VA Real Property: Realignment Progressing, but Greater Transparency about Future Priorities Is Needed
Published: 2011-01-31T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Department of Veterans Affairs (VA) has undertaken various planning efforts to realign its real property portfolio, including the Capital Asset Realignment for Enhanced Services (CARES), creation of a 5-year capital plan, and its newest effort, the Strategic Capital Investment Planning process (SCIP). Through these efforts, VA has identified numerous real property priorities it believes should be completed if the agency's facilities are to meet veterans' needs for services now and in the future. This congressionally requested report addresses the extent to which VA's capital planning efforts (1) have resulted in changes to its real property portfolio and (2) follow leading practices and provide information for informed decision making. To perform this work, GAO reviewed leading capital planning practices and data on VA's real property portfolio and future priorities. GAO also interviewed VA officials and veterans service organizations, and visited sites in 5 of VA's 21 veterans integrated service networks.
section_title: What GAO Found
paragraphs: Through its capital planning efforts, VA has taken steps to realign its real property portfolio from hospital based, inpatient care to outpatient care, but a substantial number of costly projects and other long-standing challenges also remain. Several of VA's most recent capital projects--such as community based outpatient clinics, rehabilitation centers for blind veterans and spinal cord injury center--were based on its CARES efforts and subsequent capital planning. VA officials and veterans service organizations GAO contacted agreed that these facilities have had a positive effect on veterans' access to services. However, VA has identified several high-cost priorities such as facility repairs and projects that have not yet been funded. For example, VA reported in its 5-year capital plan for fiscal years 2010-2015 that it had a backlog of $9.4 billion of facility repairs. The 5-year plan further identified an additional $4.4 billion in funding to complete 24 of the 69 ongoing major construction projects. Besides substantial funding priorities, VA, like other agencies, has faced underlying obstacles that have exacerbated its real property management challenges and can also impact its ability to fully realign its real property portfolio. GAO has previously reported that such challenges include competing stakeholder interests, legal and budgetary limitations, and capital planning processes that did not always adequately address such issues as excess and underutilized property. VA's capital planning efforts generally reflect leading practices, but lack transparency about the cost of future priorities that could better inform decision making. For example, GAO found that VA's 5-year capital plan links its investments with its strategic goals, assesses the agency's capital priorities, and evaluates various alternatives. Also, SCIP strengthens VA's capital planning efforts by extending the horizon of its 5-year plan to 10 years, and providing VA with a longer range picture of the agency's future real property priorities. While these are positive steps, VA's planning efforts lack transparency regarding the magnitude of costs of the agency's future real property priorities, which may limit the ability of VA and Congress to make informed funding decisions among competing priorities. For instance, for potential future projects, VA's 5-year capital plan only lists project name and contains no information on what these projects are estimated to cost or the priority VA has assigned to them beyond the current budget year. VA officials said during the review that they are considering the release of future year capital cost estimates to Congress. Transparency about future requirements would benefit congressional decision makers by putting individual project decisions in a long-term, strategic context, and placing VA's fiscal situation within the context of the overall fiscal condition of the U.S. government. Providing future cost estimates to Congress for urgent, major capital programs is not without precedent in the federal government. Other federal agencies, such as the Department of Defense, have provided more transparent estimates to Congress regarding the magnitude of its future capital priorities beyond immediate budget priorities.
section_title: What GAO Recommends
paragraphs: GAO recommends that VA annually provide to Congress the full results of its SCIP process and any subsequent capital planning efforts, including details on estimated cost of future projects. VA concurred with this recommendation.

section_title: Letter
paragraphs: The Department of Veterans Affairs (VA) is one of the largest federal  property-holding agencies, with more than 33,000 acres of land and over  5,500 buildings. VA uses this diverse inventory of real property to provide  health care and other services to millions of veterans. Over time, VA has  recognized the need to modernize its facilities and realign its real property  portfolio to provide accessible, high-quality, and cost-effective access to  services. For example, in 1999, VA initiated the Capital Asset Realignment  for Enhanced Services (CARES) to assess its building and land ownership  in response to changing veterans’ inpatient and outpatient demand for  care. The CARES assessment resulted in several recommendations to  modify VA’s real property portfolio, including the closing of some  hospitals and the opening of smaller more accessible clinics. After VA  released the initial CARES findings, the Secretary of Veterans Affairs  appointed the CARES commission—composed of independent  stakeholders, including former VA administrators, veterans, and health  care professionals—to bring an external perspective to the CARES  findings and to recommend which projects VA should undertake. The  commission issued its report to VA in February 2004, and, after reviewing  the report, VA issued the CARES Decision report in May 2004 to Congress  and other stakeholders, such as veterans service organizations. The  decision report listed projects and actions that VA planned to take over  the next 20 years, as well as the tools and principles that the agency  planned to use to realign its infrastructure and upgrade its facilities.
