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Testimony:

Before the Subcommittee on the Legislative Branch, Committee on 
Appropriations, U.S. Senate:

United States Government Accountability Office:

GAO:

For Release on Delivery Expected at 10:30 a.m. EDT:

Tuesday, May 17, 2005:

Capitol Visitor Center:

Priority Attention Needed to Manage Schedules and Contracts:

Statement of David M. Walker: 
Comptroller General of the United States:

GAO-05-714T:

Mr. Chairman and Members of the Subcommittee:

I am pleased to be here today to discuss GAO's ongoing work on the 
progress of the Capitol Visitor Center (CVC) project. As you know, we 
have been performing this work in response to requests from members of 
the Capitol Preservation Commission (CPC) and as directed by the 
Conference Report to the Omnibus Consolidated and Emergency 
Supplemental Appropriations Act, 1999 (House Conference Report 105-825) 
and the Conference Report on the Legislative Branch Appropriations Act, 
2004 (House Conference Report 108-279).

Approved in the late 1990s, CVC is the largest project on the Capitol 
grounds in over 140 years. Its purposes are to provide greater security 
for all persons working in or visiting the U.S. Capitol and to enhance 
the educational experience of visitors who have come to learn about 
Congress and the Capitol building. When completed, this three-story, 
underground facility, located on the east side of the Capitol, is 
designed to be a seamless addition to the Capitol complex that does not 
detract from the appearance of the Capitol or its historic landscaping. 
According to current plans, it will include theaters, an auditorium, 
exhibit space, a service tunnel for truck loading and deliveries, 
storage, and additional space for use by the House and Senate.

In my testimony today, I will discuss the Architect of the Capitol's 
(AOC) management of the project's schedules and contracts; the 
project's estimated costs, including risks and uncertainties; worker 
safety issues; and AOC's monthly reporting to Congress on the project. 
I will also discuss recommendations that we have made in previous 
testimony and briefings and the actions AOC has taken in response. We 
testified on this topic before the Subcommittee on the Legislative 
Branch, House Committee on Appropriations, in July 2003,[Footnote 1] 
and we have periodically briefed congressional representatives, the CVC 
project executive, and the Architect of the Capitol since then.

My statement is based on our monitoring of the CVC project, which 
included reviewing monthly status reports, contract files, schedules, 
contractors' cost estimates, other organizations' construction 
management policies and procedures, industry best practices, and data 
for construction projects compiled by the Construction Industry 
Institute and the Bureau of Labor Statistics. We have attended 
regularly scheduled meetings on the CVC project's progress; observed 
construction work at the site; and discussed management, procurement, 
and safety issues with AOC, contractor personnel, as well as 
experienced construction and contract management personnel at other 
organizations. Additionally, we obtained expert assistance in analyzing 
construction project costs and schedules from KPMG, Hulett & 
Associates, and the Defense Contract Audit Agency (DCAA). We did not 
perform an audit; rather, we performed our work to assist Congress in 
conducting its oversight activities.

Before I summarize our principal observations and recommendations for 
moving forward, let me briefly set the stage. As previously noted, AOC 
is managing and has overall responsibility for this complex project, 
but a construction management firm, Gilbane Building Company, is 
providing a range of construction management services in support of 
AOC, including coordinating the activities of the major construction 
contractors, monitoring worker safety, and providing AOC with status 
information for reporting to Congress. AOC is implementing the project 
in two phases, or sequences. In June 2002, it awarded the sequence 1 
contract for the excavation and structural work to Centex Construction 
Company, and in April 2003, it awarded the sequence 2 contract for 
mechanical, electrical, plumbing and interior finishing work to 
Manhattan Construction Company.

In summary, the CVC project is taking about 2 years longer than planned 
and is expected to cost between about $522 million and $559 million-- 
significantly more than originally estimated. The majority of delays 
and cost increases were largely outside AOC's control, but weaknesses 
in AOC's schedule and contract management contributed to a portion of 
the delays and cost overruns. Of the project's estimated cost increase, 
about $147 million is due to scope changes, such as the addition of the 
House and Senate expansion spaces; about $45 million to other factors 
also outside or largely outside AOC's control, such as higher than 
expected bid prices on the sequence 2 contract; and about $58 million 
to factors more within AOC's control, such as delays. Also, our 
analysis of CVC worker safety data showed that the injury and illness 
rate for 2003 was about 50 percent higher for CVC than for comparable 
construction sites and that the rate for 2004 was about 30 percent 
higher than the rate for 2003. Finally, a number of AOC's monthly 
reports to Congress have not accurately reflected the status of the 
project's construction schedules and costs and have transmitted 
inaccurate worker safety data. This has led to certain "expectation 
gaps" within Congress.

