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Witness Testimony of Mr. Jim Gorrie, President and Chief Executive Officer, Brasfield & Gorrie

Thank you, Mr. Chairman and Committee Members.

Thank you for the opportunity to meet today in Orlando.  My name is Jim Gorrie and I am President/CEO of Brasfield & Gorrie.  As you will see today, the VA Medical Center is an incredible facility.

As discussed at the March hearing, poor planning by the VA and design errors have plagued our efforts to construct the VA Medical Center.  In March, the VA not only acknowledged these problems and confirmed they were acting to correct them; they also went on to say that Brasfield & Gorrie was not to blame.  Between January and March of this year, the VA agreed to furnish over forty-five (45) separate design corrections (referred to by the team as the “Design Blitz”) to get the job back on track. 

 The "Blitz" was a major commitment by the VA that required taking responsibility for the design errors.  Unfortunately, the Blitz has grown to include over one hundred (100) separate design corrections and lasted significantly longer than the VA planned.  We are seeing signs that the changes are slowing down but just last week we received another significant revision to the operating rooms and we have been notified that additional changes are coming for additional structure to support the new medical equipment.  Unfortunately for the project, these areas are on our Critical Path schedule.  We are starting to make positive progress with the new design and our team is anxious to keep the momentum building.  Since the March hearing, we have almost doubled the manpower working on the job despite the continued changes.

The project desperately needed the Design Blitz.  However, this effort was two (2) years too late.  For B&G and its subcontractors, this time is lost forever.  The process requires us to submit a Request for Equitable Adjustment (or REA) to recover the impact to us and our subcontractors, which was mentioned in the March hearing.  Our first REA was valued at $33.6 million, and it is currently unresolved.  The costs of our REA are being carried by us and our subcontractors.  I sincerely hope the VA will review the entire REA process in the future as the costs that the general contractor and the subcontractors have incurred create real financial challenges.  Given our subcontracting plan goals for this project, including small and disadvantaged veteran owned businesses; this matter is of real importance.

At the March hearing, the VA committed to work with us to expedite the project - but things have not gone as we had hoped.  Despite Tim Dwyer’s (our South Regional President) and my personal efforts, productive meetings with the VA to develop a new game plan never happened.  In June, instead of discussing an accelerated schedule, the VA issued us a Notice to Cure and threatened to terminate us for default.  We learned about the Notice to Cure via email approximately ten (10) minutes before the VA held a press conference announcing its actions.  One reason this was so strange is that it was just one week after the VA met with us to discuss our partnering approach. 

A few weeks ago - the VA also withheld $2 million from our monthly payment, without discussion.  This action creates an additional financial hardship to us.  The VA has also contacted our bonding company for meetings on several occasions without contacting me directly to discuss their concerns first.  Our bonding company attended a meeting in Washington, D.C. at the request of the VA in July.  This is the first time in our 48 year history our bonding company has attended such a meeting.  Last month, the VA gave us the first “Unsatisfactory” rating we have ever received on a Government project in our 48 year history of doing business - again with no advanced warning.  As you know - these “Unsatisfactory” ratings are shared throughout the Government and will have a major negative impact on our ability to get new work.  We take our reputation and finances very seriously.  The recent actions taken by the VA are extremely disturbing.  We have struggled to understand how the VA could take full responsibility for the multi-year design problem at the March hearing and 11 weeks later, issue a very public Notice to Cure and Threat of Termination.  It just doesn’t make sense.

B&G has constructed many large healthcare facilities and we appreciated the positive comments by the VA at our first hearing regarding our qualifications.  This particular hospital has been a job of “firsts” for B&G:  the first time we have had to fund owner changes into the tens of millions of dollars, the first time our bonding company has been called to get involved, the first time we have testified at a congressional hearing, the first time we have received an “Unsatisfactory” rating and unfortunately the list is growing.

Our contract requires us to provide a revised schedule for completion with each monthly pay request.  Our July pay request forecasts a completion in November 2014 based on the approved schedule which the contract requires us to follow.  During the VA’s Notice to Cure 30-day evaluation period, we were instructed to provide a new “obtainable” schedule.  We updated our contract schedule for completion of the entire building and presented it to the VA.  We also proposed a detailed alternative, accelerated contract schedule which included us working in more areas.  This schedule showed completion of the clinic in 2013 and the reminder of the facility by April 2014.  We have not received any feedback on these schedules in the past two weeks.

For months the VA has mentioned completion dates in the summer of 2013; but to date they have not been willing to disclose the detailed logic they are using to reach that conclusion.  From preliminary reports, we know their analysis is not apples-to-apples with ours and does not include the most current information, including major changes issued during the Blitz.  Last week, the VA asked if we could possibly make a late 2013 construction completion date.  We said we thought it was possible; however, it would come at a higher premium than our suggested schedule.  Nevertheless, we are proceeding with the development of a plan to complete the entire project in 2013, should the VA decide to adopt and support it.  It is our desire to complete the project as soon as possible, and we hope that the VA will support and pay for our efforts to do so. We look forward to hearing back from the VA and hope that a new, obtainable completion date will be established in the next few weeks.

Our team has been raising the red flag since the first month of the job.  We need direction immediately if we are to complete in 2013, and the VA, the Hospital and the Design Team must support it.   The challenges we have faced over the last two years in just keeping everyone working on the job have been a major effort.   I would like to personally thank everyone on the job - especially our subcontractors for hanging in there with us even though we have not yet reconciled our schedule issues and even though we are still dealing with nearly $30 million of unresolved Change Order Requests (which does not even include costs associated with our REA mentioned earlier and recent Change Order Requests).

We also think it is important that you understand that the VA keeps stating the project is 60-70% complete in terms of dollars - but these discussions ignore all the pending changes, current changes and REA's on the project which ultimately represent the true cost of the work.    

  The most important thing this job needs today is clear, open and direct communications.  We reiterate our eagerness to explore an expedited completion of the project.  The threats of default termination should stop.  The only thing that could push this job over the edge into the “Twilight Zone” would be a termination.  I can’t even imagine what such an action would cost the taxpayers, not to mention the delays in opening the Hospital to our veterans.  Such an action would also have a devastating effect on all the workers employed on the jobsite.  At this stage in the game, no one can complete this project faster or more economically than Brasfield & Gorrie.

In closing, we welcome face to face working sessions with the VA and are available to answer any questions you may have about our current progress.  We sincerely desire to finish this project.  It is a wonderful facility and we are excited for you to see it today.  Thank you again for your time and we have enclosed a few very simple exhibits with our written comments to hopefully help give you a better feel for the status of the overall project.  

Thank you for your continued time and interest.

Attachments:

·        Design Schedule

·        Schedule Options Under Review

·        Contract Schedule History (With Monthly Fragnet Reconciliation Report)

·        Manpower/Staffing and Additional VA Changes in the Last 8 Weeks

·        Outstanding Change Order Report (Unresolved)