Since the May 2004 decision report, VA has undertaken additional planning  efforts to realign its real property portfolio. For example, VA now includes  with its annual budget submission to Congress, a 5-year capital plan that  includes information about projects it seeks to begin in the current budget  year, as well as their estimated costs from first year through completion.  VA is also developing a Strategic Capital Investment Planning (SCIP)  process, which is intended to continue VA’s efforts to prioritize its most  urgent real property priorities. Through these capital planning efforts, VA  has identified numerous real property priorities that it believes should be  completed if the agency’s facilities are to meet veterans’ demand for  services. As requested, we assessed the impact of CARES and the  effectiveness of VA’s capital planning process. In that context, this report  addresses the following questions:  1.  To what extent have VA’s capital planning efforts resulted in changes  to its real property portfolio and what priorities remain?  2.  To what extent do VA’s capital planning efforts follow leading federal  practices and provide the information needed for informed decision  making?
To answer these questions, we reviewed relevant laws and agency  documents on the status of VA’s capital projects, including CARES  implementation monitoring reports and VA’s annual budget submissions to  Congress. We also interviewed VA officials located in VA’s central office in  Washington, D.C., and six Veterans Integrated Service Networks (VISN).  To gain further insight on the steps VA took to realign its real property  portfolio, we observed ongoing and completed projects at five of the six  selected VISNs. The VISNs were selected using a scale of small, medium,  and large, based on the number of veterans served; we chose two VISNs  from each of those categories. We visited various types of facilities— renovated or built since the CARES decision—in five of those selected  VISNs across the United States. Among the VISNs, we observed various  types of facilities on the basis of seven CARES decisions that VA is  tracking. Regarding VA’s capital planning efforts, we reviewed various  documents, such as its 5-year capital plan and its proposal regarding SCIP.  We also interviewed officials from VA and five veterans service  organizations. Additionally, we considered the results of prior GAO  reports and the Office of Management and Budget (OMB) guidance on  leading federal capital planning practices. We conducted this performance  audit from January 2010 to January 2011, in accordance with generally  accepted government auditing standards. Those standards require that we  plan and perform the audit to obtain sufficient, appropriate evidence to  provide a reasonable basis for our findings and conclusions based on our  audit objectives. We believe that the evidence obtained provides a  reasonable basis for our findings and conclusions based on our audit  objectives. (App. I contains additional information on our scope and  methodology.)
subsections: section_title: Background
paragraphs: The mission of VA is to serve America’s veterans and their families with  dignity and compassion and to be their principal advocate in ensuring that  they receive medical care, benefits, social support, and lasting memorials.  VA is a cabinet-level agency with a budget of over $127 billion and is one  of the world’s largest health care, medical research, and insurance benefits  organizations. In addition to a central office, VA consists of three  administrations that generally operate as distinct entities: the Veterans  Health Administration (VHA), the Veterans Benefits Administration (VBA),  and the National Cemetery Administration (NCA). VHA’s facilities are  organized into 21 regional networks, known as VISNs, that are structured  to manage and allocate resources to VA health care facilities across the  United States. Each VISN is also responsible for coordination and  oversight of all administrative and clinical activities within its specified  region of the country. We reviewed the status of capital projects in 6 of  VA’s 21 VISNs, as shown in figure 1.
To provide services to veterans, VA’s current real property portfolio  consists of U.S.-owned buildings under VA jurisdiction and control. VA  also generally has authority to enter into enhanced-use leases, 3-year  outleases, and sharing agreements relating to its real property or space.  The assets include, for example, hospitals, clinics, cemeteries, and office  buildings where veterans access their many benefits and VA administers  its programs. VHA is the largest administration and, in terms of the  number of acres owned and square footage, includes the greatest portion  of VA’s real property portfolio, as shown in figure 2.
