Capitol Visitor Center: Priority Attention Needed to Manage Schedules and Contracts
Published: 2005-05-17T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Approved in the late 1990s, the Capitol Visitor Center (CVC) is the largest project on the Capitol grounds in over 140 years. Its purposes are to provide greater security for all persons working in or visiting the U.S. Capitol and to enhance the educational experience of visitors who have come to learn about Congress and the Capitol building. When completed, this three-story, underground facility, located on the east side of the Capitol, is designed to be a seamless addition to the Capitol complex that does not detract from the appearance of the Capitol or its historic landscaping. According to current plans, it will include theaters, an auditorium, exhibit space, a service tunnel for truck loading and deliveries, storage, and additional space for use by the House and Senate. This testimony discusses the Architect of the Capitol's (AOC) management of the project's schedules and contracts; the project's estimated costs, including risks and uncertainties; worker safety issues; and AOC's monthly reporting to Congress on the project. This testimony also discusses recommendations that we have made in previous testimony and briefings and the actions AOC has taken in response.
section_title: What GAO Found
paragraphs: In summary, the CVC project is taking about 2 years longer than planned and is expected to cost between about $522 million and $559 million--significantly more than originally estimated. The majority of delays and cost increases were largely outside AOC's control, but weaknesses in AOC's schedule and contract management contributed to a portion of the delays and cost overruns. Of the project's estimated cost increase, about $147 million is due to scope changes, such as the addition of the House and Senate expansion spaces; about $45 million to other factors also outside or largely outside AOC's control, such as higher than expected bid prices on the sequence 2 contract; and about $58 million to factors more within AOC's control, such as delays. Also, our analysis of CVC worker safety data showed that the injury and illness rate for 2003 was about 50 percent higher for CVC than for comparable construction sites and that the rate for 2004 was about 30 percent higher than the rate for 2003. Finally, a number of AOC's monthly reports to Congress have not accurately reflected the status of the project's construction schedules and costs and have transmitted inaccurate worker safety data. This has led to certain "expectation gaps" within Congress. AOC has taken a number of actions to improve its management of the project; however, these actions have not yet fully corrected all identified problems. To help prevent further schedule delays, control cost growth, and enhance worker safety, AOC urgently needs to give priority attention to managing the project's construction schedules and contracts, including those contract provisions that address worker safety. These actions are imperative if further cost growth, schedule delays, and worker safety problems are to be avoided. AOC also needs to see that it reports accurate information to Congress on the project. Furthermore, decisions by Congress will have to be made regarding the additional funding needed to complete construction and address any risks and uncertainties that arise.

section_title: Letter
paragraphs: I am pleased to be here today to discuss GAO’s ongoing work on the  progress of the Capitol Visitor Center (CVC) project. As you know, we  have been performing this work in response to requests from members of  the Capitol Preservation Commission (CPC) and as directed by the  Conference Report to the Omnibus Consolidated and Emergency  Supplemental Appropriations Act, 1999 (House Conference Report 105- 825) and the Conference Report on the Legislative Branch Appropriations  Act, 2004 (House Conference Report 108-279).
Approved in the late 1990s, CVC is the largest project on the Capitol  grounds in over 140 years. Its purposes are to provide greater security for  all persons working in or visiting the U.S. Capitol and to enhance the  educational experience of visitors who have come to learn about Congress  and the Capitol building. When completed, this three-story, underground  facility, located on the east side of the Capitol, is designed to be a seamless  addition to the Capitol complex that does not detract from the appearance  of the Capitol or its historic landscaping. According to current plans, it will  include theaters, an auditorium, exhibit space, a service tunnel for truck  loading and deliveries, storage, and additional space for use by the House  and Senate.
In my testimony today, I will discuss the Architect of the Capitol’s (AOC)  management of the project’s schedules and contracts; the project’s  estimated costs, including risks and uncertainties; worker safety issues;  and AOC’s monthly reporting to Congress on the project. I will also  discuss recommendations that we have made in previous testimony and  briefings and the actions AOC has taken in response. We testified on this  topic before the Subcommittee on the Legislative Branch, House  Committee on Appropriations, in July 2003, and we have periodically  briefed congressional representatives, the CVC project executive, and the  Architect of the Capitol since then.
