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The U.S. Department of Veterans Affairs Construction Process.

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NOVEMBER 1, 2007

SERIAL No. 110-59

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BOB FILNER, California, Chairman


VIC SNYDER, Arkansas
JOHN J. HALL, New York
PHIL HARE, Illinois
MICHAEL F. DOYLE, Pennsylvania
TIMOTHY J. WALZ, Minnesota

STEVE BUYER,  Indiana, Ranking
HENRY E. BROWN, JR., South Carolina
BRIAN P. BILBRAY, California




Malcom A. Shorter, Staff Director

MICHAEL H. MICHAUD, Maine, Chairman

VIC SNYDER, Arkansas
PHIL HARE, Illinois
MICHAEL F. DOYLE, Pennsylvania
JEFF MILLER, Florida, Ranking
HENRY E. BROWN, JR., South Carolina

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Veterans' Affairs are also published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process is further refined.



November 1, 2007

The U.S. Department of Veterans Affairs Construction Process


Chairman Michael Michaud
    Prepared statement of Chairman Michaud
Hon. Jeff Miller, Ranking Republican Member
    Prepared statement of Congressman Miller
Hon. Corrine Brown
    Prepared statement of Congresswoman Brown
Hon. Cliff Stearns
Hon. Shelley Berkley
Hon. Henry E. Brown, Jr.
Hon. John T. Salazar
    Prepared statement of Congressman Salazar


U.S. Department of Defense, Major General David W. Eidsaune, Commander, Air Armament Center, Eglin Air Force Base, FL, Department of the Air Force
    Prepared statement of General Eidsaune
U.S. Department of Veterans Affairs, Donald H. Orndoff, Director, Office of Construction and Facilities Management
    Prepared statement of Mr. Orndoff

American Legion, Shannon L. Middleton, Deputy Director, Veterans Affairs and Rehabilitation Commission
    Prepared statement of Ms. Middleton
Clarkson Group, The, L.L.C., The, Jacksonville, FL, Charles A. Clarkson, Founder and Chairman
   Prepared statement of Mr. Clarkson
Haskell Company, The, Jacksonville, FL, William Wakefield, Vice President, Healthcare Division
    Prepared statement of Mr. Wakefield
Veterans of Foreign Wars of the United States, Christopher Needham, Senior Legislative Associate, National Legislative Service
    Prepared statement of Mr. Needham


Post-Hearing Questions and Responses for the Record:

Hon. Michael Michaud, Chairman, Subcommittee on Health, Committee on Veterans' Affairs, to Dennis Cullinan, National Legislative Director, Veterans of Foreign Wars of the United States, letter dated November 8, 2007, and VFW response

Hon. Michael Michaud, Chairman, Subcommittee on Health, Committee on Veterans' Affairs, to Steve Robertson, National Legislative Director, American Legion, letter dated November 8, 2007, and American Legion response

Hon. Michael Michaud, Chairman, Subcommittee on Health, Committee on Veterans' Affairs, to Hon. Gordon H. Mansfield, Acting Secretary, U.S. Department of Veterans Affairs, letter dated November 8, 2007, and VA response


Thursday, November 1, 2007
U. S. House of Representatives,
Subcommittee on Health,
Committee on Veterans' Affairs,
Washington, DC.

The Subcommittee met, pursuant to notice, at 10:00 a.m., in Room 334, Cannon House Office Building, Hon. Michael Michaud [Chairman of the Subcommittee] presiding.

Present:  Representatives Michaud, Brown of Florida, Snyder, Berkley, Salazar, Miller, Stearns, and Brown of South Carolina.


Mr. MICHAUD.  I would like to call the Subcommittee on Health to order.  I would like to thank everyone for coming this morning. 

The purpose of this hearing is to learn more about the construction process within the U.S. Department of Veterans Affairs (VA).  In 2004, the VA completed the Capital Asset Realignment for Enhanced Services (CARES) process.  CARES was supposed to be a map the future VA facility development.  It is unclear to me how closely the VA is following this map, and it is also unclear how well CARES will address the medical and demographic needs of current and future veterans of Afghanistan and Iraq. 

This Subcommittee is committed to providing the highest quality of care to our Nation's veterans, and we understand that a key part of this care are the facilities in which it is provided. 

We are here today to get a better understanding of the entire construction process from the concept to the opening of a facility.  Understanding this process is particularly important right now. 

Many of the VA hospitals and medical facilities are aging and are in need of major renovation or replacement.  Many VA facilities need to be upgraded in order to meet the standards for earthquakes, fire and patient privacy.  Population shifts require new facilities in new locations.  The VA is in the process of planning several new hospitals in cities such as Las Vegas, Denver, and New Orleans.  This process can be long and drawn out.  It can take much longer than similar projects built in the private sector. 

We look forward to working with the VA to ensure that our veterans receive the best possible care in medical facilities that are modern and safe while being built efficiently and cost-effectively.  I look forward to hearing about the current construction process, the VA's plans and needs for future construction and how this Committee can support this effort, with the goal always being to provide the best possible healthcare for our veterans. 