In response to our 1999 recommendations for improving agency capital  asset planning and budgeting, VA initiated CARES. CARES was the first  comprehensive, long-range assessment of VA’s health care capital asset  priorities since 1981 and was designed to assess buildings and land  ownership under VA’s jurisdiction and control in light of expected demand  for VA inpatient and outpatient health care services across a planning  horizon through fiscal year 2022. For example, VA recognized that the shift  in veterans’ demand for services could be met at community based  outpatient clinics that are more geographically accessible to veterans than  its hospitals. The CARES process validated gaps in VA’s infrastructure and  health care services provided to veterans. The process also included a set  of tools for annual capital and strategic planning to enable VA to plan for  real property needs to provide quality health care to veterans.
Also in response to our 1999 recommendations, VA developed formal 5- year capital plans that are submitted with its annual budget requests to  Congress. The 5-year capital plan included in VA’s fiscal year 2011 budget  submission document includes the following: capital planning linked to  the agency mission, strategic goals, and objectives; baseline assessments  and identification of performance gaps—such as underutilized or vacant  property and the backlog of repairs needed at its facilities; an alternatives  evaluation and resulting risk management plan for these performance  gaps; a description of the agency’s planning and approvals process; and a  long-term capital plan. Effective planning for capital investments is  important for several reasons. First, over time, large amounts of federal  funds are spent on capital assets. Second, the performance of capital  assets affects how agencies are able to achieve their missions, goals, and  objectives to provide service to the public. Finally, capital planning drives  budgeting, procurement, and management of an agency’s capital assets.
As VA increased its emphasis on outpatient care rather than inpatient care,  it was left with an increasingly obsolete infrastructure, including many  hospitals built or acquired more than 50 years ago in locations that are  sometimes far from where veterans live. This challenge of misaligned  infrastructure is not unique to VA. In January 2003, we identified federal  real property management as a high-risk area, and VA was cited among  those federal agencies that hold a majority of federally owned and leased  space. We also reported on VA’s long-standing problems with excess and  underutilized property, deteriorating facilities, unreliable real property  data, overreliance on costly leasing, and building security challenges. We  did this to highlight the need for broad-based transformation in this area,  which, if well implemented, will better position federal agencies to achieve  mission effectiveness and reduce operating costs.
As its newest capital planning effort, VA has initiated SCIP, which will be  an agencywide review of VA’s real property priorities and will inform its  fiscal year 2012 annual budget submission. According to VA, SCIP will  include six key components. Table 1 shows these components and the  VA’s planned actions to implement them.
SCIP, which VA said builds on its existing capital planning processes, also  addresses leading practices. It further strengthens VA’s efforts in some  areas and is still evolving and being refined. The SCIP components are  linked to VA’s previous capital planning efforts, including CARES and the  development of its 5-year capital plan. Figure 3 illustrates VA’s capital  planning steps from 1999 to 2010.
section_title: VA Has Taken Steps to Realign Its Real Property Portfolio, but a Substantial Number of Costly Projects and Other Long-standing Challenges Remain
subsections: section_title: VA Has Taken Steps to Realign Its Real Property Portfolio
paragraphs: As a part of its shift from hospital based, inpatient care to outpatient care,  VA has made changes to its real property portfolio on the basis of its May  2004 CARES Decision document and subsequent capital planning. As for  specific CARES Decision projects, VA reported in its April 2010  Implementation Monitoring Report on Capital Asset Realignment for  Enhanced Services that it has completed 13 of 59 planned major and  minor construction projects, opened 82 of 156 planned community-based  outpatient clinics (CBOC), and has another 19 ongoing major construction  projects identified in the CARES Decision. As for net changes to VA’s real  property portfolio since the CARES Decision, our analysis of the data in  VA’s 5-year capital plans from 2004 to 2009 found that leases and leased  space had increased due in part to VA’s efforts to realign its portfolio  towards more outpatient facilities, such as CBOCs and vet centers. These  centers provide readjustment counseling and outreach services to all  veterans and family members dealing with military-related issues.  Although U.S.-owned buildings and vacant space under VA’s jurisdiction  and control show a decrease because of VA’s disposal of assets, VA  shows a net increase as a result of new construction projects. Similarly,  the net increase in owned acreage can be attributed to property acquired  by VA’s National Cemetery Administration for new cemeteries. These  results of VA’s agencywide capital planning efforts since its March 2004  CARES Decision are shown in table 2.
