VA CONSTRUCTION

Additional Actions Needed 

to Decrease Delays and 

Lower Costs of Major 

Medical-Facility Projects

Statement of Lorelei St. James, 

Director, Physical Infrastructure

Testimony

Before the Subcommittee on Oversight 

and Investigations, Committee on 

Veterans’ Affairs, House of 

Representatives

For Release on Delivery

Expected at 2 p.m. EDT 

Tuesday, May 7, 2013

GAO-13-556T

United States Government Accountability Office

GAO
Page 1 GAO-13-556T 

United States Government Accountability Office 

Washington, DC 20548

Chairman Coffman, Ranking Member Kirkpatrick, and Members of the 

Subcommittee:

I am pleased to be here today to discuss our recent work examining cost 

increases and schedule delays at the Department of Veterans Affairs’ 

(VA) major medical-facility construction projects.1 According to VA’s fiscal 

year 2013 budget submission to Congress, the Veterans Health 

Administration’s (VHA) existing infrastructure does not fully align with the 

current health care needs of the veteran population.2 To help address this 

situation, VA has 50 major medical-facility projects3

This testimony discusses VA construction management issues, 

specifically (1) the extent to which the cost, schedule, and scope for 

selected new medical-facility projects have changed since they were 

submitted to Congress and the reasons for these changes, (2) actions VA 

has taken to improve its construction management practices, and (3) the 

opportunities that exist for VA to further improve its management of the 

costs, schedule, and scope of these construction projects. This testimony 

is based on our April 2013 report. In that report, we discuss VA’s current 

50 major medical-facility projects, including the original cost estimates 

and completion dates and the projects’ current status according to 

November 2012 data.

under way, including 

new construction and the renovation of existing medical facilities, at a 

cost of more than $12 billion. Although VA has taken steps to improve its 

process for managing these construction projects, opportunities exist for 

VA to improve its efforts.

4

 

1

GAO, VA Construction: Additional Actions Needed to Decrease Delays and Lower Costs 

of Major Medical-Facility Projects, 

To understand issues involving costs estimates 

GAO-13-302 (Washington, D.C.: April 4, 2013). 

2

U.S. Department of Veterans Affairs, Fiscal Year 2013 Budget Request. Construction IV

(Washington, D.C.: 2012).

3

The term “major medical-facility project” means a project for the construction, alteration, 

or acquisition of a medical facility involving the total expenditure of more than $10 million. 

See 38 U.S.C. § 8104. These projects cost at least $10 million, some in the hundreds of 

millions of dollars. The project types include new construction, renovation of existing 

structures, expansion, or a combination of types. The total number of major VA medicalfacility projects is based on agency data from November 2012.

4

We identified reasons for selected facilities’ overall cost and schedule changes, but were 

not able to identify the extent to which specific reasons changed these costs and 

schedules, unless specifically noted.

 
 

Page 2 GAO-13-556T 

and completion dates, we took a more detailed review of four VA medicalfacility projects in Las Vegas, Orlando, New Orleans and Denver. We also 

reviewed and analyzed construction documents, VA’s Strategic Plan 

Fiscal Years 2011 to 2015, and other relevant documents. We 

interviewed officials from VA; veterans support organizations; 

architectural and engineering firms; general contractor construction firms; 

and construction management firms. The work on which this statement is 

based was conducted from April 2012 to April 2013 in accordance with 

generally accepted government auditing standards. For a more detailed 

explanation of our scope and methodology, see the April 2013 report.

In summary, we recognize that some cost increases and schedule delays 

result from factors beyond VA’s control; however, our review of VA’s 

largest projects indicated weaknesses in VA’s construction management 

processes also contributed to cost increases and schedule delays. Given 

that VA is currently involved in 50 major medical-facility construction 

projects, including four large medical centers, VA should take further 

action to improve its management of costs, schedule, and scope of these 

projects. 

Costs increased and schedules were delayed considerably for VA’s four 

largest medical-facility construction projects, when comparing November 

2012 construction project data with the cost and schedule estimates first 

submitted to Congress. Cost increases ranged from 59 percent to 144 

percent,5

 

5

According to the Office of Management and Budget (OMB), federal agencies should keep

a contingency fund of 10 to 30 percent above total estimated costs to address increased 

costs on construction projects. However, this guidance applies after construction has 

begun, and many of the cost increases we observed occurred before that time. The 

construction contractor is generally responsible for cost increases and schedule overruns 

under the terms of the fixed-price contract. OMB Circular No. A–11, Appendix 8 (2012).

representing a total cost increase of nearly $1.5 billion and an 

Cost Increases and 

Schedule Delays at 

the Four Largest 

Projects Occurred for 

a Variety of Reasons

Cost Increases and 

Schedule Delays
 

Page 3 GAO-13-556T 

average increase of approximately $366 million per project. The schedule 

delays ranged from 14 to 74 months with an average delay of 35 months 

per project (see table 1).

