VA Construction: Additional Actions Needed to Decrease Delays and Lower Costs of Major Medical-Facility Projects
Published: 2013-04-04T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The VA operates one of the nation’s largest health care delivery systems. Charged with addressing the issues of increasing medical demands and aging medical facilities, VA currently manages the construction of 50 major medical-facility projects, each costing at least $10 million, some in the hundreds of millions of dollars. As requested, GAO examined VA’s management of such projects. GAO reviewed (1) changes to costs, schedule, and scope for selected new medical-facility construction projects and (2) actions VA has taken to improve management and any opportunities that exist for VA to improve its management of costs, schedule, and scope of these construction projects. GAO analyzed documents, VA data as of November 2012 on selected major construction projects, and interviewed VA officials, architecture and engineering, and construction firms.
section_title: What GAO Found
paragraphs: Costs substantially increased and schedules were delayed for Department of Veterans Affairs' (VA) largest medical-center construction projects in Denver, Colorado; Las Vegas, Nevada; New Orleans, Louisiana; and Orlando, Florida. As of November 2012, the cost increases for these projects ranged from 59 percent to 144 percent, with a total cost increase of nearly $1.5 billion and an average increase of approximately $366 million. The delays for these projects range from 14 to 74 months, resulting in an average delay of 35 months per project. In commenting on a draft of this report, VA contends that using the initial completion date from the construction contract would be more accurate than using the initial completion date provided to Congress; however, using this date would not account for how VA managed these projects prior to the award of the construction contract. Several factors, including changes to veterans' health care needs and site-acquisition issues contributed to increased costs and schedule delays at these sites.
Although VA has taken some actions to address problems managing major construction projects, the agency has opportunities for further improvement. For example, VA established a Construction Review Council in June 2012 to oversee the department's development and execution of its real property programs. However, construction management challenges remain, and opportunities exist for VA to avoid further cost increases and schedule delays.
Given the complexity and speed of medical advances, many health care organizations have enlisted the services of experts in planning the procurement and installation of medical equipment for new medical centers. VA has used these planners at various phases for some projects and is reviewing its overall procurement of medical equipment. However, VA has not taken full advantage of medical equipment planners on all projects, in part because there is no guidance for doing so. Not using a medical equipment planner can lead to increased design and construction changes resulting in cost increases and schedule delays.
VA has not yet clearly defined roles and responsibilities of VA construction management staff, even though the agency previously identified the need to do so. GAO found that conflicting direction from VA to contractors can cause some confusion and lead to cost increases and construction delays. For example, contractor officials at one site said that VA's project manager directed them to defer the design of specific rooms until medical equipment was selected for the facility; however, VA's central office then directed the contractor to proceed with designing the rooms. This conflicting direction from VA will require the contractor to redesign the space, further expending project resources.
The federal government's regulations and VA's policy specify that changes to construction contracts, known as change orders, should be issued in a timely manner; however, VA's change-order approval process requires time-consuming reviews at multiple organizational levels that have resulted in extensive delays and increased costs for some projects. VA is reviewing options to shorten the decision cycle for approval of construction contract modifications but has not yet streamlined the process.
section_title: What GAO Recommends
paragraphs: GAO recommends that VA (1) develop and implement agency guidance for assignment of medical equipment planners to major medical construction projects; (2) develop and disseminate procedures for communicating to contractors clearly defined roles and responsibilities of VA officials who manage major medical-facility projects, particularly the change-order process; and (3) issue and take steps to implement guidance on streamlining the change-order process. VA concurred with GAO's recommendations, but expressed concerns about the depiction of cost increases and schedule delays; GAO believes its methodology is accurate as discussed in this report.

section_title: Letter
paragraphs: The Department of Veterans Affairs (VA) provides services for over 6  million veterans through the Veterans Health Administration (VHA), one of  the largest health care systems in the country. However, much of VHA’s  infrastructure was designed and built decades ago under an older  concept of health care delivery that focused on hospital-centered,  inpatient care. In addition, VA has experienced a gap between its existing  medical infrastructure and the infrastructure needed to provide medical  services for returning veterans from Afghanistan and Iraq, who  increasingly require specialized care for injuries such as the treatment of  spinal cord and traumatic brain injuries. According to VA’s fiscal year  2013 budget submission to Congress, VHA’s infrastructure does not fully  align with the current health care needs of the veteran population.
