MR. CHAIRMAN AND MEMBERS OF THE SUBCOMMITTEE:
On behalf of the 2.3 million men and women of the Veterans of Foreign Wars of the United States (VFW) and our Auxiliaries, I would like to thank you for the opportunity to testify today with respect to the construction process of the Department of Veterans Affairs (VA).
For the better part of a decade, the VA construction process had been dominated by the Capital Asset Realignment for Enhanced Service (CARES) process. This systematic, data-driven assessment of VA’s capital infrastructure aimed to plan for the current and future health care needs of veterans.
Throughout the CARES process, we were concerned with the under-funding of the construction budget. Congress and the Administration did not devote many resources to VA’s infrastructure, preferring to wait for the final results of CARES. This is despite the fact that many legitimate construction projects were identified by VA’s hospital managers and with House passage of the “Veterans Hospital Emergency Repair Act,” which authorized construction at numerous facilities. Needs were identified, but Congress never appropriated funding, with the ongoing CARES process being used as the primary excuse.
We believe that the de facto moratorium on VA major construction projects was poor public policy and that some of the extra expenses associated with construction costs today are a result of inability to begin projects in previous years. With construction, time equals money, and the longer a project takes, even in planning stages, the higher the ultimate cost will be.
In July 2004, then-VA Secretary Anthony Principi testified before this Subcommittee that CARES “reflects a need for additional investments of approximately $1 billion per year for the next five years to modernize VA’s medical infrastructure and enhance veterans’ access to care.” Yet, since then, the amount appropriated for major construction has lagged far behind. The Fiscal Year 2007 Continuing Resolution, which served as the VA Appropriation, only funded $399 million for major construction. The fiscal year 2006 appropriation was just $600 million. Today, we are a month into fiscal year 2008 and there is still no appropriation, meaning not one of the current construction priorities can move forward. We are certainly appreciative of the amount appropriated by the House, but for VA to properly manage the construction process, the department needs on-time funding.
Beyond the former Secretary’s statements and the CARES decision documents, the need for increased construction funding is evident. VA’s facilities are aging, with an average age well over fifty years and VA has historically recapitalized at a rate well below industry standards. From 1996-2001, for example, the average $246 million major and minor construction appropriation corresponded with a recapitalization rate of just 0.64 percent of its approximately $40 billion plant replacement value. This low rate means VA would rebuild its aging infrastructure every 155 years. Numerous reports and studies, including the 1998 Price Waterhouse report on VA’s facility management programs, cite the need for a 4-8 percent recapitalization rate, which is consistent with a total construction budget – major and minor -- of $1.6 - $3.2 billion per year.
One of the strengths of the CARES process was that it was not just a one-time snapshot of the VA health care system and its infrastructure needs. It provided the department and its managers with the tools and a framework to evaluate future needs and a prioritization methodology to determine which projects are most critical to the department. These prioritizations help the department to determine its budget request, and the full prioritization lists are included with VA’s annual budget submission as part of its 5-Year Capital Plan.
To determine the budget request, VA first assigns priority to previous year’s projects that were partially funded and then adds in newly evaluated projects from the current budget year to create an ordered list. When setting the budget, VA’s managers select projects from the top of this prioritization list. We believe that this apolitical methodology for determining construction priorities is an excellent process.
That process also reveals the inadequacies of the fiscal year 2008 budget request. Page 7-12 of the 5-Year Capital Plan shows that the budget request only funded six projects, all of which came from the list of projects partially funded in previous fiscal years. It included no additional money for six other partially funded construction priorities or any money for any of the top priorities identified for fiscal year 2008. Some of these projects were later funded as part of the continuing resolution that funded VA during the 2007 fiscal year, but it is troubling to us that funding was not requested in the first place.
With respect to minor construction, we were pleased to see the sizeable $326 million increase in the account as part of the fiscal year 2007 supplemental. As with the major construction account, there was little progress made on the long list of construction priorities laid out in the 5-year Capital Plan. Table 4-8 of that report details numerous projects that VA has identified and that will need funding in the future. We thank the Congress for upping the account, but we would hope that future funding needs are part of the regular appropriation, not just a supplemental.
