesting the committee’s action on, VA has 24 additional medical leases that are pending congressional action. 

These critically needed leases will replace, expand, or create new 

outpatient clinics, research facilities, and provide more than 2.7 

million more annual healthcare visits for our veterans and enhance 

our research capabilities nationwide. 

As VA works to meet the challenge of addressing these changing 

and ongoing demand of health care, these leases, both the eight we 

mentioned earlier on and the 24, will go a great way to help meet 

these needs. 

As you were aware, VA relies on the authority and has for the 

last 20 years that is delegated from GSA to enter into all lease 

agreements. VA depends on its partnership with GSA to obtain individual delegations, to make operating leases feasible to provide 

services. Our agencies have worked to make improvements, and 

the delegation process has evolved over the last 2 years. 

I want to thank GSA for their partnership and their help in having us move forward with these leases and to provide services to 

our veterans. They have been more than a willing partner in this 

effort. 

VA is also pleased that GAO in its 2016 report recognized the 

important need for medical leasing and the flexibility that leasing 

provides VA. As stated in the report, GAO recognized that leasing 

allows VA to align its infrastructure more easily with changing 

healthcare needs. The report highlights some of the improvements 

VA has made while operating under the GSA lease delegation process and suggests other agencies can implement other processes. 

VA fully plans to address the GAO recommendations in terms of 

further articulating in our budget submissions to Congress via advantages of the flexibility leasing provides, as well as addressing 

some of the technical recommendations involving cost estimating. 

We have agreed to do that and are working with the lessons 

learned effort to implement and consult with GAO as we implement those recommendations. 

As VA works to move the pending leases forward, VA is open to 

any and all suggestion from the committee or from anyone else of 

how we can improve your process so we can speed the delivery of 

healthcare services to our veterans and their families. 

I am here with my colleagues to answer any question that you 

may have or any member of the committee may have. Thank you 

for your time, and we appreciate the committee’s support for our 

veterans and their needs. 

Thank you, Mr. Chairman. 

Mr. BARLETTA. Thank you. Thank you for your testimony. 

Mr. Wisner, you may proceed. 

Mr. WISNER. Yes, sir. 

Good morning, Chairman Barletta, Ranking Member Carson, and 

members of the committee. I am Chris Wisner, the Assistant Commissioner for Leasing at the General Services Administration Public Buildings Service. I appreciate being invited here today to discuss GSA’s efforts to provide cost effective and suitable leased 

space for our partner Federal agencies including the Department of 

Veterans Affairs. 

7 

GSA’s mission is to provide the best value in real estate to the 

Government and to the American people. GSA currently manages 

an inventory of almost 400 million square feet. Approximately half 

of this is leased space comprising more than 8,300 active leases 

across the country. GSA seeks to provide space that assists our 

partner agencies in achieving their missions while best serving the 

public interest. GSA’s prospectus process starts with requirements 

development where GSA works with customer agencies to define 

their space needs. As part of the administration’s goal to maximize 

the use of Federal assets and eliminate unneeded and excess real 

estate, GSA first looks to the existing Federal inventory of owned 

and leased space to meet those needs. If existing space is not available, GSA determines whether Federal construction or leasing is 

the appropriate space delivery method. This determination balances the mission needs of the customer, market parameters, resources constraints, and fiscal responsibility to the public. 

If leasing is the chosen alternative, GSA continues to work with 

partner agencies to further define its program requirements, which 

includes a comprehensive housing plan, identification of delineated 

area, and an estimated space utilization rate. The prospectus process also requires market research to establish rental rates. GSA 

conducts its procurements using prevailing market rates as the 

benchmark for the evaluation of competitive offers to ensure that 

GSA rates are in line with the private sector. 

After we complete this thorough process, GSA submits a prospectus and supporting documents for projects that exceed $2.85 

million. 

In 2014, the VA began relying exclusively on GSA’s delegated authority to conduct its leasing activities. Some of the VA’s request 

for delegated leasing authority are above the GSA’s prospectus 

threshold. GSA will submit prospectuses to this committee and to 

the Senate Environment and Public Works Committee. 

The initial delegation request from VA required a number of revisions to comply with GSA’s delegation program requirements 

both in form and substance. As delegation requests above GSA’s 

prospectus threshold were not within the normal delegation program management, there was no standing GSA process for considering such an authorization. GSA and the VA have worked together to ensure VA’s documents are in line with similar GSA prospectus submissions. 

GSA supports VA’s mission to provide assistance to veterans and 

their families. From June of 2014 to September of 2016, GSA has 

granted the VA 761 leased delegations, of which 96 percent have 

been granted routinely under GSA’s standing delegation program. 

Only 4 percent, or 27 of those delegated leases, have exceeded the 

square foot limitation that requires action by the GSA Administrator. Only 6 of those 27 exceed the $2.87 million prospectus 

threshold. 

The Choice Act was enacted in 2014 to provide new authorities 

and funding to continue VA’s mission, including statutorily authorizing the Secretary of Veterans Affairs to lease medical facilities in 

18 States and Puerto Rico. Out of these 27, there are 8 remaining 

that are above GSA prospectus threshold. The committee’s help is 

8 

needed in providing GSA with resolutions for those projects, and 

we plan to submit this package in the upcoming weeks. 

As we move forward in our partnership, VA and GSA are working closely to ensure VA projects comply with GSA’s policies and 

practices. With VA’s expertise, discipline and structure can be applied to market rate justification for VA prospectuses. Furthermore, 

as part of strategic planning, VA and GSA can identify opportunities for VA to backfill existing underutilized and vacant space instead of initiating new leased actions. 

Chairman Barletta, Ranking Member Carson, and members of 

the subcommittee, GSA is dedicated to meeting the requirements 

of all of our partner agencies in an efficient, transparent, and userfriendly manner. We will continue to support the VA in their mission of providing assistance to veterans and their families. 

Thank you for the opportunity to testify before you today, and I 

am happy to answer any questions. 

Mr. BARLETTA. Thank you for your testimony. 

I will now begin the first round of questions limited to 5 minutes 

for each Member. 

If there are any additional questions following the first round, we 

will have additional rounds of questions as needed. 

