VA Construction: Management of Minor Construction and Non-Recurring Maintenance Programs Could Be Improved
Fast Facts
The Veterans Health Administration may spend more than $1 billion in fiscal 2018 for non-recurring maintenance and minor construction projects among its 1,240 medical facilities. This work includes projects such as new parking garages or clinical buildings, as well as roof and road maintenance.
We found VHA's guidance for preparing project cost estimates could be improved to help it formulate more realistic budget estimates. We also found a lack of sound project information hampered its ability to monitor projects.
We made 6 recommendations, including that VHA revise its cost estimating guidance and develop a plan for updating a key database.
This Kansas City VA Medical Center construction project includes a new 10,000 square foot service center and renovation of about 9,000 square feet. It will cost an estimated $9.95 million.
This is a photo of the construction site at this center.
Highlights
What GAO Found
The Veterans Health Administration's (VHA) guidance on preparing cost estimates for Minor Construction and Non-recurring Maintenance (NRM) projects does not fully incorporate the 12 steps in the GAO Cost Estimating and Assessment Guide. These steps, if followed, should result in reliable and valid cost estimates and help management formulate realistic budgets for these projects. Examples of Minor Construction projects include building parking garages or clinical buildings and examples of NRM projects include replacing utility systems or maintaining facility components, such as roofs and roads. VHA's guidance for its staff and contractors on how to prepare cost estimates:
- fully or substantially met 3 of the 12 steps,
- partially met 5 of the 12 steps, and
- minimally met or did not meet 4 of the 12 steps.
For example, VHA's guidance fully met the step to obtain the data because it requires cost estimators to conduct a market survey that explores factors that affect the cost of construction bids. On the other hand, the guidance does not meet the step to conduct a risk analysis because it does not require an analysis of risks associated with the estimated project cost, such as how a change in a project's schedule might affect the cost estimate. By revising the cost estimating guidance to incorporate the 12 steps in GAO's Cost Estimating and Assessment Guide , VHA could have greater assurance that its cost estimates for Minor Construction and NRM projects are reliable.
VHA's ability to monitor its Minor Construction and NRM programs is limited by a lack of accurate financial data and project information, such as reasons for changes in cost. VHA officials told GAO that their central office uses the Capital Asset Database as its primary method to monitor medical facilities' Minor Construction and NRM projects. For example, the database compares obligations, planned and actual construction completion dates, and expenditures against the annual operating plan. VHA officials also stated that they use the database to conduct a monthly budget review to identify Minor Construction and NRM construction projects with problems and assess the progress of the annual capital construction plan. However, GAO found the information in the database to be unreliable due in part to missing data and other inaccuracies in the database. For example, a project listed in the data base as complete and $3.9 million under budget was actually cancelled after VHA had paid $319,000 in design costs, according to VHA officials. In addition, the database does not contain information identifying, for example, why projects cost more than initially planned. VHA officials are aware of the problems and have been working to improve data quality by updating the database. However, VHA does not have a comprehensive plan that clearly lays out milestones to help VHA officials meet their objectives or that lays out the roles and responsibilities of those involved in the update. Without a comprehensive plan to update the database and to lay out milestones and roles and responsibilities, it is unclear if VHA will be able to improve the system the central office uses to monitor projects and the Minor Construction and NRM programs.
Why GAO Did This Study
VA relies on VHA's Minor Construction and NRM programs to maintain and improve its 1,240 medical facilities at a cost of over $1 billion in fiscal year 2018. However, in recent years, GAO and the VA's Inspector General have identified weaknesses in these programs. GAO was asked to assess VHA's management of its Minor Construction and NRM programs. This report assesses, among other things: (1) the extent to which VHA's guidance for developing cost estimates for Minor Construction and NRM projects meets GAO's 12 steps for cost estimating and (2) the extent to which VHA is able to monitor the Minor Construction and NRM programs.
GAO evaluated VHA's cost-estimating guidance against GAO's 2009 Cost Estimating and Assessment Guide. GAO also obtained and reviewed data from VHA's Capital Asset Database for the period of October 2011 through July 2017, including the reliability of these data, assessed VHA's plans to improve its database, and interviewed VHA and VA officials.
