Over the past decade, VA’s system has undergone a dramatic transformation, shifting from predominantly hospital-based care to primary reliance on outpatient care. As VA increased its emphasis on outpatient care rather than inpatient care, VA 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. To address its obsolete infrastructure, VA initiated its CARES process—the first comprehensive, long-range assessment of its health care system’s capital asset requirements since 1981. CARES is intended to enhance outpatient and inpatient care, as well as special programs such as spinal cord injury, blind rehabilitation, seriously mentally ill, and long-term care through the appropriate sizing, upgrading, and location of VA facilities. Since its inception in 1999, the CARES process has reached several major milestones (see table 2). The challenge of misaligned infrastructure is not unique to VA. We identified federal real property management as a high-risk area in January 2003 because of the nationwide importance of this issue for all federal agencies. 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. But VA and other agencies face common challenges, such as competing stakeholder interests in real property decisions. In VA’s case, this involves achieving consensus among such stakeholders as veterans service organizations, affiliated medical schools, employee unions, and communities. As noted in our high-risk work, having an effective capital planning process can help to ensure that the needs of veterans are being met. Effective planning for capital investments is a very important task because large sums of taxpayer funds are spent on capital assets and because their performance affects how well agencies are able to achieve their missions, goals, and objectives. We—as well as Congress and the Office of Management and Budget (OMB)—have all identified the need for effective capital planning. (App. III outlines a set of effective capital planning principles that we, as well as OMB, have identified.) One of these principles is for agencies to evaluate a wide range of alternatives before choosing to purchase or construct a capital asset. OMB guidance also emphasizes the importance of evaluating alternatives. Specifically, OMB guidelines state that when evaluating capital assets, a comparison of alternatives is critical for ensuring that the best alternative is selected. In its guidance, OMB challenges decision makers to consider the different ways in which various functions, most notably health care service delivery in VA’s case, can be performed. In this regard, OMB labeled the development of alternatives the single most important element in that process. In developing the model for analyzing VA’s health care demand and making recommendations for ways to meet that demand, the CARES process provided VA with a blueprint that drives VHA’s capital planning process. Specifically, as part of the CARES process, VA adapted an actuarial model that it used to project VA budgetary needs. Modifications made for the CARES process enabled the model to produce 20-year forecasts of the demand for services. Additional modifications allowed for more accurate assessments of veterans’ reliance on VA services, market penetration rates, and adjustments for capacity. Using information from the model, VA could determine current supply and identify current and future gaps in infrastructure capacity. VA continues to use this model to update its workload projections, which are used to develop the annual budget request. In addition, the CARES process serves as the foundation for VHA’s capital budget process. For example, the first step in VHA’s capital budget process is for networks to submit proposals that identify capital projects that will address service or infrastructure gaps identified in the CARES process to the department. Additionally, in its fiscal year 2008 budget submission, VA requested $560 million for VHA major construction projects and $180 million for minor construction projects— all of which will be devoted to the continuation of CARES. The CARES process is the latest in a series of initiatives to improve VA’s capital planning process. In 1997, VA started efforts to develop a systemwide, integrated capital planning process. According to VA, the fundamental goal of the new process was to ensure that all major capital investment proposals, including high-risk and mission-critical projects, were based upon sound business and economic principles; aligned with the overall strategic goals and objectives of VA; addressed the Secretary’s priorities; and supported the President’s Management Agenda, among other things. In 2001, VA took steps to further enhance its capital planning process by creating the Office of Asset Enterprise Management (OAEM), which is responsible for developing capital asset policy, providing guidance and oversight, and ensuring a consistent and cohesive agency approach to capital asset acquisition, management, and disposal. One of the objectives of creating this departmental-level office was to strengthen VA’s capital planning process and ensure the coordination of planning and investment decisions throughout the department. To streamline the process for developing capital investment proposals, OAEM developed a new process that requires officials to submit and review investment proposal data in increasing levels of