Mr. Sullivan, in September of 2014, this committee approved six 

VA leases, which were above GSA’s prospectus threshold. What is 

the status of each of those leased projects, and have they all been 

awarded, and when will they be completed and open? 

Mr. SULLIVAN. Sure. There were six leases that the committee 

approved back in 2014. Five of the six have been awarded. The last 

one is Rochester, New York, which should be awarded in the first 

quarter of 2017, based upon my information from the contracting 

officials. 

The first one Springfield, Missouri, was awarded in February 28, 

2016, and we expect to have it open in the spring of 2018. Butler, 

Pennsylvania, was awarded in December 2014. We expect to accept 

the building in the summer of 2017. San Jose, California, was 

awarded in September 2015, and we expect acceptance in the winter of 2017. South Bend, Indiana, this lease was awarded back in 

July 2015, and we expect to accept the building again in the summer of 2017. Mobile, Alabama, was awarded on August 18th, 2016. 

I will be happy to provide the committee with all the specific 

dates and milestones for each of these leases. 

Mr. BARLETTA. Thank you. 

Mr. Sullivan and Mr. Wisner, what steps has VA taken since 

2014 to work with GSA to prepare the additional eight leases that 

are above GSA’s prospectus threshold for approval by this committee? Where are those leases in the process? And when can we 

expect them to be efficiently submitted? And why have they taken 

so long? 

Mr. WISNER. I will take the first part of that. 

So, sir, we have the full packages from the VA in hand currently. 

They were received in final form July the 26th, I believe. We are 

in the process of processing those and testing them for operating 

leased—the operating leased threshold. I expect we will have them 

through our stakeholders and with signature for submission to this 

committee in coming weeks. I would say in 7 to 10 days. 

9 

Mr. SULLIVAN. Yes, Mr. Chairman. We have worked with GSA 

since that time to establish several efforts to improve the product 

they received from us and the timeliness of the product that we 

provide them. We have set up a central clearing house that reviews 

all the leases that go over to GSA. We set up a peer review to make 

sure that the products are of top-notch quality that go over to GSA. 

And I think that’s been demonstrated in the quick turnaround time 

that we have an average of 20- to 25-day turnaround time for 

leases that don’t require external approval. 

We have also set up tracking systems so in VA we know where 

every single lease is, both our leases that are in the procurement 

chain that GSA sees but also all of our existing leases. So for the 

first time, we have a complete inventory of all leases in process 

that are executed, all leases that are operating, and all leases that 

are in the procurement process, as well as all leases pending congressional action. 

We have also set up an integrated budget tool for the first time 

in 2017, and it will be reflected in our 2018 estimates to Congress 

where we allocate the funds and track the funds based upon the 

schedules of our 1,200 leases of when we will need the money, and 

what year we will need the money, and whether we need capital 

money or we need the FTE associated with it. 

So we have a really, I think, a good handle on what our requirements are and what—importantly, what is the liability of those requirements as we go out in time. Because as we have seen, as 

many of the members that are on the Veterans’ Affairs Committee 

have seen, an influx of significant workload. We have put our 

leases in place and have predicted what the liability of those leases 

will be in 2017, 2018, 2019, 2020. We do it out 5 years now, so that 

is a big improvement that we started to address the leasing. 

We have also set up internal training sessions. As you imagine, 

VA is a very complex organization, spread across the country. And 

many of our small leasing below $1 million is done in the fields, 

so it is important for us to train and provide expertise, and GSA 

has helped us do that to those people who are actually executing 

the leases. 

So I think we have taken a lot of steps. It is not perfect by any 

means. And as we go through the various budget estimates that 

come out each year, we get a little bit better a little refiner and 

we integrate our data and provide a better estimate to Congress of 

our liabilities. 

Mr. BARLETTA. Why do you think they have taken so long? 

Mr. SULLIVAN. On the eight that are coming up to the committee 

now? Two reasons, really. When we submitted the last batch, we 

took the ones based upon the priority of where they were in development, how complicated they were. And the ones that we knew 

were closest to award, we submitted to the committee in the first 

six. 

The last eight are probably the more complex, larger leases 

where we had to do the market research, the planning for the 

space requirements and the design requirements for those leases, 

so those took a little bit more time. So it was more of a priority 

of what we could get through and what we were ready to present. 

10 

We did not want to present the committee with an incomplete 

package. 

Mr. BARLETTA. How much of the delay is due to structuring the 

leases to score as operating leases as opposed to capital leases? 

Mr. WISNER. So I don’t believe that there is any delay in the 

structure between a capital and operating lease. There is full commitment from GSA and from VA that we will not bring forward 

anything that has the potential to become a capital lease. That was 

part of the controls that were put in place in 2014. I don’t think 

that there is an adjustment that is made at all. When there is the 

risk of a capital lease, we stop that prior to any award. So there 

are several checkpoints along the way, and ultimately, if we started 

to go down the path or VA started to go down the path of coming 

close to a capital lease, I think we will probably pause and take a 

look at that. But right now I don’t see any delay when we are— 

we have enough discipline in our program that we do not move 

even close to anything above an operating lease into the world of 

capital. 

Mr. BARLETTA. Thank you. 

The Chair recognizes Ranking Member Carson. 

Mr. CARSON. Thank you, Chairman Barletta. 

Ms. Shea, in your testimony, you indicated that the VA has not 

provided Congress with information that backs up their conclusion 

that its choice to have lease—to lease these facilities, which is more 

expensive than construction is justified. What metrics do you think 

would be helpful for the VA to consider, ma’am, convincingly to 

make their case to Congress that leasing provides the flexibility 

that they repeatedly claim? 

Ms. SHEA. Well, what we looked at in our report was the process 

that VA goes through to decide if it should lease. We looked at 51 

leases that were proposed to see whether leasing was the right approach. And in all 51 of those leases that we reviewed, they indicated that they required the flexibilities that come with leasing. 

And sometimes this could even be when the choice to lease was 

more than the choice to own or construct. This goes back to one of 

the reasons we made the recommendation that VA does need to 

provide information on how it has used these flexibilities. 

For example, with the requirement that leasing has for the VA 

to vacate after 20 years, are they—when they need to find a new 

leased space—still leasing in the same area: are they really having 

to move because the patient demographic has changed; or are the 

seismic security and other standards really not that different from 

when the lease ended? 