To help address this situation, VA has 50 major medical-facility projects under way, including new construction and the renovation of existing  medical facilities at a cost of more than $12 billion. Completing these  projects is a large endeavor for VA, considering that until the construction  of the Las Vegas, Nevada, medical center, VA had not built a major  medical center in over 15 years.
The term “major medical-facility project” means a project for the construction, alteration,  or acquisition of a medical facility involving the total expenditure of more than $10 million.  See 38 U.S.C. § 8104. These projects cost at least $10 million, some in the hundreds of  millions of dollars. The projects types include new construction, renovation of existing  structures, expansion, or a combination of types. The total number of major VA medical- facility projects is based on agency data from November 2012.
In 2009, we reported that many of VA’s major medical-facility projects  were over budget and behind schedule for various reasons, including  changes to project scope, land acquisition issues, and unforeseen events,  such as site contamination. Although we concluded that VA met most of  our best practices for preparing cost estimates and construction  schedules, we recommended that VA take actions to reduce potential  cost increases and schedule delays to its major construction projects. VA  is in the process of implementing these recommendations.
Because of questions regarding cost increases and schedule delays to  major medical-facility projects, you asked us to examine how VA  manages medical facilities construction projects. This report reviewed (1)  changes to cost, schedule, and scope for selected new medical-facility  projects and (2) actions VA has taken to improve its construction  management practices, and any opportunities that exist for VA to improve  its management of costs, schedule, and scope of these construction  projects.
To address these objectives, we reviewed VA data as of November 2012  on VA’s current 50 major medical-facility projects, including the original  cost estimates and completion dates and the projects’ current status.reviewed and analyzed construction documents, VA’s Strategic Plan  Fiscal Year 2011 to 2015, and other relevant documents. We interviewed  officials from VA; veterans support organizations; architectural and  engineering firms; general contractor construction firms; and construction  management firms. To examine specific projects in greater detail, we   We  selected the four largest and most expensive major medical-facility  projects based on cost, current status of the project, and type of facility.  These ongoing projects are located in Denver, Colorado; Orlando,  Florida; New Orleans, Louisiana; and Las Vegas, Nevada. We visited the  construction sites in Denver, Orlando, and New Orleans to talk to officials  on-site and determine the reasons for changes in costs and schedules.  We updated our prior work on the Las Vegas facility with information on  the project completion costs and the change-order process. The  information from our site visits is illustrative and cannot be generalized to  sites agency-wide. We assessed the reliability of the data through  interviews with knowledgeable VA officials and a review for completeness  and any unexpected values. VA data were sufficiently reliable for the  purposes of this report. In addition, we researched and reviewed relevant  legislation pertaining to the amounts that were authorized and  appropriated for these projects. Additional information on our scope and  methodology appears in appendix I.
We conducted this performance audit from April 2012 to April 2013 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.
subsections: section_title: Background
paragraphs: VA operates one of the largest direct health-care delivery systems in the  United States. As well, VA is one of the largest federal property-holding  agencies, with 35,352 acres of land, 5,873 buildings, and over 149 million  square feet of medical facilities and administrative space. VA provides  health care to veterans in 152 medical centers, and nearly 1,400  community-based outpatient clinics, nursing homes known as community- living centers, veteran-counseling centers and live-in facilities.medical facilities offer services which range from primary care to complex  specialty care, such as cardiac or spinal cord injury. VA has specialized  services at some of its medical facilities for those veterans with post- traumatic stress disorder, whose condition cannot be managed in a  primary care or general mental health setting.