I now would like to recognize Mr. Miller for an opening statement. 

[The statement of Chairman Michaud appears in the Appendix.]


Mr. MILLER.  Thank you very much, Mr. Chairman.  I appreciate you holding this hearing today. 

As you have already said, access to different types of outpatient and inpatient facilities is critical in addressing the unique healthcare needs of our changing veteran population.  Most of the Department of Veterans Affairs infrastructure was built more than 50 years ago.  Many of these facilities continue to age and are not well suited for the 21st century healthcare that is provided now. The facilities need repair and replacement, and they are sometimes simply located too far away from the veteran's choice of living arrangements. 

I have a full statement that I would like to have entered into the record, but because we do have votes coming up in a few minutes, I would like to ask unanimous consent that my statement be entered into the record. 

I do want to say a special welcome this morning to our first witness, Major General David Eidsaune, who is here from Eglin Air Force Base in my district, the First Congressional District of Florida. 

We are glad to have you here with us this morning, General. 

I yield back.

[The statement of Congressman Miller appears in the Appendix.]

Mr. MICHAUD.  Thank you very much.  Without objection, your full statement will be put in the record.

Ms. Brown?


Ms. BROWN OF FLORIDA.  Thank you.  Mr. Chairman, I want to thank you for calling this hearing today.  Thank you very much.  I had requested this hearing, and have been pressing for it, and now we have it. 

This issue is very important to me as I represent part of Orlando, Gainesville, and Jacksonville.  I would say most of Florida.  Some of my colleagues might disagree.  Central Florida waited 25 years before the VA decided to put a VA medical center there earlier this year.  Twenty-five years is too long for those men and women who have defended this country and their freedom that it holds dear.  It is 25 years too long for the oldest veterans population to wait for proper care.  Twenty-five years.  I do not want to have to wait another 15 years for this hospital to open. 

In New Orleans, it has been two years since Hurricane Katrina hit the Crescent City and devastated the city.  The employees at the VA medical center performed heroically for the patients and in evacuating everyone safely.  However, we are no closer to rebuilding that hospital now than we were two years ago. 

I have heard good things about design-build, where the design and construction aspects are contracted for or with a single entity known as a "design-builder" or a "design-builder contract."  The design-builder is usually the general contractor, but in many cases it is also the architect or the engineer.  This system minimizes the project risks and reduces the delivery schedule by overlapping the design phases and construction phases of the project. 

Why can't the VA use this modern device to speed up the process? 

I look forward to the hearing, the testimony of the witnesses today, and I will put my complete statement in the record, Mr. Chairman. 

[The statement of Congresswoman Brown appears in the Appendix.]

Mr. MICHAUD.  Without objection.

Mr. Stearns?


Mr. STEARNS.  Well, thank you, Mr. Chairman. 

I also share similar things with my colleague from Florida, Ms. Brown.  We represent the University of Florida, and we have the Gainesville Hospital up there, and so we are working together on this, and we are trying to get additional money for it and for also the new Summerfield Clinic in South Marion County, both of which are in the construction budget and are in the process.  The one in Summerfield is a 95,000-square-foot facility, which is in my hometown. 

I think a lot of us are concerned about a lot of the VA facilities that are aging, and in fact, I guess, a U.S. Government Accountability Office (GAO) report found that one out of every four medical care dollars goes to the maintenance and operation of the infrastructure, and we are losing millions of dollars annually on the upkeep of these facilities. 

So, obviously, that is why the CARES program got started, and that is why we are interested so much in the construction. 

There are, obviously, other projects throughout the United States.  I think there are about 100 major construction projects in 37 States, including in the District of Columbia and in Puerto Rico.  So I am very sensitive to that fact that you have this many in a priority situation.  The Military Construction and Veterans Affairs Appropriations Act, 2008, would provide $1.4 billion for major construction and $650 million for minor projects.  So that is the good news. 

Like other Members of Congress, we have heard from our districts, and we need the facilities, and so we are particularly pleased that there is going to be additional funding for the Gainesville Hospital, and also, we want to get money for the Summerfield Clinic. 

So, Mr. Chairman, I am glad we are having the hearing.  I compliment you on it.  I look forward to the testimony. 

Thank you.

Mr. MICHAUD.  Thank you very much. 

Ms. Berkley?


Ms. BERKLEY.  I thank you very much, Mr. Chairman, for holding this very important hearing, and thank you very much for being here. 

I represent the Las Vegas area, and as you are well aware, we are on schedule to get a full VA medical complex that includes a VA hospital, a long-term care facility and a VA outpatient clinic, a full-service VA outpatient clinic.  We have moved heaven and earth to do this.  We had 147 acres transferred from the U.S. Department of the Interior to the Department of the VA to save on costs of the land.  I was at the Paiute Indian blessing of the land, which was quite an extraordinary ceremony.  I was there for the groundbreaking with then Secretary Nicholson.  They are moving dirt out there.  Right now, it is in the middle of nowhere, but I know the growth patterns of my Congressional district and the entire State of Nevada.  It is going to be in the middle of North Las Vegas in very short order. 

