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Mr. Ray Kelley

Mr. Ray Kelley, Legislative Director, Veterans of Foreign War

On behalf of the more than 2 million men and women of the Veterans of Foreign Wars of the U.S. (VFW) and our Auxiliaries, I would like to thank you for the opportunity to testify today.  The VFW works alongside the other members of the Independent Budget (IB) – AMVETS, Disabled American Veterans and Paralyzed Veterans of America – to produce a set of policy and budget recommendations that reflect what we believe would meet the needs of America’s veterans.  The VFW is responsible for the construction portion of the IB, so I will limit my remarks to that portion of the budget.

As VA strives to improve the quality and delivery of care for our wounded, ill and injured veterans, the facilities that provide that care continue to erode. With buildings that have an average age of 60 years, VA has a monumental task of improving and maintaining these facilities. Since 2004, utilization at VA facilities as grown from 80 percent to 120 percent, while the condition of these facilities has eroded from 81 percent to 71 percent over the same period of time. It is important to remember that VA facilities are where our veterans receive care, and they are just as important as the doctors who deliver it. Every effort must be made to ensure these facilities remain safe and sufficient environments to deliver that care. A VA budget that does not adequately fund facility maintenance and construction will reduce the timeliness and quality of care for our veterans.  

The vastness of VA’s capital infrastructure is rarely fully visualized or understood. VA currently manages and maintains more than 5,600 buildings and almost 34,000 acres of land with a plant replacement value (PRV) of approximately $45 billion. Although VA has decreased the number of critical infrastructure gaps, there remain more than 4,000 gaps that will cost between $51 and $62 billion to close with an additional $11 billion in activation costs.

The two categories that concern The Independent Budget veterans service organizations (IBVSOs) the most are condition and access. To determine and monitor the condition of its facilities, VA conducted a Facility Condition Assessment (FCA). These assessments include inspections of building systems, such as electrical, mechanical, plumbing, elevators and structural and architectural safety; and site conditions consist of roads, parking, sidewalks, water mains, water protection. The FCA review team can grant ratings of A, B, C, D, and F. A through C assessments conclude the rating is in new to average condition. D ratings mean the condition is below average and F means the condition is critical and requires immediate attention. To correct these deficiencies, VA will need to invest nearly $9.8 billion.

To close the gaps in access, VA will need to invest between $30 and $35 billion dollars in major and minor construction and leasing. The remaining $20 billion is needed to close the remaining non-recurring maintenance (NRM) deficiencies.

Quality, accessible health care continues to be the focus for the IBVSOs, and to achieve and sustain that goal, large capital investments must be made. Presenting a well-articulated, completely transparent capital asset plan is important, which VA has done, but funding that plan at nearly half of the prior year’s appropriated level and at a level that is only 25 percent of what is needed to close the access, utilization and safety gaps will not fulfill VA’s mission: “to care for him who shall have borne the battle…”

Major Construction Accounts:
Decades of underfunding has led to a major construction backlog that has reached between $21 billion and $ 25 billion. There are currently 21 VHA major construction projects that have been partially funded dating back to 2007. None of these projects are funded through completion and only four received funding in FY 2013. The total unobligated amount for all currently budgeted major construction projects exceeds $2.9 billion. Yet the total budget proposal for FY 2013 major construction accounts was less than $533 million.

To finish existing projects and to close current and future gaps, VA will need to invest at least $21.7 billion over the next 10 years. At current requested funding levels, it will take between 40 years to complete VA’s 10-year plan.

In the short-term, VA must start requesting and Congress must start funding major construction at a level that begins to reduce the backlog. The IBVSOs recommend doubling the requested level, providing VA with $1.1 billion in major construction funding in FY 2014. VA must also begin presenting long-term proposals that will outline how the Department will address closing all major construction gaps.

Minor Construction Accounts:
To close all the minor construction gaps within their 10-year timeline, VA will need to invest between $8.5 billion and $10.5 billion, up $1 billion from last year. For several years VA minor construction was funded at a level to meet its 10-year goal. However, the Administration and Congress have lost their commitment and proposed a drastic funding decrease for minor construction over the past two years. The budget proposal for FY 2013 was $607.5 million, an increase from the prior year, but still underfunded to close existing minor construction gaps. At this funding rate, current minor construction gaps will take more than 16 years to close.

