VA Construction:

Additional Actions Needed to Decrease Delays and Lower Costs of Major Medical-Facility Projects

GAO-13-302: Published: Apr 4, 2013. Publicly Released: May 3, 2013.

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Contact:

Lorelei St James
(202) 512-2834
stjamesl@gao.gov

 

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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.

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 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.

 

For more information, contact Lorelei St. James at (202) 512-2834 or stjamesl@gao.gov.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To improve the management of VA's major construction projects, the Secretary of Veterans Affairs should develop and implement agency guidance for assignment of medical equipment planners to major medical construction projects.

    Agency Affected: Department of Veterans Affairs

    Status: Closed - Implemented

    Comments: In 2013, GAO reported that 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 has used these planners at various phases for some of its medical-center construction projects. Also, VA has sometimes relied on VHA staff to make medical equipment planning decisions. For example, in Orlando, VA relied on local VHA staff with limited experience in procuring medical equipment for a new hospital. Because the medical equipment specifications changed several times, construction design documents for various parts of the medical facility had to be changed. Consequently, the facility also had to be altered, and some previously constructed areas required minor demolition to accommodate the medical equipment. These and other alterations led to cost increases of at least $14 million in addition to schedule delays. In other areas of the facility, medical equipment issues forced VA to suspend construction until the issues were resolved. 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. They also agreed that a medical equipment planner is needed for future large scale projects. GAO recommended that VA should develop and implement agency guidance for assignment of medical equipment planners to major medical construction projects. On August 30, 2013, VA issued a policy memorandum providing guidance on the assignment of medical equipment planners to major medical construction projects. The memorandum states that all VA major construction projects involving the procurement of medical equipment to be installed in the construction will retain the services of a Medical Equipment Specialist to be procured through the project's architectural engineering firm. As a result, VA will utilize medical planners on major medical construction projects to help ensure that medical equipment specifications are included in planning and construction efforts and help to avoid added cost and construction delays later.

    Recommendation: To improve the management of VA's major construction projects, the Secretary of Veterans Affairs should 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.

    Agency Affected: Department of Veterans Affairs

    Status: Closed - Implemented

    Comments: In 2013, GAO reported 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. The lack of such roles and responsibilities can make it difficult for VA and contractors to communicate clearly, which contributes to schedule delays and cost increases for major medical-facilities projects. GAO recommended that VA develop and disseminate procedures for communicating, to contractors, clearly defined roles and responsibilities of VA officials who manage major medical-facility projects. In September 2013, VA put procedures in place to communicate to contractors the roles and responsibilities of VA officials that manage major medical facility construction projects, including the change order process. Among these procedures is a Project Management Plan that requires the creation of a communications plan and matrix to assure clear and consistent communications with all parties. The communications plan must address, among other things: regular project communication, such as meetings and in-progress reviews; frequency and method of communication (e.g., e-mail, phone); and stakeholder roles and responsibilities. VA also requires a Contracting Officer appointment letter that clearly delineates responsibilities and limits of authority to execute project changes. The project's prime contractor must sign the letter, acknowledging understanding of the stipulated authorities and limits. Finally, VA requires a post-award conference with major medical construction project contractors that will cover a detailed description of the responsibilities of VA management staff including the Contracting Officer, the Project Executive and the Senior Resident Engineer. By instituting clear guidance delineating the roles and responsibilities of VA staff for managing each aspect of construction projects, the ability of VA and contractors to communicate clearly is improved, which will help avoid schedule delays and cost increases.

    Recommendation: To improve the management of VA's major construction projects, the Secretary of Veterans Affairs should 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 Affected: Department of Veterans Affairs

    Status: Closed - Implemented

    Comments: In 2013, GAO reported that VA's costs substantially increased and schedules were delayed for the agency's largest medical-center construction projects in Denver, Colorado; Las Vegas, Nevada; New Orleans, Louisiana; and Orlando, Florida. Although VA has taken some actions to address problems managing major construction projects, the agency has opportunities to avoid further cost increases and schedule delays. VA established a Construction Review Council to oversee the department's development and execution of its real property programs. 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. One of the council's responsibilities is the review of the effectiveness and efficiency of processes used on construction projects, including change orders. The council issued an internal report in November 2012 that had findings and several recommendations including that VA streamline processes and procedures for change orders. However, VA was reviewing this option and others proposed by the council. GAO recommended that VA issue and take steps to implement guidance on streamlining the change-order process based on the findings and recommendations of the Construction Review Council. On August 29, 2013, VA issued a handbook for construction contract modification processing which includes milestones for completing processing of modifications based on their dollar value. In addition, as of September 2013, VA had also hired four additional attorneys and assigned on-site contracting officers to the New Orleans, Denver, Orlando, Manhattan and Palo Alto major construction projects to expedite the processing and review of construction contract modifications. By taking steps to streamline the change order process, VA can better ensure that change orders are approved in a prompt manner to avoid project delays.

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