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. Costs Have Increased for 18 of the 32 Construction Projects and Schedules for 11 Construction Projects Have Been Delayed

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. Several Projects Have Experienced Cost Increases

Eighteen of the 32 ongoing VHA major construction projects have  experienced cost increases. Five projects have experienced a cost increase of more than 100 percent. We found that VA reduced the scope of some  projects so that the projects would not exceed their budget. In addition to those projects  that did not experience a cost increase, one project experienced a cost  decrease. Some Cost Estimates Were Not Thorough

The CARES process required VA to quickly provide initial cost estimates  for about 30 major construction projects. According to VA, a number of  VA staff worked to produce these initial estimates, including staff that had  limited cost estimating expertise. For example, VHA officials  in Syracuse told us that they had about 6 weeks to prepare their initial  estimate for a new spinal cord injury center, which they did by using  analogous estimating techniques such as the cost-per-square foot of new  construction in Syracuse. Some Cost Estimates and Schedules Were Affected by Scope Changes

In two of our case studies, the scope of the project changed substantially  after VA submitted its estimate to Congress. VA Is Working to Improve Estimates but Could Better Assess Risks to Costs and Schedules

VA has developed a new process for determining its initial estimates that  allows for more time between VA approving a project and submitting a  cost and schedule estimate to Congress. VA Does Not Have an Integrated Master Schedule for Major Construction Projects

VA does not require an integrated master schedule for major construction  projects that encompasses both VA and contractor effort for all phases of  the entire project and shows the relationships between various project  phases (such as design, construction, and when the project is “activated”  for occupancy and use). Such a risk analysis should include  a determination of the largest risks to the project, a plan for mitigating  those risks, and an estimate of when the project will be finished if the risks  are not mitigated. Appendix I: Scope and Methodology

In this report, we examined: (1) how costs and schedules of current  Veterans Affairs (VA) major medical construction projects have changed  since they were first submitted to Congress, (2) the reasons for cost and  schedule changes in VA’s major medical construction projects, and (3) the  actions VA has taken to address cost increases and schedule delays as well  as the challenges VA faces in managing its major medical construction  program. Projects were estimated to cost $75 million or more. Conducting a schedule risk analysis: A schedule risk analysis uses a  good critical path method schedule and data about project schedule risks  as well as Monte Carlo simulation techniques to predict the level of  confidence in meeting a project’s completion date, the amount of time  contingency needed for a level of confidence, and the identification of  high-priority risks. Reasons for the Project

VA initiated the medical center project under the Capital Asset  Realignment for Enhanced Services (CARES) process between 2003 and  2004 because, according to VA officials, the increase in the number of Iraq  war veterans needing medical care combined with the growth in the Las  Vegas area supported building a large medical center. Project Cost

The cost of the medical center has increased from an initial estimate of  $286 million in 2004 to a current estimate of $600.4 million (an increase of  110 percent).
Why GAO Did This Study

The Department of Veterans Affairs (VA) operates one of the largest health care systems in the country. As of August 2009, VA's Veterans Health Administration (VHA) had 32 major ongoing construction projects with an estimated 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 (CARES) process, which was a comprehensive assessment of VHA's capital asset requirements. In response to a congressional request, GAO (1) described how costs and schedules of current VHA major construction projects have changed, (2) determined the reasons for changes in costs and schedules, and (3) described the actions VA has taken to address cost increases and schedule delays. To do its work, GAO reviewed construction documents, visited three construction sites, and interviewed VA officials.

What GAO Found

While about half of the 32 major ongoing construction projects are within their budget, 18 projects have experienced cost increases and 11 have experienced schedule delays since they were first submitted to Congress. Five projects have experienced a cost increase of over 100 percent. For example, the cost of a new medical center in Las Vegas rose from an initial estimate of $286 million to over $600 million, an increase of about 110 percent. Thirteen projects have experienced cost increases of between 1 and 100 percent. In addition, 11 projects have experienced schedule delays, 4 of which are more than 24 months. There are several reasons for construction project cost increases and schedule delays, including VA preparing initial cost estimates that were not thorough, significant changes to project scope after the initial estimate was submitted, and unforeseen events such as an increase in the cost of construction materials. According to VA officials, VA prepared numerous estimates during the CARES process, and some of these estimates used rudimentary estimating techniques such as average cost-per-square-foot and were completed by VA staff that did not have cost estimating expertise. The scope of some projects changed after VA submitted an estimate to Congress, which increased the projects' costs. For example, the scope for the original design for a new medical center in Las Vegas did not fully account for the amount of medical services the center would need to provide. As a result, the original estimate of $286 million rose to over $600 million. VA has taken steps to improve initial construction project cost estimates, but could better assess the risks to costs and schedules. VA plans to prepare more comprehensive estimates after approving projects and before submitting them to Congress. It is not clear how effective this new process will be, but it could improve VA's estimates. While VA contractors follow construction scheduling procedures that generally meet best practices, VA does not conduct cost or schedule risk analyses, which use statistical techniques to predict risks that can lead to cost increases and schedule delays. Thus, VA cannot quantify the largest risks to a project or mitigate those risks. For example, GAO conducted a schedule risk analysis for a medical center in Las Vegas and found that there is a 50 percent chance that the project won't be finished until more than 6 months after its estimated completion date. VA also does not require an integrated master schedule that includes VA and contractor efforts for all project phases, which can be critical to a project's success.