According to VA, the average age of VA medical facilities is approaching  60 years. The department is updating its infrastructure to allow for cost- effective management of an aging inventory under increased workload  demands, changing veteran patient demographics, advances in medical  technology, complex treatment protocols, new advanced procedures, and  evolving federal requirements. Additionally, VA’s facility program has  struggled to keep pace with advancements in health care services that  often dramatically change the physical infrastructure requirements of  hospitals and clinics. Furthermore, changes in veteran demographics,  ranging from the illnesses and care required for veterans of different  generations and conflicts to the population shifts among different areas of  the country, place a continued demand on the capital-asset portfolio.
To plan for future infrastructure needs, VA established its Strategic  Capital Investment Planning process for the 2012 budget submission.As part of this planning effort, VA annually reviews its real property  priorities and conducts a gap analysis to identify the needs of its medical  facilities across the country. Local plans are centrally validated,  evaluated, and consolidated into a prioritized national project list. VA also  uses this planning process to develop a 10-year capital plan, which  prioritizes a list of projects targeted to reduce the gaps. From the 10-year  capital plan developed for the agency’s 2013 budget submission, VA  estimated that it would cost approximately $21.7 billion to address all  capital infrastructure costs for major medical-facility projects while also  remediating all existing and projected gaps in medical facilities. However,  this does not include life-cycle costs for infrastructure maintenance.  According to VA, it is important to note that this estimate is a snap shot in  time, based on current market conditions, baseline capital portfolio and  demographic data, and projected needs.submission stated that the $21.7 billion in costs will likely change as  projects move through the planning process and project requirements are  more refined.
The agency’s 2013 budget  The VA Office of Construction and Facilities Management (CFM) is  responsible for administering major construction projects, including major   No funds may be used for any major medical- medical-facility projects. facility construction project over $10 million, unless the funds have been  specifically authorized by law, and VA is required to submit a prospectus  to the House and Senate Committees on Veterans’ Affairs that contains  information about each planned major medical-facility project. This  information includes an initial estimate of the overall cost of the project  and, in some cases, a completion date for the project. To begin a  project, CFM hires an architectural and engineering firm to develop an  architectural design for the project and a cost estimate for the project’s  completion. The cost estimate provided by the architectural and  engineering firm is generally more detailed and accurate than the initial  cost estimate VA provides to Congress in a prospectus. After the project  has been designed, VA requests construction funding. CFM then solicits  bids for project construction and awards a construction contract.construction contractor is responsible for developing a detailed  construction schedule that reflects the contract duration. CFM reviews the  construction schedule and also assigns CFM engineers—known as  resident engineers—to work on-site to monitor the construction process  until the facility is ready to be turned over to local VA medical staff. Once  construction begins, the construction firm is generally responsible for cost   The  increases and schedule overruns under the terms of the firm-fixed-price  contract, unless VA and the contractor agree to a change to modify the  scope, account for unforeseen conditions, or remedy a design error.
VA classifies the phases of construction projects in the following terms:  planning; design (developing the design and construction documents);  construction; and activation (staffing and activities that are needed to  begin operations at a new medical facility). (See table 1 for more detail on  these construction phases).
VA uses three project delivery methods for managing major medical- facility projects: “design-bid-build,” “design-build,” and “integrated design  and construction” (IDC). Although VA has mainly used the traditional  design-bid-build method, it has recently employed design-build and  integrated design and construction. See table 2 for details on these  project delivery methods. (App. II includes the project delivery methods  used for each of VA’s 50 major medical-facility projects).
VA staff at various organizational levels participate in the construction  management process for major medical-facility projects. For example, a  contracting officer is ultimately responsible for managing the execution of  the construction contract, while local site-level staff,—such as a project  manager, senior resident engineers, and resident engineers—oversee the  actual construction, with assistance provided by the contracting officer. In  some instances, officials from CFM’s regional offices and VA’s central  office, including the Office of General Counsel, provide assistance to the  contracting officer. VA staff from CFM and VHA, such as medical center  directors, also provide support during the construction of major medical- facility projects.
