	Cost Increases and Schedule Delays at the Denver Facility and Other Projects

		Cost Increases and Schedule Delays

We reported in April 2013 that costs increased and schedules were  delayed considerably 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. VA provided an update in April for the total estimated cost and estimated completion date  for some of its projects. However, as of March 2015, the final phase of the Las Vegas project to expand the  emergency department is projected to be completed in the summer of 2015. By this time,  the project’s costs had increased by approximately $470 million, and  the project’s completion was delayed by 14 months. VA Took Steps to Implement New Construction Management Design Practices, But Did Not Implement Changes Early Enough to Positively Impact the 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 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 Has Taken 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.aimed at addressing issues we identified at one or more of the four sites  we visited during our review. VA has implemented our recommendations;  however, the impact of these actions may take time to reflect  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   Our recommendations were  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 each 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. Sharing Information on the Roles and Responsibilities of VA’s Construction- Management Staff

In September 2013, in response to our recommendation, VA put  procedures in place to communicate to contractors the roles and  responsibilities of VA officials who manage major medical facility  construction projects, including the change order process. This lack of clarity can cause confusion for contractors and  architectural and engineering firms, ultimately affecting the relationship  between VA and the general contractor. 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

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 costing between $10 million and hundreds of millions of dollars, including the ongoing project in Denver. This statement discusses VA construction management issues, specifically, (1) the extent to which the cost, schedule, and scope at Denver and other major medical-facility projects has changed and the reasons for these changes, (2) actions VA has 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 ), May 2013 ( GAO-13-556T ), April 2014 ( GAO-14-548T ), and January 2015 ( GAO-15-332T ) testimonies, and selected updates on VA projects—located in Denver, Colorado; Las Vegas, Nevada; New Orleans, Louisiana; and Orlando, Florida. To conduct these updates, GAO obtained documentation from VA in April 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. In comparison with initial estimates, the cost increases for these projects now range from 66 percent to 427 percent and delays range from 14 to 86 months. Since the 2013 report, some of the projects have experienced further cost increases and delays because of design issues. For example, as of April 2015, the cost for the Denver project increased by nearly $930 million, and the completion date for this project is unknown.
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 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 that 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.
While VA has implemented GAO's recommendations, 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.