Table 1: Veterans Affairs Major Medical-Facility Projects Cost Increases and Schedule Delays, as of November 2012

Project 

location

Initial total 

estimated costs

Total 

estimated 

costs

Percentage

increase

Initial estimated 

completion date

Current 

estimated 

completion 

date

Number of 

months 

extended

Total 

estimated 

years to 

completea

Las Vegas $325 million $585 million 80 April 2009 June 2014 74 10.25 

Orlando $254 million $616 million 143 April 2010 July 2013 b 39 8.5

Denver $328 million $800 million 144 February 2014 April 2015 14 10.5

New Orleans $625 million $995 million 59 December 2014 February 2016 14 8.5

Source: GAO Analysis of VA data.

a

The column titled “total estimated years to complete” is reported to the nearest quarter year and is 

calculated from the time VA approved the architecture and engineering firm to the current estimated 

completion date. We calculated the “number of months extended” column by counting the months 

from the initial estimated completion date to the current estimated completion date, as reported by 

VA. According to VA, the dates in the initial estimated completion dates are from the initial budget 

prospectus, which assumed receipt of full construction funding within 1 to 2 years after the budget 

submission. In some cases, construction funding was phased over several years and the final funding 

was received several years later. Naval Facilities Engineering Command officials we spoke with told 

us that historically, their medical facility projects take approximately 4 years from design to 

completion. We calculated the percentage change in cost by using the initial total estimated costs and 

total estimated costs, as reported by VA. 

b

VA provided time extensions to the Orlando, Florida contractor extending the contract completion 

date to July 2013. Because of an ongoing dispute between VA and the general contractor regarding 

performance of the contract in Orlando, VA issued a “show-cause” notice to the contractor on January 

31, 2013. The show-cause notice provides the contractor an opportunity to present any facts relevant 

to the dispute. As of the publication of this testimony, VA has yet to determine the next steps to 

resolve this matter. July 2013 is considered the current completion date provided to us by VA officials. 

However, the general contractor disagrees with this date and has estimated that it will be spring 2014. 

Of the remaining 46 major medical-facility projects, 26 are under

construction or were recently completed. Of these 26, half have 

experienced cost increases, but the other half experienced either no 

change in costs or a decrease in costs. Nineteen of 24 construction 

projects currently under construction or recently completed have 

experienced schedule delays.6

 

6

VA did not provide schedule data for both initial estimated completion date and current 

estimated completion date for two projects under construction. 

 
 

Page 4 GAO-13-556T 

In commenting on a draft of our April 2013 report, VA contends that using 

the initial completion date from the construction contract would be more 

accurate than using the initial completion date provided to Congress; 

however, using the initial completion date from the construction contract 

would not account for how VA managed these projects prior to the award 

of the construction contract. Cost estimates at this earlier stage should be 

as accurate and credible as possible because Congress uses these initial 

estimates to consider authorizations and make appropriations decisions. 

We used a similar methodology to estimate changes to cost and schedule 

of construction projects in a previous report issued in 2009 on VA 

construction projects. We believe that the methodology we used in our 

April 2013 and December 2009 report on VA construction provides an 

accurate depiction of how cost and schedules for construction projects 

can change from the time they are first submitted to Congress.7 It is at 

this time that expectations are set among stakeholders, including the 

veterans’ community, for when projects will be completed and at what 

cost.

At each of the four locations we reviewed, different factors contributed to 

cost increases and schedule delays:

• Changing health care needs of the local veteran population 

changed the scope of the Las Vegas project. VA officials told us 

that the Las Vegas Medical Center was initially planned as an 

expanded clinic co-located with Nellis Air Force Base. However, VA 

later determined that a much larger medical center was needed in Las 

Vegas after it became clear that an inpatient medical center shared 

with the Air Force would be inadequate to serve the medical needs of 

local veterans.

