Most VA major construction projects are for VHA medical facilities. To determine potential new major construction projects, VHA officials identify gaps in health service during their strategic planning process, and VHA officials in field offices develop capital needs plans to fill these service gaps. These capital plans are then reviewed by a Capital Investment Panel that gives each proposed project a score based on a number of factors, including, among other things, the plan’s effect on health care, safety, and energy use. The Capital Investment Panel then produces a priority list of projects, and the Secretary of VA determines how many projects to request for funding each year and works with the Office of Management and Budget (OMB) to produce VA’s part of the President’s budget. Some large projects, such as the construction of a new medical center, can be divided into distinct phases and funded over several years. When the President submits VA’s budget to Congress, the budget includes a prospectus for each proposed major construction project. This prospectus includes, among other things, a cost estimate for the project that VA staff has assembled. In addition, some prospectuses include an estimated month and year that the project will be completed, although this is not required by law. This prospectus is the initial estimate that VA sends to Congress. Congress uses this information to authorize and appropriate funds for the project. In 1999, we reported that with better management of its large, aged capital assets, VA could significantly reduce the funding used to operate and maintain underused, unneeded or inefficient properties. We further noted that the savings could be used to enhance health care services for veterans. Thus, we recommended that VA develop market-based plans for realigning its capital assets. In response, VA initiated a process known as the Capital Asset Realignment for Enhanced Services (CARES)—a comprehensive, long-range assessment of its health care system’s capital asset requirements. As a result of CARES, VA requested funding for about 30 new major construction projects in fiscal years 2004 and 2005. While 8 of these projects have been completed, many are among the 32 ongoing projects. This effort required VA to prepare initial estimates for each project over the course of a few months. In the 2 years prior to CARES, VA proposed fewer than five major construction projects each fiscal year. According to VA, the CARES process was a onetime major initiative. However, its lasting result was to provide a set of tools and processes that allow VA to continually determine the future resources needed to provide health care to our nation’s veterans. VA’s Office of Construction and Facilities Management (CFM) is responsible for administering major construction projects. Once a project has been authorized by law and Congress appropriates funds for it, CFM staff contracts with an architect/engineering (A/E) firm to design the project. The A/E firm develops an architectural design for the project and also produces a cost estimate for the entire project. This cost estimate is generally more detailed and accurate than the initial cost estimate. After the project has been designed, CFM then solicits bids for project construction and awards a construction contract. The construction contractor is responsible for developing a detailed construction schedule. CFM reviews the construction schedule and also assigns CFM engineers to work on-site as project managers to monitor the construction process until the facility is ready to be turned over to local VA staff. Once construction begins, the construction company is generally responsible for cost increases and schedule overruns under the terms of the fixed-price contract, unless VA and the contractor agree to a change order to the construction contract to modify scope, account for unforeseen conditions, or remedy a design error. We have reported that cost estimates that are completed when a project is in the conceptual stage have a high degree of uncertainty. As a project progresses, this degree of uncertainty decreases because risks are mitigated or realized. However, we have also found that cost estimates tend to be lower than the final project costs because program managers and decision-makers do not always consider all of the potential risks to a project and tend to be optimistic when planning a project. Cost estimating requires both science and judgment. Since answers are seldom—if ever—precise, the goal is to find a reasonable “answer.” Cost estimates are based on many assumptions, including the rate of inflation and when construction will begin. Generally, the more information that is known about a project and is used in the development of the estimate, the more accurate the estimate is expected to be. OMB’s guidance for preparing budget documents identifies many types and methods of estimating project costs. The expected accuracy of the resulting project cost estimates varies, depending on the estimating method used. While about half of VHA’s ongoing major construction projects are within budget, 18 projects have experienced cost increases and 11 have experienced schedule delays. The cost for one project has decreased since the original estimate for it was submitted to Congress. Eighteen of the 32 ongoing VHA major construction projects have experienced cost increases. When a project’s cost