During the construction phase of any federal government project,  changes need to be made to the construction contract. VA contracts  contain specific language and requirements, in accordance with  applicable Federal Acquisition Regulations, which give the government  the right to make changes within the scope of the contract. Generally,  government contracts contain a changes clause that permits the  contracting officer to make unilateral changes, in designated areas, within  the general scope of the contract. Contractors can also request changes  to the contract. Changes can occur for a variety of reasons, such as  design changes resulting from the addition of new medical equipment.
section_title: Cost Increases and Schedule Delays at the Four Largest Projects Occurred for a Variety of Reasons
subsections: section_title: Cost Increases and Schedule Delays
paragraphs: For VA’s four largest medical-facility construction projects, when  comparing November 2012 construction project data with the cost and  schedule estimates first submitted to Congress, cost increases ranged  from 59 percent to 144 percent, representing a total cost increase of  nearly $1.5 billion and an average increase of approximately $366 million  per project. The schedule delays ranged from 14 to 74 months with an  average delay of 35 months per project (see table 3).
In commenting on a draft of this report, VA stated that project designs,  initial cost estimates, and completion dates are developed years  prospectively, several years before Congress appropriates funds and the  construction contract is awarded, which determines the cost to complete  the project and the completion date. VA provided information indicating  that after the Department received appropriations for these four projects,  and the construction contract was awarded, the magnitude of cost  increases and schedule delays was significantly less. For example, the  costs for the four projects decreased or remained unchanged, and the  number of months the completion dated extended ranged from 0 to 10  months.construction contract would be more accurate for measuring schedule  delays; however, using this start date would not account for how VA    VA officials said that using the initial completion date from the  managed these projects prior to awarding the construction contract. By  using the methodology VA suggests, the schedule delays and cost  increases are significantly lower.  We believe that the methodology in this  report and in our past report on VA construction provides an accurate  depiction of how cost and schedules for construction projects can change  from the time they are first submitted to Congress.expectations are set among stakeholders, including the Veterans  community, for when projects will be completed and at what cost.  We  recognize that many factors can affect cost and schedules over the life of  a project and that some of these factors, including when appropriations  are actually received, are beyond VA’s control.  We also acknowledge  that after Congress appropriates funds and contractors are selected for  projects, VA and the contractors develop more accurate cost estimates  and schedules and the likelihood increases that cost and schedule risks  are mitigated or realized.    Of the remaining 46 major medical-facility projects, 26 are under  construction or were recently completed. As shown in figure 1, of these  26, half have experienced cost increases, but the other half experienced  either no change in costs or a decrease in costs. (See app. II for detailed  information on all 50 ongoing projects.)
section_title: VA Has Taken Steps to Improve Its Construction Management Practices and Has Opportunities for Further Improvement
subsections: section_title: Creation of a Construction Management Review Council
paragraphs: In April 2012, the Secretary of Veterans Affairs established the  Construction Review Council to serve as the single point of oversight and  performance accountability for the planning, budgeting, execution, and  delivery of the VA real property capital-asset program. The council  issued an internal report in November 2012 that contained findings and  recommendations that resulted from meetings it held from April to July  2012. According to the council report, multiple internal and external VA  reviews have found systemic deficiencies in a range of areas, including  defining requirements, estimating costs, designing and scoping the  project, managing the contract, overseeing the program, and activating  completed projects. The analyses revealed that the challenges identified  on a project-by-project basis were not isolated incidents but are indicative  of systemic problems facing VA. The council report has several  recommendations including that VA streamline processes and procedures  for change orders and link the purchase of medical equipment with the  coordination of the construction schedule. VA officials are reviewing  specific options to address this issue and began receiving progress  updates on these topics and others on a monthly basis in February 2013.  However, VA has not yet developed specific guidance or instructions on  how to implement these recommendations, which would provide specific  steps on the new process to help ensure VA avoid problems involving the  purchase of medical equipment on future construction projects. As  discussed later in this report, VA is taking steps to address some of the  council’s other recommendations.
section_title: Collaborating with Other Federal Agencies and the Construction Industry
paragraphs: We have emphasized in previous work the need for federal agencies to  collaborate with other agencies to leverage each others’ resources, thus  obtaining additional benefits that would not be available if they were  working separately. VA’s Strategic Plan also recognizes the importance  of such collaboration and of 1) addressing construction management  issues by increasing communication and collaboration across  organizations, such as federal agencies, to share best practices, and 2)  identifying and addressing other opportunities to improve performance  management.