My statement is based on our monitoring of the CVC project, which  included reviewing monthly status reports, contract files, schedules,  contractors’ cost estimates, other organizations’ construction management  policies and procedures, industry best practices, and data for construction  projects compiled by the Construction Industry Institute and the Bureau of  Labor Statistics. We have attended regularly scheduled meetings on the  CVC project’s progress; observed construction work at the site; and  discussed management, procurement, and safety issues with AOC,  contractor personnel, as well as experienced construction and contract  management personnel at other organizations. Additionally, we obtained  expert assistance in analyzing construction project costs and schedules  from KPMG, Hulett & Associates, and the Defense Contract Audit Agency  (DCAA). We did not perform an audit; rather, we performed our work to  assist Congress in conducting its oversight activities.
Before I summarize our principal observations and recommendations for  moving forward, let me briefly set the stage. As previously noted, AOC is  managing and has overall responsibility for this complex project, but a  construction management firm, Gilbane Building Company, is providing a  range of construction management services in support of AOC, including  coordinating the activities of the major construction contractors,  monitoring worker safety, and providing AOC with status information for  reporting to Congress. AOC is implementing the project in two phases, or  sequences. In June 2002, it awarded the sequence 1 contract for the  excavation and structural work to Centex Construction Company, and in  April 2003, it awarded the sequence 2 contract for mechanical, electrical,  plumbing and interior finishing work to Manhattan Construction  Company.
In summary, the CVC project is taking about 2 years longer than planned  and is expected to cost between about $522 million and $559 million— significantly more than originally estimated. The majority of delays and  cost increases were largely outside AOC’s control, but weaknesses in  AOC’s schedule and contract management contributed to a portion of the  delays and cost overruns. Of the project’s estimated cost increase, about  $147 million is due to scope changes, such as the addition of the House  and Senate expansion spaces; about $45 million to other factors also  outside or largely outside AOC’s control, such as higher than expected bid  prices on the sequence 2 contract; and about $58 million to factors more  within AOC’s control, such as delays. Also, our analysis of CVC worker  safety data showed that the injury and illness rate for 2003 was about 50  percent higher for CVC than for comparable construction sites and that  the rate for 2004 was about 30 percent higher than the rate for 2003.  Finally, a number of AOC’s monthly reports to Congress have not  accurately reflected the status of the project’s construction schedules and  costs and have transmitted inaccurate worker safety data. This has led to  certain “expectation gaps” within Congress.
AOC has taken a number of actions to improve its management of the  project; however, these actions have not yet fully corrected all identified  problems. To help prevent further schedule delays, control cost growth,  and enhance worker safety, AOC urgently needs to give priority attention  to managing the project’s construction schedules and contracts, including  those contract provisions that address worker safety. These actions are  imperative if further cost growth, schedule delays, and worker safety  problems are to be avoided. AOC also needs to see that it reports accurate  information to Congress on the project. Furthermore, decisions by  Congress will have to be made regarding the additional funding needed to  complete construction and address any risks and uncertainties that arise.
subsections: section_title: Enhanced Schedule Management Needed
paragraphs: According to AOC, the entire base project is about 60 percent complete.  Except for some punch-list items, such as fixing water leaks, construction  work under the sequence 1 contract is now complete. This work includes  the basic structure, the truck and Library of Congress tunnels, and the  East Front interface. AOC and its contractors also completed work  associated with the Inauguration. Work has started on the sequence 2  contract, including fitting out and finishing the basic structure and the  Library of Congress tunnel and constructing the utility tunnel and space  for the exhibits. AOC has just made contractual arrangements for fitting  out and finishing the Senate and House expansion spaces and is now  procuring the House Connector tunnel and the connection between the  Library of Congress tunnel and the Jefferson building.
