	Background

VA operates one of the largest direct health-care delivery systems in the  United States. VA staff at various organizational levels participate in the construction  management process for major medical-facility projects. Contractors can also request changes  to the contract. Cost Increases and Schedule Delays at the Four Largest Projects Occurred for a Variety of Reasons

		Cost Increases and Schedule Delays

For VA’s four largest medical-facility construction projects, when  comparing November 2012 construction project data with the cost and  schedule estimates first submitted to Congress, cost increases ranged  from 59 percent to 144 percent, representing a total cost increase of  nearly $1.5 billion and an average increase of approximately $366 million  per project. The schedule delays ranged from 14 to 74 months with an  average delay of 35 months per project (see table 3). For example, the  costs for the four projects decreased or remained unchanged, and the  number of months the completion dated extended ranged from 0 to 10  months.construction contract would be more accurate for measuring schedule  delays; however, using this start date would not account for how VA    VA officials said that using the initial completion date from the  managed these projects prior to awarding the construction contract. As  discussed later in this report, VA is taking steps to address some of the  council’s other recommendations. VA has taken some action to tap the experience of other federal agencies  involved in constructing medical facilities. According to VA, in both Denver and  New Orleans, because the contractors were not involved in the design of  the projects and formulated their bids based on a design which had not  been finalized, these projects required changes that increased costs and  led to schedule delays. Given the complexity and sometimes rapidly evolving  nature of medical technology, many health care organizations employ  medical equipment planners to help match the medical equipment  needed in the facility to the construction of the facility. VA officials recognized in Orlando that the procurement of medical  equipment was not successful because there was no guidance on  determining the need for medical equipment procurement when building a  major new facility. Although we recognize that some cost increases and schedule delays  result from factors beyond VA’s control, our review of VA’s four largest  projects indicates that weaknesses in VA’s construction management  processes also contributed to cost increases and schedule delays. As part of its action involving the council’s recommendations, VA is  confronted with addressing a lack of guidance and procedures for some  important aspects of construction management, specifically, guidance  and procedures for using medical equipment planners on projects, clearly  communicating the roles and responsibilities of VA construction staff to  stakeholders, and streamlining the change-order process. Moreover, while the  Construction Review Council has identified opportunities to streamline  VA’s multi-layered change-order process, VA has yet to be develop  guidance to ensure that change orders are approved in a prompt manner  to avoid project delays. Recommendations for Executive Action

To improve the management of VA’s major construction projects, we  recommend that the Secretary of Veterans Affairs should take the  following three actions: 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; and  issue and take steps to implement guidance on streamlining the  change-order process based on the findings and recommendations of  the Construction Review Council. Agency Comments and Our Evaluation

We provided a draft of this report to VA for review and comment. GAO staff who made key contributions to  this report are listed in appendix V.

Appendix I: Scope and Methodology

To determine changes to costs, schedule, and scope for selected  Department of Veterans Affairs’ new major medical-facility projects, we  obtained and analyzed data that VA provided on the status of VA’s 50  active major medical-facility projects as of November 2012, including the  original cost estimates and completion dates and the project’s current  status. The information from our site visits is illustrative  To identify which actions VA has taken to improve its construction  management, and any opportunities that exist for VA to further improve its  management, we reviewed VA’s management practices of construction  projects at the three locations we visited and interviewed VA  headquarters’ officials from the Veterans Health Administration, Office of  Construction and Facilities Management, Office of General Counsel, as  well as project managers and senior resident engineers at the  construction sites we visited.
Why GAO Did This Study

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.

What GAO Found

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.
Although VA has taken some actions to address problems managing major construction projects, the agency has opportunities for further improvement. For example, VA established a Construction Review Council in June 2012 to oversee the department's development and execution of its real property programs. However, construction management challenges remain, and opportunities exist for VA to avoid further cost increases and schedule delays.
Given the complexity and speed of medical advances, many health care organizations have enlisted the services of experts in planning the procurement and installation of medical equipment for new medical centers. VA has used these planners at various phases for some projects and is reviewing its overall procurement of medical equipment. However, VA has not taken full advantage of medical equipment planners on all projects, in part because there is no guidance for doing so. Not using a medical equipment planner can lead to increased design and construction changes resulting in cost increases and schedule delays.
VA has not yet clearly defined roles and responsibilities of VA construction management staff, even though the agency previously identified the need to do so. GAO found that conflicting direction from VA to contractors can cause some confusion and lead to cost increases and construction delays. For example, contractor officials at one site said that VA's project manager directed them to defer the design of specific rooms until medical equipment was selected for the facility; however, VA's central office then directed the contractor to proceed with designing the rooms. This conflicting direction from VA will require the contractor to redesign the space, further expending project resources.
The federal government's regulations and VA's policy specify that changes to construction contracts, known as change orders, should be issued in a timely manner; however, VA's change-order approval process requires time-consuming reviews at multiple organizational levels that have resulted in extensive delays and increased costs for some projects. VA is reviewing options to shorten the decision cycle for approval of construction contract modifications but has not yet streamlined the process.

What GAO Recommends

GAO recommends that VA (1) develop and implement agency guidance for assignment of medical equipment planners to major medical construction projects; (2) 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; and (3) issue and 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 as discussed in this report.