detail. The goal of this streamlined approach was to reduce the laborious data collection associated with developing proposals that are not funded and allow proposal developers more time to provide senior management with the most accurate cost and schedule data. Through the CARES process, VA gained the tools and information needed to plan capital investments. Despite VA’s past efforts and progress, VA continued to lack current information on the condition of all VA’s facilities and information on what services veterans would need—and where—in the future. As part of the CARES process, VA modified an actuarial model that it used to project VA budgetary needs. According to VA, the modifications enabled the model to produce 20-year forecasts of the demand for services and provided for more accurate assessments of veterans’ reliance on VA services and capacity gaps, and market penetration rates. The information provided by the model allowed VA to identify service needs and infrastructure gaps, in part, by comparing the expected location of veterans and demand for services in years 2012 through 2022 with the current location and capacity of VA health care services within each network. In addition to modifying the model, facility condition assessments were conducted on all of VA’s real property holdings as part of the CARES process. This provided VA information about the condition of its facilities, including infrastructure needs. VA continues to use the tools developed through CARES as part of its capital planning process. For example, VA conducts facility condition assessments for each real property holding every 3 years on a rotating basis. In addition, VA uses the modified actuarial model to update its workload projections each year, which are used to inform the annual capital budget process. The CARES process serves as the foundation for VHA’s capital planning efforts. As shown in figure 1, the first step in VHA’s capital budget process is for networks to submit conceptual papers that identify capital projects that will address service or infrastructure gaps identified in the CARES process and as updated through the incorporation of the CARES forecasting model into the strategic and capital planning process. The Capital Asset Review Board reviews, scores, and ranks these papers. Over 50 CARES conceptual papers and business case applications were evaluated based on criteria approved by the Secretary for the fiscal year 2008 budget process. The Capital Asset Review Board identifies the proposals that will be sent forward for additional analyses and review, and may ultimately be included as part of VA’s budget request. According to VA officials, all capital projects must be based upon the CARES planning model to advance through VHA’s capital planning process. On the basis of CARES-identified infrastructure needs and service gaps, VA identified more than 100 major capital projects in 37 states, the District of Columbia, and Puerto Rico. In addition to these projects, the CARES planning model identified service needs and infrastructure gaps at other locations throughout the VA system. These service needs and gaps could translate into other proposed major or minor capital projects in the future. VHA’s capital plan and budget only contain projects identified through the CARES planning model. According to VA, the capital plan identifies priority projects that will improve the environment of care at VA medical facilities and ensure more effective operations by redirecting resources from maintenance of vacant and underused buildings and reinvesting them in veterans’ health care. The capital plan identifies 27 priority CARES projects for major construction funding for fiscal year 2008. In the accompanying fiscal year 2008 budget submission, VA requested $560 million for VHA major construction projects and $180 million for minor construction projects—all of which will be devoted to the continuation of VA’s efforts to address infrastructure needs and service gaps identified through the CARES process. According to VA’s fiscal year 2008 budget submission, the major construction funding provides for the construction of 3 new medical facilities, consolidation of services in Pittsburgh, and a new spinal cord injury center in Syracuse, New York, as well as various other projects, such as security upgrades, hazardous waste abatement, and design work. The minor construction funding provides for constructing, altering, extending, and improving VHA facilities where the estimated cost is $10 million or less. According to VA’s capital budget, this funding will enable VA to implement the CARES proposals that can be accomplished through the minor construction program. The DNCP, the CARES Commission, and the Secretary considered a range of capital asset alignment alternatives throughout the CARES process. The most frequently considered alternatives included renovating or expanding existing sites, conducting additional analysis, and changing services. The least frequently considered alignment alternatives included closing facilities, collaborating with medical universities, expanding or using existing CBOCs, and utilizing telemedicine and telehealth. Although a range of alternatives were considered, there was relatively consistent agreement among the DNCP, the CARES Commission, and the Secretary as to which were the best alternatives to pursue.