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Witness Testimony of Hon. W. Scott Gould, Deputy Secretary, U.S. Department of Veterans Affairs

Chairman Miller, Ranking Member Filner and distinguished members of the Committee, thank you for the opportunity to appear today to discuss the Department of Veterans Affairs (VA) construction priorities and planning.  Joining me today are: Mr. Glenn Haggstrom, Executive Director, Office of Acquisition, Logistics and Construction (OALC); Mr. James Sullivan, Director, Office of Asset Enterprise Management, Office of Management; and Ms. Patricia Vandenberg, Assistant Deputy Under Secretary for Policy and Planning with the Veterans Health Administration.

It is an honor and privilege for me to represent Secretary Shinseki and the many dedicated, hard-working professionals of the Department who support our mission to serve Veterans and their families by providing benefits and world class medical services. 

VA’s top three priorities are to increase access to services and benefits for Veterans, eliminate the claims backlog, and end Veteran homelessness.  While addressing these priorities it is also imperative that we ensure our employees and our Veterans are provided safe and secure facilities in which to work and receive care and benefit services.  These priorities are the principal drivers of our planning for VA’s infrastructure.

With regard to access, this is a priority of the first order.  Simply put, if Veterans and their families do not have access to the VA, then they cannot avail themselves of the services and benefits that they have earned while serving our country.  Access to our benefits and services depends on three things: the scope of and breadth of programs, technology avenues, and the physical facilities in which we operate.  This last point, physical facilities, is critical to access in our health care and cemetery systems.

One of Secretary Shinseki’s first actions was to declare the need to eliminate homelessness among our nation’s Veterans.  Since 2008 we have reduced the number of homeless Veterans living on the streets on any given night from 131,000 to 76,000.  We are proud of this early success, but we have a long way to go and we will need all possible tools at our disposal to make this vision a reality.  The Department has a number of critical tools or programs available at its disposal that assist in eliminating Veteran homelessness by leveraging current VA infrastructure to provide housing to our homeless Veterans and their families.  These programs include the Enhanced-Use Lease (EUL) authority and the Building Utilization Review and Repurposing (BURR) program, both of which I will provide more details on further in my testimony. 

As I mentioned earlier, the safety and security of our Veterans and employees is paramount.  While we are increasing access, eliminating homelessness, and implementing our other priorities and initiatives we must never lose sight of the importance of providing a safe and secure environment at our VA facilities across the country.

To understand what we will need to achieve these priorities we must look beyond the annual budget cycle and determine the investments needed to meet our projected long term requirements.  In the areas of capital investment, the recently unveiled Strategic Capital Investment Planning (SCIP) process accomplishes this by determining our current state and projecting our needs ten years into the future to determine what infrastructure gaps must be addressed in order for the VA to provide adequate access to Veterans, ensure the safety and security of Veterans and our employees, and leverage current physical resources to eliminate homelessness among Veterans.

But while we are working toward achieving these priorities we must also ensure  the efficient and effective use of  taxpayer’s dollars.  While looking a decade into the future, SCIP prioritizes the capital needs across VA’s three Administrations (VHA, VBA and NCA) as well as across the programs from which capital funding is provided (major construction, minor construction, non-recurring maintenance and leases).  No longer are VA capital decisions made in Administration or program stovepipes.  By taking a “corporate” approach to capital planning, SCIP ensures that our capital investments for all Veteran needs across the country are considered together and are prioritized according to the same criteria.

It is also important to note that providing needed infrastructure improvements also adds the benefit of creating competitively awarded short-term construction jobs as well as long-term health care and service delivery employment opportunities in local communities throughout the Nation. 

The remainder of my testimony will address the Committee specific request that VA testify on gap analysis as it relates to current and future demand; underutilized or vacant property; how VA evaluates and considers alternatives to planned investments; cost analysis and risk assessment; prioritization of new projects and renovations; the basis for the fiscal year 2012 construction authorization budget request; and the viability of the ten year capital plan.  I welcome the opportunity to discuss these important issues and address any concerns the Committee may have on these topics.

The Basis for the Fiscal Year 2012 Construction Authorization Budget Request.

A little over 6 weeks ago, Secretary Shinseki delivered the President’s 2012 Budget to this Committee.  Some of my testimony may repeat information the Secretary shared with you at that time, and much of this information can be found in Volume 4 of the Department’s 2012 Budget Submission - “Construction and 10 Year Capital Plan.”  This budget volume communicates VA’s capital investment needs spanning a 10-year planning horizon – beginning with the 2012 budget – and discusses how the SCIP process was used in the development of the 2012 construction budget submission.