AOC has taken a number of actions to improve its management of the 
project; however, these actions have not yet fully corrected all 
identified problems. To help prevent further schedule delays, control 
cost growth, and enhance worker safety, AOC urgently needs to give 
priority attention to managing the project's construction schedules and 
contracts, including those contract provisions that address worker 
safety. These actions are imperative if further cost growth, schedule 
delays, and worker safety problems are to be avoided. AOC also needs to 
see that it reports accurate information to Congress on the project. 
Furthermore, decisions by Congress will have to be made regarding the 
additional funding needed to complete construction and address any 
risks and uncertainties that arise.

Enhanced Schedule Management Needed:

According to AOC, the entire base project is about 60 percent 
complete.[Footnote 2] Except for some punch-list items, such as fixing 
water leaks, construction work under the sequence 1 contract is now 
complete. This work includes the basic structure, the truck and Library 
of Congress tunnels, and the East Front interface. AOC and its 
contractors also completed work associated with the Inauguration. Work 
has started on the sequence 2 contract, including fitting out and 
finishing the basic structure and the Library of Congress tunnel and 
constructing the utility tunnel and space for the exhibits. AOC has 
just made contractual arrangements for fitting out and finishing the 
Senate and House expansion spaces and is now procuring the House 
Connector tunnel and the connection between the Library of Congress 
tunnel and the Jefferson building.

AOC's scheduled completion date for CVC is now September 2006, nearly 
20 months later than originally planned. We believe, given past 
problems and future risks and uncertainties, that the completion date 
may be delayed until sometime between December 2006 and March 2007. 
Additionally, AOC's scheduled completion date for the interior of the 
House and Senate expansion spaces is March 2007.

The project's schedule delays are due in part to scope changes, design 
changes, and unforeseen conditions beyond AOC's control (e.g., adding 
the Senate and House expansion spaces and encountering underground 
obstructions). However, factors more within AOC's control also 
contributed to the delays. First, the original schedule was overly 
optimistic. Second, AOC has had difficulty obtaining acceptable, 
contractually required schedules from its contractors, such as a master 
summary schedule from its construction management contractor. In 
addition, AOC and its contractors did not adhere to contract provisions 
designed for effective schedule management, including those calling for 
monthly progress review meetings and schedule updates and revisions. 
AOC and its construction management contractor also had difficulty 
coordinating the work of the sequence 1 and 2 contractors and did not 
systematically track and document delays and their causes as they 
occurred or apportion time and costs to the appropriate parties on a 
timely basis. Additionally, AOC has not yet reached full agreement with 
CPC on the extent to which construction must be completed before the 
facility can be opened to the public, and AOC has not yet developed an 
overall summary schedule that links the completion of construction with 
the steps necessary to prepare CVC for facility operations. Finally, 
AOC needs to fully implement our recommendation that it develop plans 
to mitigate the project's remaining risks and uncertainties, such as 
shortages in the supply of stone or skilled stone workers, unforeseen 
conditions associated with the remaining underground tunnels, and 
commissioning the building in the allotted time.

We have made numerous recommendations to improve schedule management, 
and AOC has taken actions to implement most of them. We believe, 
however, that both AOC and its construction management contractor will 
need to sustain their attention and apply additional effort to managing 
the project's schedule, as well as fully implement our recommendations, 
to help keep the project on track and as close to budget as possible. 
More specifically, AOC needs to give priority attention to:

* obtaining and maintaining acceptable project schedules, including 
reassessing the times allotted for completing sequence 2 work;

* aggressively monitoring and managing contractors' adherence to the 
schedule, including documenting and addressing the causes of delays;

* developing and implementing risk mitigation plans;

* reaching agreement on what project elements must be complete before 
CVC can open to the public; and preparing a summary schedule, as 
Congress requested, that integrates the major steps needed to complete 
CVC construction with the steps necessary to prepare for operations.