The IBVSOs believe that minor construction accounts can be brought back on track by investing approximately $880 million per year over the next decade to close existing gaps and to prevent unmanageable future gaps in minor construction.

Additionally, for capital infrastructure, renovations, and maintenance, we recommend $50 million or more for up to five major construction projects in VA research facilities; and $175 million in non-recurring maintenance and Minor Construction funding to address Priority 1 and 2 deficiencies identified in the capitol infrastructure report (in accounts that are segregated from VA’s other major, minor, and maintenance and repair appropriations).  

Nonrecurring Maintenance Accounts:
Even though non-recurring maintenance (NRM) is funded through VA’s Medical Facilities account and not through construction account, it is critical to VA’s capitol infrastructure. NRM embodies the many small projects that together provide for the long-term sustainability and usability of VA facilities. NRM projects are one-time repairs, such as modernizing mechanical or electrical systems, replacing windows and equipment, and preserving roofs and floors, among other routine maintenance needs. Nonrecurring maintenance is a necessary component of the care and stewardship of a facility. When managed responsibly, these relatively small, periodic investments ensure that the more substantial investments of major and minor construction provide real value to taxpayers and to veterans as well.

VA is moving further from closing current NRM safety, utilization and access gaps, and continues to fall behind on preventing future gaps from occurring. Just to maintain what they have, in the condition that it is in, VA’s Non-Recurring Maintenance (NRM) account must be funded at $1.35 billion per year, based on The Independent Budget veterans service organizations (IBVSO) estimated Plant Replacement Value. It is currently being funded at $712 million per year. More will need to be invested to prevent the $22.4 billion NRM backlog from growing larger.

Because NRM accounts are organized under the Medical Facilities appropriation, it has traditionally been apportioned using the Veterans Equitable Resource Allocation (VERA) formula. This formula was intended to allocate health-care dollars to those areas with the greatest demand for health care, and is not an ideal method to allocate NRM funds. When dealing with maintenance needs, this formula may prove counterproductive by moving funds away from older medical centers and reallocating the funds to newer facilities where patient demand is greater, even if the maintenance needs are not as intense. We are encouraged by actions the House and Senate Veterans’ Affairs Committees have taken in recent years requiring NRM funding to be allocated outside the VERA formula, and we hope this practice will continue.

Capital Leasing:
The fourth cornerstone to VA’s capital planning is leasing. The current lease plan calls for little more than $2 billion over the next 10 years. The VA enters into two types of leases. First, VA leases properties to use for each Agency within VA, ranging from community-based outpatient clinics (CBOC) and medical centers, to research and warehouse space. These leases do not fall under the larger construction accounts, but under each Administration’s and Staff Office operating accounts.

VA faces a new problem regarding leasing protocols for major medical facilities; facilities that average an annual rental payment of more than $1 million. Prior to 2012 the Congressional Budget Office (CBO) used the assumption that these leases were short-term agreements used for existing and renewed leases only. While CBO prepared its cost estimate for H.R. 6375, the VA Major Construction Authorization and Expiring Authorities Extension Act of 2012, budget analysts realized most of the leases were for newly-built facilities over extended periods of time.
CBO views these types of leases in the same vein as purchasing a facility, and therefore concluded that VA must fully account for funding of such leases in first year of the lease.
Under these rules, VA would have to base its major facility leases by using a revolving fund similar to the General Services Administration’s (GSA). This is problematic for VA because the agency would now have to offset approximately $1.2 billion this fiscal year to comply with current budget rules and proceed with the current requested leases.
In the absence of VA rewording these leases in a way that would prompt CBO to calculate major facility leases in their pre-2012 method, the IBVSOs request that Congress forego current budget rules, enabling these leases to move forward while a long-term solution is determined. Providing quality, timely and accessible health care should be the highest priority, even above current budget rules.
The second type of lease, called enhanced-use lease (EUL), allows VA to lease property they own to an outside-VA entity. These leases allow VA to lease properties that are unutilized or underutilized for projects such as veterans’ homelessness and long-term care. Proper use of leases provides VA with flexibility in providing care as veterans’ needs and demographics changes.
EUL gives VA the authority to lease land or buildings to public, non-profit or private organizations or companies as long as the lease is consistent with VA’s mission and that the lease “provides appropriate space for an activity contributing to the mission of the Department.” Although, EUL can be used for a wide range of activities, the majority of the leases result in housing for homeless veterans and assisted living facilities. Unfortunately, EUL authority has expired, leaving the VA struggling to enter into agreements for under and unused property. Congress must reauthorize this authority.