So there are a lot of things that, on its face, seem like the flexibility is useful for VA, but they aren’t collecting any of the information to demonstrate how it has used that flexibility. Did they move? 

Did the patient demographic change? Did the seismic and Federal 

security standards change? Did they record that? Did they then 

show how they benefited from that flexibility, and that they need 

that moving forward? 

And so we made that recommendation to VA, and they have 

agreed to do that and include that information in its prospectuses 

going forward. 

Mr. CARSON. Yes, ma’am. Thank you. 

11 

Mr. Sullivan, what are the cost controls as the VA puts together 

a program of requirements for a leased facility? Do costs ever cause 

the VA to not lease or build a clinic because it is simply too expensive? 

Mr. SULLIVAN. VA develops a rigorous business case for each of 

its leased actions. And in that, the business cases flow up from the 

clinicians in the field who actually are delivering care to the veterans. And we look at them to, first, look at whether they need a 

capital asset in the first place. They look at other alternatives before they look at leasing to see if that is more cost effective or more 

appropriate to do, and then they look at build, and then they look 

at lease. 

In terms of the cost analysis, we look at what the industry standards are. We look at what indices are showing of what leases 

should cost adjusting them for some of the Federal standards to ensure that we are submitting reasonable costs to the Congress when 

we submit these proposals. And then when our contracting folks 

execute it, they have to ensure that the cost, the rental rates, we 

are paying for these leases are reasonable. 

One thing I would say on cost, Mr. Carson—— 

Mr. CARSON. Sure. 

Mr. SULLIVAN [continuing]. Is when you look at the real estate 

costs of providing care to veterans, we did a little analysis a few 

weeks ago. And looked at what we see in the lifecycle of a lease. 

When you look at a lease when you are providing care for veterans, 

the real estate costs of a lease are less than 9 or 10 percent of what 

the cost it is to provide care for veterans. When you really look at 

it, the real cost of deciding to put a clinic in, it is the docs; it is 

the nurses, it is the schedulers, it is all of those people that are 

there, and the real estate costs are really the small amount. 

So when we look at the consideration, we have always put with 

the question by people, you know, you could have a real estate solution that is 25 miles down the road that is $3 cheaper a square 

foot. But if the veterans, where they are, where they live are 25 

miles away, our alternative has always been to put the clinic where 

the veterans are, closer to them, even if there is a cost difference. 

We look at in the life of the lease, it is more important to provide 

the right services where the veterans are rather than to get, say, 

a primo real estate deal 45 miles away. And we have had where 

people have come in and said, hey, we could save you $10 a square 

foot if you move 60 miles down the road. I guess you could, but the 

people wouldn’t have access to it. 

The same thing in metropolitan areas. People are saying, well, 

if you can move one, you know, the other side of New York City, 

I could get you $3 off. Well, if the veterans are in Manhattan, you 

are going to put it all the way out in Queens, people in the area, 

that is a 2-hour commute difference. That is a huge impact on veterans. We look at the costs that way as well. Thank you. 

Mr. CARSON. Now that we are out of time, thank you for the very 

deep explanation. 

Sorry, Mr. Wisner, I won’t get to you. But nice haircut. My kind 

of guy. 

Mr. WISNER. I try. 

Mr. CARSON. I yield back, Mr. Chairman. 

12 

Mr. BARLETTA. The Chair recognizes Mr. Meadows for 5 minutes. 

Mr. MEADOWS. Thank you, Mr. Chairman. Thank you for your 

leadership. 

Thank you each of you for being here. 

So, Mr. Sullivan, let me come to you, because I guess I am a little confused when Ms. Shea says that the flexibility is a big issue 

for you signing up for leases. And yet, you have not, to date, provided that kind of information. 

Mr. SULLIVAN. I think we are talking a little bit of different levels of information. In the prospectuses that we send to Congress, 

we articulate why we wanted to use leasing, and we articulate the 

flexibility that—— 

Mr. MEADOWS. And why do you want to use leasing? Because 

most of the build to suit, I understand as a private sector guy, why 

you want to do that, you write off the expenses and so forth. But 

from a public sector standpoint, if you are doing build to suit, how 

in the world is that generally—because normally, a lessor is going 

to write off the cost over a 20-year lease of the entire cost in case 

you don’t re-up, how is that a benefit? 

Mr. SULLIVAN. To us, it is a big benefit. When we look at what 

we—when we provide outpatient services in a leased facility over— 

most of our leases are 15 to 20 years. If you look at the changes 

in medical technology, 20 years ago where you are, you know, 

standard practice now is, for example, to have a CAT scan, to have 

an MRI scan, to have some oncology services—— 

Mr. MEADOWS. No. I get all that. I guess what I am saying is if 

the cost of the lease covers the entire cost of construction that you 

are paying for, and yet, you don’t have an asset at the end—it is 

kind of like a car lease. If you are paying the entire—if the residual 

value is zero at the end of the car lease and you don’t own it, what 

is the benefit from a public sector standpoint? 

Mr. SULLIVAN. From a public sector standpoint is that we don’t 

have an obsolete, outdated facility at the end of 20 years that we 

have to go back in and retrofit if we owned it. And we have, unfortunately, many of those facilities in VA, and we don’t want to add 

more to that stock. 

Mr. MEADOWS. Apparently, we are missing at each other. 

If you are covering 100 percent of your cost in the lease, 100 percent—— 

Mr. SULLIVAN. Correct. 

Mr. MEADOWS [continuing]. All right? Even if it is outdated, it 

becomes an asset that GSA has, and you can start over again. 

I was in the real estate business. I know it extremely well. So 

I guess what I am saying is are you leasing at less than the full 

cost of the build to suit? I mean, is there a residual value there? 

Mr. SULLIVAN. There is—depending upon the transaction, there 

can be a residual value. But at this point, if we were to build instead of lease and we—from the beginning, we would need to have 

all of that money upfront. So right now, in a big lease, say of 

200,000 square feet, we are paying, say, $3 million a year in rent, 

or $4 million, depending on the market, where it is. We would need 

to have $35 million—— 

13 

Mr. MEADOWS. You are saying because we are not allocating it 

upfront, you are actually using a lessor to do it over a 20-year period? 