Our analysis also showed that, with the exception of hospitals, VA has  expanded the number and types of buildings by which it delivers services.  Table 3 shows VA’s changes to its real property portfolio in terms of  facility types.
VA officials and stakeholders generally agreed that changes to the VA real  property portfolio have benefited veterans. For example, both groups  reported that the new facilities, such as more accessible clinics, had  improved veteran access to services by limiting the distance that veterans  travel to VA health care facilities. Officials from veteran service  organizations with whom we spoke stated that upgrades to VA’s real  property portfolio had improved care for veterans. For example, these  officials commented that real property changes in VA facilities in Denver,  Colorado, and Syracuse, New York, have resulted in improved services for  veterans with spinal cord injuries or diseases. Additionally, officials from  VA’s central office and the VISNs that we contacted cited recent initiatives,  such as telehealth and telemental health services at CBOCs, as being  beneficial to veterans.
To gain further insight on the steps that VA took to realign its real property  portfolio, we observed ongoing and completed projects at 5 VISNs that  demonstrated VA’s changes in the areas that CARES identified as  priorities: improved access, modernization, special disability programs,  underutilized or vacant property, CBOCs, VA and the Department of  Defense (DOD) collaboration, long-term care, and mental health. As such,  we visited several facilities in those VISNs as described in figures 4  through 9.
section_title: VA Has Identified Several Costly Projects and, Like Other Agencies, Faces Persistent Underlying Obstacles in Managing Its Real Property Challenges
paragraphs: VA has been appropriated about $16.7 billion from fiscal years 2004  through 2010 for major construction, minor construction, and  nonrecurring maintenance. In addition, VA has identified several other  high-cost projects that have not yet been funded. For example, VA  reported in its 5-year capital plan for fiscal years 2010-2015 that  agencywide, it has a backlog of $9.4 billion of facility condition assessment  deficiencies (repairs). Furthermore, due to incremental funding of  projects, 24 of the 69 ongoing major construction projects listed in the  plan needed an additional $4.4 billion to complete. For example, the plan  describes funding needed for the new medical facility in Denver. As of  fiscal year 2010, VA has been funded only $307 million of the estimated  $800 million total project cost. The President’s budget for fiscal year 2011  included a request for $451 million for this project. Even if this amount is  funded, VA’s 5-year capital plan reports that this project would still need  an additional $42 million to complete construction. VA officials  commented that this phased approach enables the agency to request  funding in stages that allow for the funding of independent and stand  alone portions of projects to be built while allowing available resources to  be utilized on other high-priority projects.
Like other agencies across the government, VA has faced underlying  obstacles that have exacerbated its real property management challenges  and caused them to persist over time. Specifically, we have previously  reported on such challenges, including competing stakeholder interests,  legal and budgetary limitations, and the need for improved capital  planning. These challenges can impact the agency’s ability to fully realign  its real property portfolio. Regarding competing stakeholder interests, we  have reported that VA has faced challenges in coordinating with historic  preservation and community organizations, as well as managing  established relationships with other health care providers, such as college  and university partnerships. While joint ventures for facilities present  unique opportunities for VA to explore new ways to provide health care to  veterans, it also raises issues for VA. These issues include the benefits and  costs of investing in a joint facility compared with those of other  alternatives, such as maintaining the existing facility or considering  options with other health care providers in the area; legal matters  associated with the new facility, such as leasing or transferring property,  contracting, and employment; and potential concerns of stakeholders.
We have also identified legal and budgetary issues that can hamper  agencies’ efforts to address their excess and underutilized real property  problems. For example, federal agencies must assess and may be  required by law to pay for any environmental cleanup that may be needed  before disposing of a property—a process that may require years of study  and result in significant costs. Regarding VA, we have reported that some  VA managers have retained excess property because the administrative  complexity and costs of complying with these requirements were  disincentives to disposal. For example, we previously reported that VA  stated that except for enhanced-use leases, restrictions on retaining  proceeds relating to VA controlled properties are a disincentive for VA to  dispose of property. VA officials estimated that the average time it takes to  implement an enhanced-use lease can range from 9 months to 2 years. VA  can also dispose of underutilized and vacant property to other federal  agencies and for programs for the homeless under the McKinney-Vento  Act. However, VA officials stated that the process can average 2 years  and that the agency may not receive compensation from such agreements  entered into under this act.
