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Witness Testimony of The Honorable Robert A. Petzel, M.D., Under Secretary for Health Veterans Health Administration, U.S. Department of Veterans Affairs

Chairman Miller and Ranking Member Filner thank you for the opportunity to testify on the status of the Department of Veterans Affairs’ (VA) major construction and leasing programs, as well as the management and oversight of major construction project design, construction, and activation.  Accompanying me today is Glenn Haggstrom, Principal Executive Director, Office of Acquisition, Logistics and Construction.

I will begin my testimony with a description of the scope of our construction programs and some of the challenges inherent in this or any major construction effort by a large organization.  I will then lay out several of the actions we have taken to address these challenges, to put projects that have fallen behind schedule back on track, and to make sure that these same problems don’t hinder our efforts in the future.

Construction

The goal of VA’s construction and leasing programs is to ensure that there are appropriate facilities to provide benefits and services to our Nation’s veterans. With the support of the Congress, VA is engaged in one of the most significant capital improvement programs in our history, and overall, we are succeeding.  Candidly, we have experienced challenges in managing our complicated, new medical projects; partly because it has been 18 years since the last VA hospital was built and activated.  But, we have identified the issues, are taking steps to mitigate them, and using them as learning opportunities to avoid making the same mistakes again.

Since 2004, VA has received appropriations for 86 major construction projects, that is, those projects with costs of over $10 million.  These include various types of projects, such as: outpatient clinics; spinal cord injury centers; community living centers; polytrauma centers; seismic safety corrections; and most notably four large, full-service inpatient hospital facilities in Las Vegas, Nevada; Orlando, Florida; New Orleans, Louisiana; and Denver, Colorado.  Of the 86 projects, 32 are complete; 30 are under construction; 20 are under design; and 4 are in the planning stages. 

Hospital Projects

Four major hospital projects are currently in different stages of construction.  In Las Vegas, Nevada, we are in the process of accepting the recently completed construction of the new medical center.  The facility consists of 90 inpatient beds, a 120-bed community living center, primary and specialty care, surgery, mental health, rehabilitation, geriatrics and extended care.  VA will begin serving Veterans at the Las Vegas facility this summer, and expects to serve more than 61,000 Veteran enrollees.  

The Orlando project includes 134 inpatient beds, an outpatient clinic, a 120-bed community living center, a 60 bed domiciliary, parking garages and support facilities all located on a new site.  While phases of the project have been completed or are nearing completion, it is the construction of the final phase—of the clinic, diagnostic, treatment and inpatient facilities--that will delay the opening of the new medical center.  Three primary factors are contributing to the delays:  errors and omissions in the original design; equipment coordination and design issues; and contractor performance.  Errors in the initial design along with procuring and integrating specialized medical equipment into the existing design, both VA responsibilities, affected the contractor’s schedule.  This resulted in inefficiencies and delays that contributed to the extension of the original contract completion date.  Construction quality and manpower issues have also significantly affected the project timeline.  VA believes that the project can be completed in the summer of 2013, and expects to serve nearly 113,000 Veteran enrollees.  We are working with the contractor to determine a completion date. 

The new 1.5 million square foot facility in New Orleans, Louisiana, will accommodate the Southeast Louisiana Healthcare System’s needs for primary care, mental health, and specialty care.  The project includes 200 beds, an outpatient clinic, and research facilities along with support infrastructure.  This project has experienced delays as the City of New Orleans and State of Louisiana acquired the site’s property under a Memorandum of Understanding between the City and VA.  Additionally, VA has had to remediate environmental issues on the site, which the City of New Orleans had agreed to remedy prior to the transfer of the property.  This has required additional time not originally built into the schedule.  VA now has title to the site with the exception of one parcel, which includes a historic property.  While VA is working with the City to acquire this final piece of land, we are not delaying the project.  Construction has already begun; the project is scheduled for completion in spring 2015, with the goal of serving more than 130,000 Veteran enrollees starting in the fall of 2015.

The Denver replacement hospital is a 182-bed full service tertiary care medical center that includes a spinal injury/disorder center, community living center, research building, central energy plant and parking structures, as well as inpatient and outpatient services.  Construction of the new facility recently began, and it is expected to be completed in the spring of 2015.  The new Denver facility will begin serving its more than 119,000 Veteran enrollees in the fall of 2015. 

In addition to construction, the leasing of medical clinics is essential to providing Veterans access to state-of-the-art health care services.  Leasing provides VA an additional tool and increased flexibility to serve our Nation’s Veterans with both the space and timely services closer to where Veterans live.  Since 2008, VA has opened 180 leased medical facilities, 50 of which are major facilities, or those with an annual rent exceeding one million dollars.  VA currently leases approximately 13.4 million square feet in support of its health care system.

VA’s Way-Forward

To date, VA has taken several steps to improve the management and oversight of major hospital construction projects.  Several organizations within the Department have responsibility for various elements of construction, which include defining facility requirements, budgeting and strategic capital investment planning, authorization and appropriation, design and construction procurement and oversight, specialized equipment procurement and facility activation.  Historically, one office has not been identified as the “accountable organization” for major construction projects from beginning to end.  This has led to difficulties with communication and shortfalls in project oversight.  To address these issues going forward, the Secretary has designated the Office of Acquisition, Logistics and Construction as the single point of project accountability within the Department. 

VA has learned that we do not have enough site engineers to properly oversee our current volume of major construction efforts.  Therefore, in Fiscal Year (FY) 2012, VA is hiring approximately 30 additional on-the-ground, site engineers who are needed to properly manage and oversee our ongoing major construction projects, bringing the total number of VA site engineers up to 190.  Congress recently appropriated the funding for these engineers in the Major Construction and Medical Facilities accounts.  VA is also integrating risk management into the core project management functions.  This will help identify potential cost and schedule impacts at an earlier point in time so that issues can be mitigated sooner and/or managed better.  In the Veteran Health Administration (VHA) an oversight board has been enhanced, which will now be the central, key strategic communication path for risk management issues, and which will enable VHA leadership to act at an earlier point in time.  VA is augmenting project reporting based on experiences from the large projects discussed above to improve performance within VA’s construction program, including medical equipment procurement.

Finally, with the submission of the FY 2012 budget, VA began implementing a new, Department-wide planning process, called the Strategic Capital Investment Planning Process (SCIP), to prioritize the Department’s future capital investment needs.  With SCIP, VA develops an annual, single, integrated prioritized list of proposed projects covering all capital investment programs (major construction, minor construction, leases and VHA non-recurring maintenance (NRM)).  SCIP is designed to enable VA to strategically target its limited resources to most effectively improve the delivery of services and benefits to Veterans, their families and survivors by addressing VA’s most critical needs and performance gaps and investing wisely in VA’s future.

Conclusion

VA has a strong history of learning from past experiences and adapting our approaches when necessary to accomplish its mission to serve Veterans.  The lessons learned from our recent construction challenges will lead to improvements in the management and execution of our capital program as we move forward.  We are committed to meeting VA’s responsibility to design and build quality facilities that provide care and services to our nation’s Veterans.  I look forward to answering any questions the Committee has regarding these issues.