Mr. SULLIVAN. In your example, yes. 

Mr. MEADOWS. OK. All right. So what analysis have you had 

from veterans in terms of location? What matrix do you use? 

Mr. SULLIVAN. We have a detailed healthcare planning model 

that goes all the way down to the zip code. 

Mr. MEADOWS. Who gives you input for that? 

Mr. SULLIVAN. It comes from external contractors that take census data, utilization data. 

Mr. MEADOWS. How many veterans do you talk to when you do 

that? 

Mr. SULLIVAN. I don’t actually do that. We get that from an office 

of healthcare—— 

Mr. MEADOWS. How many veterans do they talk to? Because here 

is what happens is, is a lot of times we make decisions on locations, 

and it is based on a perception. But sometimes we don’t actually 

get the input from those who are going to use the facility. Do you 

not see a problem with that? 

Mr. SULLIVAN. I believe there are two things I was saying. We 

get overall projections of what the need is in the catchment area 

for a clinic; i.e., based upon census data, veteran pop in the future, 

and expected utilization. We then go down to the clinicians at the 

local level. Those clinicians at the local establish what is known as 

the delineated service area for that procurement. They determine, 

based upon their knowledge of the local market, the local preferences of veterans, and local clinical availability of resources 

where the type, delineated service area would be for where they believe those veterans will come for services. That is going to be different based upon each and every market. So they reach down. And 

they are the ones who establish the delineated service areas. 

Now, our folks here in Washington cannot, you know, come up 

with a delineated service area, because they know what the local 

market is and what the local—— 

Mr. MEADOWS. I agree. And so what you are saying, it is going 

to be made at the local level not in Washington, DC? 

Mr. SULLIVAN. Yes. Correct. 

Mr. MEADOWS. So let me finish in the 23 seconds we have left. 

Let me ask you. As we start to look at these allocations, how 

many times out of the 700 and some odd times that Mr. Wisner 

had mentioned that has been delegated to you, how many times 

have you actually left a location and gone to a new location because 

of the flexibility that Ms. Shea talked about? 

Mr. SULLIVAN. I would have to get for you, but I would say numerous places that we have move—— 

Mr. MEADOWS. Could you get the number to the subcommittee on 

that? 

Mr. SULLIVAN. Sure. It would take a little bit of data, but we 

could get that to you. 

[The requested information can be found in Mr. Sullivan’s response to Mr. 

Meadows’s question number 4 on page 49.] 

Mr. MEADOWS. Thank you. I yield back. 

14 

Mr. BARLETTA. And that is why we have to reform our disposal 

rules, and we have that in our bill. And the second thing is we also 

in our bill have a discounted purchase option which would allow 

you to buy, so I think they are very good points by Mr. Meadows. 

The Chair now recognizes Ms. Brownley for 5 minutes. 

Ms. BROWNLEY. Thank you, Mr. Chairman. I appreciate it. 

Thank you. And thank you, Ranking Member Carson, for allowing 

me to participate in this morning’s hearing. 

As the ranking member of the House Committee on Veterans’ Affairs Subcommittee on Health, I have been working for several 

years now to address problems in the VA’s construction and leasing 

program. As we all know, changes in CBO’s scoring have made it 

incredibly difficult for the VA Committee to authorize new facilities. This is not only frustrating to me as a Member of Congress, 

but it is having a very negative impact on veterans who are underserved. 

This is not just about better access, but it is truly a clarion call 

for equitable access for all of our veterans. I have brought a list 

today that I would love to share with the committee of 24 leases 

still caught in limbo for fiscal year 2015 and fiscal year 2017. 

These are 24 communities in 15 different States all across the 

country where veterans are underserved and where veterans sorely 

need better access to health care and are not receiving it. I am 

frustrated that Congress has not yet resolved this issue that has 

dragged on for several years now, an issue I think is a moral imperative and unquestionably an equity issue. 

I have introduced legislation to permanently fix this problem and 

to harmonize the VA leasing process with the GSA leasing process. 

This small procedure will make a big difference in the lives of veterans who are waiting for and rightfully deserve better access to 

care. 

That brings me to my first question. Last year, the VA Committee held a hearing on my bill, the Build a Better VA Act. At the 

time, VA was not prepared to answer specific questions regarding 

the administration’s position on the bill. My bill has been endorsed 

by several VSO’s and the Commission on Care has identified this 

as an area that needs to be addressed by the VA. 

So, Mr. Sullivan, has the VA now had time to review my bill, and 

does the VA support this approach? And if you don’t, what is the 

VA’s proposed long-term solution to addressing this ongoing problem that we have with authorizing the facilities? 

Mr. SULLIVAN. The VA does support your bill, and we support 

your efforts to look at the streamlining of the authorization process 

that is outlined in your bill. 

Ms. BROWNLEY. Terrific. That is very good news. Thank you for 

that. 

Ms. Shea, I appreciate the work that GAO has done to ensure 

that the American taxpayers are getting a good value for their dollar. I share the views of my colleagues that cost effectiveness is an 

important tool for measuring value. However, I also believe that 

when it comes to veterans’ health care timely access—timely access 

to high-quality care should be our absolute highest priority. 

So, Ms. Shea, did the GAO analyze the length of time that it 

would take to build new VA healthcare facilities from the ground 

15 

up versus the amount of time it would take to build out a leased 

facility? 

Ms. SHEA. We didn’t look at the time to build or lease in this report, but we did look at the time to deliver a facility through leasing in the 2014 report. And we found that there are still delays in 

that process, but most of those delays were in the upfront side before they were delivered, and the delays were on average 3.3 years. 

And we don’t have comparisons to VA construction, but based on 

some of the other construction work that we have done, there are 

generally longer delays for construction. 

Ms. BROWNLEY. Thank you. 

You know, I certainly think timeliness is—you know, is critically 

important in terms of—with the goal, the sole goal of quality health 

care and access to that health care for our veterans. So, you know, 

I understand some of the issues that have been discussed here, but 

I also believe that getting a leased facility to our veterans as quickly as we possibly can, assuming that it is cost effective, is critically, 

critically important. 

And finally, Mr. Sullivan, from the perspective of the VA, can 

you just describe, again—I know you have already said some of this 

already, but what advantages does leasing have over construction? 

