VA Construction: VA Is Working to Improve Initial Project Cost Estimates, but Should Analyze Cost and Schedule Risks

In 2010, GAO reported that Department of Veterans Affairs (VA) generally follows best practices for construction schedules at the three major medical facility construction sites it visited. However, GAO found that VA lacked an integrated master schedule for these projects--which would integrate both VA and contractor effort for all phases of a project, including all design and construction work--hampered VA's ability to provide accurate information on the schedule for a project. As a result, GAO recommended that the Secretary of Veterans direct the VA Office of Construction and Facilities Management (CFM) to require the use of an integrated master schedule for all major construction projects which would integrate all phases of project design and construction. In March 2012, CFM issued a memorandum requiring the development of a complete integrated master schedule for all projects that obtained initial funding in fiscal years 2011 or 2012. The schedule was to include planning activities for procurement, design, construction, medical equipment procurement and activation. The use of an integrated master schedule could assist VA in monitoring the progress of a major construction project before construction begins and allow VA to increase the accuracy of its schedule estimates

In 2010, GAO reported that Department of Veterans Affairs (VA) generally follows best practices for construction schedules at the three major medical facility construction sites it visited. However, GAO found that VA did not perform schedule risk analysis and therefore cannot predict a project's completion date with confidence. A schedule risk analysis uses statistical techniques to determine the likelihood of a major construction project being completed on time and to predict risks to that can lead to schedule delays. GAO recommended that the Secretary of Veterans direct the VA Office of Construction and Facilities Management to conduct a schedule risk analysis of construction projects, based on the project's cost, schedule, complexity and other factors. GAO further recommended that the 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. In April 2012, VA issued guidance which required the architecture and engineering firm to perform a schedule risk analysis during the design phase of a project and to update the analysis and schedule, including the completion date, at each subsequent phase through construction. The guidance also requires that the analysis identify schedule risk areas and recommend actions to mitigate risk. Conducting a schedule risk analysis will provide VA, Congressional decision makers, and other stakeholders with more precise information about when a project will be completed and the main risks to a project being completed on time.

In 2010, GAO reported that Department of Veterans Affairs (VA) has taken steps to improve initial construction project cost estimates. GAO visited three major construction sites and found that the cost estimates were generally comprehensive and well documented. However, GAO found that the estimates for two of the projects did not include a cost risk analysis to examine the effect of changing assumptions on the cost estimate. Conducting a cost risk analysis is particularly important because only by quantifying cost risk can management make informed decisions about risk mitigation strategies. Quantifying cost risk also provides a benchmark for measuring future progress. GAO identified best practices for estimating and managing program costs in a cost assessment guide GAO issued in 2009. As a result, GAO recommended that the Secretary of Veterans direct the VA Office of Construction and Facilities Management to conduct a cost risk analysis of major construction projects. In April 2012, VA issued a memorandum requiring cost risk analysis for all projects in the fiscal year 2012 and 2014 budgets. Conducting cost risk analysis will allow VA construction project managers to better identify issues that could lead to cost escalation and improve managers' ability to make informed decisions on how to minimize cost risks.