Recommendations
GAO is making six recommendations, including that VHA revise its cost estimating guidance to incorporate the 12 steps in GAO's Cost Estimating and Assessment Guide— and develop a comprehensive plan for updating the Capital Asset Database. VA concurred with GAO's recommendations and provided updated information, which we incorporated as appropriate.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Veterans Health Administration | The Under Secretary for Health should work with the Department of Veterans Affairs (VA's) Office of Construction and Facilities Management to ensure that VHA incorporates the 12 steps in the GAO Cost Estimating and Assessment Guide in VHA's updated construction projects' cost-estimating guidance. (Recommendation 1) | In 2018, GAO reported that Veterans Health Administration's (VHA) guidance for medical center engineering staff and contractors on how to prepare cost estimates for Minor Construction program projects-specifically VHA's Minor Construction Handbook, VA's Manual for Preparation of Cost Estimates and Related Documents, and the Veterans Affairs Medical Center Unit Cost Guide By Project Type-did not fully incorporate 12 steps, or leading practices, outlined in The GAO Cost Estimating and Assessment Guide (GAO-09-3SP), raising the possibility of unreliable cost estimates affecting decisions on how many such projects the agency can fund at one time. These steps, when incorporated into an... agency's cost-estimating guidance, should result in reliable and valid cost estimates that management can use to make informed decisions, realistic budget formulation and program resourcing, and accountability for results. GAO also found that none of the cost estimates for two minor construction and two non-recurring maintenance construction projects GAO selected to review in-depth-a non-generalizable sample-were reliable as they neither met nor substantially met all four of the characteristics of reliable cost estimates, as outlined in The GAO Cost Estimating and Assessment Guide. Specifically, a reliable cost estimate is comprehensive, well documented, accurate and credible, if it meets certain best practices. At the time, VHA officials said they were considering how to revise VHA's cost-estimating guidance to address the 12 steps in The GAO Cost Estimating and Assessment Guide. Incorporating these 12 steps in its cost-estimating guidance would provide VHA greater assurance that future cost estimates are reliable. Therefore, GAO recommended that VHA work with VA's Office of Construction and Facilities Management to ensure that VHA incorporates the 12 steps in The GAO Cost Estimating and Assessment Guide in VHA's updated construction projects' cost-estimating guidance. VA decided that, rather than update VHA's cost estimating guidance, VA's Office of Construction and Facilities Management would design a new cost estimating guide that would apply to all construction projects and, in November 2021, the Office of Construction and Facilities Management issued its revised VA's Cost Estimating manual. According to VA officials, this manual replaces all prior guidance. GAO assessed the revised guidance and found that it incorporated the 12 steps in The GAO Cost Estimating and Assessment Guide. As a result, VHA has more assurance that it can develop the kind of reliable estimates that are critical to the success of its Minor Construction and Non-recurring Maintenance Projects.
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| Veterans Health Administration | The Under Secretary for Health should collect information on the time it takes to process contract modifications. (Recommendation 2) | In 2018, GAO reported that Veterans Health Administration (VHA) medical facility staff said that contract modifications-changes to a project during construction-for minor and non-recurring maintenance projects take too long. While the time it takes to process contract modifications can be a challenge and varies based on factors such as engineering and contracting workloads and staff experience level, VHA lacks information about the extent to which time to process varies and the extent to which the time it takes to process contract modifications is a problem. Specifically, the VHA central office, which manages the Minor Construction and Non-recurring Maintenance programs, does not have...
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| Veterans Health Administration | The Under Secretary for Health should establish target time frames that trigger a higher-level review of contract modifications. (Recommendation 3) | In 2018, GAO found that Veterans' Health Administration (VHA) medical facility staff said that contract modifications-changes to a project during construction-for minor and non-recurring maintenance projects takes too long. While the time it takes to process contract modifications can be a challenge and varies based on factors such as engineering and contracting workloads and staff experience level, VHA lacks information about the time it takes to process contract modifications. Specifically, the VHA central office lacks timeframes to help it determine which contract modifications for Minor Construction and Non-recurring Maintenance programs are taking longer than a set time period....
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| Veterans Health Administration | The Under Secretary for Health should establish, at the central office level, a mechanism to monitor and review Minor Construction and NRM contract modifications that are taking longer than the established target time frame. (Recommendation 4) | In 2018, GAO found that Veterans' Health Administration (VHA) medical facility staff said that contract modifications-changes to a project during construction-for minor and non-recurring maintenance projects takes too long. VHA's Central Office officials noted that the time required to process a modification to a construction contract varies, depending on the size and complexity of the change. However, VHA officials lack specific information about the extent to which this situation varies and is an issue. In addition, a VHA central office official said that having some review of contract modifications that have not been approved, for example, for more than 60 days, could help assure that...
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| Veterans Health Administration | The Under Secretary for Health should obtain information on cost increases, schedule delays, and reasons for contract modifications in its updated Capital Asset Database through requiring medical center staff to provide the information or another appropriate method. (Recommendation 5) | The Veterans Health Administration (VHA) uses the Capital Asset Database as its primary method to monitor medical facilities' management of Minor Construction and Non-Recurring Maintenance (NRM) projects. From a non-generalizable sample of these projects, we selected seven projects-four Minor Construction and three NRM projects-to visit. In 2018, we reported that the database had limitations; VHA concurred with these limitations. Specifically, we reported that the database did not contain elements that identify the reasons projects cost more than initially planned, thus missing out on opportunities to identify potential project performance issues, improve project tracking, and ultimately...
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| Veterans Health Administration | The Under Secretary for Health should develop a comprehensive plan that includes elements such as milestones and roles and responsibilities for updating VHA's Capital Asset Database. (Recommendation 6) | The Veterans Health Administration (VHA) uses its Capital Asset Database as its primary method to monitor medical facilities' management of Minor Construction and Non-Recurring Maintenance projects. In 2018, we reported that the database had limitations; VHA officials agreed there were limitations and told us that they planned to update the database to improve the data's quality by transferring financial data, including data on projects' financial and contracting information, from other internal systems into the database. VHA officials said their goal was to finish the upgrade that links the financial data to the database by October 2018. However, VHA did not have a comprehensive plan...
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