• Decisions to change plans from a shared university/VA medical 

center to a stand-alone VA medical center affected plans in 

Denver and New Orleans. For Denver and New Orleans, VA revised 

its original plans for shared facilities with local universities to stand-

 

7

GAO, VA Construction: VA is Working to Improve Initial Project Cost Estimates, but 

Should Analyze Cost and Schedule Risks, GAO-10-189 (Washington, D.C.: Dec. 14, 

2009). 

Reasons for Cost Increases 

and Schedule Delays at 

VA’s Four Largest Projects

and Related Scope 

Changes
 

Page 5 GAO-13-556T 

alone facilities after proposals for a shared facility could not be 

finalized.

• Changes to the site location by VA delayed efforts in Orlando. In 

Orlando, VA’s site location changed three times from 2004 to 2010. It 

first changed because VA, in renovating the existing VA hospital in 

Orlando, realized the facility site was too small to include needed 

services. However, before VA could finalize the purchase of a new 

larger site, the land owner sold half of the land to another buyer, and 

the remaining site was again too small.

• Unanticipated events in Las Vegas, New Orleans, and Denver 

also led to delays. For example, VA officials at the Denver project 

site discovered they needed to eradicate asbestos and replace faulty 

electrical systems from pre-existing buildings. They also discovered 

and removed a buried swimming pool and found a mineral-laden 

underground spring that forced them to continually treat and pump the 

water from the site.

VA has made improvements in its management of major medical-facility 

construction projects, including creating a construction-management 

review council. In April 2012, the Secretary of Veterans Affairs 

established the Construction Review Council to serve as the single point 

of oversight and performance accountability for the planning, budgeting, 

executing, and delivering of VA’s real property capital-asset program.8

The council issued an internal report in November 2012 that contained 

findings and recommendations that resulted from meetings it held from 

April to July 2012.9

 

8

The Construction Review Council was comprised of officials from the VA, including the 

secretary, deputy secretary, chief of staff, under secretaries, and assistant secretaries, as 

well as key leaders across the department. The Secretary of VA chaired nine meetings 

from April 18 through June 15, 2012, to review the VA construction program and identify 

challenges that led to changes in scope, cost over-runs, and scheduling delays of major 

projects.

 The report revealed that the challenges identified on 

a project-by-project basis were not isolated incidents but were indicative 

of systemic problems facing VA, and made several recommendations to 

address these problems. But VA has not yet developed specific guidance 

or instructions for how to implement the recommendations. 

9

VA, The Construction Review Council Activity Report (Washington, D.C.: November 

2012).

VA Has Taken Steps 

to Improve Its 

Construction 

Management 

Practices
 

Page 6 GAO-13-556T 

VA has taken some other actions to improve construction project 

management. For example, VA has collaborated with other federal 

agencies involved in medical facilities construction to tap their experience, 

and convened a construction industry forum to communicate about ways 

to improve medical facilities construction practices. In addition, VA has 

taken steps to involve construction contractors earlier in some projects to 

allow coordination with the architectural and engineering firms in 

designing and planning a project. 

Although VA has made improvements in its management of major 

medical-facility construction projects, many of these projects continue to 

experience cost increases and schedule delays. We recognize that some 

cost increases and schedule delays result from factors beyond VA’s 

control; however, our review of VA’s four largest projects indicates that 

weaknesses in VA’s construction management processes–in particular, 

those listed below—also contributed to cost increases and schedule 

delays: 

VA officials have emphasized that they need the flexibility to change their 

heath care processes in response to the development of new 

technologies, equipment, and advances in medicine.10

 

10VA, Strategic Plan Refresh: FY2011–FY2015, (Washington, D.C). 

Given the 

complexity and sometimes rapidly evolving nature of medical technology, 

many health care organizations employ medical equipment planners to 

help match the medical equipment needed in the facility to the 

construction of the facility. Federal and private sector stakeholders during 

our review reported that medical equipment planners have helped avoid 

schedule delays. VA officials told us that they sometimes hire a medical 

equipment planner as part of the architectural and engineering firm 

services to address medical equipment planning. However, we found that 

for costly and complex facilities, VA does not have guidance for how to 

involve medical equipment planners during each construction stage of a 

major hospital and has sometimes relied on local VHA staff with limited 

experience in procuring medical equipment to make medical-equipmentplanning decisions. In Orlando, medical equipment specifications 

changed several times and led to cost increases of at least $14 million in 

addition to schedule delays, as these issues forced VA to suspend 

Opportunities Exist 

for VA to Further 

Improve Its 

Construction 

Management 

Practices

Using Medical Equipment 

Planners
 

Page 7 GAO-13-556T 

construction until the issues were resolved. In our April 2013 report, we 

recommended that the Secretary of VA develop and implement agency 

guidance to assign of medical equipment planners to major medical 

construction projects. VA agreed and said it planned to address this 

recommendation.