AOC’s scheduled completion date for CVC is now September 2006, nearly  20 months later than originally planned. We believe, given past problems  and future risks and uncertainties, that the completion date may be  delayed until sometime between December 2006 and March 2007.  Additionally, AOC’s scheduled completion date for the interior of the  House and Senate expansion spaces is March 2007.
The project’s schedule delays are due in part to scope changes, design  changes, and unforeseen conditions beyond AOC’s control (e.g., adding  the Senate and House expansion spaces and encountering underground  obstructions). However, factors more within AOC’s control also  contributed to the delays. First, the original schedule was overly  optimistic. Second, AOC has had difficulty obtaining acceptable,  contractually required schedules from its contractors, such as a master  summary schedule from its construction management contractor. In  addition, AOC and its contractors did not adhere to contract provisions  designed for effective schedule management, including those calling for  monthly progress review meetings and schedule updates and revisions.  AOC and its construction management contractor also had difficulty  coordinating the work of the sequence 1 and 2 contractors and did not  systematically track and document delays and their causes as they  occurred or apportion time and costs to the appropriate parties on a  timely basis. Additionally, AOC has not yet reached full agreement with  CPC on the extent to which construction must be completed before the  facility can be opened to the public, and AOC has not yet developed an  overall summary schedule that links the completion of construction with  the steps necessary to prepare CVC for facility operations. Finally, AOC  needs to fully implement our recommendation that it develop plans to  mitigate the project’s remaining risks and uncertainties, such as shortages  in the supply of stone or skilled stone workers, unforeseen conditions  associated with the remaining underground tunnels, and commissioning  the building in the allotted time.
We have made numerous recommendations to improve schedule  management, and AOC has taken actions to implement most of them. We  believe, however, that both AOC and its construction management  contractor will need to sustain their attention and apply additional effort  to managing the project’s schedule, as well as fully implement our  recommendations, to help keep the project on track and as close to budget  as possible. More specifically, AOC needs to give priority attention to:    obtaining and maintaining acceptable project schedules, including  reassessing the times allotted for completing sequence 2 work;   aggressively monitoring and managing contractors’ adherence to the  schedule, including documenting and addressing the causes of delays;   developing and implementing risk mitigation plans;  reaching agreement on what project elements must be complete before  CVC can open to the public; and preparing a summary schedule, as Congress requested, that integrates the  major steps needed to complete CVC construction with the steps  necessary to prepare for operations.
section_title: Stronger Contract Management Needed
paragraphs: AOC is relying on contractors to design, build, and help manage CVC’s  construction and help prepare for its operation. AOC has obligated over  $350 million for contracts and contract modifications for these activities.  We found that AOC needed to take additional steps to ensure that it was  (1) receiving reasonable prices for proposed contract modifications, (2)  obtaining adequate support for contractors’ requests for reimbursement of  incurred costs, (3) adequately overseeing its contractors’ performance,  and (4) taking appropriate steps to see that contractual work is not done  before it is appropriately authorized under contractual arrangements.
Initially, AOC was not preparing independent government estimates as  part of its price analyses for proposed modifications to the two major  contracts. In early 2004, AOC hired an employee for the CVC staff with  contract management experience, and AOC has improved its capacity to  obtain reasonable prices by, among other things, preparing government  estimates as part of its effort to evaluate the reasonableness of prices  offered by the contractors for the proposed modifications.
Although most CVC work is being done under fixed price contracts, for  which payment is not based on incurred costs, AOC has received or is  anticipating requests for reimbursement of over $30 million in costs that  the contractors say they incurred because of delays. In addition, AOC has  awarded some contract modifications for unpriced work that will require  reliable information on incurred costs. According to the Defense Contract  Audit Agency, several concerns relating to the contractors’ accounting  systems need to be addressed to ensure the reliability of the contractors’  incurred cost information.
AOC has continued to experience difficulty getting fully acceptable  performance from contractors. For example, as of April 30, 2005, the  construction management contractor had not provided an acceptable  master schedule identifying appropriate links between tasks and key  milestones, and it has not been providing AOC with accurate safety data  for an extended period of time. Similarly, one of AOC’s major construction  contractors had not corrected recurring safety concerns over an extended  period.
