VA learns hard lessons from hospital projects

The Department of Veterans Affairs (VA) has taken a series of steps to tighten its management and budgeting processes related to new hospital construction after the VA experienced a series of budget overruns and delays with major projects.

The Government Accountability Office (GAO) reported substantial cost overruns and schedule delays in four VA projects in a report "Additional Actions Needed to Decrease Delays and Lower Costs of Major Medical-Facility Projects" issued in April.

Costs substantially increased and schedules were delayed for VA's largest medical center construction projects in Denver, Las Vegas, New Orleans and Orlando, Fla., the GAO states in its report.

As of November 2012 the cost increases for the four projects totaled nearly $1.5 billion and delays for the projects ranged from 14 to 74 months, according to the report. To prevent reccurrences of the problems, the GAO recommended that VA:

• 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;

• 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.

In commenting on the GAO draft report, VA said using the initial completion date from when the construction contract was issued would be more accurate than using the initial completion date provided to Congress and that budgets change as the scope of projects expands.

The GAO responded by saying that using the initial completion date would not account for how VA managed these projects prior to the award of the construction contract.

GAO admits that several factors, including changes to veterans' health care needs and site-acquisition issues, contributed to increased costs and schedule delays for the projects and are out of the VA's control. Still, the VA started taking steps to improve control of its construction projects before the GAO report came out.

Stella Fiotes, executive director of the VA's office of construction and facilities management, says that the agency has learned valuable lessons in planning and executing its projects. It now provides more oversight and management regarding costs, scheduling and scope related to new medical facility construction projects.

"I think that is a lesson learned by the agency because I think it did not plan well enough in the past. It didn't determine and define its requirements well enough at the beginning of the planning process for each project," Fiotes says.

To fix that problem, the VA established a Construction Review Council in June 2012 to oversee the department's development and execution of its real property programs. Another change calls for issuing budget requests for construction funds only after reaching a minimum of 35 percent design stage of a project that has been clearly identified and defined.

The VA has launched a strategic capital investment planning process that is based on a data-driven strategy that will define project requirements based on projections of patient types for each locale.

"We're getting all that data first, analyzing that as the basis for making decisions on where we're going to build, what we're going to build and how big," she says.

More oversight is on the way, too, for getting approval for changes in projects, she adds. "We talked about change control, putting in place VA-wide at a headquarters level a more disciplined process for making major changes to the scope of a given project. So then, it's not done regionally at the discretion of the medical center director or the network director."

Even though some 50 health care facility construction and renovation projects totaling about $12 billion in costs are in various phases right now, funding for construction projects through 2014 is limited, she says.