Construction of large medical facilities involves numerous staff from 

multiple VA organizations. Officials from the Office of Construction and 

Facilities Management (CFM) stated that during the construction process, 

effective communication is essential and must be continuous and involve 

an open exchange of information among VA staff and other key 

stakeholders.11 However, we found that the roles and responsibilities of 

CFM and VHA staff are not always well communicated and that it is not 

always clear to general contracting firms which VA officials hold the 

authority for making construction decisions. This can cause confusion for 

contractors and architectural and engineering firms, ultimately affecting 

the relationship between VA and the general contractor. For example, 

contractor officials at one site said that VA’s project manager directed 

them to defer the design of specific rooms until medical equipment was 

selected for the facility; however, VA’s central office then directed the 

contractor to proceed with designing the rooms. This conflicting direction 

from VA could require the contractor to redesign the space, further 

expending project resources. Participants from VA’s 2011 industry forum 

also reported that VA roles and responsibilities for contracting officials 

were not always clear and made several recommendations to VA to 

address this issue. In April 2013, we recommended that the Secretary of 

VA develop and disseminate procedures for communicating—to 

contractors—clearly defined roles and responsibilities of the VA officials 

who manage major medical-facility projects, particularly those in the 

change-order process. VA agreed and stated they had actions underway 

to improve communication involving roles and responsibilities. 

Most construction projects require, to varying degrees, changes to the 

facility design as the project progresses, and organizations typically have 

a process to initiate and implement these changes through change 

 

11VA, Construction Primer (Washington, D.C.: January 2013). 

Sharing Information on the 

Roles and Responsibilities 

of VA’s ConstructionManagement Staff

Managing the ChangeOrder Process
 

Page 8 GAO-13-556T 

orders. Federal regulations12 and agency guidance13 state that change 

orders must be made promptly, and that there be sufficient time allotted 

for the government and contractor to agree on an equitable contract 

adjustment. VA officials at the sites we visited stated that change orders 

that take more than a month from when they are initiated to when they 

are approved can result in schedule delays, and officials at two federal 

agencies that also construct large medical projects told us that it should 

not take more than a few weeks to a month to issue most change 

orders.14 However, officials at two sites, New Orleans and Orlando, said 

that it was common for VA to take 6 months to process a change order, 

even though VA has directed its staff to eliminate or minimize delays.15

Processing delays may be caused by the difficulty involved in VA’s and 

contractors’ coming to agreement on the costs of changes and the 

multiple levels of review required for many of VA’s change orders. In April 

2013, we recommended that the Secretary of VA issue and take steps to 

implement guidance on streamlining the change-order process based on 

the findings and recommendations of the Construction Review Council.16

We provided a draft of our April 2013 report for VA for review and 

comment. In its written comments, VA concurred with our 

recommendations.

VA concurred with our recommendation and was reviewing the options 

proposed by the Construction Review Council to streamline the changeorder process. 

 

1248 C.F.R. § 43.201

13VA, VA Resident Engineer Handbook, “Chapter 3: Major Construction: Contract 

Changes” (3.24) (Washington, D.C.)

14Specifically, we interviewed the U.S. Army Corps of Engineers and Naval Facilities 

Engineering Command. We recognize that the Department of Veterans Affairs serve 

different populations in the defense community—active duty military personnel and 

veterans, respectively. However, these organizations construct similar medical facilities, in 

addition to abiding by federal government regulations for construction projects.

15Although officials at one of these sites said that VA’s timeliness of the change order 

process has improved, they noted that a change order still takes an average of 2 to 3 

months, indicating to them that further improvement is needed.

16GAO-13-302. 
 

Page 9 GAO-13-556T 

Chairman Coffman and Ranking Member Kirkpatrick, and Members of the 

Subcommittee, this completes my prepared statement. I would be 

pleased to respond to any questions that you may have at this time.

If you have any questions about this testimony, please contact Lorelei St. 

James at (202) 512-2834 or stjamesl@gao.gov. Other key contributors to 

this testimony include are Ed Laughlin (Assistant Director), Nelsie 

Alcoser, George Depaoli, Raymond Griffith, Joshua Ormond, Amy 

Rosewarne, James Russell, Sandra Sokol, and Crystal Wesco.

Contacts and 

Acknowledgments

(544195)
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