One of AOC’s CVC consultants began work several months before AOC  had awarded a contract to it authorizing the work. AOC agreed to take  action to prevent this type of problem from recurring.  We have made several recommendations to enhance AOC’s contract  management. AOC has generally agreed and taken action to implement  these recommendations. For example, it has enhanced its capacity to  review cost-related data submitted by contractors with requests for  reimbursement based on incurred costs, and it has better evaluated its  construction management contractor’s performance and taken action to  obtain improvements. To help prevent further schedule delays and control  cost growth, AOC needs to aggressively manage its contractors’  performance, particularly in the areas of managing schedules and  obtaining reasonable prices on contractual actions, and continue to ensure  that contractors’ requests for payment based on incurred costs are  adequately evaluated. It also needs to ensure that its contractors report  accurate safety data and promptly act to correct safety concerns.
section_title: Project Costs and Funding Provided as of May 2005
paragraphs: We currently estimate that the cost to complete the construction of the  CVC project, including proposed additions to its scope, is about $522  million without any allowance for risks and uncertainties. Of this amount,  $483.7 million has been provided to date. In November 2004, we estimated  that the cost to complete the scope of work approved at that time was  likely to be about $515 million, without an allowance for risks and  uncertainties. Since November 2004, AOC and the U.S. Capitol Police have  proposed about $7 million in scope changes that we included in our  current estimate, bringing it to $522 million. However, the project  continues to face risks and uncertainties, such as unforeseen conditions,  scope gaps and changes, and possible further delays. To provide for these,  we estimated in November 2004 that an additional $44 million would likely  be needed, bringing our estimate of the total cost to about $559 million.  We continue to believe that this estimate of the project’s total costs is  appropriate. We have not increased our allowance for risks and  uncertainties in response to the recent requests for $7 million in scope  changes because we consider such changes among the risks and  uncertainties that the project faced in November.
Over the years, CVC construction costs have increased considerably. Most  of these costs were outside or largely outside AOC’s control, but other  costs were more within its control. About $147 million of the cost increase  was due to changes in the project’s scope, many of which were for security  enhancements following September 11 and the anthrax attacks in October  2001. Congress added the House and Senate expansion spaces and the  Library of Congress tunnel to the project’s scope after the original  project’s cost was estimated; similarly, the Department of Defense  recommended and funded an air filtration system for the facility. Other  factors also outside or largely outside AOC’s control contributed about $45  million to the increase. For example, bid prices for the sequence 1 and 2  contracts exceeded budgeted costs, and unforeseen field conditions, such  as underground obstructions, necessitated additional work. Finally,  factors more within AOC’s control accounted for about $58 million of the  expected additional project costs. For example, the project experienced  significant delays during sequence 1, and we expect AOC will incur  additional costs in the future because we believe the sequence 2 work will  not be done by AOC’s September 2006 completion date; slow decision- making by AOC also contributed to higher costs.
In its fiscal year 2006 budget request, AOC asked Congress for an  additional $36.9 million for CVC construction. AOC believes this amount  will be sufficient to complete the project’s construction and, if approved,  will bring the total funding provided for the project to $520.6 million.  AOC’s request includes the $4.2 million for potential additions to the  project’s scope (e.g., congressional seals, an orientation film, and  backpack storage space), but does not include $1.7 million for the air  filtration system—-an amount that AOC thought it would not need and  returned to DOD, but that we believe AOC will still likely need. AOC  believes that it could obtain these funds from DOD if needed. Thus, with a  $1.7 million increase for the air filtration system, the total estimated cost  to complete the project’s construction would be the $522.3 million cited  above without provision for risks and uncertainties.