My desired outcome for the brief time spent with you today is to provide depth and meaning to the numbers and information on SCIP, and to provide insights on how all the pieces fit together.  Equally important, I will highlight some additional innovative strategies and tools VA is using across the Department’s portfolio of capital assets to maximize, repurpose, and right-size our inventory.  Our strategic capital approach is part of our Integrated Operating Model which is designed to strengthen our management infrastructure across VA.  These tools further support our commitment to VA’s strategic priorities such as ending Veteran homelessness, and meeting our obligations to all Veterans in an effective, accountable, and efficient manner.

For 2012, VA is requesting more than $2.8 billion for major, minor, non-recurring maintenance and leasing programs.   New budget authority of $1.27 billion is for VA’s construction programs:  $589.6 million for major construction and $550.1 million for minor construction, and $131 million for grants.  VA also plans to apply an additional $135.7 million that have been previously appropriated by Congress to 2012 major construction projects.  In addition to major and minor construction programs, the Department is requesting $868.9 million to fund the medical facilities’ non recurring maintenance account, and an additional $834 million for 2012 leasing activities.    

VA’s 2012 construction request reflects a continued commitment to provide Veterans with quality health care and benefits in modern, safe, and secure facilities.  The request includes seven ongoing major medical facility projects (New Orleans, Denver, San Juan, St. Louis, Palo Alto, Bay Pines, and Seattle) and design for three new projects (Reno, West Los Angeles and San Francisco).  One cemetery expansion project will be completed to maintain and improve burial service in Honolulu, Hawaii.  The 2012 request would also fund needed alterations, improvements and renovations of existing hospitals, community based outpatient clinics, expansion of national cemeteries and enhancements of other VA facilities such as Vet Centers and regional offices. 

2012 Authorization for Major Medical Facility Construction/Leasing Projects

In addition to the 2012 budget request, VA is required to obtain authorization for medical facility investments classified as major construction as well as for those medical facility leases with annual rent of over $1 million.  Based on the 2012 SCIP process, VA plans to submit a legislative request to authorize seven (7) major medical facility projects as follows:  Construct a clinical addition and a parking garage in Fayetteville, Arkansas; add a Simulation, Learning, Education and Research Network Center to the previously authorized new medical facility project in Orlando, Florida; construct an Ambulatory Care, Polytrauma and Blind Rehabilitation Center in Palo Alto, California; Medical Facility Improvements; expand the National Cemetery at St. Louis (Jefferson Barracks), Missouri; and to seismically correct three buildings at three medical facilities:  Building 1 in San Juan, Puerto Rico, Building 100 in Seattle, Washington, and Building 209 in West Los Angeles, California.

In addition to these major medical facility construction projects, VA plans to seek authorization for major medical facility leases for five Outpatient Clinics and three Community Based Outpatient Clinics.  The Outpatient Clinics are located in Fort Wayne, Indiana; Mobile, Alabama; Rochester, New York; San Jose, California; and South Bend, Indiana.  Three Community Based Outpatient Clinics require authorization: Columbus, Georgia; Salem, Oregon and Springfield, Missouri.

Overview Strategic Capital Investment Planning (SCIP)

In developing the 2012 budget, with the initiation of SCIP, VA made far-reaching enhancements to its strategic capital planning and investment decision-making processes by providing a more comprehensive approach to capital investment planning.  SCIP builds upon previous capital investment processes by capturing, for the first time, the full extent of our infrastructure inventory (including underutilized and vacant properties), identifying gaps in the provision of service to our Veterans and their families, and developing a 10-year strategic capital plan, employing both capital and non-capital solutions, to address these gaps.

This transformative tool enables VA to deliver the highest quality services by targeting investments now and into the future that balance and prioritize competing interests and address our most critical needs first.  VA’s first-ever Department-wide integrated and prioritized list of 2012 capital projects is an important outcome of the SCIP process.  Through SCIP, VA evaluates each capital investment proposal based on its contribution to six key criteria – the most important of which is “Safety and Security”.  The remaining five criteria are, “Department Major Initiatives,” “Fixes What We Have,” “Increases Access,” “Right-Sizing Inventory,” and “Ensuring Value of Investment.”  