Stronger Contract Management Needed:

AOC is relying on contractors to design, build, and help manage CVC's 
construction and help prepare for its operation. AOC has obligated over 
$350 million for contracts and contract modifications for these 
activities. We found that AOC needed to take additional steps to ensure 
that it was (1) receiving reasonable prices for proposed contract 
modifications, (2) obtaining adequate support for contractors' requests 
for reimbursement of incurred costs, (3) adequately overseeing its 
contractors' performance, and (4) taking appropriate steps to see that 
contractual work is not done before it is appropriately authorized 
under contractual arrangements.

* Initially, AOC was not preparing independent government estimates as 
part of its price analyses for proposed modifications to the two major 
contracts. In early 2004, AOC hired an employee for the CVC staff with 
contract management experience, and AOC has improved its capacity to 
obtain reasonable prices by, among other things, preparing government 
estimates as part of its effort to evaluate the reasonableness of 
prices offered by the contractors for the proposed modifications.

* Although most CVC work is being done under fixed price contracts, for 
which payment is not based on incurred costs, AOC has received or is 
anticipating requests for reimbursement of over $30 million in costs 
that the contractors say they incurred because of delays.[Footnote 3] 
In addition, AOC has awarded some contract modifications for unpriced 
work that will require reliable information on incurred costs. 
According to the Defense Contract Audit Agency, several concerns 
relating to the contractors' accounting systems need to be addressed to 
ensure the reliability of the contractors' incurred cost information.

* AOC has continued to experience difficulty getting fully acceptable 
performance from contractors. For example, as of April 30, 2005, the 
construction management contractor had not provided an acceptable 
master schedule identifying appropriate links between tasks and key 
milestones, and it has not been providing AOC with accurate safety data 
for an extended period of time. Similarly, one of AOC's major 
construction contractors had not corrected recurring safety concerns 
over an extended period.

* One of AOC's CVC consultants began work several months before AOC had 
awarded a contract to it authorizing the work. AOC agreed to take 
action to prevent this type of problem from recurring.

We have made several recommendations to enhance AOC's contract 
management. AOC has generally agreed and taken action to implement 
these recommendations. For example, it has enhanced its capacity to 
review cost-related data submitted by contractors with requests for 
reimbursement based on incurred costs, and it has better evaluated its 
construction management contractor's performance and taken action to 
obtain improvements. To help prevent further schedule delays and 
control cost growth, AOC needs to aggressively manage its contractors' 
performance, particularly in the areas of managing schedules and 
obtaining reasonable prices on contractual actions, and continue to 
ensure that contractors' requests for payment based on incurred costs 
are adequately evaluated. It also needs to ensure that its contractors 
report accurate safety data and promptly act to correct safety 
concerns. 

Project Costs and Funding Provided as of May 2005:

We currently estimate that the cost to complete the construction of the 
CVC project, including proposed additions to its scope, is about $522 
million without any allowance for risks and uncertainties.[Footnote 4] 
Of this amount, $483.7 million has been provided to date.[Footnote 5] 
In November 2004, we estimated that the cost to complete the scope of 
work approved at that time was likely to be about $515 million, without 
an allowance for risks and uncertainties. Since November 2004, AOC and 
the U.S. Capitol Police have proposed about $7 million in scope changes 
that we included in our current estimate, bringing it to $522 
million.[Footnote 6] However, the project continues to face risks and 
uncertainties, such as unforeseen conditions, scope gaps and changes, 
and possible further delays.[Footnote 7] To provide for these, we 
estimated in November 2004 that an additional $44 million would likely 
be needed, bringing our estimate of the total cost to about $559 
million. We continue to believe that this estimate of the project's 
total costs is appropriate. We have not increased our allowance for 
risks and uncertainties in response to the recent requests for $7 
million in scope changes because we consider such changes among the 
risks and uncertainties that the project faced in November.

Over the years, CVC construction costs have increased considerably. 
Most of these costs were outside or largely outside AOC's control, but 
other costs were more within its control. About $147 million of the 
cost increase was due to changes in the project's scope, many of which 
were for security enhancements following September 11 and the anthrax 
attacks in October 2001. Congress added the House and Senate expansion 
spaces and the Library of Congress tunnel to the project's scope after 
the original project's cost was estimated; similarly, the Department of 
Defense recommended and funded an air filtration system for the 
facility. Other factors also outside or largely outside AOC's control 
contributed about $45 million to the increase. For example, bid prices 
for the sequence 1 and 2 contracts exceeded budgeted costs, and 
unforeseen field conditions, such as underground obstructions, 
necessitated additional work. Finally, factors more within AOC's 
control accounted for about $58 million of the expected additional 
project costs. For example, the project experienced significant delays 
during sequence 1, and we expect AOC will incur additional costs in the 
future because we believe the sequence 2 work will not be done by AOC's 
September 2006 completion date; slow decision-making by AOC also 
contributed to higher costs.