To continue to move the project forward, Congress will have to consider  the additional funding AOC has requested for fiscal year 2006 to complete  the project, including the $4.2 million in additional scope items. Through  effective risk mitigation, as we have recommended, and effective  implementation of our other recommendations for enhancing schedule  and contract management, AOC may be able to avoid some of the $44  million that we allowed for risks and uncertainties. However, given the  project’s complexity and the additional requests for funds already made  and anticipated, we believe AOC will likely need much of this $44 million  even with effective implementation of our recommendations. Already, it  appears that AOC may need additional funds for sequence 2 changes in  fiscal year 2005. For example, as of April 30, 2005, AOC had identified  proposed changes to the sequence 2 contract that it considered necessary  and expected to cost about $13.8 million. This sum is about $700,000 less  than the $14.5 million AOC has available during fiscal year 2005 for  sequence 2 changes.
section_title: Worker Safety Issues
paragraphs: Because the number of construction workers at the CVC site is soon  expected to increase significantly, worker safety will continue to be an  important issue during the remainder of the project. Our review of worker  safety issues found that the construction management contractor’s  monthly CVC progress reports contained some inaccurate data for key  measures of worker safety, including injuries and illnesses and lost time.  For example, the contractor reported 3 lost-time incidents for 2004, but  our analysis identified 45 such incidents. These inaccuracies resulted in  both overstatements and understatements of rates. For instance, the  contractor reported a rate of 6.3 injuries and illnesses for April 2004,  whereas our analysis identified 12.5. The construction management  contractor attributed the inaccuracies to key data missing from its  calculations, unawareness of a formula change that began in 2002,  mathematical errors, and poor communication with the major  construction contractors.
According to our analysis, the rates for injuries and illnesses and for lost  time were higher for CVC than for comparable construction sites. For  2003, the injury and illness rate was about 50 percent higher, and the lost- time rate was about 160 percent higher. Additionally, both the numbers  and the rates for injuries and illnesses and for lost time worsened from  2003 to 2004. For example, the injury and illness rate increased from 9.1 in  2003 to 12.2 in 2004, and the lost-time rate increased from 8.1 to 10.4. AOC  and its contractors have taken some actions to promote and manage safety  on the site, such as conducting monthly safety audits and making  recommendations to improve safety. However, at the time of our review,  neither AOC nor its construction management contractor had analyzed the  results of the monthly safety audits to identify trends or concerns, and  neither had reviewed the safety audit findings in conjunction with the  injury and illness data. Our analysis of key safety audit data for the first 10  months of 2004 identified about 700 safety concerns, the most frequent of  which was inadequate protection against falls. Furthermore, AOC had not  fully exercised its authority to have the contractors take corrective actions  to address recurring safety concerns.
We recommended that, to improve safety and reporting, AOC ensure the  collection and reporting of accurate injury and illness and lost-time data,  work with its contractors to develop a mechanism for analyzing the data  and identifying corrective actions, and more fully exercise its authority to  take appropriate enforcement actions when warranted. AOC agreed with  our recommendations and initiated corrective actions. However, follow-up  work that we did in early 2005 at AOC’s request indicated the corrective  actions had not yet fully eliminated errors in reporting. AOC agreed that  continued action on our recommendations was essential.
section_title: Reporting to Congress
paragraphs: Both AOC and its construction management contractor prepare monthly  progress reports on CVC. AOC relies heavily on its contractor for the  information it puts into its own reports, which it sends to Congress. We  have found that AOC’s reports have sometimes failed to identify problems,  such as cost increases and schedule delays. This has resulted in certain  “expectation gaps” within Congress. We have suggested to AOC that its  reports could be more helpful to Congress if, for example, they discussed  critical issues facing the project and important upcoming decisions. AOC  has been making improvements to its monthly reports and has agreed to  continue doing so.
Mr. Chairman, this completes my prepared statement. We would be happy  to answer questions that you and other Subcommittee Members may have.
section_title: Contact and Acknowledgments
paragraphs: For further information about this testimony, please contact Bernard  Ungar at (202)512-4232 or Terrell Dorn at (202) 512-6923. Other key  contributors to this testimony include Shirley Abel, Timothy DiNapoli,  Brett Fallavollita, Jeanette Franzel, Jackie Hamilton, Bradley James, David  Merrill, Scott Riback, Susan Tindall, and Kris Trueblood.
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