My biggest concern—and the appropriations have already been made, and we are moving forward.  My biggest concern and what keeps me up at night, quite frankly, given the fact that I have got the fastest growing veterans population in the United States in the Las Vegas Valley, is that I have 300,000 veterans in the State of Nevada.  Two hundred and fourteen thousand of them call my district home.  They have no healthcare facilities.  There is nothing to repair.  There is nothing there right now, and that is why this is so critical.  I have 1,600 veterans who have returned from the Iraq-Afghanistan theater of war, and they are already accessing whatever healthcare system we have in Nevada. 

I need to keep this on track, and I need to have periodic—I mean other than my going over there and looking at the facilities going up, I need to know that we are moving in a positive direction.  With the construction costs in Las Vegas skyrocketing beyond anybody's wildest beliefs, my concern is that this gets more costly with every passing day.  The sooner we get it up, the sooner we are going to save millions and millions of taxpayers' dollars. 

So anything I could do to be working with you to move this in a very rapid and a positive direction, I am there for you, but I need to get these facilities up, and I need to get them up fast.

Mr. STEARNS.  Will the gentlelady yield? 

Ms. BERKLEY.  Of course, Mr. Stearns. 

Mr. STEARNS.  On this Indian blessing for the site, perhaps others might have to have that same kind of ceremony. 

How long a ceremony was it? 

Ms. BERKLEY.  It was quite remarkable. 

Mr. STEARNS.  Quite remarkable.

Ms. BERKLEY.  The Paiute Indians were in full regalia, and there were blessings and a lot of smoke.  I do not think it was peyote, but it smelled good.  It was quite an extraordinary cultural experience.

Mr. STEARNS.  That is the first I have heard of something like that occurring. 

So, Mr. Chairman, if you do not mind, I just indulged myself to find out a little more about it.  Thank you.

Ms. BERKLEY.  By the way, that is all former Paiute land. 

Mr. MICHAUD.  Mr. Brown?


Mr. BROWN OF SOUTH CAROLINA.  Thank you, Mr. Chairman. 

Thank you, General, for coming, and I look forward to hearing your testimony and that of the other members of the panel. 

I represent the First Congressional District of South Carolina.  We have been working for some time now to try to develop a model that we feel would upgrade, I guess, the healthcare delivery for veterans across the Nation.  It is to partner with the local, you know, State-run Medical University.  We have been working on that plan for a long time, but it seems to me that we just cannot quite move to the next level. 

The Medical University now is in the process of building a complete new hospital complex.  What we were hoping to do is to be able to incorporate in that development the replacement for the old VA hospital now in Charleston. 

We are facing a similar situation that you find in New Orleans today where the VA hospital was built on the peninsula of Charleston, which was built in a low-lying area, and we could almost sense, if we had a Katrina-type storm come through the region, that we would be out of business just like the folks in New Orleans.  The Medical University is sensing that concern and is building on higher ground, and we were hoping that we would be able to replace the old VA hospital in the same time and manner as the current Medical University complex.  By doing so, we would be able to unite some services between the VA and the Medical University that we currently are not doing. 

Ninety-five percent of those doctors who operate in the VA hospital actually come from the Medical University, so there is already some sharing; some imaging equipment is also being shared.  What we were looking for is to get the units closer together in a physical sense so we would be able to unite more services and, I think, upgrade particularly in the highly specialized areas and, I think, in the clinical care area for, I guess, mental patients and some of the prostheses and for the heart and for some of the other high-tech procedures where we could better utilize the taxpayers' dollars by uniting both of those units, but we cannot seem to move to the next level. 

We have appropriated—we have not appropriated, but we authorized some $38 million last year in the authorization bill, but we cannot seem to get the connectivity with the administration to be able to move that project forward, and I certainly would like to address that as you make your statements today. 

Thank you, Mr. Chairman.

Mr. MICHAUD.  Mr. Salazar?


Mr. SALAZAR.  Thank you, Mr. Chairman. 

I just wanted to thank the General for being here. 

Of course, I share the same concern as many of my colleagues here around the table.  We have been working on the Fitzsimons Hospital construction in conjunction with the University of Colorado, which will be, I hope, soon a state-of-the-art facility.  I want to thank you for your service as well. 

So I will submit my full statement for the record, Mr. Chairman.  Thank you very much for holding this hearing.

Mr. MICHAUD.  Without objection. 

[The statement of Congressman Salazar appears in the Appendix.]

Mr. MICHAUD.  It is my pleasure now to recognize the first panel, Major General David Eidsaune.  I want to welcome you here.  A lot of comments you heard this morning so far actually deal with the VA jurisdiction, but hopefully those folks from the VA heard those opening remarks and will be able to address them when they come up to do their part. 

So, without further adieu, Major General, I want to thank you once again for your service to this great Nation of ours.  I look forward to your testimony here today. 

So please begin.


General EIDSAUNE.  Thank you, Mr. Chairman and Members of the Subcommittee, and thank you for this opportunity to speak about the ongoing VA construction project we have at Eglin Air Force Base, and thank you for your great support of our veterans, including the many who live in the community around my base, and they are also very vibrant supporters of our mission at Eglin. 