VA has taken some action to tap the experience of other federal agencies  involved in constructing medical facilities. VA stated that it has  collaborated with Department of Defense agencies such as the Tricare  Management Activity, U.S. Army Corps of Engineers, and Naval Facilities  Engineering Command as well as other federal agencies such as the  National Institute of Building Sciences and the Federal Preservation  Institute to discuss general construction issues. Additionally, VA participates in the VA/Department of Defense Joint Executive Council and  the Federal Facilities Council, as well as federal agency construction  forums.
VA has also taken steps to reach out to the construction industry. In June  2011, VA convened a construction industry forum to facilitate  communications with the construction industry about ways to improve  medical facilities construction practices. VA hosted attendees from 75  contractor firms, who provided written feedback. According to a summary  of the proceedings issued by VA, attendees said that VA needed to  improve communication among project team members. VA construction  officials noted that the participant suggestions have been valuable and  have assisted them in their effort to improve medical-facilities construction  practices. VA plans to host another industry forum in the future.
section_title: Evaluating Project Delivery Methods
paragraphs: To better manage the cost and schedules for major medical-facility  projects, VA has taken steps to implement a new project delivery method,  such as the Integrated Design and Construction (IDC). In response to  the construction industry’s concerns that VA and other federal agencies  did not involve the construction contractor early in the design process, VA  and the Army Corps of Engineers began working to establish a project  delivery model that would allow for earlier contractor involvement in a  construction project, as is often done in the private sector. However, in  Denver and New Orleans VA did not implement IDC early enough to  garner the full benefits.
VA officials stated that Denver and New Orleans were initiated as design- bid-build projects and later switched to IDC after the projects had already  begun. According to VA officials, the IDC method was very popular with  industry, and VA wanted to see if this approach would be effective in  delivering a timely medical facility project. Thus while the intent of the IDC  method is to involve both the project contractor and architectural and  engineering firm early in the process to ensure a well coordinated effort in  designing and planning a project, VA did not hire the contractor for  Denver until after the initial designs were completed. New Orleans  officials said that they were delayed in bringing on the contractor because  of a bid protest. The designer was allowed to continue with design development during the resolution of the protest, which did not allow the  project to fully benefit from the IDC method. According to VA officials, had  the award not been protested, sufficient interaction between the  architectural and engineering and construction firm could have taken  place during design development, which should have greatly limited or  mitigated many of the design issues. According to VA, in both Denver and  New Orleans, because the contractors were not involved in the design of  the projects and formulated their bids based on a design which had not  been finalized, these projects required changes that increased costs and  led to schedule delays. VA staff responsible for managing both projects  said it would have been better to maintain the design-bid-build model  throughout the entire process rather than changing mid-project because  VA did not receive the value of having contractor input at the design  phase, as the IDC method is supposed to provide. For example,  according to Denver VA officials, the architectural design called for curved  walls rather than less expensive straight walls along the hospital’s main  corridor. The officials said that had the contractor been involved in the  design process, the contractor could have helped VA weigh the aesthetic  advantages of curved walls against the lower cost of straight walls.
section_title: Using Medical Equipment Planners
paragraphs: VA officials have emphasized that they need the flexibility to change their  heath care processes in response to the development of new  technologies, equipment, and advances in medicine. Thus, for new  heath care facilities, VA seeks to ensure that the most up-to-date  equipment is installed, and that space and electrical installations support  the equipment. However, this can be a challenge for projects that take a  number of years to complete, as advances in technology can require  design changes. Given the complexity and sometimes rapidly evolving  nature of medical technology, many health care organizations employ  medical equipment planners to help match the medical equipment  needed in the facility to the construction of the facility. Naval Facilities  Engineering Command officials told us that they use medical equipment  planners on all medical facility projects, hired through the architectural  and engineering contract. Army Corps of Engineers officials said they  also use medical planners from the Department of Army’s Office of the  Surgeon General on all of their medical facility projects. Officials from  contracting firms currently working on VA projects told us that in their  experience with other federal agencies, including the U.S. Army Corps of  Engineers, medical equipment planners have helped avoid schedule  delays. VA officials told us that they sometimes hire a medical equipment  planner as part of the architectural and engineering firm’s services to  address medical equipment planning. The planner can be brought on  early in the design phase and remain through construction phases of the  project. The planner should help coordinate with the architectural and  engineering firm to ensure that the project’s design and construction will  accommodate the necessary medical equipment. However, we found that  for costly and complex facilities, VA does not have guidance for how to  involve medical equipment planners during each construction stage of a  major hospital.