SCIP’s Data Driven Approach to Identify Gaps

As an integral part of the SCIP process, VA systematically identified performance gaps where current infrastructure or services need to be enhanced to meet the location and demand of current and future Veterans.  Guidelines provided to the Administrations required capital investments to contribute to correcting corporately-identified gaps in access, utilization, space, condition, energy, safety, security, parking deficiencies, IT deficiencies, as well as other functional deficiencies such as privacy and emergency preparedness for each investment proposal.

VA faces major challenges with its aging infrastructure.  On average, VA buildings are more than 60 years old.  The SCIP process directly addresses these challenges with a range of solutions, including reuse or repurposing, and working with state and local historical societies to identify properties that should be demolished.  These efforts increase efficiencies and decrease the government spatial footprint.

Evaluation and Consideration of Alternatives to Planned Investments

A business case was required to accompany each 2012 investment proposal.   Each business case included the following components:  Project description and justification; a quantification of the performance gaps the project would address; the alternatives considered; and, the impact the project would have on meeting the Department’s strategic initiatives to better serve Veterans. 

The business cases were also required to include alternative options to the investment proposal.  Major construction and lease projects were required to provide an “alternatives analysis” that considered the status quo, new construction and/or renovation, leasing, and contracting out for services.  Minor construction and non-recurring maintenance projects were required to provide an analysis of the status quo and two additional options.  

Cost Analysis and Risk Assessment.

All business cases also included a cost-effectiveness analysis (CEA) that compared the costs of the status quo to the other alternatives considered.  A portion of each project’s total score was based upon whether it provides the best value compared to the proposed alternatives.  Major construction and leases greater than $1 million in annual rent that are selected for inclusion in the budget request are required to complete OMB’s Exhibit 300s.  These exhibits provide a more comprehensive analysis of the alternatives considered, cost effectiveness assessments, risk analysis and risk management plans. 

Building Utilization Review and Repurposing

To best utilize resources and sustain our commitment to good stewardship, SCIP requires that existing capital assets be considered for reuse or repurposing.  SCIP identifies the underutilized and vacant properties and the Building Utilization Review and Repurposing (BURR) program identifies potential strategies for their reuse or disposal.  VA has reduced its inventory of owned vacant space by 34 percent, from 8.6 million square feet in 2001 to 5.7 million square feet in 2010.  It is anticipated that the BURR process will put a significant number of buildings in use to serve our homeless Veterans and their families. 

The BURR process will assess the potential to develop new housing opportunities for homeless or at-risk Veterans and their families for use in public-private partnerships and VA’s enhanced-use lease (EUL) program.  The Department’s EUL authority allows VA to match supply (available buildings and land) and demand among Veterans for housing with third-party development, financing, and supportive services.  This approach has multiple benefits:  helping to reduce homelessness among our Veterans while leveraging an underutilized asset, reducing the inventory of underutilized real estate, and transferring the operation and maintenance costs to a developer.  Other internal and external potential reuse opportunities will be explored for buildings determined unsuitable for housing.    Currently, the Department’s authority to enter into additional EUL agreements expires as of December 31, 2011.  The Administration will be submitting a legislative proposal to address this expiration.

Viability of the 10-Year Capital Plan

The 2012 SCIP process identified an estimated cost of $53-$65 billion to close all currently-identified gaps over the next 10 years.  The advantage to the SCIP-based 10-year strategic capital plan is its data-driven approach in which all projects are prioritized based on identified needs and the ability to close known performance gaps.  The SCIP process is dynamic and will require an annual update as part of the budget formulation process to take into account changes in health care delivery systems and Veteran demographics.  

The total level of capital resources requested is reassessed each year in the annual budget process, where hard choices are made balancing capital needs identified in the SCIP 10-year plan and other VA priorities (such as the cost to provide medical care and Veteran benefits and services) in order to determine the appropriate level of funding for the fiscal year.

We are determined to provide our Veterans with access to high quality medical care and benefit services.  Capital infrastructure is an essential part of our ability to achieve this vision

Conclusion

I appreciate the opportunity to testify on these important topics.  With SCIP, VA has instituted a rigorous capital planning process that quantifies and prioritizes the need to repair, upgrade, dispose of, or replace VA’s aging infrastructure and address the current and future needs of America’s Veterans within the context of prudent capital investment decision making. 

VA must be prepared to meet projected health care demand and any future benefits delivery requirements.  We are committed and will continue to work with Congress, Veteran Service Organizations and other stakeholders to refine and improve the SCIP process as needed.  VA will continue to provide Veterans and their families with the benefits and world class medical services they have earned and deserve.