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[Senate Hearing 114-282]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 114-282

           FIELD HEARING ON DENVER REPLACEMENT MEDICAL CENTER

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

                                HEARING

                               BEFORE THE

                     COMMITTEE ON VETERANS' AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 24, 2015

                               __________

       Printed for the use of the Committee on Veterans' Affairs

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                     COMMITTEE ON VETERANS' AFFAIRS

                   Johnny Isakson, Georgia, Chairman
Jerry Moran, Kansas                  Richard Blumenthal, Connecticut, 
John Boozman, Arkansas                   Ranking Member
Dean Heller, Nevada                  Patty Murray, Washington
Bill Cassidy, Louisiana              Bernard Sanders, (I) Vermont
Mike Rounds, South Dakota            Sherrod Brown, Ohio
Thom Tillis, North Carolina          Jon Tester, Montana
Dan Sullivan, Alaska                 Mazie Hirono, Hawaii
                                     Joe Manchin III, West Virginia
                       Tom Bowman, Staff Director
                 John Kruse, Democratic Staff Director
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                 
                            C O N T E N T S

                              ----------                              

                             April 24, 2015
                                SENATORS

                                                                   Page
Isakson, Hon. Johnny, Chairman, U.S. Senator from Georgia........     1
Blumenthal, Hon. Richard, Ranking Member, U.S. Senator from 
  Connecticut....................................................     2
Bennet, Hon. Michael F., U.S. Senator from Colorado..............    27
    Prepared statement...........................................    27
    Rogoff, Bernie, Commissioner, Veterans Affairs, City of 
      Aurora; letter.............................................    28
Gardner, Hon. Cory, U.S. Senator from Colorado...................    31
Rounds, Hon. Mike, U.S. Senator from South Dakota................    48

                            REPRESENTATIVES

Perlmutter, Hon. Ed, U.S. Representative from Colorado's 7th 
  District.......................................................    32
Coffman, Hon. Mike, U.S. Representative from Colorado's 6th 
  District.......................................................    33

                               WITNESSES

Goldstein, Mark, Director, Physical Infrastructure Issues, U.S. 
  Government Accountability Office...............................     3
    Prepared statement...........................................     5
    Response to posthearing questions submitted by Hon. Richard 
      Blumenthal.................................................    35
Rylant, Steve, President, United Veterans Committee of Colorado..    19
    Prepared statement...........................................    21
Robinson, William ``Robby,'' Chairman, Colorado Board of Veterans 
  Affairs........................................................    23
    Prepared statement...........................................    24
Gibson, Sloan D., Deputy Secretary, U.S. Department of Veterans 
  Affairs........................................................    35
    Prepared statement...........................................    37
    Response to posthearing questions submitted by Hon. Richard 
      Blumenthal.................................................    56
Caldwell, Lloyd C., P.E., Director of Military Programs, U.S. 
  Army Corps of Engineers, U.S. Department of the Army...........    41
    Prepared statement...........................................    43
    Response to posthearing questions submitted by Hon. Richard 
      Blumenthal.................................................    57
 
           FIELD HEARING ON DENVER REPLACEMENT MEDICAL CENTER

                              ----------                              

                         FRIDAY, APRIL 24, 2015

                                       U.S. Senate,
                            Committee on Veterans' Affairs,
                                                        Aurora, CO.
    The Committee met, pursuant to notice, at 1:32 p.m. in City 
Council Chambers, Aurora Municipal Center, 15151 E. Alameda 
Parkway, Hon. Johnny Isakson, Chairman of the Committee, 
presiding.
    Present: Senators Isakson, Rounds, and Blumenthal.
    Also present: Senators Gardner and Bennet; and 
Representatives Coffman and Perlmutter.

           OPENING STATEMENT OF HON. JOHNNY ISAKSON, 
              CHAIRMAN, U.S. SENATOR FROM GEORGIA

    Chairman Isakson. I call this meeting of the U.S. Senate 
Committee on Veterans' Affairs to order.
    I want to, first of all, thank the city of Aurora and all 
the citizens of Colorado for their hospitality. We had a great 
visit today. I appreciate being in your great State. I wish we 
could take your weather back to Washington, D.C.
    We are here today for two reasons. Michael Bennet from the 
U.S. Senate and Cory Gardner from the U.S. Senate issued an 
invitation for us to come to Colorado almost immediately upon 
Senator Blumenthal and I being selected chairman and ranking 
member of the Veterans' Affairs Committee. We have been very 
well versed by them and read everything we could read about the 
problems at the VA hospital in Denver, but we wanted to be here 
firsthand at their invitation.
    The second reason we are here is this. When I was chosen 
chairman, I told the Members of the Committee that we had no 
more solemn obligation to the veterans of the United States of 
America than to see to it that they got the benefits and the 
treatment they deserve. They risk their lives and limbs for us. 
We need to do no less than the same for them.
    I pledged, rather than sitting in Washington behind a dais, 
we would go to the cities and the towns and the places where 
the veterans are and where the problems are, holding the VA 
accountable to see to it we deliver the very best possible 
service we could deliver.
    We have been to Wisconsin to look at the problem with the 
over-prescription of opiates. We have been to Arizona, looking 
at the problems that began with the Phoenix hospital where 
consults were canceled, veterans lost appointments and veterans 
died. Now we are here today in Colorado to look at the problems 
with the cost overruns of 427 percent from its inception on the 
veterans' hospital that is pending here in Aurora, CO.
    We are here to get the answers as to why we are where we 
are, what we need to do to get to where we need to be, and see 
to it we fulfill our promise to our veterans and this hospital 
is completed, but also that the VA and those people in the VA 
who need to be held accountable for getting us to where we are, 
are held accountable. As chairman of the Committee, I pledge my 
complete support to the other members of the Senate and the 
House to do exactly that.
    The format of the meeting today is my brief opening 
statement, which you just heard. I will turn to Richard 
Blumenthal from Connecticut in 1 second as ranking member, and 
then we will go straight to our testimony from our first panel. 
Then after that, each Member of the Senate and the House 
members that are here today will be able to ask questions or 
make statements after the testimony of our first panel. Then we 
will go to our second panel, Sloan Gibson from the VA, later 
on.
    I now turn it over to Ranking Member Richard Blumenthal 
from the great State of Connecticut.

  STATEMENT OF HON. RICHARD BLUMENTHAL, RANKING MEMBER, U.S. 
                    SENATOR FROM CONNECTICUT

    Senator Blumenthal. Thank you, Mr. Chairman, and thank you 
to the Colorado delegation, our colleagues, Senator Bennet and 
our good friend Senator Gardner, for being here and for 
inviting us.
    We are here at a really critical turning point in this 
project. The question is, will the Nation fulfill its 
commitment to our veterans, not only the veterans of Colorado 
and the Rocky Mountain States but of Connecticut and Georgia 
and all around the country?
    The debacle in Aurora--it is a financial and fiscal 
catastrophe--has to be addressed, and it must be addressed 
positively in finding a path forward, whatever the most 
practical alternatives are to funding completion of this 
project. Right now there is no clear path forward.
    There also has to be accountability. The public officials 
and private-sector actors who bear blame must be held 
accountable. There must be some financial accountability and 
perhaps discipline.
    Part of our goal has to be imposing or finding a way to 
impose that accountability in a way that has not happened 
before. We thought there was going to be accountability after 
the cooking of books and delayed treatment times, but so far I 
am unconvinced there has been that accountability in that 
instance. I remain unconvinced that there is a path forward 
here, that all the alternatives have been explored, and I want 
to see the quality of care, the caliber of health treatment 
that our veterans need and deserve. I also want it done without 
sacrificing care elsewhere in the country.
    The VA has submitted to us a proposal for how to deal with 
that funding. It means deferring or delaying indefinitely 
construction and maintenance elsewhere in the country, 
including Georgia, Connecticut, and South Dakota. In fact, in 
the vast majority of States where our colleagues are going to 
be very reluctant to go back to their constituents and their 
veterans and say you must sacrifice.
    I think a path forward on funding has to be found.
    Thank you, Mr. Chairman.
    Chairman Isakson. Before I go to our panelists, I want to 
make sure to acknowledge the other members of the panel who are 
here and their role in this meeting.
    Senator Mike Rounds from the great State of South Dakota, 
thank you.
    He made a long trip to be here, and he is making a long 
trip home tonight. I appreciate him as a Committee Member and a 
good friend being here.
    Welcome Congressman Perlmutter. With a name like Isakson, 
you would think I could pronounce a name like that.
    Congressman Coffman, thank you for being here.
    Senator Gardner, and obviously Senator Bennet I recognized, 
and Senator Blumenthal I have recognized as well. I think that 
covers all of us.
    With that said, we have two of our three panelists who are 
here. One of our panelists, Mr. Robinson, had a family 
emergency and he will either be late or may not be able to 
attend. So, we are going to go immediately to Mr. Goldstein. He 
is the Director of Physical Infrastructure Issues at the 
Government Accountability Office in Washington, D.C. We 
appreciate your being here today.
    Next we will hear from Steve Rylant, President of the 
United Veterans Committee of Colorado. We are grateful that you 
are here today.
    Mr. Goldstein, we will start with you. Please try to hold 
your remarks to about 5 minutes, if you can.

STATEMENT OF MARK GOLDSTEIN, DIRECTOR, PHYSICAL INFRASTRUCTURE 
            ISSUES, GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Goldstein. Thank you, Mr. Chairman, Ranking Member 
Blumenthal, and Members of the Committee. I am pleased to be 
here today to discuss information from GAO's April 2013 report 
regarding the construction of new major Department of Veterans 
Affairs medical facilities. That report examined VA's actions 
to address cost increases and schedule delays at four of its 
largest and most expensive major medical facility construction 
projects in Denver, Orlando, New Orleans, and Las Vegas.
    At the time of our review, VA had 50 major medical facility 
projects underway, including new construction and renovation of 
existing medical facilities, at a cost of more than $12 
billion.
    My statement today discusses VA construction management 
issues, specifically: one, the extent to which the cost, 
schedule, and scope for the four selected medical facility 
projects changed since this information was first submitted to 
VA's authorizing committees and the reasons for these changes; 
two, actions VA has taken to improve its construction 
management practices; and three, VA's response to 
recommendations in our report for the agency to further improve 
its management of the costs, schedule, and scope of these 
projects.
    This testimony is based on our April 2013 report. It is 
also based on our May 2013, April 2014, and January 2015 
testimonies on this topic, as well as selected updates that we 
received from VA. These selected updates include information on 
the status of VA's major medical center projects in Las Vegas, 
Orlando, New Orleans, and Denver.
    In April 2013, GAO found the cost substantially increased 
and schedules were delayed for VA's largest medical facility 
construction projects. In comparison with initial estimates, 
the cost increases for these four projects now range from 66 
percent to 427 percent, and delays range from 14 to 86 months.
    Since the 2013 report, some of the projects have 
experienced further cost increases and delays because of design 
issues. For example, as of April 2015, the cost for the Denver 
project increased by nearly $930 million, and the completion 
date for this project is unknown.
    In its April 2013 report, GAO found that VA had taken some 
actions since 2012 to address problems managing major 
construction projects. Specifically, VA established a 
construction review council in April 2012 to oversee the 
Department's development and execution of its real property 
programs. VA also took steps to implement a new project 
delivery method called Integrated Design and Construction, 
which involves a construction contractor early in the design 
process to identify any potential problems early and speed the 
construction process.
    However, in Denver, the VA did not implement this method 
early enough to garner the full benefits of having a contractor 
early in the design phase.
    VA has taken actions to implement the recommendations in 
GAO's April 2013 report. In that report, GAO identified 
systemic reasons that contributed to overall schedule delays 
and cost increases at one or more of the four reviewed projects 
and recommended ways the VA could improve its management of the 
construction of major medical facilities.
    In response, the VA has: one, issued guidance on assigning 
medical equipment planners to major medical facility projects 
who will be responsible for matching the equipment needed for 
the facility in order to avoid late design changes leading to 
cost increases and delays; two, developed and disseminated 
procedures for communicating to contractors early to find roles 
and responsibilities of the VA officials who manage major 
medical facility projects to avoid confusion that can affect 
the relationship between VA and the contractor; and three, it 
has issued a handbook for construction contract modifications 
that includes milestones for completing processing of 
modifications based on their dollar value, and it has taken 
other actions to streamline the change order process to avoid 
project delays.
    While VA has implemented these recommendations, we do not 
have a good idea at this point in time of their impact and how 
effective they have been. Many of these are going to take time 
to show improvements, especially for ongoing construction 
projects, and depends on several issues, including the 
relationship between VA and its contractors.
    Mr. Chairman, that concludes my opening remarks. I would be 
happy to respond to questions that you and the members have. 
Thank you.
    [The prepared statement of Mr. Goldstein follows:]
      Prepared Statement of Mark L. Goldstein, Director, Physical 
      Infrastructure Issues, U.S. Government Accountability Office
      
      
      
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]     
      
      
      
     Chairman Isakson. Thank you very much, Mr. Goldstein.
    Mr. Rylant.