VA has sometimes relied on VHA staff to make medical equipment  planning decisions. For example, in Orlando, VA relied on local VHA staff  with limited experience in procuring medical equipment for a new  hospital. Orlando VA officials recommended hiring a consulting firm to  assist them with various aspects of medical equipment planning,  procurement, delivery, and installation in 2011. However, VA was unable  to implement this recommendation until fiscal year 2012, at which point  the design decisions had already been made. Because the medical  equipment specifications changed several times, construction design  documents for various parts of the medical facility had to be changed.  Consequently, the facility also had to be altered, and some previously  constructed areas required minor demolition to accommodate the medical  equipment. These and other alterations led to cost increases of at least  $14 million in addition to schedule delays. In other areas of the facility,  medical equipment issues forced VA to suspend construction until the  issues were resolved.
VA officials recognized in Orlando that the procurement of medical  equipment was not successful because there was no guidance on  determining the need for medical equipment procurement when building a  major new facility. CFM headquarters and Orlando officials acknowledged  that these problems might have been avoided if experienced medical  equipment planners were used to coordinate the construction schedule  and select medical equipment. They also agreed that a medical  equipment planner is needed for future large scale projects. Procedures  supporting the timely use of medical equipment planners—so that design  decisions are coordinated with construction—would help ensure that  medical equipment specifications such as space and electrical needs are  included in planning and construction efforts and help to avoid added cost  and construction delays later.
section_title: Sharing Information on the Roles and Responsibilities of VA’s Construction- Management Staff
paragraphs: Construction of large medical facilities involves numerous staff from  multiple VA organizations. For example, VA staff involved in the projects  we visited included local on-site officials and staff from VA’s regional and  central office. In its 5-year Strategic Plan, VA identified the need for each  organizational unit, including CFM, to review its spans of control and  establish clear roles and responsibilities and make changes where  necessary. Additionally, CFM stated that during the construction  process, effective communication is essential and must be continuous  and involve an open exchange of information among VA staff and other  key stakeholders.and offices involved in the construction management process.
section_title: Conclusions
paragraphs: VA has made improvements in its management of major medical-facility  construction projects, but many of these projects continue to experience  cost increases and schedule delays similar to those we reported in 2009.  Although we recognize that some cost increases and schedule delays  result from factors beyond VA’s control, our review of VA’s four largest  projects indicates that weaknesses in VA’s construction management  processes also contributed to cost increases and schedule delays. The  Construction Review Council has also identified a number of these same  weaknesses, including in particular a review process that hinders the  timely processing of change orders. VA is considering the council’s  recommendations for addressing construction management weaknesses.
As part of its action involving the council’s recommendations, VA is  confronted with addressing a lack of guidance and procedures for some  important aspects of construction management, specifically, guidance  and procedures for using medical equipment planners on projects, clearly  communicating the roles and responsibilities of VA construction staff to  stakeholders, and streamlining the change-order process. Such guidance  would help institutionalize the types of changes that the Construction  Review Council and others say are needed in VA’s construction  management process. Without guidance on which projects require  medical planners and at which the stage they should be used, VA could  continue to experience delays and cost increases resulting from late-  stage design changes to accommodate medical equipment. Furthermore,  the lack of clear guidance delineating the roles and responsibilities of VA  staff for managing each aspect of construction projects, can make it  difficult for VA and contractors to communicate clearly, which also  contributes to schedule delays and cost increases. Moreover, while the  Construction Review Council has identified opportunities to streamline  VA’s multi-layered change-order process, VA has yet to be develop  guidance to ensure that change orders are approved in a prompt manner  to avoid project delays. Given that VA is currently involved in 50 major  medical-facility construction projects, including four large medical centers,  such guidance could help to strengthen the management of these  projects.