In its fiscal year 2006 budget request, AOC asked Congress for an 
additional $36.9 million for CVC construction. AOC believes this amount 
will be sufficient to complete the project's construction and, if 
approved, will bring the total funding provided for the project to 
$520.6 million. AOC's request includes the $4.2 million for potential 
additions to the project's scope (e.g., congressional seals, an 
orientation film, and backpack storage space), but does not include 
$1.7 million for the air filtration system---an amount that AOC thought 
it would not need and returned to DOD, but that we believe AOC will 
still likely need. AOC believes that it could obtain these funds from 
DOD if needed. Thus, with a $1.7 million increase for the air 
filtration system, the total estimated cost to complete the project's 
construction would be the $522.3 million cited above without provision 
for risks and uncertainties.[Footnote 8]

To continue to move the project forward, Congress will have to consider 
the additional funding AOC has requested for fiscal year 2006 to 
complete the project, including the $4.2 million in additional scope 
items. Through effective risk mitigation, as we have recommended, and 
effective implementation of our other recommendations for enhancing 
schedule and contract management, AOC may be able to avoid some of the 
$44 million that we allowed for risks and uncertainties. However, given 
the project's complexity and the additional requests for funds already 
made and anticipated, we believe AOC will likely need much of this $44 
million even with effective implementation of our recommendations. 
Already, it appears that AOC may need additional funds for sequence 2 
changes in fiscal year 2005. For example, as of April 30, 2005, AOC had 
identified proposed changes to the sequence 2 contract that it 
considered necessary and expected to cost about $13.8 million. This sum 
is about $700,000 less than the $14.5 million AOC has available during 
fiscal year 2005 for sequence 2 changes.

Worker Safety Issues:

Because the number of construction workers at the CVC site is soon 
expected to increase significantly, worker safety will continue to be 
an important issue during the remainder of the project. Our review of 
worker safety issues found that the construction management 
contractor's monthly CVC progress reports contained some inaccurate 
data for key measures of worker safety, including injuries and 
illnesses and lost time. For example, the contractor reported 3 lost- 
time incidents for 2004, but our analysis identified 45 such incidents. 
These inaccuracies resulted in both overstatements and understatements 
of rates.[Footnote 9] For instance, the contractor reported a rate of 
6.3 injuries and illnesses for April 2004, whereas our analysis 
identified 12.5.[Footnote 10] The construction management contractor 
attributed the inaccuracies to key data missing from its calculations, 
unawareness of a formula change that began in 2002, mathematical 
errors, and poor communication with the major construction contractors.

According to our analysis, the rates for injuries and illnesses and for 
lost time were higher for CVC than for comparable construction sites. 
For 2003, the injury and illness rate was about 50 percent higher, and 
the lost-time rate was about 160 percent higher.[Footnote 11] 
Additionally, both the numbers and the rates for injuries and illnesses 
and for lost time worsened from 2003 to 2004. For example, the injury 
and illness rate increased from 9.1 in 2003 to 12.2 in 2004, and the 
lost-time rate increased from 8.1 to 10.4. AOC and its contractors have 
taken some actions to promote and manage safety on the site, such as 
conducting monthly safety audits and making recommendations to improve 
safety. However, at the time of our review, neither AOC nor its 
construction management contractor had analyzed the results of the 
monthly safety audits to identify trends or concerns, and neither had 
reviewed the safety audit findings in conjunction with the injury and 
illness data. Our analysis of key safety audit data for the first 10 
months of 2004 identified about 700 safety concerns, the most frequent 
of which was inadequate protection against falls. Furthermore, AOC had 
not fully exercised its authority to have the contractors take 
corrective actions to address recurring safety concerns.

We recommended that, to improve safety and reporting, AOC ensure the 
collection and reporting of accurate injury and illness and lost-time 
data, work with its contractors to develop a mechanism for analyzing 
the data and identifying corrective actions, and more fully exercise 
its authority to take appropriate enforcement actions when warranted. 
AOC agreed with our recommendations and initiated corrective actions. 
However, follow-up work that we did in early 2005 at AOC's request 
indicated the corrective actions had not yet fully eliminated errors in 
reporting. AOC agreed that continued action on our recommendations was 
essential.