Over the years, we have reported that (1) prudent capital planning can  help agencies make the most of limited resources and (2) timely and  effective capital acquisitions can result in economical acquisitions that are  on budget, on schedule, and in line with mission needs and goals. Both  OMB and GAO guidance emphasize the importance of developing a  long-term capital investment plan to guide the implementation of  organizational goals and objectives and to help decision makers establish  priorities over time. Capital planning is an especially important area for  VA, given the agency’s efforts to effect a large-scale transformation of its  real property portfolio and the substantial capital investment these efforts  will require.
section_title: VA’s Capital Planning Efforts Generally Reflect Leading Practices, but Its Capital Plan Lacks Transparency about the Cost of Future Priorities That Could Better Inform Decision Making
subsections: section_title: Leading Practices in Capital Planning Have Been Established by OMB and GAO
paragraphs: Congress, OMB, and GAO have identified the need for effective capital  planning. In addition, budgetary constraints and demands to improve  performance in all areas have put pressure on agencies to make sound  capital acquisition proposals. In the overall capital programming process,  planning is the first phase—and, arguably, the most important—since it  drives the remaining phases of budgeting, procurement, and management.  OMB has issued various guidance and requirements for agencies to follow  and use in developing disciplined capital programming processes,  including the 1997 Capital Programming Guide, to provide agencies with  a basic reference for establishing an effective process for making  investment decisions. In 1998, GAO issued its Executive Guide on the  basis of a study of leading state and local government and private-sector  capital investment practices. Our guide (1) summarizes fundamental  practices that have been successfully implemented by organizations that  are recognized for their outstanding capital decision-making practices and  (2) provides examples of leading practices from which the federal  government may draw lessons and ideas. Although our guide focuses on  fundamental practices, rather than detailed guidance, the practices  represent actions and steps to be taken. In addition, the examples  presented in our guide illustrate and complement many of the phases and  specific steps contained in OMB’s guide. There is a great deal of overlap in  the OMB and GAO guides since both suggest similar fundamental practices  that are essential to making effective capital investment decisions.  Because of the importance of planning, we focused on VA’s  implementation of the concepts that underlie the planning phase of OMB’s  guide and planning practices in our guide (see fig.10).
OMB and our guidance stress the importance of linking capital asset  investments to an organization’s overall mission and long-term strategic  goals. The guidance also emphasizes evaluating a full range of alternatives  to bridge any identified performance gap, informed by agency asset  inventories that contain condition information. Furthermore, the guidance  calls for a comprehensive decision-making framework to review, rank, and  select from among competing project proposals. Such a framework should  include the appropriate levels of management review, and selections  should be based on the use of established criteria. The ultimate product of  the planning phase is a comprehensive capital plan, which defines the  long-term capital decisions that resulted from the agency’s capital  planning process. Both OMB and our guidance highlight the importance of  this plan. The planning phase is the crux of the capital decision-making  process and the products that result from this phase are used throughout  the remaining phases of the process.
section_title: VA’s 5-Year Capital Plan and SCIP Reflect Several of the Leading Practices
paragraphs: We found that VA’s 5-year capital plan and SCIP reflect several of the  leading capital planning practices that we have previously discussed. For  example, VA’s 5-year capital plan is updated annually as part of its annual  budget submission to Congress and contains lists of projects, by  administration, for the next 5 years. SCIP is an update to VA’s capital  planning process that builds on existing processes, including the  principles and tools of CARES, and was used to inform VA’s annual  budget submission to Congress for fiscal year 2012. Figure 11 presents  examples of how VA’s planning efforts reflect leading practices.
We compared VA’s 5-year capital plan with the leading practices. In the  area of strategic linkage, we found that VA’s efforts reflect leading  practices by identifying projects that received the highest priority ranking  using criteria that reflect the goals and mission contained in VA’s Strategic  Plan. For example, one of the criteria by which potential capital projects  were prioritized was “Departmental Alignment,” which includes the  Secretary’s goals for improving management and performance and VA’s  strategic goals. In regard to assessing needs and identifying gaps, in 2004  we reported that VA neither had an agencywide inventory of existing  capital assets nor agencywide information about the condition of those  assets, but VA has since developed a capital asset database. VA officials  said they recently completed facility condition assessments for all of its  owned buildings and are considering whether to assess the condition of  their leased buildings, many of which VA is not responsible for  maintaining. VA uses facility condition assessments as one factor in  guiding capital investment decisions to improve the condition of its most  deteriorated buildings.