STATEMENT OF STEVE RYLANT, PRESIDENT, UNITED VETERANS COMMITTEE 
                          OF COLORADO

    Mr. Rylant. Thank you, Mr. Chairman and Members of the 
Committee, for the opportunity to testify on an issue that is 
so very important to the veterans of Colorado and the 
surrounding States.
    My name is Steve Rylant, and I am the President of the 
United Veterans Committee of Colorado, also known as UVC, a 
coalition of over 50 different veterans' service organizations 
including the Veterans of Foreign Wars, the American Legion, 
the Disabled American Veterans, the Paralyzed Veterans of 
America, and many others. Our organization works to support 
legislation on veterans on the Federal and State level that 
benefit veterans.
    The need for this replacement hospital goes back many 
years. I became closely involved in 2007 when VA Secretary Peak 
told us they had a new plan to lease 3 or 4 floors of the 
University of Colorado Medical Center for around $300 million 
to replace the current facility. We told him that was not 
acceptable. The veterans deserve a standalone full service 
hospital and medical center. When Eric Shinseki became the VA 
Secretary in 2009, he agreed.
    We had a groundbreaking in August 2009. The VA accepted the 
bid from Kiewit-Turner in October 2010. The VA and Kiewit-
Turner spent a year negotiating a contract. The UVC told the VA 
that they needed to get a contact signed and start construction 
or we would bring our shovels on Veterans Day 2011 and start 
digging the hole for them. I have a pin that I wear that is a 
shovel with the letters BTDT, ``Build The Damn Thing.'' A week 
before Veterans Day the VA and KT signed the contract and we 
had a celebration.
    Construction began January 2012, two-and-a-half years after 
the groundbreaking. From that day on, we have been meeting with 
the VA, with Kiewit-Turner, and with the Colorado congressional 
delegation.
    In July 2013, Kiewit-Turner filed a complaint in the U.S. 
Civilian Board of Contract Appeals that the construction design 
that they had received from the VA could not be completed with 
the $600 million authorized by Congress and that it would take 
at least a billion dollars.
    In May 2014, Eric Shinseki resigned as Secretary of the VA 
and VA Secretary Robert McDonald and Deputy Secretary Sloan 
Gibson were confirmed. They had a big job ahead of them, as we 
well knew.
    This past December, the U.S. Board of Contract Appeals 
ruled in favor of Kiewit-Turner and found the VA in material 
breach of the contract. Since Kiewit-Turner no longer had a 
valid contract to build the facility, they shut down the 
project. When that happened, 1,100 workers scrambled to find 
other projects to replace this one to keep their people 
employed. Another delay.
    Deputy Secretary of the VA Sloan Gibson came to Denver and 
met with the UVC and leadership of many of our member 
organizations and told us that Kiewit-Turner required three 
things to restart the project: the U.S. Army Corps of Engineers 
must take over administration of the project; that they be paid 
a sum of money that they had put into the project to keep it 
going; and that they needed a bridge contract on a cost 
reimbursable basis with the VA until the U.S. Army Corps of 
Engineers could negotiate and sign a contract. Deputy Secretary 
Gibson agreed, and KT started the project.
    The next delay. The subcontractors have not come back to 
the project because they no longer trust the VA and Kiewit-
Turner to not shut down the project again. Only 700 of the 
original 1,100 have come back, and this is causing new delays. 
They are waiting to see Congress pass authorization and 
appropriation bills so the Corps can negotiate a completion 
contract with KT. When that happens, they will come back to the 
project. That is why it is so important to get this facility 
completed.
    There is a serious problem of backlog for veterans to get 
appointments with the VA doctors and clinicians. It is not a 
scheduling problem. The schedulers can only schedule 
appointments when there is a room available and a doctor 
available. Getting the medical center completed will begin to 
solve the problem of shortage of patient and examination rooms.
    That is only half of the problem. One of the proposals we 
have heard is to finance the completion of the medical center 
by taking away all bonuses for 3 years until the medical center 
is completed. Because of government regulations, the VA cannot 
pay the doctors and nurses salaries that are competitive with 
the private sector. They make up the difference with bonuses. 
If you take away the bonuses of the doctors and nurses, we 
could have a mass exodus of doctors. When that happens, we have 
a much worse problem. The schedulers will have rooms to 
schedule, but no doctors to schedule. We cannot allow that to 
happen.
    In conclusion, this situation is not the fault of the 
veterans. The UVC unanimously approved a position 3 years ago, 
and it continues today. We do not take sides with the VA, or 
Kiewit-Turner, or Congress, or now the U.S. Army Corps of 
Engineers. We want the replacement Eastern Colorado health care 
system built. We want it built with quality. We want it built 
in the shortest time possible. We want it built by veterans. 
Like the shovel pin says that I wear, ``BTDT,'' build the damn 
thing.
    My written testimony has some more, and I am more than 
happy to discuss anything you would like me to. Thank you for 
the opportunity to testify, and I am available for any 
questions you may have.
    [The prepared statement of Mr. Rylant follows:]
    Prepared Statement of Steve Rylant, President, United Veterans 
                         Committee of Colorado
    My name is Steve Rylant and I am the President of the United 
Veterans Committee of Colorado, a coalition of over 50 Veterans Service 
Organizations including the Veterans of Foreign Wars, The American 
Legion, The Disabled American Veterans, The Paralyzed Veterans of 
America and many others. Our organization works to support, testify and 
help get legislation passed on the Federal Level, and the State Level, 
that benefit veterans.
    The need for this replacement VA Regional Medical Center goes back 
many years. I first became involved in 2007 when VA Secretary James 
Peak told us they had a new plan to lease 3 or 4 floors of the 
University of Colorado Medical Center for around 300 Million Dollars to 
replace the current facility. We strongly told him that would not be 
acceptable. The veterans deserve a stand alone full service Hospital 
and medical center.
    When Eric Shinseki became the VA Secretary in 2009, he agreed. We 
had a ground breaking in August 2009. The VA put out a call for bids, 
accepted the bid from Kiewit Turner in October 2010. The VA and Kiewit 
Turner spent a year negotiating a contract. The UVC and its members 
told the VA that they needed to get a contact signed and start 
construction or we would bring our shovels on Veterans Day 2011, and 
start digging the hole for them. I have a pin that I wear that is a 
shovel with the letters BTDT. Build The Damn Thing! A week before that 
Veterans Day the VA and KT signed the contract and we had a celebration 
Construction began January 2012, Two and a half Years after the ground 
breaking! From that day on we have kept a close eye on what has been 
going on, meeting with the VA, with Kiewit Turner, and with the 
Colorado Congressional Delegation.
    There have been many other delays since that time as a result of 
the VA not approving change orders in a timely manner and 
subcontractors not getting paid for the work they had been completed 
for 4 to 6 months after the change order work was finished.
    July 2013 Kiewit Turner filed a complain in the United States 
Civilian Board of Contract Appeals that the construction design that 
they had received from the VA could not be completed with the 600 
Million authorized by Congress and that it would take at least a 
billion dollars.
    A hearing by the House Committee on Veterans Affairs was conducted 
in Denver in April 2014 and Glenn Hagstrom, then Chief of Acquisition 
and Construction, testified that the VA did not need any additional 
funding from Congress and that they would win the litigation and KT 
would have to build the VA Medical Facility with the 600 Million 
already authorized. That was ridiculous!
    In May 2014 Eric Shinseki resigned as Secretary of the VA and 
subsequently VA Secretary Robert McDonald and Deputy Secretary Sloan 
Gibson were confirmed. They had a Big Job ahead of them, as we will 
knew.
    This past December, the United States Civilian Board of Contract 
Appeals ruled in favor of Kiewit Turner and found the VA in material 
breach of the contract. Since Kiewit Turner no longer had a valid 
contract to build the facility, they shut down the Project. When that 
happened, just weeks before Christmas, the subcontractors with about 
1,100 workers on the project had to scramble to find other projects to 
replace this one to keep their people employed. Another delay
    Deputy Secretary of the VA Sloan Gibson, within a week of the 
decision, came to Denver and met with the UVC and leadership of many of 
our members, and told us that Kiewit Turner required three things to 
restart the project. The US Army Corp of Engineers must take over 
administration of the Project, that they be paid a sum of money that KT 
put into the project to keep it going, and that they needed a bridge 
contract on a cost reimbursable basis with the VA until the US Army 
Corp of Engineers could negotiate and sign a construction completion 
contract. Deputy Secretary Gibson told us that he was going to agree to 
all of those requirements the next day in a meeting with Kiewit Turner, 
which he did.
    Kiewit Turner restarted the project and started working to get the 
subcontractors back to work on the construction.
    Then the next delay, The subcontractors have not come back to the 
Project because they no longer trust the VA and Kiewit Turner to not 
shut down the project. only 700 of the original 1,100 have come back to 
the project, and this is causing new delays. They are waiting to see 
Congress pass Authorization and Appropriation bills so the Corp can 
negotiate a completion contract with Kiewit Turner before they will 
come back to the project.
    So to your two questions in the letter inviting me to testify on 
behalf of Colorado's Veterans. There is a serious problem of back log 
for veterans to get appointments with the VA Doctors and Clinicians. It 
is not a scheduling problem. The schedulers can only schedule 
appointments when there is a room available and a doctor available. 
Getting the Medical Center completed will begin to solve the problem of 
shortage of patient and examination rooms. The completion of the 
facility will solve the first part of the equation.
    But that is only half of the problem. One of the ways we have heard 
suggested to finance the completion of the Medical Center was to take 
away all bonuses for three years until the Medical Center is completed. 
Because of government regulations, the VA cannot pay the doctors and 
nurses salaries that are competitive with the private sector. They make 
up the difference with bonuses. If you take away the bonuses of the 
Doctors and Nurses, we could have a mass exodus of highly qualified and 
professional people. If that happens, then the problem of access will 
be worse! The schedulers will have rooms to schedule, but no doctors to 
schedule to examine the veterans in those nice new rooms. We can not 
allow that to happen.
    The delays have obviously negatively impacted the veterans that 
need access to VA Health care with wait times that are totally 
unacceptable, and the Deputy Secretary has publicly acknowledged that 
it is unacceptable.
    Prior to my retirement in 2008 I was a project manager for General 
Electric. What I have seen here is alarming because of that experience, 
but not surprising. I have some thoughts on future projects and how to 
control the costs and delivery times and would be happy to discuss them 
with you.
    In conclusion, this situation is not the fault of the Veterans, The 
United Veterans Committee of Colorado unanimously approved a position 
three years ago, and it continues today. We do not take sides with the 
VA, or Kiewit Turner, or Congress, or now the US Army Corp of 
Engineers. We want the replacement Eastern Colorado Regional Medical 
Center Built! We want it built with Quality! We want it built in the 
shortest time possible! And we want it built by Veterans. Like the 
shovel pin says, BTDT, Build The Damn Thing.

    Thank you for the opportunity to testify and I am available for any 
questions you may have.

    Chairman Isakson. Thank you very much, Mr. Rylant.
    Mr. Robinson, please come forward. We understand you had an 
emergency, and we are sorry. I hope everything is OK. We 
appreciate you making it here quickly, and we would love to 
hear your testimony within 5 minutes.

  STATEMENT OF WILLIAM ``ROBBY'' ROBINSON, CHAIRMAN, COLORADO 
                   BOARD OF VETERANS AFFAIRS

    Mr. Robinson. My apologies, Mr. Chairman, and I appreciate 
the opportunity to be here.
    I am William ``Robby'' Robinson, and I am the serving 
Chairman of the Colorado Board of Veterans Affairs, which is a 
seven-member board appointed by the Governor to advise and 
assist the Department of Military and Veterans Affairs, the 
Governor, and the General Assembly on issues affecting 
veterans.
    I would like to note that there are several past members of 
the board here in our presence today.
    The board monitors key issues among the State's veterans, 
and I can tell you that the concern over the progress on the 
medical center remains among the top four issues, which also 
includes claims and appeals processing, homelessness, and 
access to care from our many rural communities.
    We have been monitoring as a board the progress on a new 
medical center since 1999, virtually since the inception of the 
whole idea. It was obvious that a new facility was required, 
and we were pleased that the Department of Veterans Affairs 
recognized the requirement and began searching for places to 
build a new medical center.
    I think it is a bit ironic that we are sitting here in 
Aurora this month of 2015, which was originally about the time 
the facility was supposed to be opened. We know, of course, 
that it is only about halfway finished right now.
    The Board of Veterans Affairs has monitored the 
construction process and the interaction of veterans' 
representatives with the VA and Kiewit-Turner in nearly all 
aspects of the design and construction. The delays have 
disappointed the veterans who worked hard to bring it to 
reality. I think more importantly, the delays have led to 
continued reliance on the old facility which, by its very size 
and age, limits access to timely appointments and procedures, 
as well as patient care. That impacts veterans all over 
Colorado and many in adjacent States that are and will be 
served by the Denver VA medical facility.
    We are very concerned about the challenges facing the VA as 
they try to complete the new medical center. We hope that all 
the parties involved can work together productively and 
cooperatively to complete the project expeditiously.
    The Colorado Board of Veterans Affairs stands ready to 
assist in any way we can. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Robinson follows:]
      Prepared Statement of William ``Robby'' Robinson, Chairman, 
                   Colorado Board of Veterans Affairs
    The Board of Veterans Affairs is a seven member board appointed by 
the Governor to advise and assist the Department of Military and 
Veterans Affairs, the Governor, and the General Assembly on issues 
affecting veterans. I would note that several past members of the Board 
are also here today.
    We have been monitoring progress on a new veterans' medical center 
since 1999. It was obvious that a new facility was required and we were 
pleased that the Department of Veterans Affairs recognized the 
requirement and began searching for places to build a new medical 
center. It is ironic that we sit here in Aurora today discussing 
construction of the facility when originally it was supposed to be 
opened about now. The Board of Veterans Affairs has monitored the 
construction process and the interaction of veterans' representatives 
with the VA and Kiewit-Turner in nearly all aspects of the design and 
construction. The delays have disappointed the veterans who worked hard 
to bring it to reality. More importantly, the delays have led to 
continued reliance on the old facility which by its very size and age 
limits access to timely appointments and procedures as well as patient 
care. That impacts veterans all over Colorado and many in adjacent 
states that are and will be served by the Denver VA.
    We are very concerned about the challenges facing the VA as they 
try to complete the new medical center. We hope that all parties 
involved can work together productively and cooperatively to complete 
the project expeditiously.

    The Board of Veterans Affairs stands ready to assist in any way 
that we can.