You have talked about flexibility and timeliness. And do you believe, still, that the option allows the delivery of health care to happen more swiftly? 

Mr. SULLIVAN. Yes. We believe leasing we can deliver there 

quicker. We can put an asset in place quicker—sorry. 

We believe that leasing provides a more expeditious way to provide healthcare services to veterans. We believe leasing is the right 

thing to do in terms of allowing us to change the types of services 

we need if we—at the end of the lease or if we have a shorter term 

lease. We believe technology is the big driver in health care. And 

for us to be able to have a 20-year old facility that took 2 years 

to plan, so 22 years out, that that technology is going to change, 

especially in the area of radiology, imaging, oncology, and those 

areas. It is night and day what it was 20 years ago, and we need 

to be able to have those facilities that have that up-to-date technology. 

There are challenges with the leasing process, I don’t doubt that 

at all. But we believe that flexibility and also the flexibility if we 

have a new cadre of veterans that come in that demand new services that we don’t know about today, leasing will allow us to shift, 

to provide those services where they are. And especially as we deal 

with some of the younger veterans coming into—from the Persian 

Gulf wars and more recently that their need for services are different and they want them in a different time in a different place 

than people who are from the World War II Vietnam era. So we 

need to balance that as we go forward, and we think leasing provides us flexibility. 

There is a need for owned assets. I am not saying there isn’t. But 

in the outpatient arena where access is key, we believe that that 

is important. 

Ms. BROWNLEY. Thank you, Mr. Chairman, for allowing me to be 

here and allowing me to go over my time. I yield back. 

Mr. BARLETTA. Thank you for coming. 

16 

The Chair now recognizes Mr. Costello for 5 minutes. 

Mr. COSTELLO. Thank you, Mr. Chairman. 

Before I got here, I used to be a real estate lawyer, and I used 

to negotiate leases. And it was not necessarily a fun endeavor, but 

I did learn that it is very value added. And I do think that the 

questions today are largely oriented towards improving the efficacy 

of the leasing process, and that is what we want to see. We just 

don’t want to see us paying more money than we should pay in a 

lease. And I think we also want a cleaner analysis on, to Mr. 

Meadows’s point, the valuation between an outright purchase 

and—or build to suit versus a 20-year lease. 

And in looking, Ms. Shea, at your analysis here, it strikes me 

that the issue that the VA is deficient in, relative to this analysis, 

comes under the credible characteristic and, most specifically, the 

conduct risk and uncertainty analysis. 

And I find that to be consistent with the conclusion without analysis criticism that we say, oh, it provides more flexibility and so, 

therefore, we should do it. I happen to think that it, in a lot of instances, leasing a medical facility probably is the more prudent 

cost, because unlike a lot of other real estate assets and office 

building, certainly raw ground, with a medical facility, there is a 

functional obsolescence after 20 years. And that you do run into 

negative equity much quicker. I mean, in my home township, we 

have an old mental health facility that, you know, 20 years later 

it was still there, and it was negative $8 million on an appraisal. 

So for Mr. Sullivan, what I would like to hear from you is what 

do you intend to do to address the shoring up the risk and uncertainty analysis, which I think will go a long way toward addressing 

Ms. Shea’s report where the VA is deficient? The other question 

that I would have for you, Mr. Sullivan, is contained on page 10 

of Ms. Shea’s report which references the fact that the VA plans 

to conduct a, quote, ‘‘lessons-learned study that could further improve how VA estimates its costs.’’ 

And the final point I would make, and then I will turn it over 

to all of you, is those of us who serve on the VA Committee, and 

I think even beyond that, the delivery model for caring for veterans 

is changing very rapidly, telehealth. We have a facility in my district where a lot more is done that way. And we look at the way 

e-health is able to provide services. It just doesn’t require as much 

physical space. And some of it is space that once built can remain 

flex space. 

So I would ask for your take on that. And I think that that is 

part of the risk that I mentioned. 

And in the final question I have for you, Mr. Sullivan—I am sort 

of doing it all at once is, the report that McKinsey issued in 2015 

found that for larger built-to-suit medical facilities, VA rents were 

40 to 50 percent higher than private sector benchmarks. I think 

that that brings back into the fold of Mr. Meadows’s point on, well, 

why don’t we just do a build—I mean, why not build to suit and 

own it if you are going to be paying 40 to 50 percent higher? It is 

one thing if at the end of 15 or 20 years, it’s like, OK. We paid for 

it, and now we are at zero and we have a facility, and maybe it 

is worth something, maybe it is not. It is a whole other thing when 

you are paying 40 to 50 percent over and above. 

17 

Then the final point, I am not so keen on—I mean, we have 

enough examples on the VA Committee where VA construction 

projects end up a whole heck a lot higher than they should, which 

I think, points again, to leasing versus building. If it is a 50–50 

proposition, I think I would probably lean towards the leasing. 

I have said a lot. I turn it over to you for your comments on my 

comments. 

Mr. SULLIVAN. Sure. I will try and take them as I jotted them 

down here. In terms of the cost lessons learned that GAO recommended, what I believe that lessons learn is going to do is, right 

now we treat each procurement, it goes through a process. We do 

a fair and reasonable assessment before we award. What we have 

from that result is we have individual instances of costs. And I 

think what GAO is saying from a portfolio perspective to take all 

of those costs as you get them, roll them back into your estimating 

model. 

Right now, it may or may not be done. It is not required, so we 

have agreed comprehensively to do that. That data is there. It is 

just a matter of us going forward and pulling it forward. 

The same thing on the risk in terms of whether we really move 

out of these facilities or we really will use them. The data is there 

in the decentralized environment. And we defer to the locals. When 

we submit the budget, we can easily pull that data, and we will do 

if for the committee that shows where we have moved, whether we 

have upgraded the facility, or whether we have stayed in place. 

So I think the data is there for that, and that will really inform, 

you know, how much risk are we really avoiding by doing this. 

I think everyone just intuitively and all the clinicians intuitively 

live in these facilities day to day, and they know there is no way 

that they should stay in that facility, not only due to the changes 

in care, but the security, the setbacks, and all of those things. We 

take them from their gut, but we need to get the data to make it 

clear to everybody that that is and that is fair, and we will do that 

as soon as we can. We have it, just a matter of aligning it. 