VA’s 5-year capital plan also includes steps to evaluate various alternatives  for addressing real property priorities by requiring that four alternative  approaches be considered to bridge any capital need—leasing; status quo;  new construction; and rehabilitation, repair, or expansion of existing  facilities. In the area of establishing a review and approval framework for  VA’s capital investment decisions, VA has a panel chaired by a department- wide group of senior VA management to assess capital investment  proposals; evaluate, score, and prioritize proposals by VA administration;  and make recommendations through the VA governance process to the  Secretary of VA. VA’s 5-year plan uses established criteria by which  potential capital projects are evaluated, such as criteria that reflect VA’s  goal of increasing veterans’ access to health care and supporting services  for veterans suffering from spinal cord injury, traumatic brain injury, and  post-traumatic stress disorder. Finally, in 2004 we reported that VA did not  have a long-term capital plan that identified agencywide real property  priorities. However, VA has since developed a 5-year capital plan,  updated annually, which is used to inform the agency’s annual budget  submission. It describes VA’s capital planning process and gives brief  descriptions of capital investment projects included in its budget  submission.
VA also modified its capital planning efforts in 2010 by developing a new  process, called SCIP, which was used to inform its fiscal year 2012 budget  submission to Congress. VA officials told us that SCIP builds on its  existing capital planning processes, addresses leading practices, and  further strengthens VA’s efforts in some areas. Under SCIP, VA will  continue to link its investments with its strategic goals, assess the agency’s  real property priorities, evaluate various alternatives, and use a similar  review and approval framework when making capital investment  decisions. In addition, SCIP also strengthens VA’s capital planning in some  areas. Specifically, SCIP extends the horizon of its 5-year capital plan to 10  years, providing VA with a longer range picture of the agency’s future real  property priorities. As a result of SCIP, VA officials told us that the agency  developed cost estimates for all of its major and minor construction  projects, leases, and nonrecurring maintenance projects for the next 10  years. SCIP is also centralizing VA’s process for ranking and selecting  capital investments on the basis of established criteria. For example, in the  past, VA would develop a list of prioritized projects for each of its  administrations, such as VBA, NCA, and VHA, for projects less than $10  million dollars. However, VA is now prioritizing projects from an  agencywide perspective across all of its administrations and developing  one list to guide its capital planning decisions. VA has also drafted a set of  weighted criteria by which it plans to evaluate projects. The criteria listed  below assess whether capital investments  improve the safety and security of VA facilities by mitigating potential  damage to buildings facing the risk of a seismic event, improving  compliance with safety and security laws and regulations, and ensuring  that VA can provide service in the wake of a catastrophic event;    address selected key major initiatives and supporting initiatives identified  in VA’s strategic plan;    address existing deficiencies in its facilities that negatively impact the  delivery of services and benefits to veterans;  reduce the time and distance a veteran has to travel to receive services  and benefits, increase the number of veterans utilizing VA’s services, and  improve the services provided;  right-size VA’s inventory by building new space, converting underutilized  space, or reducing excess space; and    ensure cost-effectiveness and the reduction of operating costs for new  capital investments.
VA officials said that SCIP is still evolving and being refined. For example,  VA officials said that the agency completed a series of “lessons learned”  sessions to determine how the process can be improved and to make  changes, if needed, for the 2013 budget cycle.
section_title: VA’s 5-year Capital Plan Lacks Transparency about the Cost of Future Priorities That Could Better Inform Decision Making
paragraphs: Despite the positive aspects of VA’s capital planning efforts, VA’s resulting  5-year capital plan that it provides yearly to Congress lacks transparency  about the cost of future priorities beyond the current budget year. For  projects VA proposes to initiate in the current budget year, VA’s 5-year  capital plan includes current year estimates for cost of construction,  equipment, and operating costs for major and minor construction projects,  such as new and replacement medical facilities. It also provides estimates  to complete these and other ongoing projects in future years. However, the  plan identifies other potential projects, not beginning in the current budget  year, for which it lists project name but contains no information on what  these projects might cost or the priority, as VA has not assigned one to  them. For example, VA’s most recent capital plan, submitted with its 2011  budget request, lists potential projects—including 100 major construction  and 1,062 minor construction projects—for which pricing estimates are  not provided.