section_title: Recommendations for Executive Action
paragraphs: To improve the management of VA’s major construction projects, we  recommend that the Secretary of Veterans Affairs should take the  following three actions: develop and implement agency guidance for assignment of medical  equipment planners to major medical construction projects; develop and disseminate procedures for communicating, to  contractors, clearly defined roles and responsibilities of VA officials  who manage major medical-facility projects, particularly the change-  order process; and  issue and take steps to implement guidance on streamlining the  change-order process based on the findings and recommendations of  the Construction Review Council.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to VA for review and comment.  In its  written comments, VA concurred with our recommendations, generally  agreed with our conclusions and discussed actions underway or planned  to implement the recommendations. However, VA stated that it had  significant concerns with how we portrayed medical center cost and  scheduling issues, particularly with respect to the table in the draft report  showing cost increases and schedule delays for these projects. In our  analysis of changes in cost and schedules for these projects, we  considered the initial cost estimates and completion dates to be those  that were first submitted to Congress.  Cost estimates at this stage should  be as accurate and credible as possible because Congress uses these  initial estimates to consider authorizations and make appropriations  decisions. We used a similar methodology to estimate changes to cost  and schedule of construction projects in a previous report issued in 2009  on VA construction projects. VA has been working to improve its initial  cost estimates, as noted in our 2009 report. In its comments, VA stated  that designs, initial cost estimates, and initial completion dates are  developed several years before Congress appropriates funds and the  construction contract is awarded, actions that then determine the cost and  completion date.  According to VA, a more accurate depiction of the  project’s cost would be to make a comparison between the total  appropriations received and the current total estimated cost, and a more  accurate depiction of the schedule would be to compare the initial  completion date established at the award of the construction contract with  the estimated or actual completion date. In its letter, VA provided  information on the changes to cost and schedules for the four projects  after the final congressional appropriation was received and the  construction contract was awarded. By using the methodology VA  suggests, the schedule delays and cost increases are significantly lower.  VA asked that we include this new information to supplement the  information on cost and schedule changes already included in the report.
We believe that the methodology we used in this and our prior report on  VA construction provides an accurate depiction of how cost and  schedules for construction projects can change from the time they are  first submitted to Congress.  It is at this time that expectations are set  among stakeholders, including the veterans community, for when projects  will be completed and at what cost.  As noted earlier, we recognize that  many factors can affect cost and schedules over the life of a project and  that some of these factors, including when appropriations are actually  received, are beyond VA’s control.  We also recognize that VA and the  contractors develop more accurate cost estimates and schedules after  Congress appropriates funds and contracts are awarded, and the  likelihood increases that cost and schedule risks are either mitigated or  realized.  We therefore incorporated information in the report indicating  how cost increases and schedule delays for the four projects have  decreased in the stages after VA received appropriations.  In addition, VA  suggested a number of technical corrections which we incorporated as  appropriate. VA’s letter is reprinted in appendix IV.
As agreed with your office, 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, the Secretary of Veterans Affairs,  and other interested parties. In addition, the report will be available at no  charge on GAO’s website at http://www.gao.gov.