Empty or Underutilized Space at Medical Centers:
The Department of Veterans Affairs maintains approximately 1,100 buildings that are either vacant or underutilized. An underutilized building is defined as one where less than 25 percent of space is used. It costs VA from $1 to $3 per square foot per year to maintain a vacant building.
Studies have shown that the VA medical system has extensive amounts of empty space that can be reused for medical services or reapportioned for another use. It has also been shown that unused space at one medical center may help address a deficiency that exists at another location. Although the space inventories are accurate, the assumption regarding the feasibility of using this space is not. Medical facility planning is complex. It requires intricate design relationships for function, as well as the demanding requirements of certain types of medical equipment. Because of this, medical facility space is rarely interchangeable, and if it is, it is usually at a prohibitive cost. Unoccupied rooms on the eighth floor used as a medical surgical unit, for example, cannot be used to offset a deficiency of space in the second floor surgery ward. Medical space has a very critical need for inter- and intradepartmental adjacencies that must be maintained for efficient and hygienic patient care.
When a department expands or moves, these demands create a domino effect on everything around it. These secondary impacts greatly increase construction expense and can disrupt patient care.
Some features of a medical facility are permanent. Floor-to-floor heights, column spacing, light, and structural floor loading cannot necessarily be altered. Different aspects of medical care have various requirements based upon these permanent characteristics. Laboratory or clinical spacing cannot be interchanged with ward space because of the different column spacing and perimeter configuration. Patient wards require access to natural light and column grids that are compatible with room-style layouts. Laboratories should have long structural bays and function best without windows. When renovating empty space, if an area is not suited to its planned purpose, it will create unnecessary expenses and be much less efficient if simply renovated.
Renovating old space, rather than constructing new space, often provides only marginal cost savings. Renovations of a specific space typically cost 85 percent of what a similar, new space would cost. Factoring in domino or secondary costs, the renovation can end up costing more while producing a less satisfactory result. Renovations are sometimes appropriate to achieve those critical functional adjacencies, but are rarely economical.
As stated earlier in this analysis, the average age of VA facilities is 60 years. Many older VA medical centers that were rapidly built in the 1940s and 1950s to treat a growing war veteran population are simply unable to be renovated for modern needs. Another important problem with this existing unused space is often location. Much of it is not in a prime location; otherwise, it would have been previously renovated or demolished for new construction.
Public Law 108-422 incentivized VA’s efforts to properly dispose of excess space by allowing VA to retain the proceeds from the sale, transfer, or exchange of certain properties in a Capital Asset Fund. Further, that law required VA to develop short- and long-term plans for the disposal of these facilities in an annual report to Congress. VA has identified 494 buildings that have been identified for repurposing. Building Utilization Review and Repurposing or BURR will focused on identifying sites in three major categories; housing for veterans who are homeless or at risk for being homeless; senior veterans capable of independent living and veterans who require assisted-living and supportive services. The three phases planned include identifying campuses with buildings and land that are either vacant or underutilized; sites visit to match the supply of building and land with the demand for services and availability of financing and lastly identifying campuses using VA’s enhanced-use leasing authority. Under the BURR initiative, if no repurposing for a building is identified, VA will begin to assess its vacant capital inventory by demolishing or disposing of buildings that are unsuitable for reuse or beyond their usefulness.
The IBVSO’s have stated that VA must continue to develop these plans, working in concert with architectural master plans, community stakeholders and clearly identifying the long-range vision for all such sites.