    Chairman Isakson. Thank you, Mr. Robinson. Thank you for 
your testimony, and thank you for your service to the people of 
Colorado and to the country.
    What we are going to do is each Member is going to ask a 
question, and time permitting we will have a second round of 
questions as well. I will ask the first one.
    Mr. Rylant, when you responded to the question about paying 
for the overruns at the VA hospital here in Denver by docking 
the pay of some of the employees in the Veterans 
Administration, your response was that it is already hard to 
hire people for the VA because of what is paid in their salary 
schedule, and if we had discipline in the VA by lowering the 
pay of anybody, that they might not come to work. Is that 
right?
    Mr. Rylant. That is my understanding. I have talked to 
several VA doctors here, and I believe that the doctors and 
nurses and all the people in the VA hospital really are 
interested in helping veterans. They seem to be more dedicated 
to veterans than civilian hospitals are to civilian patients.
    But there comes a point, the civilian hospitals can offer a 
lot more money to those doctors than the VA can. If I am wrong, 
somebody please tell me that. It is my understanding that they 
make up the difference to keep them there through bonuses, and 
also the opportunities for research, which is why the research 
facility at this health center is so important, because that 
helps bring doctors and nurses into the system.
    Chairman Isakson. I am going to cut you off because we are 
going to try to keep things moving.
    Mr. Rylant. OK.
    Chairman Isakson. I think your point is well taken and you 
are right, but I want to make a point here. When you talk to 
the VA about discipline within the VA in terms of 
accountability for work that is done that is not done well or 
poorly--and I am not talking about nurses and doctors, I am 
talking about construction superintendents and people building 
buildings--you are oftentimes told, oh, we cannot fire anybody. 
If we fire somebody, we cannot get anybody to come to work for 
us for fear of being fired. Therefore, you have an agency that 
is incestuous in terms of less than peak performance.
    So, while I agree about nurses, doctors, and physicians and 
accountability and how you would be very careful in taking 
their bonus away, I think there is got to be some system, an 
improved system of accountability in the administration of the 
VA, to hold people who are responsible for jobs taking place.
    When Mr. Goldstein testified a minute ago that there are 
$12 billion in projects under construction at VA, $4 billion of 
that $12 billion is in New Orleans, Las Vegas, Denver, and 
Orlando. Those projects, between the three or four of them, are 
66 percent, 147 percent, 427 percent, and 80 percent in cost 
overruns. There is a consistent failure of the VA to be able to 
manage its money in construction or manage projects without 
them running over.
    So, I just want to make the point that while your point may 
be well taken on those delivering the services--the physicians 
and the doctors and the nurses--somebody has got to be in 
charge, and somebody who is in charge has got to be held 
accountable for responsibilities that they take in construction 
management and cost of construction projects.
    Mr. Rylant. May I briefly respond?
    Chairman Isakson. Briefly.
    Mr. Rylant. We are in complete agreement. Veterans are also 
citizens and taxpayers, and we do not want our money wasted, 
absolutely. If you have selected to have bonuses taken away 
from the senior management that have done the mismanaging and 
so forth, we are in complete agreement with that. We just would 
not want it to be across-the-board wipeout of bonuses that 
would hurt people at the lower levels that were not responsible 
for the things that happened. We completely agree with you.
    Chairman Isakson. Thank you for your testimony.
    Senator Blumenthal.
    Senator Blumenthal. Thanks, Mr. Chairman.
    Thank you to Mr. Rylant and Mr. Robinson for your service 
to our Nation, and thank you for being here today.
    Thank you, Mr. Goldstein, for the work that you have done 
over the years in holding agencies of the Federal Government 
accountable.
    In this instance, I find your report, even though it is 
somewhat dated, to be absolutely staggering when it talks about 
some of the numbers the Chairman has mentioned. The sheer fact 
that there have been cost overruns in VA construction projects 
of $2.4 billion, and they are still counting, is unacceptable. 
I guess my question is, should the VA be out of the 
construction business?
    It is not easy to construct a complex and costly building 
of this type. People spend their whole lives figuring out how 
to do it, and maybe the Corps of Engineers should be empowered 
to do the VA's construction management since that is its 
business and it has a longstanding and distinguished record in 
this area. Would taxpayers not be better served? That is my 
question.
    Mr. Goldstein. Senator, of the 50 projects that we looked 
at, in addition to these four, we found that roughly half of 
them had cost increases or schedule increases. In the 
appendices to the report that you mentioned, for all 50 of the 
projects, half of them had cost increases, half of them had 
schedule increases.
    So clearly there is a problem at VA that goes, frankly, 
beyond Denver and beyond the four major projects. It goes to 
the entire construction program.
    Whether you decide that VA should continue constructing 
hospitals is really a policy question not well suited for the 
GAO. However, I would say that regardless of whether you allow 
VA to do it or the Army Corps, if you do decide to have VA do 
it, obviously capacity has to be instilled into the agency, 
into the Department to be able to do it. If you look at the 
record--and I have spent some time now looking at what happened 
there--three things come to mind throughout: a lack of 
planning, a lack of communication, and a lack of oversight. 
Those three things are critical to whoever is going to manage 
these programs.
    I am not sure it is a silver bullet to just take it away 
from VA. It may be something you need to do in the short term 
in order to get this job done. I understand that. But capacity 
would be the critical----
    Senator Blumenthal. But your testimony and your reports and 
your work indicates deep-seated institutional failings.
    Mr. Goldstein. Absolutely.
    Senator Blumenthal. We cannot take down the construction 
shelves that have been built in Aurora for the hospital 
facility there. We cannot just start all over again. But, we 
can start over with the VA and adopt a different system so as 
to avoid these kind of systemic failings. They are systematic 
failings in the VA's construction history. They may do some 
things very well, but construction, apparently, is not one of 
them. Thank you.
    Mr. Goldstein. Yes, sir.
    Chairman Isakson. Senator Mike Rounds of South Dakota.
    Senator Rounds. Thank you, Mr. Chairman.
    Gentlemen, thank you for your service to our country.
    Mr. Goldstein, I want to go specifically to this project in 
particular. I have had the opportunity to review your report, 
and sometimes we try to oversimplify; you did not. You went 
through this pretty specifically. What I was trying to do, 
then, was turn around and put it back into something that we 
can share as far as what the basic challenges are here.
    I appreciate the way you have laid out the three specific 
broad categories in which you saw failings. In this particular 
case it would appear--and I would just like it if you think I 
am on the right track or not--it would appear that the original 
estimate was never correct to begin with in terms of what the 
cost would be. Second of all, the late change over to the 
integrated design construction approach late in the game harmed 
rather than helped the process. Finally, there appeared to be 
literally no effective and efficient change order process that 
could efficiently get those changes necessary in a project this 
size in for approval and back out again so our contractors 
could get paid on a timely basis.
    Am I on the right track?
    Mr. Goldstein. You are right on all three counts, Senator. 
Yes, sir.
    Senator Rounds. Thank you, sir.
    Thank you, Mr. Chairman.
    Chairman Isakson. Thank you, Senator Rounds.
    Senator Bennet.

             STATEMENT OF HON. MICHAEL F. BENNET, 
                   U.S. SENATOR FROM COLORADO

    Senator Bennet. Thank you, Mr. Chairman.
    I know that we have to decide whether we are going to give 
an opening statement or ask a question. So I would ask that my 
opening statement be included in the record.
    Chairman Isakson. Without objection.
    Senator Bennet. Thank you, Mr. Chairman.
    [The prepared statement of Sen. Bennet follows:]
    Prepared Statement of Hon. Michael F. Bennet, U.S. Senator from 
                                Colorado
    Chairman Isakson and Ranking Member Blumenthal, thank you for your 
attention to this important project.
    And, thank you for traveling to Denver to see and hear first-hand 
what its completion means for our veterans in Colorado and across the 
Rocky Mountain region.
    Now that you've seen the structure and heard from our veterans here 
in Colorado, I'm sure you understand why our delegation has been so 
outraged and frustrated by this process, and also why we're adamant 
that this hospital is completed.
    There is no other option.
    Bottom line: those most hurt by the VA's negligence and 
mismanagement are our veterans and our taxpayers who have lost faith in 
the VA to complete this project.
    In the words of Steve Rylant and the UVC--``BTDT''--Build The Damn 
Thing.
    There is also much work to be done to ensure that the mistakes that 
were made on the Denver replacement facility never happen again--
especially since lessons learned from previous VA construction projects 
were not applied to this project.
    That must change.
    We owe that to our veterans and to the taxpayers.
    The story of this Denver replacement facility should have been 
about the government improving the delivery of care to our veterans, 
instead of how feckless and shortsighted it can be.
    The delegation here today looks forward to working with our 
colleagues in Congress and our partners in the Rocky Mountain region to 
do just that.

    Chairman, we will work with you, our veterans and the other Members 
of the Committee to find a solution that completes the hospital so 
veterans can access the care they have been promised.
    Thank you.

    Senator Bennet. I would also ask to put in the record a 
letter that was sent August 9, 2013, to the Inspector General 
of the Veterans Affairs Commission from Bernie Rogoff, the 
Commissioner of Veterans Affairs for the city of Aurora.
    Chairman Isakson. Without objection.
    [The information referred to follows:]

  Letter from Bernie Rogoff, Commissioner, Veterans Affairs, City of 
 Aurora submitted by Hon. Michael F. Bennet, U.S. Senator from Colorado
 
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
 

    Senator Bennet. He has still not received an answer to that 
letter. I hope the fact that it is now in the record means he 
will receive an answer to that letter.
    I want to thank you both, Mr. Chairman and the Ranking 
Member from Connecticut. Senator Gardner and I are well aware 
of the importance you attach to the oversight of the VA 
hospital, but your willingness to hold this hearing in 
Colorado--it is very unusual not to have it in Washington--is a 
real demonstration and testament to your seriousness, and it 
honors Colorado's veterans and the veterans of the Rocky 
Mountain West. On their behalf, I want to thank you very much 
for being here.
    I would also like to thank the veterans that are here today 
because we wanted to hold this hearing here so you could be 
here. And in that spirit I guess I would start by asking Mr. 
Rylant and Mr. Robinson, if they would like to comment, what 
the state and condition of the VA hospital is that our veterans 
are using right now in Colorado. In other words, why do we need 
this new veterans' hospital, and what efforts did your 
organizations take and have you taken to alert the VA to the 
challenges that have been occurring out at the Aurora site?
    Mr. Rylant, why do not we start with you?
    Mr. Rylant. In reference to the need, the doctors and 
nurses and----
    Senator Bennet. I am sorry to interrupt, but also include 
in the need access to care by the rural veterans as well.
    Mr. Rylant. OK. The doctors and nurses and staff at the 
present medical facility work hard with what they have, but it 
is an ancient hospital. It has been built on. I mean, the times 
that I have had to go there and find a room, I go through halls 
trying to figure out where I am supposed to go.
    One specific instance. A good friend of mine--and if I said 
his name, I am sure you would know who I was talking about--has 
developed cancer as a result of Agent Orange exposure in 
Vietnam. The hospitals work very hard to help him, and he tells 
me that they are doing a great job of taking care of him as 
quickly as they possibly can.
    But, he had an appointment to have an MRI, and the day of 
his appointment when he went, they had a shortage of people to 
do that. There were four veterans in wheelchairs waiting in the 
hallway to get into the MRI room. That is just not acceptable. 
If you went to a civilian hospital and saw that, heads would 
roll.
    So, we need the new hospital and medical facility to take 
care of people, the veterans who have sacrificed so much, to 
take care of them in a dignified manner. Also, in this hospital 
we are going to have spinal injury facilities. I believe it is 
30 spinal injury beds, which we have needed for a long time. If 
somebody has got a spinal injury, they have got to go to San 
Diego or other places.
    A friend of mine right now is in San Diego getting a spinal 
injury problem taken care of that he has had for years and 
years and years. He would not have to go to San Diego if this 
hospital was built. He would be able to stay here with his 
family and get it taken care of. Those are just a couple of 
personal examples.
    Prior to my retiring in 2008, I was a project manager for 
General Electric. Kiewit-Turner, when they started 
construction, they started having briefings for the UVC to let 
us know what is going on. As I learned about the change order 
process and the design-to-build process, as a project manager, 
I guess I was not surprised but I was horrified.
    When I was a project manager, we had a specific design to 
build. I knew exactly what we had to build. We also had a 
specific date that we had to complete it on, and if we did not 
complete it on that date, we had late delivery penalties. If we 
delivered early, we had early bonuses.
    The change order process that I worked with, we first gave 
a written proposal of scope, cost, and any delay in time that 
would cost the project, and we did not do anything until we had 
a signed document from the customer that he agreed to the 
scope, he agreed to the price he would pay, and he agreed to 
the change in the delivery date.
    What I saw in the process here, Kiewit-Turner would propose 
a change and the VA would say, OK, go ahead and do the change 
and we will decide how much we are going to pay you. That is 
crazy. I do not know how I would have functioned as a project 
manager. There was never a specific date. It just kept floating 
out there, and there was no accountability to KT of when they 
had to have it built. I think they have been working hard to 
get it done because they need to minimize their costs. But the 
moving target of an end date has been horrible.
    I have been attending meetings with their activation 
committee that has to buy equipment to put in there, and they 
have got to schedule delivery of that equipment. If they buy it 
too early, it is going to be out of warranty before it ever 
gets used. The activation committee has had horrible problems 
trying to plan their part of it because they do not know when 
it is going to be built, and we do not know when it is going to 
be built.
    Does that kind of answer your question?
    Senator Bennet. It more than kind of answers my question.
    Chairman Isakson. I will inject there two things. One is on 
the spinal cord injury. We have a distinguished Vietnam veteran 
who is in the audience today who has already consulted with me 
before the meeting about the need to pay attention to the needs 
of veterans with disabilities in the planning process of our 
facilities, and we are going to do that, I promise you.
    Mr. Robinson, you might have a comment? Please try to keep 
your answers a little bit more brief, if you can.
    Mr. Robinson. I will echo from personal experience much of 
what he said, but not as chairman of the board. We work for the 
Governor, and this is fundamentally a Federal issue. We stand 
ready to assist in any way we can.
    My personal experience at the VA has resulted in the fact 
that I do not go to the VA anymore, for several reasons. They 
are too antiquated. They are too small, which leads to, in 
orthopedics for instance, waiting 2-3 months in specialty care 
to get an appointment; that is after you go through your 
primary care physician. It took me 7 months to have a simple 
scoping of my ankle done.
    I have had several procedures there. I look around and I 
say I have access to other care. I have TRICARE. Now I have 
Medicare and TRICARE for life. I am not going to jam up their 
system over there by being one more person who has access to 
outside health care who has to go to the VA and wait so long 
but, more importantly, give the access to other veterans who do 
not have anything but the VA.
    That facility and the limited ORs and the limited exam 
rooms really creates a burden on the veterans. Where does the 
State come in to play a role? Well, this board administers 
about a $1 million grant program that goes to veterans, 
provided by the taxpayers of Colorado through the tobacco fund 
settlement, but also another $1 million we provided. You would 
be amazed at how much of that money goes for transport of rural 
veterans into the hospital system here, and how much of it goes 
for homelessness and the other projects we mentioned. Part of 
that is because the Denver VA just cannot handle all the 
medical issues and the appointments and what-not, nor the 
transportation requirements.
    So, that is what the State has done to kind of fill some of 
the gaps.
    Chairman Isakson. Senator Gardner?

                STATEMENT OF HON. CORY GARDNER, 
                   U.S. SENATOR FROM COLORADO

    Senator Gardner. Thank you, Mr. Chairman, and to Senator 
Blumenthal and Senator Rounds from the Veterans' Affairs 
Committee, thank you for coming to Denver today to be a part of 
this, to see the work that has taken place and to see the work 
that needs to be done.
    Believe it or not, it does look a lot more like 50 percent 
completed than the last time they told us it was 50 percent 
completed.
    I had the opportunity to travel to Afghanistan and the 
Middle East 2 weeks ago. I met with a young 19-year-old soldier 
from Brighton, CO, and all the way from Colorado to Afghanistan 
we talked about what was happening with the veterans' hospital, 
the VA hospital here in Colorado. The last thing a 19-year-old 
soldier ought to be worrying about while he is on the 
frontlines is what is happening with his care on the home 
front.
    Mr. Goldstein, we have seen the report here that you have 
laid out before us. We know there are ongoing conversations 
that you are having with the Veterans Administration. What 
concerns you? What surprises are there? What things are you 
looking out for as we try to solidify an agreement on what is 
now a $1.73 billion project?
    Mr. Goldstein. I think, Senator, that we would continue to 
be concerned about the overall management of the project and 
the relationship between the Army Corps and VA to ensure that 
lines of communication and oversight and accountability between 
those two organizations as they go forward are effective. At 
the end of the day, this is still a VA project. VA is still 
accountable for the results. I would hate to see accountability 
for this project be dissipated by yet a new arrangement that VA 
uses in order to achieve its results.
    That is something that I would be most concerned about 
right now, is making sure that that process works and that 
people who are going to do this are still held accountable for 
it, if you all decide to go down that road.
    Senator Gardner. Thank you, Mr. Chairman.
    Chairman Isakson. Let me just comment. You can rest assured 
that this Committee and the U.S. Senate is going to see to it 
that that does not happen. I mean, this testimony, the visit 
today, your testimony and all that we have learned, it is 
absolutely incumbent, no excuses, that we are going to get the 
project done, get it done right, and hold the VA accountable. I 
do not care what kind of contractual arrangement they make with 
anybody. It is their baby, it is their responsibility, and we 
are going to hold them accountable for it, you can count on 
that.
    Let us see. Congressman Perlmutter? I almost got it right.