Reporting to Congress:

Both AOC and its construction management contractor prepare monthly 
progress reports on CVC. AOC relies heavily on its contractor for the 
information it puts into its own reports, which it sends to Congress. 
We have found that AOC's reports have sometimes failed to identify 
problems, such as cost increases and schedule delays. This has resulted 
in certain "expectation gaps" within Congress. We have suggested to AOC 
that its reports could be more helpful to Congress if, for example, 
they discussed critical issues facing the project and important 
upcoming decisions. AOC has been making improvements to its monthly 
reports and has agreed to continue doing so.

Mr. Chairman, this completes my prepared statement. We would be happy 
to answer questions that you and other Subcommittee Members may have.

Contact and Acknowledgments:

For further information about this testimony, please contact Bernard 
Ungar at (202)512-4232 or Terrell Dorn at (202) 512-6923. Other key 
contributors to this testimony include Shirley Abel, Timothy DiNapoli, 
Brett Fallavollita, Jeanette Franzel, Jackie Hamilton, Bradley James, 
David Merrill, Scott Riback, Susan Tindall, and Kris Trueblood.

FOOTNOTES

[1] GAO, Capitol Visitor Center: Current Status of Schedule and 
Estimated Cost, GAO-03-1014T (Washington, D.C.: July 15, 2003.

[2] The base project includes a finished visitor center shell and core, 
an extended loading dock service tunnel, exterior finishes, 
improvements to the East Plaza, construction of unfinished House and 
Senate expansion space shell, exhibits, technical security systems, a 
utility tunnel, and a connecting tunnel to the Library of Congress. The 
base project does not include other items, such as finishing the House 
and Senate expansion space and certain security-related enhancements.

[3] Reimbursements for the costs of non-weather-related delays not 
attributable to the contractor are standard practice in the 
construction industry.

[4] Our November 2004 estimate of $515 million was similar to AOC's 
estimate based on work done by one of its consultants; however, except 
for the $4.2 million in additional scope items, AOC has not requested 
funds to cover risks and uncertainties provided for in our $44 million.

[5] Public Law 108-447, enacted in December 2004, provided that up to 
$10.6 million could be transferred from funds appropriated for Capitol 
Buildings operations and maintenance to CVC upon the approval of the 
House and Senate Committees on Appropriations. In March 2005, AOC 
requested that about $4 million of these funds be transferred to CVC, 
including some funds for construction-related work, such as design of 
the gift shop space. As of May 12, the House Committee had not yet 
approved this transfer, and none of the $10.6 million has been included 
in the $483.7 million figure above.

[6] Last week, Congress enacted legislation that provided the 
additional funding requested by the Capitol Police for security 
monitoring. Public Law 109-13, Emergency Supplemental Appropriations 
for Defense, the Global War on Terror, and Tsunami Relief, 2005 (May 
11, 2005).

[7] Other risks and uncertainties that continue to face the project 
include, but are not limited to, shortages in the supply of stone and 
skilled stone workers, possible additional requirements for life safety 
or security changes, unknown operator requirements, and contractor 
coordination issues.

[8] Essentially, AOC's $36.9 million fiscal year 2006 budget request 
was consistent with our $515.1 million estimated cost at completion 
except that it included $4.2 million for the additional scope items and 
excluded the $1.7 million for filtration--$517.6 million less $4.2 
million plus $1.7 million equals $515.1 million.

[9] The Bureau of Labor Statistics (BLS) calculates the number of 
injury/illness incidents per 100 full-time workers as follows: (N/EH) x 
200,000, where (N) = number of injuries/illnesses, (EH) = total hours 
worked by all employees during the calendar year, and 200,000 = base 
for 100 equivalent full-time workers (working 40 hours per week, 50 
weeks per year). BLS calculates the number of lost-time incidents per 
100 full-time workers as follows: (LT/EH) x 200,000 where (LT) = cases 
of (1) days away from work, (2) restricted work or (3) work transfer, 
(EH) = number of employee hours for the desired period and 200,000 = 
base for 100 equivalent full-time workers (working 40 hours per week, 
50 weeks per year). 

[10] In early 2005, the major contractors provided us with updated data 
for injuries and illnesses and lost time in 2004. We used these data to 
recalculate the 2004 rates. For example, the monthly rate for injuries 
and illnesses in April 2004 increased to 15.7. 

[11] The CVC rates are sensitive to small variations in the number of 
injuries, illnesses, or lost-time incidents for a given year.