VA Admits Costly Failures with Colorado Hospital Project

A senior Veterans Affairs Department official conceded to lawmakers on Wednesday the possibility that the VA should not be in the business of overseeing building of its own hospitals.

Against a backdrop of a Colorado facility hundreds of millions over budget and may be three years late on its completion date when it is finished in 2017, VA  Deputy Secretary Sloan Gibson admitted to Congress that asking whether the department should be allowed to oversee hospital construction "is a fair question."

"It may well be that the best outcome for veterans and for taxpayers is that we turn to the [Army] Corps and we say, Corps, we want you to build our hospitals from now on'," Gibson said. "And if that's the decision, so be it."

Responding to a comment by Rep. David Roe, R-Maryland, that the VA's Colorado project "could [not] have been done much worse," Gibson agreed.

"No, on this one, I don't either," he said.

The manner in which the VA developed and contracted for the project's construction is currently under review.

Gibson attributed the project setbacks to the VA's trying to establish a firm fixed price for the facility before it had a design completed.

His admission that the construction project in Aurora, Colorado, about 10 miles from Denver, has been a disaster came during a hearing before the House Veterans Affairs Committee.

"The situation in [Colorado] is unacceptable and I apologize for that," he said. "Veterans and taxpayers have a right to expect more and they serve much better."

Problems with several of the VA's largest hospital construction programs have been known to the department for several years.

In 2013, the General Accountability Office found substantial cost increases and schedule delays not only at the Colorado site, but at projects in Las Vegas, New Orleans, and Orlando, Florida.

Compared to their original estimates, the cost increases ranged from 66 percent to 144 percent, while delays ranged from 14 months to 86 months, GAO reported this month.

One of the most significant contributions to the cost increases and delays in Colorado are related to changes to veterans' health care needs and site-acquisition issues, according to GAO. The VA's decision to establish the new hospital as a stand-alone medical center, rather than one shared with a local medical university, has also increased the price tag, the GAO reported.

Under the original VA contract the facility would be constructed for about $600 million. Estimates now indicate the cost will be about $1.1 billion, which is about what prime contractor Kiewit-Turner told VA it would cost.

But Gibson told lawmakers on Wednesday that final cost figures probably will not be known for several months.

Some 1,400 workers walked off the construction site in mid-December after the U.S. Civilian Board of Contract Appeals ruled that the VA was in breach of its contract by not producing a design that could be built for the $600 million agreed to cost. 

The walk-off ended after the VA agreed to pay the contractor $234 million in what Gibson called "bridge" costs – covering amounts the contractor already incurred as well as money for continuing the project.

VA came up with the interim funding by redirecting money from other projects. Gibson did not identify the projects the money was taken from, but said VA will continue to look for funding elsewhere in its budget to keep the construction on track.

VA will have to go before Congress for approval of its reprogrammed spending and for additional funding to stay on track, he said.

Gibson praised the Army Corps of Engineers for working with it and the contractor to get the project going again. The Corps is currently working on an agreement to take over the Colorado project from the VA, Corps project engineer Lloyd Caldwell told lawmakers.

The Corps oversees medical facility construction for the Defense Department, and has built facilities across the United States as well as overseas, including Iraq and Afghanistan, Caldwell said.

-- Bryant Jordan can be reached at bryant.jordan@military.com