               STATEMENT OF HON. ED PERLMUTTER, 
       U.S. REPRESENTATIVE FROM COLORADO'S 7TH DISTRICTn

    Mr. Perlmutter. You got it right, Mr. Chairman. Thank you, 
and thanks to the panel for allowing us to participate in this, 
and thanks to the city of Aurora for sharing their municipal 
chambers.
    As you heard from Mr. Robinson, we are now on our third 
administration: the Clinton Administration, the Bush 
Administration, and the Obama Administration. We have been 
through at least seven secretaries. At least six senators have 
dealt with this, starting with Senator Ben Campbell, Senator 
Wayne Allard, Senator Ken Salazar, Senator Mark Udall, and the 
two senators from Colorado sitting here today. I think we are 
on the fifth Member of Congress that is had some level of 
participation in this, and it is something that we have all 
wanted to see built. It should have been a reward to our 
veterans. Instead we have all been embarrassed by how this has 
proceeded. But even being embarrassed, all of us still have 
resolve to get this done and to provide the services to our 
veterans.
    You mentioned Arty Guerro over there. Arty was one of the 
driving forces, along with many of the other vets in this 
chamber today, to get this done, because we have not had a 
spinal cord unit of any kind for ages and ages.
    I would like to say to Mr. Goldstein, if you go back to 
1999, you probably would see 1,000 percent increase in cost of 
this thing. We need to keep moving. These delays certainly do 
not help.
    In your study, did you figure out how much is cost overruns 
due to increases in prices from when we did the original 
groundbreaking in 2009? Was that part of your study at all?
    Mr. Goldstein. We looked generally at the cost increases 
and schedule delays overall. We did not break it down into the 
specific reasons beyond that and attribute cost to individual 
pieces of it, sir.
    Mr. Perlmutter. Did you----
    Mr. Goldstein. That would be more like an audit.
    Mr. Perlmutter. Did your office look at the initial 
contract that was drawn up between the general contractor and 
the VA for the initial construction at the original price of 
about $600 million? Did you analyze that at all?
    Mr. Goldstein. I do not know if we analyzed it or not, sir. 
I would have to go back and look.
    Mr. Perlmutter. Obviously, this is something that has been 
on the drawing board, and I would just want one little thing. 
Secretary Gibson came out in June of last year. We all met at 
the old facility. All of us--Senator Gardner, Representative 
Coffman, Senator Bennet and I, and a number of others--got on 
an elevator over there, and it immediately dropped a foot, and 
we had to climb out of the elevator to then walk up steps, 
which was no problem. My point being the hospital serves, but 
it is undergone benign neglect since at least 1999.
    Chairman Isakson. Congressman Coffman.

   STATEMENT OF HON. MIKE COFFMAN, U.S. REPRESENTATIVE FROM 
                    COLORADO'S 6TH DISTRICT

    Mr. Coffman. Thank you, Mr. Chairman. Thank you so much for 
coming out to the State of Colorado, and your colleagues, our 
counterparts in the U.S. Senate. We deeply appreciate you being 
here.
    As a combat veteran and as a taxpayer, I could not be more 
offended by what has occurred by the leadership of the Veterans 
Administration on building this project, that our veterans in 
this region have earned the right to state-of-the-art health 
care that they are not receiving because of construction delays 
and out-of-control costs on this hospital.
    The core function of VA is the delivery of health care and 
benefits. They are clearly not a construction entity.
    Mr. Goldstein, you in your report, I will tell you what 
amazes me, that Senator Bennet, Congressman Perlmutter, and 
Senator Gardner and myself had repeated meetings with the VA 
after this report was issued in April 2013. I have been on the 
Veterans Committee since January 2013, and before I even got on 
the Veterans Committee, the House Veterans Committee of the 
Congress of the United States requested this study to be done 
by the GAO. It said that this hospital was hundreds of millions 
of dollars over budget and knew it was behind schedule in 2013. 
That is your analysis. Yet we had meeting after meeting with 
the VA where, quite frankly, we were lied to. We were lied to 
again and again and again.
    My question to you is that even before this report, the 
GAO, probably for the last three decades, had been looking at 
VA construction and had been sounding the alarm about problems 
in terms of cost overruns and schedule delays, and I wonder if 
you could comment on that.
    Mr. Goldstein. We have issued a number of reports over the 
years to get to that very issue of delays, cost increases, and 
problems in the management of the VA construction program. That 
is correct.
    Mr. Coffman. I believe in your report, and when I put 
forward legislation in 2013, passed in 2014 after this report 
came out, because one thing you referenced in this report, 
although you did not make it a specific recommendation because 
I think you said that was a positive question, was that the 
Army Corps of Engineers has built similar projects for the 
Department of Defense, and I think you also referenced--I am 
trying to remember the name of the Army Corps of Engineers 
counterpart for the U.S. Navy.
    Mr. Goldstein. The Naval Engineering Command.
    Mr. Coffman. Right, that both these organizations have 
built similar projects for the Department of Defense on 
schedule, on budget. In the four projects that you mentioned 
here that were ongoing at the time, the four major construction 
projects, again each hundreds of millions of dollars over 
budget and years behind schedule, I wonder if you could comment 
on that.
    Mr. Goldstein. They were, sir. They were over budget and 
had multiple delays for a number of reasons. The principal 
reason for all of them included incomplete designs, change 
order processing delays, construction and approval delays, cost 
of material increases, and risk-based pricing. Because of the 
processes and the management of VA, the subcontractors and 
contractors were bidding up and asking for prices because they 
knew there would be problems associated with the program. All 
of those factors led to the delays and to the cost increases 
generally in all those projects. Some were specific, of course, 
to Denver or Orlando and the like. Yet, those overall problems 
were in each one of the projects we looked at.
    Mr. Coffman. I firmly believe that the VA has to focus on 
its core mission, and its core mission is delivering health 
care benefits and delivering claims processing and other 
benefits to the men and women who have served this country in 
uniform, and I think we have got to get this hospital built. 
There is no question about that. But in that process, this cost 
has got to come out of VA's hide. In part, that is going to be 
bonus money.
    There is got to be an outside investigation. VA cannot be 
entrusted to do their own investigation.
    Third, they must be stripped of their management 
construction authority on major construction projects going 
forward.
    With that, Mr. Chairman, I yield back.
    Chairman Isakson. Thank you very much.
    While we switch to the second panel, let me thank Mr. 
Goldstein, Mr. Rylant, and Mr. Robinson for your sacrifice, 
your time, and your service to the country.
    As Sloan Gibson and Mr. Caldwell are making their way 
forward I want to ask Mr. Perlmutter to do me a favor.
    Arty Guerro, Vietnam decorated veteran, lost the use of 
your legs from Vietnam--is that correct?--48 years ago.
    Mr. Guerro. Forty-eight years ago. Yes, sir.
    Chairman Isakson. We are contemporaries, you and I. We are 
of the same vintage and the same age. I want you to know I had 
a coin struck when I became chairman of the Committee that has 
got an acronym on it, ``IDWIC.'' That stands for ``I Do What I 
Can.'' That is the way a guy named Second Lieutenant Noah 
Harris used to email me from the battlefront in Iraq when he 
would send me updates on how he was doing, right up until the 
day before he died, which was the last email I got.
    I want Congressman Perlmutter to present this medal to you, 
Arty, as a token of our appreciation, from the Senate Veterans' 
Affairs Committee, for all your work and sacrifice, and for 
representing all that veterans have done for the United States 
of America. [Applause.]
    Chairman Isakson. It does not get any better than that.
    Thank you very much, Arty.
                                ------                                

 Response to Posthearing Question Submitted by Hon. Richard Blumenthal 
to Mark Goldstein, Director, Physical Infrastructure Issues, Government 
                         Accountability Office
    Question 1.  GAO's written testimony mentions VA's use of a 
Construction Review Council to assume oversight and accountability 
roles relative to VA's real property programs. In the April 15, 2015 
House Committee on Veterans Affairs hearing on VA construction, Deputy 
Secretary Gibson testified that the Council had not met since he was 
sworn in, and he believed that it ``diffuses responsibility.'' Do other 
Agencies have bodies that play a role similar to the Construction 
Review Council, and are there best practices in this area?
    Response. We have not done work regarding whether other agencies 
have a council of high level officials, such as VA's Construction 
Review Council, that serves as the single point of oversight and 
performance accountability for the planning, budgeting, execution, and 
delivery of property capital-asset program. However, we have identified 
leading practices for performing these functions based on OMB and GAO 
guidance.\1\ For example, before choosing to purchase or construct a 
capital asset, agencies should carefully consider a wide range of 
alternatives. In addition, agencies should establish and follow a 
formal process for senior management to review and approve proposed 
capital assets. Further, after a construction project is implemented an 
evaluation team, composed of individuals not directly involved in a 
project should determine how accurately the project meets the 
objectives, expected benefits, and the strategic goals of the agency 
and indicate the extent to which the agency's decisionmaking processes 
are sustaining or improving the success rate of capital investments.
---------------------------------------------------------------------------
    \1\ Office of Management and Budget, Supplement to Circular No. A-
11: Capital Programming Guide (Washington, DC: July 2012). GAO, 
Executive Guide: Leading Practices in Capital Decision-Making, GAO/
AIMD-99-32 (Washington, DC: December 1998). GAO, Federal Courthouses: 
Recommended Construction Projects Should Be Evaluated under New Capital 
Planning Process, GAO-13-263 (Washington, DC: April 2013)

    Chairman Isakson. On our second panel we will hear first 
from the Hon. Sloan Gibson, Deputy Secretary of the U.S. 
Department of Veterans Affairs, and then from Lloyd C. 
Caldwell, the Director of Military Programs, U.S. Army Corps of 
Engineers.
    I believe, Mr. Gibson, you are accompanied by Stella 
Fiotes. Is that right? Is that the right pronunciation?
    Mr. Gibson. That is right. Yes, sir.
    Chairman Isakson. I have been messing up ``Perlmutter'' all 
day long, so I wanted to get that right.
    And Dennis Milsten.
    Deputy Secretary, the floor is yours for no more than 5 
minutes.

   STATEMENT OF HON. SLOAN D. GIBSON, DEPUTY SECRETARY, U.S. 
 DEPARTMENT OF VETERANS AFFAIRS; ACCOMPANIED BY STELLA FIOTES, 
   EXECUTIVE DIRECTOR, OFFICE OF CONSTRUCTION AND MANAGEMENT 
FACILITIES; AND DENNIS MILSTEN, DIRECTOR OF OPERATIONS, OFFICE 
           OF CONSTRUCTION AND MANAGEMENT FACILITIES