Although not specifically related to the construction budget, I would like to place special emphasis on nonrecurring maintenance funding, part of the Medical Services budget account. When the Washington Post detailed the deplorable living conditions some wounded warriors faced at Walter Reed Army Medical Center, including mold, leaky plumbing and holes in walls, the reactions were swift, immediate and universal. These intolerable conditions were a national shame and we as a nation can and must do better for those who have served this country.
The VFW absolutely agrees, but we view the problems at Walter Reed as the manifestation of a problem we have repeatedly pointed out. The unacceptable living conditions at Walter Reed were caused, in part, because of an insufficient maintenance budget. Although Walter Reed is not a VA facility, the maintenance problems are consistent with the concerns we have had with VA.
In light of the attention focused on the health care of veterans, VA Secretary Jim Nicholson ordered an immediate review of the Department’s maintenance needs on March 7, 2007. The results, which were released on May 21, 2007, showed that the majority of VA’s facilities were in good condition and that most of the deficiencies that VA’s internal review identified were, in VA’s words “normal wear and tear.”
The VFW, however, has some concerns with the report’s findings and what they represent. A March 22, 2007 article in the Washington Post reported that VA officials concluded that 90 percent of the problems identified were routine, but that 10 percent were deemed more critical. Among the critical problems VA identified were problems with the fire alarm and smoke barrier systems in a hospital in Amarillo. In Fayetteville, the review found problems with fixtures and other objects in patient areas that could pose a suicide threat in its mental health unit. The VA Medical Center in Saginaw found that, “[o]ld, worn out carpet may harbor residue/bacteria from patients' personal accidents.” In Manchester the damaged and stained carpet is over 15 years old and was installed over asbestos floor tiles. Many other facilities had leaky pipes or roofs, discolored or defective ceiling tiles, peeling paint or holes in walls, and issues with the appearance or quality of the flooring.
We, as part of The Independent Budget, have identified full and proper funding of the NRM account as one of the biggest challenges facing VA. We have cited industry standards, as well as the findings of the aforementioned Price Waterhouse study that found a need for VA to spend 2-4 percent of its plant replacement value each year on NRM.
VA’s Office of Asset Enterprise Management’s most recent Asset Management Plan (accessible on the internet at http://www.va.gov/oaem/docs/FINALAMPsigned.pdf) estimates the current plant replacement value of VA’s facilities to be roughly $40 billion. Accordingly, VA’s own Asset Management Plan recommends an appropriate level of funding ranging from $800 million to $1.6 billion on NRM.
The level of NRM funding in the past few years has fallen far below that. For fiscal year 2008, for example, the Administration recommended a paltry $573 million for NRM. Over the previous two fiscal years, only about $1 billion total was appropriated for this critical account, far below what VA itself had identified as a need.
We were pleased to see that Congress stepped up once VA identified these numerous maintenance issues, with an additional $550 million for NRM in the fiscal year 2007 supplemental appropriation. We would hope, however, that future funding requests would be sufficient enough to eliminate the need for emergency requests. These issues must be taken care of before they develop into larger problems.
We would also thank Congress for listening to our recommendations in previous years in exempting this funding from apportionment using the Veterans Equitable Resource Allocation (VERA) formula. While VERA does move the funding toward geographic areas with the highest demand for health care, it also tends to move funds away from facilities with the oldest capital structures – facilities that generally have the greatest maintenance needs. We would hope that future NRM goes to the facilities with the greatest demand.
Providing a safe, clean, hospitable health care environment is critical to the effective delivery of health care and accordingly Congress must provide VA with all the resources it needs to address the shortcomings already identified, but also to stay on top of any problems that arise in the future. We cannot afford to have what happened at Walter Reed happen ever again. The VFW encourages Congress and VA to be proactive and to do what is right for this nation’s veterans.
Mr. Chairman, this concludes my testimony and I would be happy to answer any questions you or the members of this Subcommittee may have.