At Eglin and across the Air Force, we are continually working to expand and to improve available healthcare services for our active duty and veteran populations.  This includes renovating and enlarging existing healthcare facilities as well as planning and building new facilities such as our own VA community-based outpatient clinic, which is under construction. 

The VA Gulf Coast Veterans Healthcare System covers the gulf coast of Mississippi, Alabama, and the Florida Panhandle.  This extensive area is covered by one VA inpatient facility in Biloxi and three outpatient clinics in Mobile, Pensacola, and Panama City. 

Because the Emerald Coast of northwest Florida is one of the top 10 fastest growing areas in the United States, there is a strong need to improve access for veterans to the medical services they deserve.  The VA and Eglin Air Force Base have combined forces to address this need.  The resulting VA community-based outpatient clinic is currently under construction and is scheduled to open in the spring of 2008. 

Eglin provided a 10-acre parcel, within walking distance of our main hospital, at no cost to the VA.  The close proximity will enable a sharing arrangement for inpatient care, emergency room services, radiology, lab work, pharmacy, and specialty care, just to name a few. 

In closing, this VA clinic will be a tremendous joint success for Eglin, for the VA, and for our combined patient populations.  I believe this cooperative effort will serve as a model for future initiatives to support the healthcare needs of our Nation's veterans.  

Thank you. 

[The statement of General Eidsaune appears in the Appendix.]

Mr. MICHAUD.  Thank you very much, Major General. 

I have a couple of quick questions. 

What major challenges did you face in building the community-based outpatient clinic (CBOC) at Eglin Air Force Base?  Were you able to stay on schedule and on budget for this project? 

General EIDSAUNE.  In fact, there were no major challenges.  It all went very well.  We have been on schedule, on budget, and I know Congressman Miller has been out there to observe the construction, and he was very happy with that.  So I would say it is a great success story so far.

Mr. MICHAUD.  Great.  You are to be commended. 

Mr. Miller?

Mr. MILLER.  Thank you, Mr. Chairman. 

I think the focus of your testimony is unique now, it was not so unique five years ago.  It was not even thought about that much, the cosharing between the VA and the U.S. Department of Defense (DoD). 

When I was elected in 2001, it was interesting to me that there was a huge disconnect between the DoD and the VA. Now, I think everybody is trying to bring them together as there is a possibility of providing much better service for both DoD and VA patients. 

In El Paso, the VA Medical Center and the William Beaumont Army Medical Center at Fort Bliss are colocated. VA inpatient care is provided through a VA/DoD cosharing agreement.  Obviously, one was entered into in Florida because of the Community-Based Outpatient Clinic at Eglin. 

Were there great problems in putting that agreement together?  What do you see as the future at Eglin or at other facilities of being able to expand inpatient care for VA patients? 

General EIDSAUNE.  In fact, it made a lot of sense for us to have the big hospital right there at Eglin and one of the top five in the Air Force, in terms of size, to put a clinic right outside the fence and to provide primary care.  If a veteran needs specialty care follow-up, they can walk right next-door.  We plan on putting in a golf cart shuttle system to take them back and forth through the gate, an electronic-type gate, to make it easy.  So it all makes sense that we should put these two together and share arrangements. 

Mr. MILLER.  What type of security issues are you having to deal with, going through the fence between the two facilities? 

General EIDSAUNE.  What we plan to do is, for people who have appointments the next day, we will provide a list of those patients to the security forces, and when they come in the next day, they just show a picture ID and their VA patient badge, and they will be let right in to go to the hospital.  For same-day appointments, we will use that gate I talked about—it will be an electronic gate—so the staff that accompanies the patient on the golf cart over there will just be able to swipe a card through the gate and get through to the hospital.  So we do not see any major security concerns at all.

Mr. MILLER.  Do you think that adding veterans to the mix of patients that Eglin currently has is going to provide a broader range of services than currently exists?  Do you see VA patients coming in helping the physicians and the facility at the hospital expand what they do? 

General EIDSAUNE.  In fact, I think it will. 

Part of our certification progress is we have to have a wide range of patient population, including aging patients.  Well, we do not have that many on base right now in terms of the active duty.  We also have a fairly good active residency program, and those residents need to see those types of patients also, so this really benefits our own hospital in terms of these VA patients coming over. 

Mr. MILLER.  You came in when the process was already started, but what type of stumbling blocks have you seen through the VA and the DoD working together that you have had to overcome? 

General EIDSAUNE.  Yes, I wish I could give you some, but it has been just a very smooth process so far.  I know the folks in my hospital worked this really hard with the VA, but nothing has bubbled up to my level as being a major stumbling block in making this happen.

Mr. MILLER.  I think it is important for the Subcommittee to hear that both VA and DoD have worked seamlessly in making this transition, in providing the ability for veterans to receive healthcare as close to home as possible. 

