The Department of Veterans Affairs (VA) operates one of the largest health care systems in the country. As of August 2009, VA's Veterans Health Administration (VHA) had 32 major ongoing construction projects with an estimated total cost of about $6.1 billion and average cost per project of about $191 million. Some of these projects were initiated as part of VA's Capital Asset Realignment for Enhanced Services (CARES) process, which was a comprehensive assessment of VHA's capital asset requirements. In response to a congressional request, GAO (1) described how costs and schedules of current VHA major construction projects have changed, (2) determined the reasons for changes in costs and schedules, and (3) described the actions VA has taken to address cost increases and schedule delays. To do its work, GAO reviewed construction documents, visited three construction sites, and interviewed VA officials.

While about half of the 32 major ongoing construction projects are within their budget, 18 projects have experienced cost increases and 11 have experienced schedule delays since they were first submitted to Congress. Five projects have experienced a cost increase of over 100 percent. For example, the cost of a new medical center in Las Vegas rose from an initial estimate of $286 million to over $600 million, an increase of about 110 percent. Thirteen projects have experienced cost increases of between 1 and 100 percent. In addition, 11 projects have experienced schedule delays, 4 of which are more than 24 months. There are several reasons for construction project cost increases and schedule delays, including VA preparing initial cost estimates that were not thorough, significant changes to project scope after the initial estimate was submitted, and unforeseen events such as an increase in the cost of construction materials. According to VA officials, VA prepared numerous estimates during the CARES process, and some of these estimates used rudimentary estimating techniques such as average cost-per-square-foot and were completed by VA staff that did not have cost estimating expertise. The scope of some projects changed after VA submitted an estimate to Congress, which increased the projects' costs. For example, the scope for the original design for a new medical center in Las Vegas did not fully account for the amount of medical services the center would need to provide. As a result, the original estimate of $286 million rose to over $600 million. VA has taken steps to improve initial construction project cost estimates, but could better assess the risks to costs and schedules. VA plans to prepare more comprehensive estimates after approving projects and before submitting them to Congress. It is not clear how effective this new process will be, but it could improve VA's estimates. While VA contractors follow construction scheduling procedures that generally meet best practices, VA does not conduct cost or schedule risk analyses, which use statistical techniques to predict risks that can lead to cost increases and schedule delays. Thus, VA cannot quantify the largest risks to a project or mitigate those risks. For example, GAO conducted a schedule risk analysis for a medical center in Las Vegas and found that there is a 50 percent chance that the project won't be finished until more than 6 months after its estimated completion date. VA also does not require an integrated master schedule that includes VA and contractor efforts for all project phases, which can be critical to a project's success.

Status Legend:

Review Pending-GAO has not yet assessed implementation status.

Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.

Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.

Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.

• Review Pending
• Open
• Closed - implemented
• Closed - not implemented

Recommendations for Executive Action

Recommendation: To provide a realistic estimate of when a construction project may be completed as well as the risks to the project that could be mitigated, we recommend that the Secretary of Veterans Affairs direct CFM to require the use of an integrated master schedule for all major construction projects. This schedule should integrate all phases of project design and construction.

Agency Affected: Department of Veterans Affairs

Status: Open

Comments: VA is undergoing a Facility Management Transformation (VAFMT) Part of this effort is a pilot project currently underway that requires an integrated master schedule for major construction projects. The results of the pilot are expected in the 2nd quarter of FY12 with full implementation for FY13 projects.

Recommendation: To provide a realistic estimate of when a construction project may be completed as well as the risks to the project that could be mitigated, the Secretary of VA should direct CFM to conduct a schedule risk analysis, when appropriate, based on the project's cost, schedule, complexity, or other factors. Such a risk analysis should include a determination of the largest risks to the project, a plan for mitigating those risks, and an estimate of when the project will be finished if the risks are not mitigated.

Agency Affected: Department of Veterans Affairs

Status: Open

Comments: VA is developing a predictive algorithm that will allow a realistic estimate of when a construction project will be completed. VA believes that this algorithm will provide an estimate of when major construction projects will be completed. In addition, VA will require the architectural engineering firms for major construction projects to perform a schedule risk analysis.

Recommendation: To improve estimates of the cost of a major construction project as well as the risks that may influence the cost and how these risks can be mitigated, the Secretary of VA should direct the Office of Construction and Facilities Management (CFM) to conduct a cost risk analysis of major construction projects.

Agency Affected: Department of Veterans Affairs

Status: Open

Comments: As part of VA's Facility Management Transformation (VAFM), VA is piloting a plan that requires a cost risk assessment and a realistic budget. The pilots are underway with results expected by the 2nd quarter of FY12 with full implementation for all FY13 projects.