	Cost Increases and Schedule Delays at the Four Largest Projects Occurred for a Variety of Reasons

		Cost Increases and Schedule Delays

In our April 2013 report, we found that costs increased and schedules  were delayed for all four of VA’s largest medical-facility construction  projects, when comparing November 2012 construction project data with  the cost and schedule estimates first submitted to Congress. Since our  2013 report, these projects have experienced further increases and  delays. For example, the cost  for the New Orleans project increased by nearly $40 million. The delays now  range from 14 to 86 months. For instance, the delays in Orlando have  extended from 39 months to 57 months. Reasons for Cost Increases and Schedule Delays and Related Scope Changes

In our April 2013 report, we found that different factors contributed to cost  increases and schedule delays at each of the four locations we reviewed:
Changing health care needs of the local veteran population  changed the scope of the Las Vegas project. Decisions to change plans from a shared university/VA medical  center to a stand-alone VA medical center affected plans in  Denver and New Orleans. Unanticipated events in Las Vegas, New Orleans, and Denver  also led to delays. VA Took Steps to Improve Its Construction Management Practices, But Did Not Implement Changes Early Enough to Impact Denver Project

In our April 2013 report, we found that VA had taken steps to improve its  management of major medical-facility construction projects, including  creating a construction-management review council. In April 2012, the  Secretary of Veterans Affairs established the Construction Review  Council to serve as the single point of oversight and performance  accountability for the planning, budgeting, executing, and delivering of  VA’s real property capital-asset program. In our 2013 report we also found that VA had taken steps to implement a  new project delivery method—called the Integrated Design and  Construction (IDC) method. In response to the construction industry’s  concerns that VA and other federal agencies did not involve the  construction contractor early in the design process, VA and the Army  Corps of Engineers began working to establish a project delivery model  that would allow for earlier contractor involvement in a construction  project, as is often done in the private sector. We found in 2013 that VA did not implement IDC early enough in Denver  to garner the full benefits. VA Reports Taking Actions to Implement GAO Recommendations

In our April 2013 report we identified systemic reasons that contributed to  overall schedule delays and cost increases, and recommended that VA  take actions to improve its construction management of major medical  facilities: including (1) developing guidance on the use of medical  equipment planners; (2) sharing information on the roles and  responsibilities of VA construction project management staff; and (3)  streamlining the change order process. VA has implemented our recommendations;  however, the impact of these actions may take time to show  improvements, especially for ongoing construction projects, depending on  several issues, including the relationship between VA and the contractor. Since completing our April 2013 report, we have not reviewed the extent  to which these actions have affected the four projects, or the extent to  which these actions may have helped to avoid the cost overruns and  delays that occurred on that specific project. Thus,  we recommended that the Secretary of VA develop and implement  agency guidance to assign medical equipment planners to major medical  construction projects. This can cause confusion for contractors and architectural and  engineering firms, ultimately affecting the relationship between VA and  the general contractor. Participants from VA’s 2011 industry forum also  reported that VA roles and responsibilities for contracting officials were  not always clear and made several recommendations to VA to address  this issue. Therefore, in our 2013 report, we recommended that VA  develop and disseminate procedures for communicating—to  contractors—clearly defined roles and responsibilities of the VA officials  who manage major medical-facility projects, particularly those in the  change-order process. Streamlining the Change- Order Process

On August 29, 2013, VA issued a handbook for construction contract  modification (change-order) processing which includes milestones for  completing processing of modifications based on their dollar value.
Why GAO Did This Study

The VA operates one of the nation's largest health care delivery systems. In April 2013, GAO reported that VA was managing the construction of 50 major medical-facility projects at a cost of more than $12 billion. This statement discusses VA construction management issues, specifically, (1) the extent to which the cost, schedule, and scope for four selected major medical-facility projects has changed and the reasons for these changes, (2) actions GAO reported that VA had taken since 2012 to improve its construction management practices, and (3) VA's response to GAO's recommendations for further improvements in its management of these construction projects.
This statement is based on GAO's April 2013 report ( GAO-13-302 ) and May 2013 ( GAO-13-556T ) and April 2014 ( GAO-14-548T ) testimonies. GAO included selected updates on VA projects--”located in Denver, Colorado; Las Vegas, Nevada; New Orleans, Louisiana; and Orlando, Florida--and documentation obtained from VA in April 2014 and January 2015.

What GAO Found

In April 2013, GAO found that costs substantially increased and schedules were delayed for Department of Veterans Affairs' (VA) largest medical-facility construction projects, located in Denver, Colorado; Las Vegas, Nevada; New Orleans, Louisiana; and Orlando, Florida. As of January 2015, in comparison with initial estimates, the cost increases for these projects ranged from 66 percent to 144 percent and delays ranged from 14 to 86 months. Since the 2013 report, some of the projects have experienced further cost increases and delays. For example, the cost for the New Orleans project increased by nearly $40 million, and delays at the Orlando project has extended from 39 months to 57 months. Several factors, including changes to veterans' health care needs, site-acquisition issues, and a decision in Denver to change plans from a medical center shared with a local medical university to a stand-alone VA medical center, contributed to increased costs and schedule delays.
In its April 2013 report, GAO found that VA had taken some actions since 2012 to address problems managing major construction projects. Specifically, VA established a Construction Review Council in April 2012 to oversee the department's development and execution of its real property programs. VA also took steps to implement a new project delivery method, called Integrated Design and Construction, which involves the construction contractor early in the design process to identify any potential problems early and speed the construction process. However, in Denver, VA did not implement this method early enough to garner the full benefits of having a contractor early in the design phase.
VA stated it has taken actions to implement the recommendations in GAO's April 2013 report. In that report, GAO identified systemic reasons that contributed to overall schedule delays and cost increases at one or more of four reviewed projects and recommended ways VA could improve its management of the construction of major medical facilities. In response, VA has
issued guidance on assigning medical equipment planners to major medical facility projects who will be responsible for matching the equipment needed for the facility in order to avoid late design changes leading to cost increases and delays;
developed and disseminated procedures for communicating to contractors clearly defined roles and responsibilities of the VA officials who manage major medical-facility projects to avoid confusion that can affect the relationship between VA and the contractor; and
issued a handbook for construction contract modification (change-order) processing which includes milestones for completing processing of modifications based on their dollar value and took other actions to streamline the change order process to avoid project delays.
VA has implemented GAO's recommendations; however, the impact of these actions may take time to show improvements, especially for ongoing construction projects, depending on several issues, including the relationship between VA and the contractor.

What GAO Recommends

In its April 2013 report, GAO recommended that VA (1) develop and implement agency guidance for assignment of medical equipment planners; (2) develop and disseminate procedures for communicating to contractors clearly defined roles and responsibilities of VA officials; (3) issue and take steps to implement guidance on streamlining the change-order process. VA implemented GAO's recommendations.