VA Real Property: VHA Should Improve Activation Cost Estimates and Oversight
Fast Facts
How much does it cost to get a new medical facility for veterans up and running? The Veterans Health Administration (VHA) spent more than $4 billion staffing and equipping (“activating”) such facilities from fiscal year 2012 through 2018.
But VHA doesn’t have a clear definition of allowable activation expenses or a process to estimate total activation costs.
Our recommendations address these issues to improve VHA’s oversight of activation costs.
Medical staff and equipment can be activation expenses for new medical facilities
A person in scrubs using a large piece of medical equipment
Highlights
What GAO Found
The Veterans Health Administration (VHA) under the Department of Veterans Affairs (VA) is constructing and leasing new medical facilities, such as outpatient clinics, to better serve and meet the changing needs of veterans. VHA equips and staffs these new facilities in a multi-year process called “activation.” From fiscal year 2012 through 2018, VHA channeled more than $4 billion to major medical facilities undergoing activation, which these facilities could use toward furniture, equipment, and new staffing costs, among other start-up expenses.
Activation Costs Include Equipment Purchases and Installation, among Others
VHA lacks processes and clear definitions for estimating total activation costs and for comparing actual expenses against these estimates. Specifically,
- VHA's current cost estimation process does not cover the full duration of activation.
- Headquarters officials have never compared activation costs against estimated costs because until recently, officials said, VHA lacked the accounting mechanisms to facilitate such comparisons; however, while VHA now possesses these mechanisms, it has not documented the process for how the new information should be used.
- VHA documentation does not clearly define allowable activation expenses or the appropriate spending timeframes. Local and regional officials expressed confusion over what items could be purchased with activation funds. In addition, local officials held inconsistent beliefs regarding how long expenses could qualify as activation-related.
VHA management's priorities include data-driven decision-making. Further, the Office of Management and Budget's guidance states that agencies should compare actual project costs against planned expenses so managers can determine if cost goals are being met. Without processes and clear definitions associated with measuring activation costs, VHA does not have reasonable assurance that it will be able to effectively manage the resources associated with activation.
Why GAO Did This Study
VHA operates one of the nation's largest health care systems with more than 1,200 sites across the country; however, many facilities were built decades ago and do not align with the agency's current emphasis on outpatient and specialized care. Additionally, new or expanded facilities are needed to accommodate veterans returning from recent conflicts. VHA is constructing and leasing new facilities to respond to these needs. GAO was asked to review VHA's efforts to activate new major medical facilities.
This report examines the extent to which VHA is able to compare the actual costs of activation against the estimated costs, among other objectives.
GAO analyzed VHA's documentation on estimating activation costs. GAO also interviewed officials and analyzed cost information reported by a non-generalizable selection of eight medical facilities. The facilities had more than $1 million in annual rent or $20 million in construction costs, reported finishing activation in fiscal years 2016 and 2017, and were located in various regions.
Recommendations
GAO recommends that VA (1) develop and document a process for estimating total activation costs, (2) develop and document a process for comparing actual activation costs to the estimates, (3) define allowable activation expenses, and (4) clarify when facilities should cease to classify expenses as activation-related. VA agreed with GAO's recommendations.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Office of the Under Secretary for Health | The Assistant Deputy Under Secretary for Health for Administrative Operations should develop and document a process for estimating total activation costs for major medical facility projects. This process should reflect the 12 steps for developing a reliable cost estimate outlined in the GAO Cost Guide. (Recommendation 1) |
In October 2024, we reviewed a policy document VHA provided on the process for estimating total life cycle activation costs for major medical facility projects. We did not see evidence that the policy reflected the 12 cost estimating steps required, nor did we see evidence that the policy had been widely distributed within VHA for cost estimators to follow. As a result, we requested that VHA provide evidence of these two items. We are currently awaiting VHA's response, and we will continue to track their progress in this area.
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| Office of the Under Secretary for Health | The Assistant Deputy Under Secretary for Health for Administrative Operations should develop and document a process for comparing actual activation costs for major medical facility projects to estimates. This process should identify the personnel responsible for comparing the estimated costs to the actual expenses and document their responsibilities. (Recommendation 2) | VHA operates one of the nation's largest health care systems. VHA constructs and leases new medical facilities to better serve and meet the changing needs of veterans. VHA equips and staffs these new facilities in a process called "activation." From fiscal year 2012 through 2018, VHA channeled more than $4 billion to major medical facilities undergoing activation, which these facilities could use toward furniture, equipment, and new staffing costs, among other start-up expenses. GAO interviewed officials from eight selected medical facilities where major activations were completed in fiscal years 2016 or 2017 and were located in various VA regions. In 2020, GAO reported that VHA lacks...
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| Office of the Under Secretary for Health | The Assistant Deputy Under Secretary for Health for Administrative Operations should define and document what items and services officials can purchase with activation funds. (Recommendation 3) | VHA operates one of the nation's largest health care systems. VHA constructs and leases new medical facilities to better serve and meet the changing needs of veterans. VHA equips and staffs these new facilities in a process called "activation." From fiscal years 2012 through 2018, VHA channeled more than $4 billion to major medical facilities undergoing activation, which these facilities could use toward furniture, equipment, and new staffing costs, among other start-up expenses. In 2020, GAO reported that VHA had not clearly defined what officials at local facilities can purchase with activation funding. VHA officials said that there is a general understanding that some expenses, such...
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| Office of the Under Secretary for Health | The Assistant Deputy Under Secretary for Health for Administrative Operations should define and document when facilities should cease to spend activation funds. (Recommendation 4) | VHA operates one of the nation's largest health care systems. VHA constructs and leases new medical facilities, to better serve and meet the changing needs of veterans. VHA equips and staffs these new facilities in a process called "activation." From fiscal year 2012 through 2018, VHA channeled more than $4 billion to major medical facilities undergoing activation, which these facilities could use toward furniture, equipment, and new staffing costs, among other start-up expenses. GAO interviewed officials from eight selected medical facilities where major activations were completed in fiscal years 2016 or 2017 and which were located in various VA regions. In 2020, GAO reported that VHA...
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