increases, VA can receive a new authorization and an additional appropriation from Congress. Without additional funds from Congress, VA must alter the scope of the project to ensure that the project does not exceed the amount Congress has appropriated for the project by more than 10 percent. The cost increases that these 18 projects have experienced since the estimates were initially submitted to Congress range from 2 to 285 percent. In addition to those 18 projects, the costs of 13 projects have not changed, and 1 project has experienced a cost decrease. Figure 1 shows the range of cost changes in ongoing VHA major construction projects. Five projects have experienced a cost increase of more than 100 percent. These projects include new construction and seismic corrections (which are improvements to a structure to make it less susceptible to earthquakes). For example, in its fiscal year 2006 budget submission, VA submitted a $286 million estimate to Congress for a new medical center in Las Vegas, Nevada. However, VA estimated in 2007 that the project would cost just over $600 million (an increase of 110 percent) and in 2008 the project’s authorization was modified and the project received an additional appropriation from Congress. However, VA now estimates that the project will cost about $100 million less than it anticipated. More information about the new medical facility in Las Vegas is in appendix V. Seven projects experienced a cost increase between 51 and 100 percent and six projects experienced a cost increase between 0 and 50 percent. These projects vary in size and type, from a modernization of patient wards in Georgia that is estimated to cost about $24.5 million to a new medical center in Louisiana that is estimated to cost $925 million. All projects that experienced a cost increase are listed in table 1. As of August 2009, the costs of 13 projects have not changed from their initial estimated cost. We found that VA reduced the scope of some projects so that the projects would not exceed their budget. For example, one project we visited in Cleveland, Ohio, is designed to consolidate two medical centers and construct a new facility at one of the medical centers. According to VA officials in Cleveland, VA reduced the original scope of the project by excluding room for 30 new patient beds in the new facility so that the project could stay within its budget. However, VA will make space for the 30 beds by expanding part of its existing facility through separate facility funds. VA staff made other changes to the original plan for the new facility, such as deleting balconies from patient’s rooms and using more concrete and less steel in the structure, so that the facility could be completed within budget. More information about the medical center consolidation in Cleveland is in appendix III. In addition to those projects that did not experience a cost increase, one project experienced a cost decrease. Specifically, the cost to construct a data center in West Virginia decreased from $35 million to $33.7 million, or about 4 percent. Eleven of the 32 ongoing projects are projected to be completed later than originally estimated. Even if the cost of a project has not increased, a schedule delay can lead to an increased cost to VA because CFM project managers must stay on to monitor the project as it is being built. A schedule delay can also affect veterans’ access to medical care, since VA constructs facilities where they are needed to serve the local veteran population and a schedule delay results in veterans waiting longer for the services to be available. Of the 11 projects that have experienced a schedule delay, 2 are scheduled to be completed within 2 months of their originally scheduled end date, 5 are scheduled to be completed between 12 and 24 months of their originally scheduled end date, and 4 are scheduled to be completed more than 24 months after their originally scheduled end date. These projects range from an electrical upgrade in Florida that is estimated to end less than a month after its initial estimated completion date to seismic corrections at a facility in Puerto Rico that are estimated to end about 7 years after their initial estimated completion date. The original estimated completion dates, the latest estimated completion dates, and the change in dates for those projects are in table 2. Information on the number of projects that experienced both a schedule delay and a cost increase is in appendix VI. Cost increases and schedule delays have been caused by factors that have generally occurred before construction of the project begins. These factors include initial estimates that were not thorough because they were completed quickly, scope changes that occurred after the initial estimate, and unforeseen events and market conditions such as a rise in construction costs. The CARES process required VA to quickly provide initial cost estimates for about 30 major construction projects. Specifically, in 2004 VA had about 3 months to provide initial cost estimates to Congress so that Congress could consider authorizing these projects and appropriating funds for them in fiscal years 2004 and 2005. According to VA, a number of VA staff worked to produce these initial estimates, including staff that had limited cost estimating expertise. The 30 projects included three new large medical centers in Las Vegas, Nevada; Denver, Colorado; and Orlando, Florida.