In terms of the McKinsey report, we will have to get you more 

specifics on that. I believe some of the comparison made in the 

McKinsey report was made to private sector healthcare facilities 

that do not have some of the Federal requirements that we have 

to handle. But we can get that for you. We are familiar with it. It 

is a pretty thorough report, and we are happy to provide you and 

the committee with that. 

Mr. COSTELLO. And that would be providing veterans care. 

Mr. SULLIVAN. Right. 

Mr. COSTELLO. There could be some good explanations. I am just 

looking for that. 

Mr. SULLIVAN. Right. Because there is a big difference. Our clinics and one of the things we talk about a lot is when you compare 

an MBO medical office building to a VA clinic, they are very different. And a lot of the benchmarking people use against us are 

medical offices buildings and—— 

Mr. COSTELLO. I understand. 

Mr. SULLIVAN [continuing]. Apple to orange. But we are happy 

to provide that to you. Thank you. 

Mr. COSTELLO. Thank you. 

18 

Mr. BARLETTA. The Chair now recognizes Mr. Rouzer for 5 minutes. 

Mr. ROUZER. Thank you very much, Mr. Chairman. 

And I want to follow up on my colleague, Representative 

Costello’s questions and your answer there. 

I have a specific case, in Wilmington, North Carolina, where we 

have our Wilmington VA clinic, basically, a brand new building. 

There is a lot of concern among constituents and my veterans in 

particular, about the—what they feel is an outrageous figure that 

we are paying for that space, roughly to the tune of $300,000 a 

month. 

Now, I heard your answer there at the very end to Representative Costello where you are saying—when you compare the prime 

medical space elsewhere, it is not necessarily apples to apples, perhaps apples to oranges. But when you consider the fact that it is 

$300,000 a month, and the vast majority of my constituents, they 

are probably thinking in terms of a 30-year mortgage, and that is 

far and above the average 30-year mortgage in my district. So 

there are a lot of questions about, you know, how do we negotiate 

these leases, and are we just absolutely being raked over the coals 

with this? 

So if you can elaborate more on how you go through what that 

process actually is. 

And I am curious where GSA fits into this. Who actually negotiates the lease? Is it GSA and with—in consultation with the VA, 

or is it the VA with advice from GSA? If you can explain how that 

works, I would be interested. 

Mr. WISNER. So I will take the first question—or the last question first. 

Mr. ROUZER. Sure. 

Mr. WISNER. GSA provides advice to VA. VA has their own lease 

contracting officers who are trained to use the GSA program, GSA 

forms, and the Government leasing process. So they follow the 

FAR, the follow the GSEM; they follow all the rules and regulations there are related to GSA. Part of this relationship is if you 

use GSA’s delegated leasing authority, you follow GSA’s policies 

and practices. 

I must say that the program has improved significantly with VA 

in the past 2 years. The centralization that Jim has been speaking 

about on bringing the decisionmaking to a central point and having 

prioritization and decisions made through that has been extremely 

helpful, and I think there is more that you will see in the near future. 

So VA does their own negotiations. We oversee through a delegation of authority, and then we do pre-award checks to make sure 

they are not capital leases. We also do post-award checks to ensure 

that they followed all the rules and regulations, and then we do 

clean up actions afterwards if necessary. 

Mr. SULLIVAN. I can tell you have we have an entire organization 

that, as Mr. Wisner referenced, is our contracting elements that actually contract and do all of the solicitation, the evaluation, and the 

selection of the winning proposers on these. I know generally that 

they validate with benchmarks and appraisals the rates that they 

pay. I am not that familiar with that case. I would be happy to get 

19 

you the information or whatever way you want. I would be happy 

to sit down with you and go through that so you can understand 

what the process was in that particular case. 

Mr. ROUZER. Well, I would very much like to get that presented 

to the committee because that is a big question mark in the minds 

of many of my constituents when they look at that figure. 

One thing, if you can expound on this a little bit, you mentioned 

that you use prevailing market rates as you try to negotiate these 

leases, but yet if you have a medical clinic and you have no comparable, per se, facility to measure against, how do those two 

mesh? I am not sure I follow that. 

Mr. WISNER. So this is one of the most challenging things that 

we have had to work with and are trying to understand more of. 

GSA typically acquires general office space. The VA works through 

a market analysis and then does a type of buildup to get to a cost 

of what their hospital should be. There are lots of questions back 

and forth between our program. We are trying to understand more 

about how the VA establishes those costs, and I know the VA internally is working on cost estimating and improving the mechanism 

by which they do these cost estimates. 

We have access to many databases, RF means, et cetera, where 

we can look and validate on what the VA has. I think that there 

is still room for improvement on this market rate question, but 

what we have before us today is by far an improvement over where 

we were 2 years ago. 

Mr. ROUZER. My time is expired. Thank you, Mr. Chair. 

Mr. BARLETTA. Thank you. The Chair now recognizes Mr. 

Massie, for 5 minutes. 

Mr. MASSIE. Thank you, Mr. Chairman. Last week Chairman 

Mica had a good hearing about property and assets and how difficult it is for us to dispose of them or turn them over back to the 

private sector, so I can definitely see the benefits of leasing, but I 

left that hearing with a question and I still have that question in 

this hearing—it seems to be coming up—which is how good is our 

database of properties, leased and owned? Because some of the 

questions we are asking today we could answer ourselves if we 

could get on a computer and just query the database. We wouldn’t 

even have to show up to get some of these apples and oranges 

questions answered. We could go into that database. 

Mr. Sullivan, let me ask you first. How close are we to having 

a full database of all the properties that, for instance, congressional 

staff could look at? 

Mr. SULLIVAN. I think there are two levels of data, as I understand it. There is the Federal real property database that is run 

by an outlet, and it is a little bit out of Mr. Wisner’s area, but GSA 

runs, which includes all Federal assets across all agencies. I believe 

most of what is in there is civilian-based data for civilian agencies, 

and I believe that information has been and can be released to 

committees and other people with interest. I am sure that we could 

find out what the status with that is. 