    Mr. Gibson. Yes, sir. The current situation is totally----
    Chairman Isakson. Make sure your mic is on.
    Mr. Gibson. There is no switch here. I am relying on 
somebody else to switch it on.
    Chairman Isakson. You are OK.
    Mr. Gibson. The current situation is totally unacceptable. 
The VA made mistakes on this project. I apologize again. This 
must not happen another time, not on my watch or in the longer-
term future at VA.
    Our priorities are to finish the project, make the best use 
of resources, and put in place sound construction management 
processes to ensure it never happens again.
    That means embracing lessons learned. It means taking 
meaningful corrective actions. Some of the improvements are 
already in place: requiring major medical construction projects 
to achieve at least 35 percent design prior to establishing 
cost estimates or schedules, or requesting funds; implementing 
a rigorous requirements control process; institutionalizing a 
project review board, similar to that used by the Corps of 
Engineers' district offices; conducting pre-construction 
reviews of major construction projects; a private construction 
management firm evaluates design and engineering factors; and 
integrating medical equipment planners into construction 
project teams from concept through activation.
    In addition to these measures already in place, the Corps 
of Engineers is conducting a broader examination of the VA's 
largest construction projects, and we expect that report next 
month.
    An independent third-party organization is also conducting 
a comprehensive assessment of VA's entire construction program 
as part of the Choice Act legislation and will report their 
findings to Congress by September of this year. We will use the 
findings of the Corps' report and the independent third-party 
assessment to further strengthen VA's construction management 
practices. In the future, VA believes the Corps should be 
designated as construction agent for our largest medical 
facility projects.
    The Denver project has a long history. Let me briefly cover 
two major decision points that I believe led us to where we are 
today.
    In 2009, we hired an architect-engineer joint venture to 
complete a design with an estimated cost of $583 million. VA's 
acquisition strategy for the project was to complete 100 
percent design and then solicit proposals to build. VA, in a 
misguided effort to get work under way, changed strategies to a 
contract mechanism known as integrated design and construct, 
the idea being to bring the contractor on board early to 
participate in the design.
    In August 2010, VA entered into contract with Kiewit-Turner 
to perform design constructability and cost reviews, with an 
option to award facility construction. KT maintained that the 
project could not be built for the established cost. Under 
pressure to move the project forward, VA and the contractor 
executed an option to construct the project in November 2011. 
This option committed VA to deliver a design that could be 
built for $583 million.
    These two watershed events, the selection of the IDC 
contract form and VA's commitment to deliver a design that 
could be built for less than $600 million, were both critically 
flawed. VA's legal interpretation of these two agreements, and 
our ensuing litigation strategy, also compounded these errors.
    In July 2013, KT filed a complaint with the Civilian Board 
of Contract Appeals, and in December VA was found in breach of 
the contract for failure to provide a design that met the 
contract price. I would be remiss in my testimony if I did not 
take particular note of the commitment that Kiewit-Turner has 
to this project and the quality of work that KT and their 
subcontractors have completed over the life of the project. I 
think the fact that Peter Davoren has--who are both sitting 
here today present at this hearing is an indication of their 
commitment to this project and their desire to see veterans 
being served at this facility.
    That brings us to where we are today. After analysis by the 
Corps of Engineers, we informed Congress that the total 
estimated cost of the facility will be $1.73 billion, which 
includes the Corps' estimate of $700 million to complete 
construction. The total would require an authorization increase 
of $930 million and additional funding of $830 million.
    After consulting with our partners, reviewing the status of 
the project, considering cost, risk, scope and scale, and time 
required, we believe the best option for veterans and for 
taxpayers is to contract with KT to complete the project, 
leveraging the 100 percent design, KT's knowledge of the 
project, presence on the site, and existing subcontractor 
relationships.
    Now we must work with this Committee and others to secure 
funding. We have proposed funding the cost by using a portion 
of the $5 billion provided for minor construction and non-
recurring maintenance in the Choice Act, and we look forward to 
discussing that proposal and other options with the Committee.
    We know that accountability is also central to ensuring 
that VA never repeats the mistakes that led to these delays and 
cost overruns. As stated earlier, I believe two critical 
decisions led to the current situation, decisions made in 2010 
and 2011. None of the people who were in positions of 
responsibility for the project during this critical time are 
still in these positions. In fact, only one still remains at 
VA.
    Our administrative investigation board is still under way, 
and I have also asked our IG to conduct a formal investigation 
of all aspects of the Denver project. I will continue to pursue 
accountability actions wherever evidence supports it.
    All that said, when completed, the Denver facility will be 
a tremendous resource for veterans and their family members in 
Eastern Colorado and throughout the Rocky Mountain area, an 
exceptional Level 1A facility.
    Thank you, Mr. Chairman. We look forward to answering your 
questions.
    [The prepared statement of Mr. Gibson follows:]
     Prepared Statement of Hon. Sloan D. Gibson, Deputy Secretary, 
                  U.S. Department of Veterans Affairs
    Good morning, Mr. Chairman and Members of the Committee. Thank you 
for the opportunity to update the Committee on the status of the 
construction of the replacement medical center in Denver. I am 
accompanied today by Ms. Stella Fiotes, Executive Director, and Mr. 
Dennis Milsten, Director of Operations, of the VA Office of 
Construction and Facilities Management.
    The Department's main priority regarding the Denver project is to 
complete the facility without further delay, and to do that while 
delivering the best possible value to taxpayers given the difficult 
circumstances. Our commitment to completing this project, which is 
intended to serve over 390,000 Colorado Veterans and their families, 
has never wavered, and current VA medical facilities and programs in 
the area continue to ensure that no Veterans or their families go 
unserved.
                               background
    I think it is important to review the events that brought us to 
where we are today. I would like to highlight some key events that 
directly shaped the current status of the project.
    The replacement of the existing Denver VA Medical Center began as 
an idea between the University of Colorado and VA to construct a shared 
facility. The project went through a protracted development period that 
included a concept to build a shared facility with the Department of 
Defense. VA requested design funds in fiscal year (FY) 2004, with an 
estimated project budget of $328.5 million. In 2004, then VA Secretary 
Principi set forth the requirement for a stand-alone VA facility on the 
Fitzsimmons campus. VA developed a plan for a 1.4 million square foot 
facility in 2006, then revised that plan to 945 thousand square feet, 
and subsequently requested appropriations for an $800 million project 
in 2010 with final funding being requested and received in 2012.
    VA retained the services of an architect engineer firm (AE) to 
complete a design with an Estimated Construction Cost at Award (ECCA) 
of $582 million. The original acquisition strategy for the project was 
to complete 100 percent design and then solicit construction proposals 
to build the project. This strategy was changed to use a different 
contract mechanism, known in the Industry as ``Early Contractor 
Involvement,'' to bring the contractor onboard early to participate in 
the design. This change in acquisition strategy, intended to expedite 
project delivery by overlapping early phases of construction with 
completion of the design, was a decisive moment in the life of the 
project. The timing and appropriateness of this specific delivery 
method underlie many of the ensuing issues with the management of the 
project. VA entered into a contract in August 2010 with Kiewit-Turner 
(KT) to perform design, constructability, and cost reviews. This 
contract also provided an option to award the construction of the 
facility to the contractor.
    At the time of the 2010 contract award, the design had progressed 
to a point that limited the opportunity for the contractor to influence 
the design and cost. The contractor provided pre-construction services 
and amid attempts at cost reconciliation with the designer, the 
contractor maintained that the project was over budget and could not be 
built for the established ECCA. The parties negotiated for a period of 
approximately six months to arrive at a construction contract price but 
differences remained. Feeling the need to finally get to construction 
award for the project, VA and the contractor executed an option on 
November 11, 2011, to build the replacement hospital, which became 
known as Supplemental Agreement 07 (SA-07). The total design was not 
100 percent complete at the time; it was at what was deemed an 
``enhanced design development or roughly 65% stage.'' SA-07 stated that 
VA would ensure that the design produced would meet the ECCA of $582.8 
million and that the contractor, KT, would build the project at the 
firm target price of $604 million, which included pre-construction 
services and additional items. This was the next and probably most 
critical point in the project's evolution. VA's promise to ensure that 
the design produced met the ECCA became the centerpiece of diverging 
interpretation and conflicts between VA and the contractor. Course 
correction opportunities were missed because of the fundamentally 
different interpretation of SA-07, poor project and contract 
management, and the increasingly strained relationships among the 
parties.
    KT filed a complaint with the Civilian Board of Contract Appeals 
(CBCA) in July 2013 that further cemented the differing perspectives on 
the interpretation of the contract and ultimately the cost of the 
project. Despite the less-than-optimal business environment during the 
year-and-a-half of litigation, construction quality and progress were 
maintained. In December 2014, VA was found in breach of contract for 
failure to provide a design that met the ECCA, and KT began to 
demobilize from the project site. VA entered into immediate 
negotiations with KT to stop the demobilization, recognizing the 
hospital was approximately 50 percent complete. Subsequently, VA 
entered into an interim agreement with KT to continue the project, and 
with the United States Army Corps of Engineers (USACE) to assess the 
project, and to manage all the pre-award activity related to the 
follow-on contract. VA intends to enter into a separate agreement with 
USACE to execute a new construction contract and to complete the 
facility once we have obtained the necessary authorization and funding.
              options and costs for completion of project
    After the decision by the CBCA, VA identified two primary courses 
of action. The first was to allow KT to continue demobilizing and have 
VA assume maintenance of the site, update the construction contract 
documents, and re-compete the contract for the remaining work. The 
second option was to re-establish a contractual relationship with KT 
for continued construction of the medical center. The option to re-
compete the project represented a potential 18- to 22-month delay, 
involving closeout of the existing contract and development and award 
of a new contract to finish the job. While this work was ongoing, VA 
would also need to engage several contractors to maintain the site and 
preserve the work accomplished to date. In addition, VA would have to 
recognize the bidding climate for this project would not be 
advantageous, and a premium would be applied by subcontractors to cover 
perceived risk. These factors would have served to increase both the 
length of time to complete the project and its ultimate cost.
    The second option of retaining KT leveraged their current knowledge 
of the project, presence on the site, and existing relationships with 
subcontractors. It reduced delays that could have impacted construction 
warranties and provided the best option for protecting the existing 
construction. Finally, resuming work with KT put over 600 workers back 
on the job, and also best protected the significant investment already 
made in this project. In the days immediately following the 
demobilization, this option represented the clearest path to achieving 
the two main goals stated above. For this reason, it is the path that 
VA chose.
    On March 17, 2015, VA notified Congress that the total estimated 
cost for the Denver Replacement Medical Center project would be $1.73 
billion. This is an authorization increase of $930 million to complete 
the project and requires additional funding of $830 million. The new 
authorization level reflects input from USACE on the required cost to 
complete the project. USACE has had access to all design documents and 
VA staff relative to the Denver project. The USACE team included 
subject matter experts in cost contracting, acquisition, construction 
management, design management, and cost engineering. The team also 
looked at the cost to administer the construction. USACE was provided 
access to all estimates of construction, cost paid to-date, and 
modifications executed. USACE also examined the original contract as 
well as the interim contract to assess cost and completion progress.
    USACE used all this information to form their assessment of the 
cost to complete the effort. Their estimate included a contingency and 
cost to manage the construction. USACE estimates a need for an 
additional $700 million following the close out of the original and 
interim contracts. USACE has established a June 2015 target to award a 
new contract for the completion effort.
    VA added the cost necessary to continue the interim contract 
through June 2015, additional funds for closing out the original 
contract and funds for completing the Post Traumatic Stress Disorder 
residential treatment facility. This totaled $130 million in addition 
to USACE's construction completion estimate. The money currently on the 
project of $899.8 million, plus the $700 million and the $130 million, 
drive the $1.73 billion estimate for the project.
    Now, we must work with this Committee and others to secure funding. 
We have proposed funding the increased cost by requesting authority to 
use funds provided to VA in The Veterans Access, Choice, and 
Accountability Act.
    The Act provided $5 billion in mandatory funding to increase health 
care staffing and improve physical infrastructure. We propose adjusting 
that language to enable VA to redirect a portion of this funding toward 
the remaining requirements to complete the Denver project. We will 
forward to the Committee an updated spend plan for the $5 billion that 
shows how this proposed change would impact the allocations for other 
VA programs. We believe this is the best approach among the difficult 
choices before us.
    This hospital complex is an important part of VA infrastructure, 
and completing it will improve access to care for over 390,000 Colorado 
veterans. The development of this new, state-of-the-art medical center 
will enhance Veteran health care capabilities in the Eastern Rockies by 
ensuring every patient receives the fullest complement of clinical 
services. The expansion of Mental Health services will meet a projected 
workload increase of 16% over the next 20 years support VA's targeted 
goal of improving Veteran wellness and economic security. Clinical 
education will also be significantly enhanced by increasing space to 
match clinical need and patient demand.
                             accountability
    VA established an Administrative Investigation Board to look at the 
actions and processes that resulted in the current situation and the 
employees responsible for those actions and decisions. At this 
juncture, while the investigation is ongoing, it is premature for VA to 
identify who may be subject to appropriate disciplinary action. VA 
intends to hold any individuals found to have acted negligently 
accountable for their actions. As previously discussed during the 
hearing in January 2015, USACE is also conducting a broader, detailed 
examination of VA's major construction program to identify gaps and 
improve management processes, structures, and controls in project 
oversight and delivery. We expect USACE to complete their review and 
report their findings in May 2015. In the interim, we changed the 
reporting structure within the Department so that the Office of 
Construction and Facilities Management reports directly to me to ensure 
continued visibility and accountability in real time.
    In addition to the review of the four large hospital projects by 
USACE, an independent third-party organization is conducting a 
comprehensive assessment of the entire VA construction program as part 
of the Choice Act legislation and will report their findings to 
Congress by September 2015.
                     the future of va construction
    Over the past two years, VA has significantly changed the way it 
conducts business, but more work remains to be done. Unfortunately, 
many of these changes were too late to affect the Denver project.
    To help ensure that previous challenges are not repeated and to 
lead improvements in the management and execution of our capital asset 
program as we move forward, VA will continue to adopt best-management 
practices and controls including:

     Incorporating integrated master planning is essential to 
ensure that the planned acquisition closes the identified gaps in 
service and corrects facility deficiencies.
     Requiring major medical construction projects must achieve 
at least 35-percent design prior to cost and schedule information being 
published and construction funds requested.
     Implementing a deliberate requirements control process, 
where major acquisition milestones are identified to review scope and 
cost changes based on the approved budget and scope. Any significant 
changes in project scope or cost need to be approved by the Secretary 
prior to submission to Congress.
     Institutionalizing a Project Review Board (PRB). VA worked 
with USACE to establish a PRB for VA that is similar to the structure 
at the USACE District Offices. The PRB regularly provides management 
with metrics and insight to indicate if/when a project requires 
executive input or guidance.
     Using a Project Management Plan to outline a plan for 
accomplishing the acquisition from planning to activation to ensure 
clear communication throughout the project.
     Establishing of VA Activation Office to ensure the 
integration of the facility activation into the construction process 
for timely facility openings.
     Conducting pre-construction reviews--Major construction 
projects must undergo a ``constructability'' review by a private 
construction management firm to evaluate design and engineering factors 
that facilitate ease of construction and ensure project value.
     Integrating Medical Equipment Planners into the 
construction project teams--Each major construction project will employ 
medical equipment planners on the project team from concept design 
through activation.

    These improvements are being applied to our ongoing and upcoming 
major construction projects. Depending on the stage of development, 
some projects like the Denver Replacement Medical Center did not 
benefit from many of these improvements.
    In the past five years, VA has delivered 75 major construction 
projects valued at over $3 billion that include the new medical center 
complex in Las Vegas; cemeteries; polytrauma rehabilitation centers; 
spinal cord injury centers; a blind rehabilitation center; and 
community living centers. The New Orleans replacement facility is 
currently on schedule, and is anticipated to be completed in the fall 
of 2016. This is not to diminish our serious concerns over the mistakes 
that led to the current situation on the Denver project, but only to 
emphasize that we have successfully managed numerous projects through 
our major construction program. VA takes full responsibility for the 
situation in Denver, and we will continue to review our major 
construction program and the details of this project to improve our 
performance. We must ensure these mistakes never happen again. Not only 
will we rigorously apply the best practices above and those included in 
the Corps' report, we look forward to receiving the independent study 
directed by The Choice Act. We will work with the Independent 
Commission established by Congress under the Choice act to provide a 
comprehensive proposal for the future of VA's construction program.
    In closing, each day, VA is moving toward its goal of improving and 
streamlining our processes to increase access to our Veterans and their 
families. I am personally committed to doing what is right for Colorado 
veterans, and completing the Denver project without further delay and 
to do that while delivering the best possible value to taxpayers given 
the difficult circumstances.

    Mr. Chairman, this concludes my statement. Thank you for the 
opportunity to testify before the Committee today. My colleagues and I 
would be pleased to respond to questions from you and Members of the 
Committee.

    Chairman Isakson. Thank you, Deputy Secretary Gibson.
    Mr. Caldwell, am I correct that you all are there in 
support; you are not to testify?
    Mr. Milsten. Yes, sir. Correct.
    Chairman Isakson. OK.
    Mr. Caldwell, welcome.

  STATEMENT OF LLOYD C. CALDWELL, P.E., DIRECTOR OF MILITARY 
PROGRAMS, U.S. ARMY CORPS OF ENGINEERS, U.S. DEPARTMENT OF THE 
                              ARMY