We have previously reported that capital planning should result in a long- term capital plan with prioritized projects and justification of capital  requests, such as project resource estimates and costs. The cost  estimates of prioritized projects can then be incorporated into an agency’s  annual budget request to Congress. The yearly request reflects the  agency’s policy decisions regarding what it has determined, in  consultation with OMB, should be funded. VA officials told us that it has  been VA’s policy to not include multiyear pricing information for projects  in their current 5-year capital plan and budget submission to Congress.  VA’s SCIP, according to VA officials and VA documents we reviewed, will  identify costs for future projects and information about their relative  priority within their organization. VA commented that the future priority of  unfunded projects cannot be provided as these projects are reprioritized  each year using updated weights and decision criteria. Further, during our  review, VA officials told us they are considering the release of future year  capital cost estimates to Congress. A decision on the release of this  information is expected to be reflected in the fiscal year 2012 budget and  SCIP plan to be released in February 2011. VA officials added that pricing  information is viewed as an internal tool for prioritizing projects and  preparing budget requests and that project cost estimates become more  reliable as the projects move closer to the year of construction.
While we agree that cost estimates beyond the current year are less  reliable, this could be made clear to decision makers, and as the projects  move closer to the year of implementation, the estimates can be refined.  VA officials told us that the agency already maintains future year estimates  internally. While VA may view this information as suitable only for internal  use, decision makers in Congress would benefit from having it for several  reasons. Specifically, transparency about future priorities allows decision  makers to weigh current year budget decisions in context with the  magnitude of future costs. In the case of VA, which has identified a  significant number of future projects in the tens of billions of dollars, full  transparency regarding these future priorities may spur discussion and  debate about actions Congress can take to address them. This could  include not only appropriations, but also programmatic changes and real  property management tools that could help VA to leverage its real property  to more efficiently and effectively meet the future needs of veterans.  Additionally, transparency regarding future capital costs puts VA’s  priorities in context with the overall fiscal condition of the U.S.  government. There is widespread agreement that the federal government  faces formidable near- and long-term fiscal challenges. GAO has long  stated that increased information and better incentives for budget  decisions involving both existing and proposed programs that require  significant future resources could facilitate consideration of competing  demands and help put our finances on a more sustainable footing. And  lastly, one of VA’s key stakeholders, the Senate Appropriations Committee,  recently asked VA for more information on its future capital project costs.
The committee is aware of VA’s SCIP process and requested that the  department submit with its fiscal year 2012 budget request, all findings  associated with this review. At the time of our review, VA had not  determined how it would respond to this request.
Providing cost estimates for future projects to Congress for capital  programs is not without precedent in the federal government. For  example, in 1987, Congress directed the Department of Defense to submit  a 5-year defense program (referred to as the future years defense  program,(FYDP)) used by the Secretary of Defense in formulating the  estimated expenditures and proposed appropriations included in the  President’s annual budget to support DOD programs, projects, and  activities. The FYDP provides DOD and Congress with a tool for looking at  future funding needs beyond immediate budget priorities and can be  considered a long-term capital plan. As another example, the judiciary  recognized that it was facing space shortages, security shortfalls, and  operational inefficiencies at courthouse facilities around the country. In  March 1996, the judiciary issued a 5-year plan for courthouse construction,  which was intended to communicate the judiciary’s urgent housing needs  to Congress and the General Services Administration, and identified 45  projects for funding on the basis of information from Congress and GSA  that $500 million could be used as a planning target in estimating funds  that will be available for courthouse construction each year. The judiciary  also developed a methodology, including criteria and weights, for  assigning urgency scores to projects. As another example, we reported  earlier this year that House and Senate appropriators have voiced interest  in having the Army Corps of Engineers include additional information in  the agency’s budget presentation. We found that an information gap is  created when an administration highlights its priority projects, but does  not provide sufficient information on other future resource needs.  Congressional users of the Corps’ budget presentation told us that not  having information on future resource needs limits the ability of Congress  to make fully informed decisions when making appropriations decisions.  Further, such information would increase the usefulness and transparency  of the budget presentation.