As you heard this morning, there is a cry, a need for community-based outpatient clinics to be located throughout the United States.  As my colleague, Ms. Berkley, and I go back and forth about who has the most veterans, she obviously has a tremendous need and has for many years been an advocate for a full service hospital in her district.  Finally it has been authorized, and the process is beginning. 

The veteran population has changed tremendously over the years; therefore, VA has had to modify the way that they provide healthcare.  I want to say "thank you" to the DoD for being willing to partner with VA to help solve the problem. Today, once people leave active duty and become veterans or retirees within the system, they are still able to gain the healthcare that they deserve as people who have served this country, through VA and DoD collaboration.    

General, thank you for coming and for representing Eglin Air Force Base, Big Blue, and certainly the DoD.  It is great to have somebody from northwest Florida here today.  Thank you.

General EIDSAUNE.  Thank you, sir.

Mr. MICHAUD.  Ms. Brown?

Mr. Brown?

Ms. Berkley? 

Ms. BERKLEY.  Because of your experience, what would you recommend to me?  What should I be doing?  What can I do to be most effective to keep this on track in Las Vegas? 

General EIDSAUNE.  Well, what is really important is the working level relationships between the VA and the DoD hospital there, and to make sure that is vibrant and working very well, and they just have a way of working things out. 

Ms. BERKLEY.  Okay.  I am not sure if I understand how that helps get my facility built. 

General EIDSAUNE.  Well, I am not familiar with where you are going to build it.  Are you close to a DoD hospital? 

Ms. BERKLEY.  The Michael Callahan Hospital that services Nellis Air Force Base. 

The reason that we are getting this VA facility is because it is just totally inadequate for the number of enlisted that we have at Nellis and the extraordinary number of veterans.  That is why we are getting our own separate hospital.

Mr. MILLER.  If the gentlelady would yield for a minute, I think part of the issue is, yours is a stand-alone VA facility, and we are talking about the joint facility.  So there is a difference, but I think he is right.  What I have learned is the more times you visit the site, talk to the contractor, remind people that you are there, and your staff is there all the time, that is a lot. What we are looking at now is a collaborative effort, not a stand-alone facility.

Ms. BERKLEY.  I think, Mr. Miller, I will bring you to my district, and we can talk to them together.  I will watch you in operation. 

Mr. MILLER.  Let’s go.  I am ready. 

Ms. BERKLEY.  Thank you. 

Mr. MICHAUD.  Mr. Salazar?

Mr. SALAZAR.  Thank you, Mr. Chairman. 

Major General, as you know, out in rural communities, we face a severe problem when we try to set up CBOCs.  You know, sometimes the sufficiency ratio is not very good, and so sometimes there has been some talk in this Committee about partnering with private facilities, such as other hospitals, to help run these CBOCs. 

Do you have any suggestions as to how we address the issue out in small rural communities where you are not close to a military base? 

General EIDSAUNE.  Well, in our own hospital at Eglin, we have some sharing relationships with private hospital facilities downtown, and if our workload is too high and we cannot see patients, we will send them downtown.  We have worked that out.  So I would suggest the same thing, maybe working with some of the smaller medical facilities out in the rural areas in terms of sharing arrangements like that.

Mr. SALAZAR.  Doing, maybe, some type of a contracting arrangement? 

General EIDSAUNE.  Right.

Mr. SALAZAR.  I do not know.  I know that Mr. Miller has the same problem—I believe it is you—and also the Chairman.  So we might look at something like that in the near future because I do believe that, you know, the VA set up a CBOC out in Craig, although it is not a full facility.  People have to travel, or veterans have to travel over 5 hours to get to a VA hospital from that area, and so I would really encourage us to look at something like that. 

I yield back.

Mr. MICHAUD.  I concur, Mr. Salazar.  We definitely will.  In the rural areas we have our own unique problems, and I definitely look forward to working with you as we move forward. 

If there are no other questions, once again, Major General, I want to thank you very much for your testimony and for coming here today and for your enlightening the Subcommittee on how well projects can move forward if you work together in a cooperative effort.  So, once again, thank you very much, and thank you for your service to this great Nation of ours.

General EIDSAUNE.  Thank you, Mr. Chairman. 

Mr. MICHAUD.  I would like to ask the second panel to come forward. 

I will also ask Congresswoman Brown if she would introduce the second panel.  Ms. Brown has been a very strong advocate, to put it mildly, in making sure that we had this hearing today.  As well, she feels deeply about this issue, and I appreciate her passion and her willingness to move forward as we look at the VA construction process. 

So, Ms. Brown?

Ms. BROWN OF FLORIDA.  Once again, Mr. Chairman, thank you for holding this hearing. 

I would like to introduce the panel and really thank them. Mr. William Wakefield is the Vice President of The Haskell Company, the division leader for healthcare in Jacksonville.  He has been involved in developing medical facilities for over 30 years, and he is a board certified architect.  Yesterday, he was in Atlanta.  He, I guess, flew to Jacksonville and flew back up here to be with us. 

So I want to thank you so very, very much, and make sure you thank Mr. Haskell, too. 