    Mr. Caldwell. Thank you, Chairman Isakson.
    Chairman Isakson. I know you are a good man because you 
married a Georgia girl. [Laughter.]
    Mr. Caldwell. Yes, sir, and she keeps me straight, that is 
for sure. Thank you.
    Thank you, Chairman Isakson, Senator Blumenthal, Members of 
the Committee and congressmen. We appreciate the opportunity to 
appear before you on behalf of LTG Thomas Bostick, the Chief of 
Engineers.
    My job with the Corps of Engineers is the application of 
our engineering and construction capability in support of 
defense agencies and other agencies that we may support.
    The Corps recognizes the importance of the service of the 
members of the Armed Forces and the service of our veterans in 
sustaining the strength of our Nation. The Corps has 
significant construction management capabilities and experience 
in delivering medical facilities, primarily for the Department 
of Defense, but also with other agencies.
    Today I will address the actions we are taking in 
partnership with the Department of Veterans Affairs to complete 
the construction of the Denver hospital and otherwise assist 
them with their construction program.
    The Department of Defense construction program utilizes 
designated construction agents, of which the Corps of Engineers 
is one. Earlier someone mentioned NAFEC, the Naval Facilities 
Engineering Command, which is also one. These agencies procure 
and execute the design and construction of projects to deliver 
the Department of Defense infrastructure requirements, as 
authorized by law.
    Interagency collaboration is an important element of the 
Corps' work, and the Corps provides interagency support to non-
defense agencies as well as part of our service to the Nation. 
The Economy Act provides the necessary authority for the Corps 
to assist the VA with any construction requirements, from minor 
to major construction, to include completion of the Denver 
hospital.
    There are currently three lines of effort associated with 
the Corps' support to the VA's major construction program, 
which includes completing the Denver hospital project as the 
construction agent. We are also undertaking a review to 
identify lessons learned from the Denver hospital project and 
three other major projects, the Las Vegas, the Orlando, and the 
New Orleans projects. Finally, we are engaging with the VA 
leadership in discussion regarding the application of best 
practices and other application and execution of their program.
    In December 2014, the VA and the Corps entered into an 
Economy Act agreement to allow the Corps to assist the Denver 
project. Beginning in January, we had a number of technical 
experts visit the site and assess the completed work and the 
design documents. We later modified that agreement to provide 
funding and authority to prepare for the award of a new 
contract to complete the construction. Currently we are working 
with the VA on a new agreement that would allow the Corps to 
actually award a contract and to manage the contract when that 
action is authorized by Congress.
    Our teams of professionals have made progress to formulate 
a new construction contract. We have identified the preferred 
course of acquisition. In February, we issued a Notice of 
Intent to industry of our intent to negotiate and award a sole-
source contract to Kiewit-Turner. That gave industry the 
opportunity to comment on our plan of action. We have recently 
achieved approval per the Federal acquisition regulation from 
appropriate Army acquisition authorities to proceed in this 
manner, and we began discussions just this week with the senior 
leadership of Kiewit-Turner to prepare for the negotiations of 
that new contract.
    As we work toward a new contract award, we will continue to 
assess the developments on this project and the detailed 
requirements, taking into account the fact that the 
construction is continuing under an interim separate VA 
contract with Kiewit-Turner. The Corps provided a preliminary 
estimate for completing construction at Denver, which was one 
component of the increased authorization requirements reported 
to Congress by the VA. The VA included the Corps' estimate, 
along with other VA costs, for the project. Meanwhile, we are 
developing an independent estimate that will be suitable for 
our negotiation of the new contract.
    As the actions for the new contract are proceeding, the 
Corps is also advising the VA on the management of the interim 
contract with Kiewit-Turner. The interim contract permits 
continued progress on the project while the Corps prepares to 
assume construction agent responsibilities. Although the Corps 
will assume a lead role in the construction of the Denver 
hospital, the VA remains the project proponent and is still 
responsible for project requirements, for resourcing, and for 
facility transition to full operation.
    In partnership with the VA, and in partnership with Kiewit-
Turner, and by using the Corps of Engineers' project delivery 
process, we are confident that the Corps can complete the 
construction of the Denver hospital in a most effective way.
    Concerning the Corps' review of the four major medical 
projects--Denver, New Orleans, Las Vegas, and Orlando--the 
purpose of that review is to assess the management processes 
which were then used by the VA and which they may then use to 
assess their organizational structure, processes, and controls. 
The scope of our effort is an analysis of the current 
techniques and procedures used by the VA for these projects, 
and we will compare those with how the Corps of Engineers 
conducts its business with the Department of Defense process 
for executing major medical infrastructure projects. That 
review is under way, and the objective is to provide a report 
to the VA in May.
    We have other projects not related to the Denver hospital 
that we continue to execute for the VA. That association 
predated the existing challenges. We are committed to working 
with the VA as construction agent to complete this project, as 
well as future projects, as may be appropriate.
    Mr. Chairman, that concludes my statement. I will be glad 
to answer questions that you may have.
    [The prepared statement of Mr. Caldwell follows:]
   Prepared Statement of Lloyd C. Caldwell, P.E., U.S. Army Corps of 
                 Engineers, U.S. Department of the Army
    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to appear before you on behalf of Lieutenant General Thomas 
Bostick, the Chief of Engineers. I provide leadership for execution of 
the U.S. Army Corps of Engineers (Corps) engineering and construction 
programs in support of the Department of Defense (DOD) and other 
agencies of the Federal Government.
    The Corps fully recognizes the importance of the service of members 
of the Armed Forces and the service of our veterans in sustaining the 
strength of our Nation. We understand the vital link between the goals 
of their service and the technical capabilities we provide, from 
consultation to delivery of infrastructure. The Corps has significant 
construction management capabilities and experience delivering medical 
facilities for our servicemembers and veterans.
    DOD's construction program utilizes designated Construction Agents, 
of which the Corps is one, that procure and execute design and 
construction of projects to deliver the Department's infrastructure 
requirements authorized by law. The Corps is also known for the Civil 
Works projects it executes for the Nation, and the Corps' capabilities 
are perhaps uniquely developed to deliver both defense and non-defense 
infrastructure. Interagency collaboration is an important element of 
the Corps' work, and the Corps provides interagency support as a part 
of its service to the Nation. The Economy Act (31 U.S.C. 1535) provides 
the necessary authority for the Corps to assist the VA with any 
construction requirements, from minor to major construction.
    Today, we have been asked by the Committee to testify on the 
subject of the Denver Replacement Medical Center in Aurora, Colorado 
(Denver Hospital), including the Corps' review of the original and 
interim contracts and the completion estimate. We have also been asked 
to address the Corps' review of the Department of Veterans Affairs (VA) 
major construction program and recommendations to improve project 
oversight and delivery.
    There are currently three lines of effort associated with the 
Corps' support to the VA's major construction program. One is the 
completion of the Denver Hospital project as the construction agent. 
Another is a review of management processes from the Denver Hospital 
and three other major projects, which may be used by VA to assess their 
organizational structure, processes and controls. The third is 
discussion with VA leadership regarding best practices and how we may 
help support major project execution in their future program.
    In December 2014, the VA and the Corps entered into an Economy Act 
agreement to allow the Corps to assess the Denver Hospital construction 
project. Subsequent modifications to this agreement have provided 
funding and the authority to prepare for the award of a new Corps 
contract to complete the construction. We are currently working with VA 
to develop a new agreement that would allow the Corps to award the new 
contract and transition the construction agent responsibility to the 
Corps to manage the new contract. Beginning in January, we had a number 
of technical experts on site to assess the completed work and contract 
documents. Subsequently those and other teams of professionals, 
including from the Northwestern Division, Omaha District, Huntsville 
Engineering and Support Center, and Corps Headquarters are undertaking 
the steps that will lead to award of the new construction contract as 
well as to managing the contract through to completion. We have 
identified a preferred course for acquisition, and in February we 
issued a Notice of Intent to negotiate and award a sole source contract 
to Kiewit-Turner, and we have requested approval for the acquisition 
strategy. As we work toward a new contract award, we continue to assess 
the detailed requirements of this project, taking into account the fact 
that construction is continuing under a separate VA contract with 
Kiewit-Turner.
    The Corps provided a preliminary estimate for completing 
construction at Denver, which was one component of the increased 
authorization requirements reported to Congress by the VA. The VA 
combined the Corps' estimate with other VA costs for completing the 
project. The preliminary estimate was appropriate to inform the 
increased authorization requirements. Meanwhile, we are developing an 
independent estimate suitable for negotiation of the new contract.
    As the actions for a new Corps contract are proceeding, the Corps 
is also advising the VA on the management of the VA's interim 
construction contract with Kiewit-Turner. This approach continues 
progress on the project while the Corps prepares to assume construction 
agent responsibilities.
    While the Corps will assume the lead role in the construction of 
the Denver Hospital, the VA, as the project proponent, will remain 
responsible for project requirements, resourcing and facility 
transition to full operations. By using our project delivery process, 
we are confident that the Corps, acting as the Construction Agent, can 
complete construction of the Denver Hospital for VA and our veterans.
    Concerning the Corps' review of VA's four major medical projects, 
the purpose is to review management processes, which may be used by VA 
to assess their organizational structure, processes and controls. The 
scope of the Corps effort is an analysis of current VA techniques and 
procedures utilized in executing construction of their major hospitals 
compared to procedures used by the Corps in executing major medical 
infrastructure projects. The construction projects under review include 
the medical facilities at New Orleans, Las Vegas, and Orlando, in 
addition to the Denver Hospital. The review is underway with the 
objective to provide a report to VA in May. There are no findings and 
conclusions currently to report.
    In regard to the third line of effort, we have assisted the VA to 
establish a project review process for major projects.
    In other efforts, which predate our involvement with the Denver 
Hospital project, we provide assistance to VA to execute multiple minor 
construction and non-recurring maintenance projects for the Veterans 
Integrated Service Networks and the VA's National Cemetery 
Administration. We are committed to work with VA to complete the Denver 
Hospital, to continue our partnership and to collaborate on future 
major construction projects.

    Mr. Chairman, this concludes my statement. Thank you for allowing 
me to be here today to discuss the Corps' capabilities and our work to 
assist VA. I would be happy to answer any questions you or other 
Members may have.

    Chairman Isakson. Thank you very much, Mr. Caldwell.
    Secretary Gibson, you made the comment that all those that 
had a responsibility for the problems at the Denver VA are no 
longer working on that project. Is that correct?
    Mr. Gibson. That is correct. Those directly responsible, 
yes.
    Chairman Isakson. Is it true that the principal person 
responsible earlier retired with a full pension? Correct?
    Mr. Gibson. In fact, I believe most of the people that were 
involved in the project retired.
    Chairman Isakson. They either retired or they were 
transferred within the agency. Is that correct?
    Mr. Gibson. There is one individual that still works at the 
agency. He was the project executive at the time. He was moved 
from this project, assumed a position without supervisory 
responsibilities at a lower grade.
    Chairman Isakson. My point is that Secretary McDonald told 
us he had made 700 personnel moves in his first year as 
Secretary. Eleven of those were terminations. All the rest of 
them, 689 of them, were transfers, early retirements or things 
of that nature.
    The reason we are always given for accountability being 
difficult is that you cannot really fire anybody in the Federal 
Government. Well, you can, for cause. It would seem to me, in 
places where you are talking about hundreds of millions or 
billions of dollars, there are causes there that contributed to 
the losses of the taxpayer, and there ought to be 
accountability more than somebody taking a pension and retiring 
or transferring within the agency. That is just my statement. 
Since you are not answering that statement, I am going to put a 
question in.
    Mr. Gibson. I agree with that sentiment precisely.
    Chairman Isakson. We will probably make it one out of two 
because here is my next observation. Senator Blumenthal, 
Congressman Coffman----
    Senator Bennet. Can I just say, nothing else in Washington 
runs as well as this Committee runs under this chairman. So, we 
are grateful for the example.
    Chairman Isakson. Congressman Coffman made reference to 
some consequences for people in terms of how we pay for this 
overrun at the Denver VA. The ranking member has made a number 
of comments about it--let me just give you an observation.
    I am sitting in the Committee and the VA comes to me and 
says we have got a $930 million overrun on top of a $600 
million overrun, we need to find some way to pay for it, we are 
going to take it out of Veterans Choice, that is our solution.
    I am going to ask you two questions. How much in the 
administrative budget of the VA did you first look for to find 
that money? Number 1. Number 2, if you are going to take it out 
of Veterans Choice, who are you going to penalize and how are 
you going to fix them when their problem comes up?
    I will give you one good example. If you go through the 
Fiscal Year 2015 budget for the administrative offices of the 
VA, there is an increase of 73 FTE and $66 million in 1 year 
for personnel. That is some money that should be available for 
a contribution toward the $930 million. That is number 1.
    Number 2. If, in fact, the Corps of Engineers is going to 
take over construction and this thing is going to be out of 
your hair, I do not know why you need $53,874,000 for 
acquisition, logistics, and construction. You might need some 
of it, but you are certainly not going to need all of it. That 
money ought to be going to the overruns, and that is where you 
need to find as much of the money as you can, not in penalizing 
veterans from the program Congress passed to try to improve 
their access to VA health care. That was a statement, not a 
question. However, if you want to respond, you can.
    Mr. Gibson. I would like to respond, Mr. Chairman. We will 
take a look at those specific areas that you have raised. I 
would tell you, if there was ever a time when VA had the 
ability to go reach inside its organization and scrape out 
additional resources for any particular purpose, this is not 
the time.
    We have been working for almost a year now to do everything 
possible to accelerate care for veterans. We have hired 8,000 
additional staff in VHA over the last 12 months. We have got 
emergency leasing activity going on at locations around the 
country in order to be able to provide additional access to 
care. We had nothing in our 2015 budget for the new Hepatitis C 
protocol, and we were able to go in and find $700 million that 
we pulled over in there which, frankly, we are about to run out 
of. So, we are trying to figure out how to be able to bridge 
the period until the 2016 budget to continue to provide that 
Hepatitis C care.
    Last, while we have not done a good job of executing the 
Choice Program, per se, we have seen an explosion in referrals 
of veterans to VA care in the community, as opposed to allowing 
them to continue to wait.
    All of these things done to try to accelerate access to 
care. Historically, what VA did, my view is we managed to a 
budget, and what we are shifting to is managing to veterans' 
requirements, managing to the needs of the people that we are 
serving, and that is what is happening right now, and that is 
why we do not find ourselves in a situation where we have got 
buckets of money sitting in different places that we can go 
scrape together to come up with a meaningful impact on that 
$830 million.
    Chairman Isakson. I apologize to the Committee, but I want 
to finish the thought.
    Mr. Gibson. Yes, sir.
    Chairman Isakson. We have got maybe 2 months to come up 
with the money or else there is going to be a slowdown in 
construction further or a stop altogether at the site.
    Mr. Gibson. Yes, sir. I think we have less than that.
    Chairman Isakson. To me, that is unacceptable.
    Mr. Gibson. It is unacceptable to us.
    Chairman Isakson. It is equally unacceptable if there is 
that much of an emergency and half of the Senate committee came 
all the way across the country to hold this hearing. When we go 
back to Washington, having heard what you heard today and what 
I heard today, and knowing what your plans are in terms of 
turning things over to the Corps of Engineers, and we see a 
request that comes in for that money that has some source of 
finding that money within the VA's budget, if you can find $700 
million for Hepatitis C on your own volition--and I am not 
penalizing, that is a good thing to do--there is probably some 
more money somewhere else.
    Every contribution that comes from an existing spent dollar 
rather than a new dollar we have to borrow from China is really 
important to me.
    Excuse me, Senator Blumenthal, and I apologize for taking 
more time than I should have.
    Senator Blumenthal. Thank you, Mr. Chairman. Again, I want 
to thank all of my colleagues, particularly the Colorado 
delegation, for focusing not only today, not only this year, 
but over a long period of time on these issues, and we are here 
because of your advocacy.
    Second, I want to thank Mr. Guerro for being here today and 
for his long-time advocacy, because I think you personify the 
kind of fight that many of our veterans sustain day in and day 
out, year in and year out, so that their brothers and sisters 
can have the kind of care they deserve.
    In that spirit, I would just like to ask all the veterans 
who are here today to please raise your hand so that we can 
acknowledge you and thank you for your service. Thank you. 
[Applause.]
    Senator Blumenthal. I have got a couple of quick questions 
for you, Mr. Gibson. I would like you to commit to me that you 
will undertake a complete overhaul of construction practices 
and systems in the VA, including considering, in effect, 
delegating that authority to the Corps of Engineers or some 
other similar organization. I have not reached any conclusions 
about whether it should be done, but I want a commitment that 
you will undertake reform of the system.
    Mr. Gibson. You have that commitment. The good news is that 
a substantial portion of it has already been completed.
    Senator Blumenthal. Well, I do not want to hear about what 
has been completed. I want to hear about what is going to 
happen, because----
    Mr. Gibson. Part of it is what will continue to happen.
    Senator Blumenthal. Great.
    Mr. Gibson. Understood and----
    Senator Blumenthal. We are here to make sure things go 
right in the future, but also for the sake of transparency, so 
that people understand where the fault lies and what is going 
to be done in the future. In that spirit I would ask that you 
make available to the Committee and to the public the Jones/
Lang/LaSalle report that was done examining alternatives. That 
has not yet been made public.
    Mr. Gibson. We will do that. We just received the report 
the day I gave it to you. That was the day I received it, so 
the day before. We will make that available.
    Senator Blumenthal. All of the cost estimates of specific 
components going into the overruns that have occurred so far as 
the Corps of Engineers is analyzing them, and all of the 
components, the specific numbers, how they are attributed to 
the additional costs that will be incurred. We spoke about this 
earlier today, and I think that the Corps of Engineers has 
committed to do it. To the extent they are under your control, 
I would like you to make available those documents.
    Mr. Gibson. To the extent that those amounts can be 
determined, we will do that.
    Senator Blumenthal. Well, they need to be determined. 
Otherwise, it is more of the same. ``Well, we will make it up 
as we go along.'' If you are building a house, any of us in 
this room, you do not go into it and say, well, we will figure 
out the cost after we are three-quarters of the way through. We 
need to know with some certainty and finality, when we make a 
decision about whether to give you this money, whether it is 
going to be what is necessary. So, I would like a commitment 
that you make those numbers available as soon as possible.
    Mr. Gibson. We will make the numbers necessary, as much as 
we can, of the $830 million. The portion that I was referring 
to was the ability to somehow disaggregate the components of 
the added cost to the facility. As you heard Peter Davoren 
mention earlier today, the essence of the issue was VA's 
failure to acknowledge what it was going to cost to build in 
the first place.
    Senator Blumenthal. I would like your commitment also that 
you will make available all the relevant documents relating to 
whistleblowers, when their complaints were filed, what the 
responses were, and what you are going to do, in effect, to 
correct any wrong that has been done unjustly and unfairly.
    Mr. Gibson. I believe you are referring to the 2012 
whistleblower related to this particular project. Is that 
correct?
    Senator Blumenthal. Correct.
    Mr. Gibson. We will do that. There is a pending action 
before the Merit System Protection Board, but we will do that 
in a manner that is appropriate and protects that 
confidentiality.
    Senator Blumenthal. I would like your commitment that you 
will support an outside investigation. I know that there is an 
AIB, an IG. For those who do not know, an Administrative 
Investigation Board, the Inspector General. By the way, the 
Inspector General has involved the FBI, but the Inspector 
General is still the one responsible for investigating the 
Phoenix delays, and we have yet to receive a report from the 
IG, not yet done. I have complained about the amount of time 
that it has taken, and my questions--your predecessor I asked 
about when that report would be done, and we still have no 
guarantee that it will be done.
    I am asking for your commitment that we will see a request 
from you for an outside investigation, likely the Department of 
Justice.
    Mr. Gibson. You asked that I would support it. I agree that 
I will support the request.
    Senator Blumenthal. Thank you.
    Finally, I would like a commitment that you will respond to 
other requests for documents that we will be submitting. I do 
not want to go through the list now because I do not want to 
take the time of my colleagues to cull them out. I think that 
this document, for example, this document is a list of the 
projects that would be deferred or delayed indefinitely from 
around the country if the $1 billion is taken from the Choice 
Program. I do not want to speak for any of my colleagues, and 
they are all affected, the majority of my colleagues in the 
U.S. Senate, by what will happen if the $1 billion is taken 
from the Choice Program, but I know in West Haven, Connecticut, 
that this project on primary care facility upgrades has been 
delayed for years and years and years, and I do not want to see 
it delayed again. I do not want to see any veterans across the 
country have to sacrifice because of the incompetence, or 
worse, on the part of past VA administrations.
    I agree with the Chairman that we need to find an 
alternative path. Thank you.
    Chairman Isakson. Senator Rounds.