section_title: Conclusions
paragraphs: VA has an important mission in serving veterans, and its real property  portfolio is critical to ensuring that veterans have access to benefits and  services. Billions of dollars have already been appropriated to VA to  realign and modernize its portfolio. Further, VA has identified ongoing and  future projects that could potentially require several additional billion  dollars over the next few years to complete. Given the fiscal environment,  VA and Congress would benefit from a more transparent view of potential  projects and their estimated costs than VA currently provides. Such a view  would enable VA and Congress to better evaluate the full range of real  property priorities over the next few years and, should fiscal constraints  so dictate, identify which might take precedence over the others. In short,  more transparency would allow for more informed decision making  among competing priorities, and the potential for improved service to  veterans over the long term would likely be enhanced.
section_title: Recommendation for Executive Action
paragraphs: To enhance transparency and allow for more informed decision making  related to VA’s real property priorities, we recommend that the Secretary  of Veterans Affairs provide the full results of VA’s SCIP process and any  subsequent capital planning efforts, including details on the estimated cost  of all future projects, to Congress on a yearly basis.
section_title: Agency Comments
paragraphs: We provided a draft of this report to VA for their review and comment. VA  generally agreed with our conclusions and concurred with our  recommendation. VA also provided technical corrections and  clarifications, which we incorporated as appropriate. See appendix II for  VA’s comments.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, to the Secretary of Veterans’  Affairs, and other interested parties. The report also will be available at no  charge on the GAO Web site at http://www.gao.gov.
If you or your staff members have any questions about this report, please  contact me at (202) 512-2834 or stjamesl@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made major contributions to this  report are listed in appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: We addressed the following objectives: (1) To what extent have the  Department of Veterans Affairs’ (VA) capital planning efforts resulted in  changes to its real property portfolio and what priorities remain? and   (2) To what extent do VA’s capital planning efforts follow leading  practices and provide the information needed for informed decision  making?
To determine the extent to which VA’s capital planning efforts, including  the Capital Asset Realignment for Enhanced Services (CARES), have  resulted in changes to its real property portfolio and to identify the  agency’s remaining priorities, we interviewed VA officials located in the  central office in Washington, D.C., and 6 Veterans Integrated Service  Networks (VISN) and observed VA facilities in 5 of these 6 VISNs. (See  table 4 for a list of VA departments, VISNs interviewed and projects  observed.) Based on the number of veterans served annually, we selected  2 large, medium, and small VISNs each, out of a total of 21. To further  guide our selections, we also considered a number of other factors,  including the number of completed and ongoing projects, new medical  facilities, and geographic dispersion. Within each VISN, we selected  projects in various stages, CARES projects being monitored by VA  according to seven centrally tracked implementation measures, and sites  throughout the geographic footprint of each selected VISN. We also  interviewed senior officials at 5 veterans service organizations chartered  by Congress or recognized by VA for claim representation. (See table 5 for  a list of the veterans service organizations that we interviewed.) We also  reviewed agency data in VA’s CARES Decision, its Implementation  Monitoring Report on Capital Asset Realignment for Enhanced Services,  and its 5-year capital plan about changes to its real property portfolio and  the number and cost of projects needing additional funding. In addition,  we reviewed the funding that VA has received for major and minor  construction projects and nonrecurring maintenance since fiscal year 2004  in VA budget submission documentation, its 5-year capital plans, and  appropriation laws. We assessed the funding and facilities data from the  VA and determined it was reliable for our purposes.
To determine the extent to which VA’s capital planning efforts follow leading  practices and provide the information needed for informed decision making,  we interviewed VA officials involved in its capital planning efforts. We also  collected information on leading capital planning practices from the Office of  Management and Budget’s Capital Programming Guide and GAO’s  Executive Guide, and compared it with VA’s efforts as described in the  agency 5-year capital plan. In addition, we collected information and  interviewed officials on VA’s new capital planning process, called SCIP, and  compared it to leading capital planning practices. To compare VA’s efforts  with the efforts of other federal agencies that have provided estimates to  Congress regarding the magnitude of future real property priorities, we  reviewed our previous reports on capital planning across the federal  government, including the Department of Defense’s future years defense  program and efforts by the judiciary in March 1996 to communicate its  urgent housing needs to Congress. Finally, we collected VA data on the  agency’s future real property priorities and reviewed a recent request by  Congress to VA to develop and submit a comprehensive capital plan, along  with other information related to VA’s capital planning efforts.
section_title: Appendix II: Comments from the Department of Veterans Affairs
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, David Sausville, Assistant  Director; Daniel Cain; George Depaoli; Colin Fallon; Wati Kadzai; and  Erica Miles made key contributions to this report.