In addition to that, we have kind of a subsidiary database, if you 

will, that has a little bit more granularity so we know where all 

of our assets are, all of our leases are, so between the two of those, 

I am sure we could provide any information that you would want. 

20 

Mr. MASSIE. My next question on this topic is to Ms. Shea and 

Mr. Wisner. You deal with property across various Departments, 

not just the VA, is that correct, that is in your jobs? 

Mr. WISNER. Yes, across the Federal Government. 

Mr. MASSIE. So my question to both of you then—so I assume 

you do as well, based on your title, Ms. Shea—how does the VA 

database compare, because I am sure the DOD has maybe a different type of database, and I am sure there are certain Departments that maybe keep more information about let’s say the constraints on the property if it ever were to be released to the public 

or something like that. 

But how does the data on the buildings that we have within the 

VA, leased and owned, compare to the data in other Departments? 

Are they doing a better job or worse job? 

Mr. WISNER. Yeah. So I have not looked at the database that the 

VA has internally. I mainly work with the FRPP, which is the Federal Real Property Profile database. I believe that the majority of 

the property that VA controls is fed into the FRPP, so it would be 

difficult for me to comment on something that I haven’t seen yet 

on the VA database. 

Mr. MASSIE. Ms. Shea. 

Ms. SHEA. Right. And that is a bit outside of the scope of this 

review, but we have in our other work for real property used the 

FRPP and looked at that extensively. And perhaps at the hearing 

that you are referring to, my colleague Mr. Wise mentioned that 

there are fewer than half of the Federal properties that are in that 

database because if you have independent leasing authority, you 

won’t be in that database. So VA is in that database, but we didn’t 

look to see how its own internal database for properties compares 

to the FRPP. 

Mr. MASSIE. It just strikes me that if the data was out there, you 

would almost sort of have crowd sourcing monitoring and reporting 

of this that it would just happen, and you would have realtors 

combing through that database, looking for, OK, in 3 years, this 

property is coming up and the Government is going to want to dispose of it. I think it would be handy to have the lease information 

in that database, particularly if the bill we are talking about here 

is going to allow sort of a purchase agreement at the end. That way 

we do want to compare apples to oranges when we look at should 

we buy that property at the end of the lease. So we want to have 

a comparable database for the lease stuff, wouldn’t you think, Ms. 

Shea? 

Ms. SHEA. I think GAO is always in favor of having centralized 

data that we can look at, so yes. 

Mr. MASSIE. All right. I am in favor of that, too, and I yield back 

my remaining 30 seconds. 

Mr. BARLETTA. Thank you. I am going to start a second round. 

I just have one or two more questions. 

Ms. Shea, the GAO noted that the VA has made progress in 

meeting GSA’s requirements. Can you highlight key challenges 

that there may be? 

Ms. SHEA. When VA first started going to GSA for delegated 

leasing authority, they had a bit of a learning curve. And since that 

time, they have done three key things, including, as Mr. Sullivan 

21 

mentioned, a management review process so that every single one 

of the proposals—before it gets put into the database—gets reviewed to make sure they have got all the right documentation. 

They also ensure that all of their contracting officers received this 

training that they needed to understand GSA’s requirements and 

to make sure that they had all the documentation at the ready. 

And lastly, according to both GSA and VA, there is a lot greater 

coordination among the two, and there are, for example, weekly 

meetings to discuss the issues. I guess the issue for us is that they 

have implemented this process, and that is all a very good thing. 

But that is mostly for the lower, the non-prospectus-level leases. 

They have applied that to those. It may be harder to make sure 

that the prospectus level leases are in alignment with GSA’s requirements. And so it is something that they are just going to have 

to test and see how well it works and continue to monitor those 

new practices and make sure that they are working for the larger 

leases as they move forward. 

Mr. BARLETTA. Mr. Sullivan, in your analysis as to whether to 

lease or own a medical facility, how does the VA take into consideration existing space that may be available? 

Mr. SULLIVAN. When we do a procurement for a replacement 

lease or an expansion, and many of our leases not only replace 

what is there, but they expand it, we look first to see if there is 

an existing asset somewhere that we can do. We also check with 

GSA. As Mr. Wisner said, we are just as happy if we can find a 

Federal building that has space that is located where veterans are, 

to us it doesn’t—unless there is some special need in that clinic 

that can’t fit within a Federal building—or a lease that GSA has 

that has come free because another tenant doesn’t want it, if there 

is someone who can use it, we are more than happy to take that. 

So we look at existing first because it is going to be usually in 

a lot of cases if the bare requirements for our lease don’t have a 

lot of specialties in it, we could move in a lot quicker, which means 

that we can provide services quicker, and that is what we want to 

do. So we use that as our first look in the procurement process and 

in the process of delegation to GSA. When we don’t find ones there, 

we do go out, and they end up going through the procurement process. 

Mr. WISNER. Sir, we have several examples where this methodology has worked. We have had a number of vacant spaces where 

we have aligned with the VA. They have been able to move into 

the space in a more quick fashion. These are the smaller C-box, 

and I call them retail spaces so obviously not large prospectus-level 

leases that you would see, but in the operations we have seen quite 

a few number of leases where we have been able to backfill. 

Mr. SULLIVAN. It should be noted all of our nonmedical leasing, 

I mean, we do not portray to have significant expertise in nonmedical leases. So all of our nonmedical leases, whether they are for 

cemeteries, veteran benefits, or overhead leases, are all done by 

GSA, as they should be. 

Mr. BARLETTA. Thank you. I have no further questions. Ranking 

Member Carson. 

Mr. CARSON. Mr. Wisner, in January of 2016, the VA issued a 

new standard design that covers the different types of facilities 

22 

that the VA procures. The GAO indicated that design changes are 

the main drivers of increases of costs for a facility. The committee 

previously tackled the issue of courthouses spiraling out of control 

with increases related to deviations from the design guide for 

courthouses. What are appropriate reasons for the VA to deviate 

from the design guide that they have completed, and would you 

recommend that our committee resolutions require congressional 

notification if the VA departs from the design guide at all? 

Mr. WISNER. This is probably a two-person question, but I will 

start off. As I understand it, the VA has established some standard 

types of hospital and delivery mechanisms which can be categorized, and I just call them like the big three, the types of hospitals or types of locations that they need to acquire. That will help 

a lot in the world of standardization. I don’t know necessarily if we 

need to go to the level of notification to Congress if they deviate. 