Mr. Bucky Clarkson, Charles Clarkson, has been involved in the real estate industry for over 25 years as an investor, developer and manager.  Mr. Clarkson has also associated in the past with the Ross Company, a large national developer.  He received his initial real estate experience as a real estate negotiator for the Safeway Stores in the Washington, D.C. area.  He is a graduate of Princeton University and of George Washington Law School, and most importantly, he has been a very personal friend of mine for over 25 years. 

Thank you very much, also, for flying up here.  I talked with him yesterday morning.  He got on a plane and came up here to be here today. 

So thank you all very much. 

Mr. MICHAUD.  Once again, thank you as well. 

Mr. Wakefield, would you begin?



Mr. WAKEFIELD.  Yes.  Thank you very much for having me today on short notice.  I would like to make a few comments if I can about the—

Mr. MICHAUD.  Is your microphone on?  Press the button. 

Mr. WAKEFIELD.  Thank you very much. 

Again, thank you very much for having me today.  I am delighted to come to talk to you today. 

My principal area of focus today will be on design-build as an alternative delivery model for your consideration.  I am, again, Vice President for Healthcare Facilities at the Haskell Company.  Haskell is a firm that provides design and construction services to a number of markets, including healthcare providers, principally in a design-build delivery mode.  What I would like to—and I have spent most of my career also, similarly, in the design-build delivery mode. 

What I would like to comment on just before we get started into questions is I would like to particularly draw your attention to a Penn State University-published study that was done in 1997, an objective study that looked at a variety of delivery models for design and construction.  It studied 351 projects, and their findings are very interesting in terms of the benefits that design-build can offer to clients. 

As to the unit cost in terms of the actual cost of a facility, they found that, of the 351 projects that were studied, those delivered under the design-build delivery model were the lowest cost.  They also represented the lowest cost growth, if you will, and that is the cost from the initial budget to the final construction cost of the completion and occupancy of the building.  There were similar results for delivery speed in terms of the shortest period of time through design and construction and for the shortest or the least scheduled growth during the process. 

Finally, of course, none of that would be of much benefit if you did not have similar results in terms of quality, and again, the Penn State study indicates that quality, as ranked by the owners of the various facilities, was highest for design-build delivery projects. 

There are a number of other advantages to design-build and, obviously, a number of nuances in terms of a design-build delivery versus a design-bid-build or a construction management-type delivery. 

I would be delighted to entertain your questions on those as we get into the discussion.  Thank you very much for the opportunity to give opening comments.

[The statement of Mr. Wakefield appears in the Appendix.]

Mr. MICHAUD.  Thank you very much, Mr. Wakefield. 

Mr. Clarkson?


Mr. CLARKSON.  Thank you, Mr. Chairman.  Thank you, Congresswoman Brown and Members of the Subcommittee. 

I am pleased to share the limited amount of knowledge that I have on an extremely important topic.  I just have three brief comments as I have a slightly different view than my friend Mr. Wakefield and my dear friend Congresswoman Brown. 

In my experience in development, design-build definitely applies when you have what I would simply call a cookie cutter opportunity, in my experience.  Making sure—and this is not always the case in design-build.  Making sure that you have complete plans before you break ground is critical in terms of managing time, costs and risks.  However, clearly, the positive elements of design-build that lend itself toward the encouragement of standardization are very important points. 

To the extent that products can be standardized, whether for hospitals or for any other type of product, the more you can standardize, the more you get the benefits of design-build, because the more you standardize, the more you will reduce time in design—you will reduce some cost in the design cost itself, and you also will reduce overall risk. 

So, as a developer, I have chosen the alternative, mainly because our projects are high-barrier-to-entry opportunities where we have to squeeze them into downtown Savannah or into downtown Tampa or somewhere like that. 

Clearly, any project that has some previously established standardized approach will really get the benefits of streamlining and cost reduction and risk management. 

Thank you.

[The statement of Mr. Clarkson appears in the Appendix.]

Mr. MICHAUD.  Thank you very much, Mr. Clarkson. 

I have a couple of questions for both of you. 

What difference do you see between the private development process and the VA development process?  What lessons about development and construction do you feel the VA could learn from the private sector to make construction more efficient and cost-effective? 

Mr. Wakefield, do you want to start off with that? 

Mr. WAKEFIELD.  Yes, I would be happy to.  Thank you. 

I do think that Mr. Clarkson's comments are valid with respect to the ability to control cost and schedule, to a large extent, through somewhat of a standardization in terms of design.  Many of our clients, private-sector clients, do have standard designs for patient rooms and for other types of patient-care areas.  From our perspective, of course, each is different, and therefore, each is unique. 

So for a design-build firm, we deliver with a variety of design concepts, but from our owner's standpoint, the provider's standpoint, somewhat of a standardization on design is an important aspect.  I do believe that the VA can benefit somewhat from that standardization.  That is not to imply that a certain facility will not provide the service or the quality of service that one would wish, but to the degree that you can replicate patient rooms, for example, in inpatient facilities, the process becomes much easier, much more streamlined, and it can be more predictable in terms of time and in terms of cost. 

