VA Health Care: Actions Needed to Control Major Construction Costs

Pursuant to a congressional request, GAO reviewed the Department of Veterans Affairs' (VA) management of its major construction program, focusing on whether VA: (1) uses reasonable methods to identify construction needs and set funding priorities; (2) construction projects exceed program needs; and (3) uses sound project cost estimates for construction funding. GAO found that: (1) VA uses reasonable methods to identify needed construction and renovation projects and set funding priorities, but it does not consider veterans' income and insurance coverage, or lower-cost alternatives such as use of state and community resources and joint ventures with the Department of Defense (DOD); (2) a universal health care system could reduce the demand for VA inpatient care and create excess hospital capacity, which could be converted to nursing home beds at a lower cost than new construction; (3) VA construction projects often exceed program needs because of VA overestimates, excess space, or numerous costly design changes; (4) VA nursing home construction costs are higher than private-sector costs because VA adapts the facilities' designs to fit on medical center grounds and designs the facilities to meet hospital criteria rather than nursing home criteria; and (5) appropriating construction funds for projects before design completion can lead to unnecessary spending or insufficient funding.

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.

VA CONSTRUCTION: Additional Actions Needed to Decrease Delays and Lower Costs of Major Medical-Facility Projects

" 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. "

The Dept. of Vet. Affairs (VA) operates one of the largest health care systems in the country. As of Aug. 2009, VA's Veterans Health Admin. (VHA) had 32 major ongoing construction projects with a total cost of about $6.1 billion and average cost per project of about $191 million. Some of these projects were initiated as part of VA's Capital Asset Realignment for Enhanced Services process, which was a comprehensive assessment of VHA's capital asset requirements. This report: (1) describes how costs and schedules of current VHA major construction projects have changed; (2) determines the reasons for changes in costs and schedules; and (3) describes the actions VA has taken to address cost increases and schedule delays. Charts and tables.