If you or your staff have any questions regarding 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 key contributions to  this report are listed in appendix V.
section_title: Appendix I: Scope and Methodology
paragraphs: To determine changes to costs, schedule, and scope for selected  Department of Veterans Affairs’ new major medical-facility projects, we  obtained and analyzed data that VA provided on the status of VA’s 50  active major medical-facility projects as of November 2012, including the  original cost estimates and completion dates and the project’s current  status. The data included a short project description, project location, the  original and current total estimated cost of the project, the original and  current completion date, and the type of acquisition strategy selected for  the project. We analyzed the current cost and completion dates to  determine any increases in costs and the extent to which projects may  have exceeded time allotted and summarized the results. We also  collected VA information on reasons for cost increase and schedule  changes to VA projects based on scope changes. We assessed the  reliability of the data through interviews with knowledgeable VA officials  and a review for completeness and any unexpected values. We  determined that the data was sufficiently reliable for the purpose of this  report. To identify the reasons for cost, schedule, and scope changes in  VA’s construction projects, we interviewed VA’s headquarters officials  regarding the status of all major medical-facility projects and examined  project documents and interviewed on-site managers and engineers. We  selected the four most expensive ongoing major medical-facility  construction projects based on cost, current status of the project, and  type of facility, located in Denver, Colorado; Orlando, Florida; New  Orleans, Louisiana; and Las Vegas, Nevada. We obtained specific  information from VA’s ongoing major medical-facility projects as of  November 2012. We visited the construction sites in Denver, Orlando,  and New Orleans to talk to officials on site to determine the reasons for  changes in costs and schedules. We updated our prior work on the Las  Vegas facility with information on the project completion costs and the  change-order process.and cannot be generalized to sites agency-wide.
The information from our site visits is illustrative  To identify which actions VA has taken to improve its construction  management, and any opportunities that exist for VA to further improve its  management, we reviewed VA’s management practices of construction  projects at the three locations we visited and interviewed VA  headquarters’ officials from the Veterans Health Administration, Office of  Construction and Facilities Management, Office of General Counsel, as  well as project managers and senior resident engineers at the  construction sites we visited. We reviewed and analyzed construction  documents, agency policy and guidance, previous VA reports, and  interviewed officials from VA, veterans support organizations, architecture  and engineering firms, general contractor construction firms, and  construction management firms. We also reviewed the Federal  Acquisition Regulations, VA’s Strategic Plan, and GAO past reports. In  addition, we interviewed officials from the Naval Forces Engineering  Command and the U.S. Army Corps of Engineers to discuss their current  construction practices in major medical-facility projects.
We conducted this performance audit from April 2012 to April 2013 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.
section_title: Appendix II: Changes in Cost for Department of Veterans Affairs Major Medical-Facility Projects
paragraphs: In November 2012, VA provided GAO with data for its 50 ongoing major  medical-facility projects. The term “major medical-facility project” is  defined as “a project for the construction, alteration, or acquisition of a  medical facility involving the total expenditure of more than $10 million.”  We calculated the percentage change in cost by using the initial total  estimated costs, which were first submitted to Congress and total  estimated costs, as reported by VA. Included is a summary of cost data  arranged in descending order by the percentage change for each of VA’s  50 major medical-facility projects.
section_title: Appendix III: Changes in Schedule for Department of Veterans Affairs Major Medical-Facility Projects
paragraphs: In November 2012, VA provided GAO with data for its 50 ongoing major  medical-facility projects. The term “major medical-facility project” is  defined as “a project for the construction, alteration, or acquisition of a  medical-facility involving the total expenditure of more than $10 million.”
We calculated the “total months delayed” column by counting the months  from the initial estimated completion date, which was first submitted to  Congress, to the current estimated completion date, as reported by VA.  According to VA, the dates in the initial estimated completion dates are  from the initial budget prospectus, which assumed receipt of full  construction funding within 1 to 2 years after the budget submission.  In  some cases, construction funding was phased over several years and the  final funding was received several years later. Included is a summary of  schedule data arranged in descending order by the number of months  delayed for each of VA’s 50 major medical-facility projects.
section_title: Appendix IV: Comments of the Department of Veterans Affairs
paragraphs: VA sent our agency  comments 3/29/13.
subsections: section_title: GAO Contact
paragraphs: Lorelei St. James, (202) 512-2834 or stjamesl@gao.gov.
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Ed Laughlin, Assistant Director;  Nelsie Alcoser; George Depaoli; Raymond Griffith; Joshua Ormond; Amy  Rosewarne; James Russell; Sandra Sokol; and Crystal Wesco made key  contributions to this report.