Mr. CLARKSON.  I just thought—I have not done any public projects, but I would expect an empowered decision maker in the private sector would be a critical difference.  The public sector is not my area. 

You could streamline the decision-making process and have an empowered decision maker to drive the project forward.  There are probably a lot of things going on in the public sector.  Whereas, in the private sector, we cannot afford it.  Somebody has got to get it done.

Mr. MICHAUD.  Great.  Thank you very much. 

Mr. Miller?

Mr. MILLER.  I pass, and will yield my time to Ms. Brown.

Ms. BROWN OF FLORIDA.  Thank you very much. 

Let me just ask; there is another problem, it seems. 

Recently, I visited the Gainesville facility, and it is on-line.  We have gotten the authorization and the funding, but there is going to be a hospital built right next-door, and that hospital will probably come up—you know, and this is private—like 2 years before our VA facility is going to come up.  In that facility, you have five patients in a room, and they do not have a bathroom.  Now, that does not make any sense.  There has to be a way—like I said earlier, Orlando, 25 years. 

How can we streamline the process?  Should we think about a one-stop process?  Because part of it is permits and those kinds of things, and they are all our agencies.  Why can't we have kind of a one-stop facility so that you can get everybody in a room with these high-priority projects and work through the permitting process or something like that? 

Mr. CLARKSON.  Without knowing that project particularly, it just sounds like maybe nobody is in charge, really.  Again, my gut would tell me to go back to the empowered decision maker who is breaking the logjam.  I know there is bureaucracy at every level of industry.  In any place where you have more than 300 people involved, there is a bureaucracy, and the only way you can get through it is to have an empowered decision maker.

Ms. BROWN OF FLORIDA.  So you are suggesting something like an ombudsman—

Mr. CLARKSON.  It could be.  It could be.

Ms. BROWN OF FLORIDA.  —or a building czar or something? 

Mr. CLARKSON.  Right.  It is going to make somebody unhappy, but that happens in the private sector where the contractor is not happy or the architect is not happy, but "this is what we are going to do."  That is my gut.  I would suspect that nobody is in charge, so they are waiting for somebody else to tell them to do something.

Ms. BROWN OF FLORIDA.  Mr. Wakefield? 

Mr. WAKEFIELD.  Yes.  I do think that the team that is selected to implement the project can have an impact on that.  Certainly, again, I believe that in a design-build arrangement, where you do have a single source that is in charge at least from the delivery side, it is an important aspect but it is not the only aspect. 

We recently completed a hospital, a 100-bed hospital, in the Tulsa area for the St. John Health System 16 months from conceptual design to occupancy.  So I think that the delivery speed and the cost control, and so forth, are available through an integrated design-build process, but I would reflect the comments that were made here, that the decision-making process and the permitting processes are probably the largest variables in terms of a schedule for completing a new hospital.

Ms. BROWN OF FLORIDA.  So you were able to complete this hospital in 16 months. 

Mr. WAKEFIELD.  From beginning conceptual design to occupancy in 16 months, yes, ma'am.

Ms. BROWN OF FLORIDA.  What do you think are some of the contributing factors? 

Mr. WAKEFIELD.  Well, I think some of the contributing factors are the streamline design—or the decision-making process on the owner's part.  This is the first new, free-standing hospital that St. John Health Systems has built, but nonetheless, they organized themselves in a very efficient, committee-like organization to manage the overall process.  So from our perspective, the things that slow us down is indecision about design issues, indecision about, you know, how patient floors will be organized, and so forth. 

While, again, St. John does have some standards for the design process, any new hospital is going to have a lot of custom questions and decisions to be made, St. John organized themselves very efficiently in terms of providing that guidance to us that enabled us to deliver on such a schedule.

Ms. BROWN OF FLORIDA.  Mr. Chairman. 

Mr. MICHAUD.  Thank you very much, Ms. Brown. 

Mr. Salazar?

Mr. SALAZAR.  Thank you, Mr. Chairman. 

I am not quite clear on the difference between design-build and whatever.  Could you just explain it to a layman farmer? 

Mr. WAKEFIELD.  Yes, I would be happy to. 

In what is often referred to as the "traditional process," an owner will hire an architect under a contract where that architect will provide design and engineering services.  Once the architect's design is complete, the project would be put out for bid to contractors.  Contractors would then bid on the project, and you know, the lowest qualified contractor's bid would be accepted, and that contractor would be hired also by the owner under a separate contract with the construction firm then.  So the owner holds two contracts.  They hold an architectural agreement with the architect, and they hold a construction agreement with the construction company. 

In the design-build setting, the architect and the contractor are one in the same; they are the same entity, and the owner holds a single contract with that design-build firm. 

The differences are that, in the traditional setting the owner is placed in a position of mediating, if you will, reconciling differences.  When there are errors in design documents, the contractor is going to come back and look for extras as a result of that, and so forth, and that is part of the reason—and because the team is not as closely coordinated, that is part of the reason why that process does not necessarily result in as fast or as cost-effective a delivery. 

