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. 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.) 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.