Searching for a Better Way to Build Big Veterans' Hospitals
With millions of veterans in need of care, the U.S. Dept. of Veterans Affairs (VA) could have been forgiven the inevitable slipups in building out its already big portfolio of hospitals, clinics and treatment facilities.
In the past two years, as differences with contractors on big medical centers in Aurora, Colo., and Orlando, Fla., have spun into noisy feuds, recriminations have replaced understanding.
Should Congress respond by taking control of big medical-center construction away from the VA?
Some legislators already are trying to get it done.
Rep. Mike Coffman (R-Colo.), a veteran's-affairs committee member whose district includes Aurora, says the VA should stick to health care and wants to call in the U.S. Army Corps of Engineers to manage building. The veterans' agency has been formally and gradually working more closely with the Corps since 2007.
The problems at the VA are reminiscent of difficulties faced over the years by other federal agencies. The US Dept. of Energy oversees hazardous- and nuclear-waste cleanup projects that have dragged on for years. The US General Services Administration has experienced a number of misadventures building new federal courthouse complexes.
On these projects, scopes often have proved hard to pin down, and the costs to complete end in guesswork and, eventually, claims.
"Cost and schedule overruns on federal construction projects are not isolated to the VA," wrote Mia Steinle, an investigator for the Project on Government Oversight, a watchdog organization, in a blog post last year.
Congressman: Call in the Corps
Coffman believes the Corps is more suited to managing the task. "The core responsibility of the VA," Coffman said in a statement, "is to deliver the health care and the benefits that our men and women who have served in the military have earned through their sacrifices in defense of our country."
Another idea is to require the Corps to place a project manager on each VA hospital center or other big project.
But a top Corps official says that isn't a formula for success.
"We know that's not an effective way for us to operate—for the VA or the Corps," says Lloyd Caldwell, Corps director of military programs. "The success of major-complex projects depends on the entire enterprise and capacity and leadership, not one or two individuals."
Aurora and Orlando are two of four new VA hospitals, with facilities also in Las Vegas and New Orleans. The U.S. Government Accountability Office last year reported that the total estimated costs of the projects had risen between 80% and 144%, and that completion dates had extended time frames, ranging from 14 to 74 months.
Of course, GAO's job is to monitor, and its 2013 report doesn't say specifically where early budget and schedule baselines were driven up by scope changes. Of 26 recently completed major medical-facility projects included in the GAO review, 13 had either come in on or below budget.
So, the issue boils down to whether the VA is a competent builder capable of learning from its errors.
Poor Appearance
Judged by its conflict on the Aurora project with Kiewit-Turner, a powerhouse prime joint-venture contractor, the VA looks bad.
The project was bid as an integrated design-and-construct (IDc) contract, similar to construction-manager-at-risk. It established separate contracts for the contractor and the designers, with the intention of bringing the former into the design process early to help manage costs.
It is the first time the VA has attempted to use the IDc delivery process.
Although 50% of the design had been finished in 2005, the construction price wasn't negotiated until 2010. The VA originally said the hospital would open in May 2015.
Kiewit-Turner disputed that date, targeting the earliest possible opening to be early 2017. Last August, Kiewit-Turner asked to leave the project—claiming the agency failed to agree on a design that could be finished for the agreed-upon $604-million price and that the VA owed it $100 million for unpaid work and materials.
In a Dec. 9 ruling, the U.S. Civilian Board of Contract Appeals essentially endorsed the joint venture's version of what had happened, adding that the VA had failed to "control its designer" and "comport itself with standards of good faith."
Problems With Design Team
To be sure, the VA also has pointed fingers at the design team—a joint venture led by Skidmore Owings & Merrill—claiming that it created an overly complex design that was too focused on aesthetics and misled the agency about whether the design could be built within budget.
The VA "may have gotten the contractor in early but not early enough," said one engineer with extensive experience in federal facilities who asked not to be quoted by name. "For one reason or another, the VA probably got caught between a designer saying, 'I can't make it any cheaper' " and a builder saying 'it can't be built any cheaper.' "
With a still unfolding controversy over delays in healthcare to veterans, the agency may not have been able to go back to Congress for more funds.
A day after the board ruling, Kiewit-Turner walked off the project and demanded immediate payment of $157 million in past costs, transference of management to the Corps from the VA and a delivery model based on federal cost-reimbursable principles.
Soon after, the joint venture agreed to tentative terms under which the Corps would provide advice to the VA but isn't in charge.
The terms were finalized and Kiewit-Turner now is back on the job.
In their appearances before congressional committees, VA officials have reassured Congress about agency capabilities. Glenn Haggstrom, principal executive director of acquisition, logistics and construction, told a House committee last year that change orders are "not unusual during the construction of any large, complex project" and that the VA had taken steps to streamline a "too cumbersome" process.
In March, Stella S. Fiotes, executive director of the VA's office of construction and facilities management, testified against a proposed bill that would have required, among other things, that the agency use a special project manager from the Corps on its New Orleans, Orlando and Aurora medical centers.
She said the new measure, which was not adopted, would "complicate, if not confuse, the project delivery process and lead to increased management and overhead."
Added Fiotes, "The way the [agency]is doing business today has changed significantly since the Orlando, Denver and New Orleans projects were undertaken."