You might look at it from a standpoint of risk. How much have you 

deviated, and how much of a notification do we require around 

that? But I think the standardization is going to go a long way. 

Many of our customer agencies—I am working with the United 

States Coast Guard right now—are moving toward standard platforms of what we will acquire other than individual one-offs across 

the portfolio. So standardization is, I think, something that we 

should push more, and we should look for that discipline across the 

entire portfolio. 

Mr. SULLIVAN. I agree with Mr. Wisner. We are doing three types 

of standardization. At the lowest level we are doing something 

called patient-aligned care teams where we set up modules where 

we predesign what services will be provided and create standardized areas where outpatient services are provided, and we set them 

up in teams. So you can get one module, two modules, six modules. 

You build on it. 

The second thing we are doing is we are doing a prototype what 

we are calling, what Mr. Wisner referred to, we have a small, medium, and large prototype for outpatient clinics trying to standardize that process. And then the third effort, which is less mature 

than those two, is we are looking at all of our contract documents 

and all of our contract standards that we have out there for building and designing and trying to reduce and make them, to the extent we can, more aligned with what private sector practices are 

in the healthcare practice, which is an ongoing effort, and we do 

have a lot to go on that effort, but we believe that is what we need 

to do to bring us more in align and lower cost. And we are pushing 

forward to do that, probably on new leases in the coming years, to 

look at standardizing that more to make it easier for the private 

sector to come in. Thank you. 

Mr. CARSON. Thank you. I yield back, Mr. Chairman. 

Mr. BARLETTA. Thank you. The Chair recognizes Mr. Rouzer. 

Mr. ROUZER. Thank you very much. You may have answered this 

when I had to step out, but I am just curious. What is the percentage of those facilities that are leased versus owned at the VA, security slip that is overall? 

Mr. SULLIVAN. We have about 25 million square feet leased and 

about 158 million owned, and the lease has significantly increased 

while the owned has held steady, or we are trying to move it down. 

23 

Mr. ROUZER. Got you. At what point in time did you change your 

focus to leasing versus owning? 

Mr. SULLIVAN. I don’t know if we completely changed our focus, 

but if we look back about 5 years ago, we had a major change in 

the way we provided health care, maybe a little bit longer, but we 

shifted more to the outpatient area. That is when the leases, say, 

10 years ago started to take off because we wanted to move it to 

the outpatient setting, closer to where veterans are, not in the hospital. So we kind of have focusing on us a perfect storm that VA 

is coming through. 

We have a whole series of leases that started 10 or 15 years ago 

that are all becoming mature, and we need to move out. At the 

same time, as everyone in our world knows, we have been hit with 

an unprecedented workload increase, which require new clinics because we don’t have the capacity. So you have the expiring old ones 

and the new ones and then updating all of the new ones for technology and security and safety, so we kind of have this large cloud 

that is coming at us, and that is what we are trying to work 

through. 

Mr. ROUZER. Got you. Going back in my memory bank, and this 

goes back to when this issue at VA clinic in Wilmington came to 

light, and we were paying roughly $300,000 a month. I remember 

being told by somebody somewhere—the specifics I don’t recall precisely—but basically that they did not look at prevailing market 

rate. They looked at other comparable VA facilities or other Government-owned facilities elsewhere in the country. And so initially 

when I was listening to you, I was trying to reconcile that with the 

comment about you do look at market rate. 

And then, of course, in response to Representative Costello’s 

question, market rate really doesn’t apply if you don’t have a commensurate, you know, facility in the area. So I am kind of going 

back in my mind on this, and I am thinking to myself, OK, maybe 

what I was told originally actually is accurate, that they don’t look 

at prevailing rate, or they didn’t look at the prevailing rate in the 

Wilmington area and looked at other VA facilities elsewhere. 

I am just curious. This facility is roughly 85,000 square feet from what I understand. So basically we are paying $3.50 or so per 

square foot. This pretty much has all the services that can be provided at a VA facility. Do you know off the top of your head how 

that compares with another facility elsewhere in the country? 

Mr. SULLIVAN. Earlier, I don’t know the particulars of that transaction. I will be happy to get it for you. I know as a matter of policy 

we try and use benchmarking from existing prevailing rates somewhere else with a like facility. 

Mr. ROUZER. Now when you say somewhere else with a like facility, where is somewhere else? 

Mr. SULLIVAN. Well, in a reasonable area. The contracting officer 

decides within a reasonable area, is there a comp that is there. And 

in some cases, as I referenced earlier, there are no comps. I mean, 

we have places where we put a clinic; there is no healthcare comp 

anywhere near it. So then they look to see is there an office comp 

that you can build up off of, and in some cases there might be an 

office comp and there may not, and they may have to go further 

away. So it is really market driven. 

24 

So I don’t think there is inconsistency in the answer because in 

some cases we have straight comps; you can use them. Others you 

have an office comp that you build up, and others you will have to 

go further away. But I don’t know the particulars in that case, and 

we will just have to get it to you. 

Mr. ROUZER. Well I have to say for the record it is been very, 

very difficult for my office to get any transparency at all with the 

VA on this in terms of comparable rates and how this was negotiated, and I would very much appreciate if you all can provide 

some transparency there, because there are a lot of folks in my district, and rightly so, including myself, that would like to know. 

Mr. SULLIVAN. I will take it back to the contracting folks and get 

them in contact with your office. 

Mr. ROUZER. Thank you very much. I yield back. 

Mr. BARLETTA. Thank you. I would like to thank you all for your 

testimony today. Your comments have been helpful in today’s discussion. 

If there are no further questions, I would ask unanimous consent 

that the record of today’s hearing remain open until such time as 

our witnesses have provided answers to any questions that may be 

submitted to them in writing and unanimous consent that the 

record remain open for 15 days for any additional comments and 

information submitted by Members or witnesses to be included in 

the record of today’s hearing. Without objection, so ordered. 

I would like to thank our witnesses again for your testimony 

today. If no other Members have anything to add, this subcommittee stands adjourned. 

[Whereupon, at 11:49 a.m., the subcommittee was adjourned.] 

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