In the design-build setting, under a single contract, there is a single point of accountability, so the design-builder is responsible for not only the close coordination of their work, but they are also responsible for the quality of the documents, the completeness of the documents, and so forth.  So, if there were an error in the design documents, for example, that would result in additional construction costs to remedy, it would be the design-builder's responsibility, not the owner's responsibility. 

Again, because it is one integrated party, they can coordinate their work much better.  We can order materials.  Critical lead item materials we can order before the design is completed, for example, and there are a number of techniques like that that we can take advantage of as an integrated firm to increase the delivery speed. 

Mr. CLARKSON.  Let me just add to that.

The enemy of managing construction costs is the change order.  In a very specialized project, when the contractor and the architect—the architect has had to run off sophisticated designs.  Often, the contractor—certainly not the Haskell firm—looks for his profit opportunity within the change order where the architect did not quite get it right, and he has got to make some changes.  Then the contractor comes in and makes a nice adjustment in the cost. 

So, to the extent that the project is more specialized and less cookie cutter, there is more risk for change orders, and therefore more risk for delays, cost controls and people yelling at one another.  It also comes back to the importance of making sure those plans are not 90 percent, not 95 percent but, hopefully, 100 percent, but even with those that are 100 percent, there are still going to be some issues in terms of execution by the contractor and what the plans actually said. 

So the more complicated the project, the greater the risk is.  So when you have tension between the architect and the contractor, they are sort of balancing one another.  Whereas, if it is a single point and the architect screwed up, it will get buried—certainly not with this firm—but the project will get built anyway, and that is the way to manage the best bottom line for the contractor. 

So there is in my testimony a little bit of reference to the fox guarding the hen house.  As to the architect's working for the contractor, is the quality of the resolution of that issue going to be the best resolution or is it going to be the best resolution for the contractor?  So that is the advantage of the traditional. 

To the extent that you standardize and you reduce the potential for confusion between the design and the execution, you are really then taking advantage of the design-build approach.  So that is why I am saying it is cookie cutter.  But if it is not cookie cutter, increasing standardization will reduce time issues, cost issues and risk issues.  The more chance you have for a disagreement between the contractor and the design, the more you have got change orders, the more you have got delays, et cetera, et cetera. 

There are contractors that will bid at cost, knowing they are going to make money on change orders, but again that applies to the very customized project, not a more standardized project. 

As Congressman Miller and the previous witness were talking about working with the DoD and the VA, the potential for standardization between those two agencies could be huge, which again could spread the savings and risk across a much bigger area.

Mr. MICHAUD.  Ms. Brown, do you have any more?

Ms. BROWN OF FLORIDA.  I do have some follow-up. 

If you all could just kind of walk us through the process, one of my questions is: 

A lot of times, it is the lowest possible bid.  We start out with that.  In design-build, maybe the best thing to do is to have prequalifying first so that you go through the process, you evaluate the participants, and then after the prequalifying you select a firm.  Maybe the lowest possible bid is not the best thing.  Maybe qualifications and experiences have to be included in the building process. 

We are getting ready to fund the largest VA budget in the history of the United States.  We have a lot of projects that have been shelved, but part of the pressure that I am feeling is the veterans are saying, you know, "What are you all doing?"  "Why do we have to wait so long?"  I am with them.  So I am trying to find out from you what some of the best ways are that we can alleviate this problem. 

Mr. WAKEFIELD.  The second part of my submitted testimony addresses the procurement process, and I chose to treat the delivery system as a design-build versus traditional, separate from the procurement process, because any number of procurement processes can be followed for either delivery model, and design-build is quite often selected on a qualifications-based procurement process because, again, the design-build contractor or the design-build builder is selected before final plans are done, of course, before the design is started, so the final cost is not necessarily known at the time that the design-build firm is engaged. 

So, oftentimes, a process will follow a qualifications-based selection process, which is very similar to the way an architect would be hired.  So you prequalify a few number of firms that you know are experienced in the field and that have the resources to deliver and that have a proven track record, and so forth.  Then you look for their qualifications; also, establish what their costs will be in terms of fees, in terms of general conditions, overhead costs, and so forth, so that you know that—and design fees so you know that the fees that are controlled by the design-builder are competitive, and you can look at those across each of the design-build firms.  Then as the design evolves, additional input is provided from subcontractors for the cost of the masonry work, for the cost of the mechanical system, and so forth, and those are usually taken on a competitive basis.  So, again, you know that you have a competitive price for each of the relative components. 

So it enables one to take advantage of a design-build delivery system while being assured that you are getting the best value for your dollar.  This is a system that is followed, incidentally, especially by the State of Florida now in terms of the procurement of a number of their projects, and they similarly realize the benefits.

Mr. CLARKSON.  That idea makes sense, a lot of sense, particularly if that firm has previously built a VA hospital and you know exactly what they have done.  Standardization.

Ms. BROWN OF FLORIDA.  Thank you very much.

Mr. MICHAUD.  Once again, I would like to thank you, Mr. Clarkson and Mr. Wakefield, for your testimony this morning.  I look forward to working with you, and —