 STATEMENT OF HON. MIKE ROUNDS, U.S. SENATOR FROM SOUTH DAKOTA

    Senator Rounds. Thank you, Mr. Chairman. My comments and my 
questions are going to be very brief.
    To Mr. Gibson, I remember the first time when you and I met 
was the same time that Secretary McDonald was in, and the 
Chairman made it very clear that we as a committee wanted you 
to be successful. We wanted you and the Veterans Administration 
to succeed, and I thought this is coming from a Republican 
chairman to a member of the Administration saying we want you 
to be successful, and I thought that is what this is all about.
    I heard the Chairman say here today one of the most 
important things that we can do here is to find the resources 
to build this project, to get this project done. I support him 
in that. We will find a way. The project is not going to hang 
out there and it will get done.
    In looking at it, I thought about this. You have not been 
with the VA that long. You came in at a time literally when the 
pond was already full of alligators, and you and the new 
Secretary agreed to walk into the middle of it to help take 
care of things and make things right again, and I admire you 
for that, and I thank you for that. We want you to be 
successful, and we want you to drain the pond. This pond has 
got a lot of alligators in it. Construction projects that are 
out there right now are one more alligator you do not need.
    I am just curious. There are some folks that do this all 
the time, and I know that part of the process here is you would 
like to see--and we talked about it at lunch today, and I asked 
you then, why do you want to take on the challenge of 
continuing to try to build projects when the expertise could be 
found and laid out on a regular basis by people that deal with 
these things all the time and do them without the kinds of 
problems that I believe you have run into here, that you found 
when you walked in.
    What does the VA bring to the table that should convince us 
that you should be the responsible party for construction 
projects in the future?
    Mr. Gibson. First of all, I will reiterate my commitment 
that we want to work with the Corps, have the Corps work as our 
construction agent on our largest, most complex projects.
    As I mentioned in our earlier discussion, we look at the 15 
or so projects that are categorized as active as we look over 
the next 3 years. Five of those are already substantially under 
way. Of the remaining ten, we are prepared to send seven of 
those, some of which are actually under $250 million, to work 
with the Corps because we feel like that is what makes the most 
sense in those cases. That represents 86 percent of the dollars 
of that prospective construction.
    In the meantime, we have got somewhere on the order of 50 
major construction projects that we are in the middle of, all 
over the country. We have got to see those construction 
projects through to conclusion.
    As you look at VA's vast infrastructure that includes--I 
cannot even tell you how many buildings, with an average age of 
50 years or so, what you find are not only requirements to 
complete non-recurring maintenance but minor construction 
projects that enhance those facilities. It is our knowledge of 
those requirements----
    Senator Rounds. I do not disagree that you should, for 
maintenance and so forth. I get that. I understand your desire 
to try to be a part of finishing. But long term, and that is 
what we are talking about--we are not going to fix all the 
problems in a matter of 18 months. But long term, what does the 
VA bring to the table?
    The reason I ask is because one of the major issues here, 
even the sizes of the rooms had to be upgraded because you did 
not know how big the equipment was that was going to be put in 
it to begin with. It seems to me that if you are one of the 
providers of the services to buy this equipment, you ought to 
at least be able to bring that kind of expertise up front, and 
it was not included.
    Mr. Gibson. I am not following the last point, sir.
    Senator Rounds. The medical equipment that was required 
within the rooms themselves, as I look back at the reports and 
some of the problems that were found, I am not sure which one 
of the panelists provided that information, but you had to 
expand the size of the rooms just to fit the medical equipment 
in.
    Mr. Gibson. We agree with that point completely, and that 
is one of the reasons why we now include medical equipment 
planners at the very beginning of our process. We did not do 
that in the past.
    Senator Rounds. Thank you, sir.
    Mr. Gibson. Yes, sir.
    Chairman Isakson. Senator Bennet.
    Senator Bennet. Thank you, Mr. Chairman.
    I listened carefully to my colleague from Connecticut's 
points, and observations from the Chairman earlier and we may 
not have complete agreement on how to find this money to pay 
for this project and to finish this project, but I do think we 
have complete agreement that we need to find the money and that 
we will finish the project. I am very, very grateful because 
you do not need to do that. Thank you.
    Mr. Secretary, it will take me a minute to get through my 
question, and I am optimistic we are going to get it done. What 
is so depressing about today for me is how predictable it is 
that we were going to end up here in this kind of conversation, 
and I think I speak on behalf of all of my colleagues when I 
say that.
    You said that the fundamental fatal error, the first error 
was picking a number that was too low for this project. The 
very first time I went to the site and stood there on the same 
floor where we were meeting today, and nothing was yet even 
constructed, there were designs, there was a picture I saw of 
what is now called the concourse and what was then called the 
spine. The person who worked for me who was actually with me 
that day and with whom I would worked in the city, in the 
County of Denver on various projects, took one look at that and 
said there is no way they are going to be able to build this 
project for the estimated cost--not an expert in construction, 
but an expert in common sense.
    In 2014, in May I think of 2014, in desperation for not 
having been heard, I wrote a letter. I wrote it myself, just as 
the veterans did here, to the preceding Secretary of the VA 
pointing out all of the things I would been hearing from our 
veterans and from the contractor, and with my colleagues who 
are up here today. Among other things, I observed that the VA's 
position at that time, in 2014--that is before you got there, 
and I want everybody in this room to know that--was that 46 
percent of the building had been built. That was the VA's 
position. The contractor's position was that 25 percent had 
been built. The VA's position of 46 percent was based on the 
fact that 46 percent of the money had been spent. There is not 
a person here, whatever project they were working on, who would 
say it is 46 percent built because we spent 46 percent of the 
money. It is laughable.
    As I said in my letter to Secretary Shinseki, any passerby 
would know that it is not 46 percent built. Today we learned 
that it is actually 50 percent complete. In the following year, 
somehow we have reached an incremental 4 percent. Obviously, 
the 46 percent was wrong. It was obviously wrong when I wrote 
the letter. Any school kid could have told the Veterans 
Secretary that.
    Then the legal position of the VA hardened, and the 
position was, over and over again to the delegation, they have 
to build this thing for $660 million, that is our position, 
even though every single person up here, including some who 
actually are lawyers, who know what they are talking about on 
this stuff, told them that they were going to lose the lawsuit. 
It was patently obvious that they were going to lose the 
lawsuit. In fact, you did lose the lawsuit, by a lot, not by a 
little. That is what enabled the contractor, who I think has 
done a good job on this project and on so many other projects 
in Colorado, to have to walk off the project until they knew 
what the budgeting was going to be.
    What I want to know is, when you consider the fact that for 
three or more years the congressional delegation made it clear 
that it was wildly off track, and we now know that your own 
employees, some of them, said there was no way you were going 
to build it for what you said you were going to build it. When 
the contractor was telling you we cannot build it for what you 
are telling us you are going to build it, and you are putting 
out of business subcontractors here in the State of Colorado 
because of your unwillingness to pay the overages--and again, I 
am talking about the VA, not you--your unwillingness to pay the 
overages of these change orders, how is it possible that an 
institution could be that immune to that level of information 
and that arrogant about what it was doing? What are we going to 
do at the VA to ensure that that never happens again? Because 
that is not about building a building. That is about having a 
culture of disrespect, a culture that does not actually believe 
in service to our veterans here in Colorado, and a culture that 
is unwilling to learn from what were obvious facts.
    Mr. Gibson. Is that it?
    Senator Bennet. That is it. Did I leave anything out?
    Mr. Gibson. I cannot think of anything that you might have 
left out, and I do not know that I would change a single word 
of what you said.
    I think my perception, my personal perception, what I saw 
as I transitioned into the organization, what was a--you might 
call it an insular organization. It was not kind of an open and 
transparent organization. I hope you have sensed in the last 10 
or 12 months a difference in the tenor and tone of 
communication and openness and the interest in other views and 
other opinions, and the willingness to embrace those other 
views and other opinions, the realization that we cannot 
accomplish what we want to accomplish without partnering with 
other organizations.
    I would tell you, when I came in the door, I have known 
Peter Davoren for years. I have known Jim Clark, whose firm is 
building the hospital in New Orleans, and I have known Jim 
Gorey and his dad, Miller Gorey, for 20-some-odd years, who 
built Orlando. The first thing I said when I got on the ground 
was this is a relationship business. I need to reach out and 
interact with these folks. We have got to get this back on 
track; But the mindset was no. That was the mindset at the 
time. That has changed.
    In June 2014, in the first week of my tenure, the first 
week or two, I reached out to all three of those contractors, 
and now I have open communication with them regularly.
    Chairman Isakson. For the benefit of the three remaining 
members who have not asked questions, I am going to move on, if 
that is OK, because we have plane connections that are 
important.
    Senator Bennet. Thank you.
    Chairman Isakson. Sorry to cut off the senior senator from 
Colorado, but I think I just did. [Laughter.]
    Senator Gardner.
    Senator Gardner. Thank you, Mr. Chairman.
    To the Deputy Secretary, thank you for being here.
    I look out to the participants today in the auditorium, and 
I have known many of them for decades now. There are city 
council members. There are veterans here, opinion leaders, 
policymakers. But I have got to be honest. Some of the veterans 
that kicked off this project in 1999 are not looking as good 
today as they were then, a little bit older, a little bit 
grayer. Some of them have oxygen that they never were on.
    They started this project in 1999 in good faith, and I 
honestly believe that you are trying in good faith to get this 
done. This hearing is about answers. It is about answers 
looking forward, and it is about answers to make sure that what 
happened to put us here is prevented, never happens again.
    Mr. Gibson. Yes, sir.
    Senator Gardner. So, while we look out and see the veterans 
here, we know we have an obligation to finish it so that they 
can see their work done, so that they can see their promises 
fulfilled.
    I have two questions. Is there any cost, litigation, 
project, construction, new information, is there anything out 
there that can still surprise us?
    Mr. Gibson. As it relates to Denver, or in construction 
generally?
    Senator Gardner. As it relates to the construction of the 
Denver hospital.
    Mr. Gibson. Pardon me?
    Senator Gardner. As it relates to Denver and the 
construction of the Denver hospital.
    Mr. Gibson. There is nothing else. We are in the process, 
have been in the process since probably January, of amicably 
resolving the claims both that KT had made, but also the claims 
of the subcontractor, and we have been working methodically 
through those. The residual amount of that is part of what we 
requested in the $130 million that will allow us to resolve the 
last of those claims before the Corps takes over the project so 
it is a complete new start.
    There is nothing else that I am aware of.
    Senator Gardner. No surprises?
    Mr. Gibson. No, sir.
    Senator Gardner. The last question I have is this. In 
August, I believe, of 2014, testimony at the State capitol 
before myself and Congressman Coffman, Glenn Haggstrom, then 
the chief of acquisition--I am reading from Steve Rylant's 
testimony today--Glenn Haggstrom, then chief of acquisition and 
construction, testified that the VA did not need any additional 
information from Congress, any additional funding from 
Congress, and that they would win the litigation and KT would 
have to build the VA medical facility with the $600 million 
already authorized. That is the quote from Mr. Rylant's 
testimony today.
    Who approved Mr. Haggstrom's testimony?
    Mr. Gibson. I do not know the answer to that question, but 
I will pursue an answer to the question. I will tell you that 
was consistent with what VA's legal posture was at the time. 
Not an excuse for it, because it was profoundly wrong.
    Senator Gardner. I guess we still have to get an answer of 
when legal posture and when the truth can actually prevail.
    Mr. Gibson. I think the truth prevailed in December when 
the Board of Contract Appeals issued their decision. Somebody 
else said it. I think Congressman Perlmutter is the one who 
said it to me the first time, ``you couldn't have lost any 
worse.'' That is when the truth came out, which made it very 
clear, and that is what you heard me reiterate in my opening 
remarks. This is on us, no mistake.
    Senator Gardner. Mr. Chairman, thank you.
    Chairman Isakson. Congressman Perlmutter.
    Mr. Perlmutter. Thank you, Mr. Chairman. Again, thanks to 
the Senate Committee for taking the time to come out here.
    I do want to say that since December/January, I have heard 
among the Corps, the VA, and the contractor that what was a 
horrible working relationship last year, the year before, the 
year before that, that there is a positive, good working 
relationship, and I want to thank you for that.
    The senators have expressed everything that I have been 
feeling and thinking. We recognize that you are sitting in the 
hot seat, you have stepped into something that is been very 
difficult to resolve, you are working at it. We appreciate 
that.
    The big question is, why do you want to keep doing this? I 
am just putting it out there rhetorically like he did, OK? You 
have other priorities and responsibilities, and I just 
appreciate your taking the bull by the horns. I thank the Corps 
for jumping into this. This was not really in your agenda more 
than 3 months ago.
    I appreciate the senators for listening and taking this so 
seriously because this is a mess, it is a big mess, and we have 
got to straighten it out. Thank you.
    Chairman Isakson. Thank you Congressman Perlmutter, and 
thanks for participating in the hearing today.
    We will end with----
    Mr. Coffman. Mr. Chairman, can I----
    Chairman Isakson. I was saying, we are going to end by 
hearing from Congressman Coffman.
    Mr. Gibson. Please. I have been waiting to hear Congressman 
Coffman's questions since the inception. [Laughter.]
    Senator Blumenthal. In the course of Representative 
Coffman's questioning, I may have to leave to catch a plane. I 
hope you will forgive me. But I want to thank again the 
Chairman, the Colorado delegation, our colleague Senator 
Rounds; and, Mr. Gibson, thank you for your service to our 
Nation.
    Mr. Gibson. Yes, sir.
    Senator Blumenthal. I know you have a history of service in 
uniform and now in the VA, and a family history of service in 
World War II. So, thank you for being here today, and also Mr. 
Caldwell.
    I just want to join in the remarks made by Senator Bennet. 
We will get it done. We owe it to the brave veterans and heroes 
of the Rocky Mountain States to make sure that their needs are 
served, and needs of veterans across the country as well. Thank 
you very much.
    Thank you, Mr. Chairman. Sorry to abandon you.
    Chairman Isakson. Congressman Coffman.
    Mr. Coffman. Thank you, Mr. Chairman.
    This GAO report from April 2013, Mr. Milsten, when did you 
read this report?
    Mr. Milsten. Shortly after it was published. Actually, I 
would have read the draft also.
    Mr. Coffman. Ms. Fiotes, when did you read this report?
    Ms. Fiotes. Approximately the same time.
    Mr. Coffman. Mr. Gibson, when did you read this report?
    Mr. Gibson. I read the report--actually, the first time 
might have been before I was confirmed. Subsequently, I have 
been in and out of the report as I transitioned into the 
Department.
    Mr. Coffman. This report showed that this project was just 
totally out of control. This report showed that it was being 
mismanaged. This report showed that it was way behind schedule. 
This report showed that it was hundreds of millions of dollars 
over budget. I got on the House Veterans' Committee in January 
2013, and the Committee had requested this report before I even 
got on it. This was certainly public knowledge.
    What action did you take relative to this report, Mr. 
Milsten?
    Mr. Milsten. One of the things we did relative to all of 
the reports that we received--and this report in 2013 had its 
basis in 2009--we instituted the requirements package that says 
at 35 percent, 65 percent, and before we work construction now 
we do a requirements. We check to make sure that the project 
has not grown in scope, it stays in budget, it stays in the 
requirements. This was not done until----
    Mr. Coffman. You have been working on this project, Ms. 
Fiotes. You have been working on this project, too. Am I right?
    Ms. Fiotes. I am sorry?
    Mr. Coffman. You have been working on this project, too. Am 
I correct?
    Ms. Fiotes. I have the oversight of this project.
    Mr. Coffman. How is it that, Mr. Gibson, you are saying 
there is only one person remaining that has been working on 
this project when we have two people sitting across from us 
today that have been in the meetings with this congressional 
delegation multiple times?
    Mr. Gibson. The point that I made, sir, was that the two 
crucial decisions that got us to where we are today were made 
in 2010 and 2011, and all the people that were involved in the 
project in any kind of a direct role, all but one are gone 
from----
    Mr. Coffman. So, Mr. Haggstrom, who remained on the project 
all the way up until there was a complete stoppage of work on 
the project, because the general contractor--his remedy in 
terms of prevailing in court--was allowed to walk from the 
project, which they did. They refused to come back on the 
project until one of the conditions met was that you would be 
replaced by the Army Corps of Engineers on the project after a 
transitional period.
    Now, Glenn Haggstrom was ultimately in charge--am I 
correct?--on this project.
    Mr. Gibson. He was the executive director----
    Mr. Coffman. He got a bonus during the very time that this 
report came out. Can you share with us the criteria for the 
bonus, getting a bonus on a project that was hundreds of 
millions of dollars over budget and years behind schedule? And 
not just this project; he was responsible for four projects 
that were all in the same category.
    Mr. Gibson. He did not get a bonus on my watch, and I 
cannot tell you what the criteria were prior to that.
    Mr. Coffman. You know, why were you telling the members of 
this Colorado congressional delegation, all the way up until 
the decision came down from the court, that this project could 
be built for $640 million?
    Mr. Gibson. Why was he telling you that?
    Mr. Coffman. Why was the VA telling us? I met with 
Secretary McDonald just after he was confirmed, and he 
reiterated to me that this project could be built for $640 
million despite this report.
    Mr. Gibson. I cannot explain that statement.
    Mr. Coffman. You know, let me tell you that I think what 
you heard from the members certainly of the Senate Veterans 
Committee who are here today, from Senator Bennet and Senator 
Gardner, and I believe Congressman Perlmutter, as well as 
myself, is that your core responsibilities are to deliver 
health care benefits and other benefits that our veterans have 
earned, and you are not a construction management entity. In my 
view, you cannot be trusted, as I have said before, to build a 
lemonade stand, let alone a major hospital. So, you have got to 
extricate yourself from that business, and the folks with their 
fingerprints on these projects now need to find another line of 
work.
    I just think that this is just more of the same. Your 
predecessor and the predecessor before and the predecessor 
before have all been before Congress and said we can make this 
better, we can make this work, and it never has. Unfortunately, 
I do not believe it ever can.
    With that, Mr. Chairman, I want to thank you so much for 
holding this hearing today, and I yield back.
    Chairman Isakson. Thank you, Congressman Coffman.
    Let me just observe this. This has been a great hearing. I 
have attended a lot of hearings. I think everybody stuck to the 
point, and I want to thank our witnesses and each Member of 
Congress and the Senate.
    Nine days ago I, and I think most everybody else in this 
room, wrote a check to the U.S. Treasury. It was painful. It 
was my money that I had worked hard to earn. Let the record 
show that sometimes we waste money in Washington, but sometimes 
we are willing to come and hold people accountable when things 
go wrong, and that is what we are trying to do here.
    We want to see to it that this hospital is finished, it is 
finished efficiently and effectively and without any more cost 
overruns, and see to it the lesson learned in Denver is not 
replicated again somewhere else because we forgot about it, 
because another Secretary came in or another congressman got 
elected or another Senate chairman came in. We are going to 
make this a permanent and indelible lesson to be learned for 
not just the Veterans Administration but for all the 
government.
    For those of you who served in the military or have sons 
and daughters who did, God bless you and thank you for that, 
and God bless the United States of America.
    This hearing stands adjourned, with the record open for 7 
days.
    [Whereupon, at 3:13 p.m., the hearing was adjourned.]
                                ------                                

Response to Posthearing Questions submitted by Hon. Richard Blumenthal 
to Hon. Sloan D. Gibson, Deputy Secretary, U.S. Department of Veterans 
                                Affairs
    Question 1.  The Civilian Board of Contract Appeals, GAO, and the 
Army Corps of Engineers all have found that VA faced issues with design 
completeness on the replacement Denver VA Medical Center. These 
challenges led to issues with change order management, and delays in 
procuring subcontractor work.

    a. Who at VA was responsible for quality control when it comes to 
reviewing facility designs?
    Response. In general, the Project Manager and Contracting Officer, 
along with subject matter experts, are responsible for quality control 
reviews of each project's design. Additionally, the Department of 
Veterans Affairs (VA) employs the use of a third party peer architect/
engineer (A/E) firm for technical reviews throughout the design 
process. In the future, the United States Army Corps of Engineers 
(USACE) will be the construction agent for the Department of Veterans 
Affairs projects over $250 million.

    b. What is the process VA utilizes to review designs and ensure 
they meet Federal and user standards, and how can it be improved to 
avoid challenges in the future?
    Response. The Department of Veterans Affairs (VA) reviews major 
projects at three stages during the design process: 1) schematic design 
(35%); 2) design development (65%); and 3) construction documents 
(95%). The review team comprises VA medical center staff, Construction 
and Facilities Management (CFM) staff (including engineering staff, 
cost estimators, and scheduling staff), along with private sector peer 
reviewers (at the construction documents (95%) review). All comments 
are gathered, reconciled, and recorded in the United States Army Corps 
of Engineers review system known as Dr. Checks, for response and 
resolution by the design team professionals. As part of the design 
review, VA has since mandated an independent third-party 
constructability review at the completion of each design phase, which 
ensures an efficient and effective construction process.

    Question 2.  Many parties have provided cost estimates for this 
project, yet VA took little to no action to evaluate them fully or 
determine what changes could be made to stay within the budget.

    a. How do you plan to add more rigor to the Department's cost 
estimation policies and practices?
    Response. As part of the three stages of the design process, VA has 
partnered with the USACE to implement a management review process that 
re-examines the scope and cost estimates for construction projects to 
assure the scope and cost remain within the established budget for each 
project. This management review includes a review of the estimated cost 
by CFM cost estimators, and will assure there is alignment between all 
estimates and the budget before the design is allowed to proceed to the 
next phase. In this way, VA can assure reconciliation of ALL estimates 
prepared for the project. As part of the partnership with USACE, they 
provided two experts to assist VA in developing the internal VA review 
process.

    b. VA's testimony notes that it is now doing constructability 
reviews from outside contractors. The initial contract awarded to 
Kiewit-Turner was for site work and preconstruction services to assist 
the design team on this project. Please explain how preconstruction 
services on this project differ from the constructability reviews that 
are now being conducted.
    Response. In general, there are minimal functional differences 
between the preconstruction services provided by Kiewit-Turner (KT) and 
the independent constructability reviews.
    While these reviews are a standard practice under an Integrated 
Design and Construct (IDC) contract--which allows the award of the 
construction to the company that served as the construction management 
agent and provided the constructability review--they were previously 
not required for all major construction projects. Additionally, VA now 
requires the independent reviews be conducted at each phase of design 
and each review will require management reviews to assure 
reconciliation between the cost estimates.

    Question 3.  Please explain the legal basis upon which VA 
interpreted that the contractor had agreed to a fixed, target price on 
this project.
    Response. The legal basis supporting VA's interpretation that the 
contractor had agreed to a fixed, target price on the project is due to 
the fixed-price incentive contract between VA and KT pursuant to FAR 
16.403-2; 52.216-17. A fixed-price incentive contract is a fixed-price 
contract that provides for adjusting profit and establishing the final 
contract price by applying a formula. The formula is based on the 
relationship between the total final negotiated cost and the total 
target cost. The contract modification known as SA-007, that both VA 
and KT signed, was the document that finalized the profit adjustment 
formula and the other elements key to the fixed-price incentive 
contract including the firm target price ($604,087,179.00) and the 
ceiling price ($610,087,179.00). That is the modification that KT 
signed and through which it agreed to build the project for the target 
price of $604M not to exceed the ceiling price of $610M. The ceiling 
price is the maximum that may be paid to the contractor. The purpose of 
fixed-price incentive contracts is to motivate the contractor to earn 
more compensation by achieving better performance and controlling 
costs. Thus, in this contract, the incentive for KT was to build the 
design as close to the firm target price as possible in order to 
maximize its profit.

    Question 4.  What accountability measures are being taken as a 
result of the misinterpretation of SA-007, the agreement that set out 
terms of agreement between VA and Kiewit-Turner?
    Response. The ongoing VA Administrative Investigation Board (AIB) 
has been charged with evaluating SA-007 and will make specific findings 
with respect to the roles various VA employees played in its 
negotiation, execution, and interpretation.

    Question 5.  The use of early contractor involvement project 
management models can result in savings, but only if the contractor is 
involved at the beginning of the design process. One of the biggest 
cost drivers on this project was the decision to switch from design-
bid-build to an early contractor involvement model after design had 
been underway for some time and the first round of design documents had 
already been submitted. Who at VA made the decision to switch project 
management methods after the design was so complete, and what were the 
reasons cited to justify that change at the time?
    Response. The ongoing VA AIB has been charged with determining how 
and why an IDC (Integrated Design and Construct) contract vehicle was 
chosen for this project and will make specific findings with respect to 
the roles various VA employees played in that decision. Most of the key 
personnel associated with the use of the IDC contract for this project 
are no longer employed by the VA. However, some retired VA employees 
have agreed to be interviewed by the AIB, which should help shed light 
on some of these early contracting decisions.
                                 ______
                                 
Response to Posthearing Questions Submitted by Hon. Richard Blumenthal 
 to Lloyd C. Caldwell, P.E., Director of Military Programs, U.S. Army 
            Corps of Engineers, U.S. Department of the Army
    Question 1.  The Civilian Board of Contract Appeals ruling noted 
that when proposed changes were approved, the designer of record 
refused to incorporate them into the design, and even though the 
independent project manager asked, VA did not require the designer to 
take appropriate action. This made building a challenge, and likely 
complicated the Army Corp's efforts to review this project. When the 
Army Corps assumes construction agent responsibilities for this 
project, what plans will be in place to ensure that changes are 
incorporated into design and progress is tracked?
    Response. The Army Corps of Engineers has a well documented process 
for change order management, which includes steps for identifying, 
approving, communicating and documenting or incorporating required 
changes into the contractual documents. On-Site Corps Representatives 
have different responsibilities and authorities and play a key role in 
managing and implementing the change order process. We will use the 
Corps of Engineers Resident Management System to track and manage all 
Change Orders, both discretionary and mandatory. The Corps of Engineers 
understands that if the process of identifying, approving, 
communicating and documenting changes is disorderly or disrupted, there 
is potential for schedule and cost impact as well as impact on the 
working relationship between the Government and the contractor.

      

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