oversight

Capitol Visitor Center: Current Status of Schedule and Estimated Cost

Published by the Government Accountability Office on 2003-07-15.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                            United States General Accounting Office

GAO                         Testimony
                            Before the Subcommittee on Legislative,
                            Committee on Appropriations, House of
                            Representatives

For Release on Delivery
Expected at 1:30 p.m. EDT
Tuesday, July 15, 2003      CAPITOL VISITOR
                            CENTER
                            Current Status of Schedule
                            and Estimated Cost
                            Statement of David M. Walker,
                            Comptroller General of the United States




GAO-03-1014T
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                                                July 15, 2003


                                                CAPITOL VISITOR CENTER

                                                Current Status of Schedule and
Highlights of GAO-03-1014T, a testimony         Estimated Cost
before the Subcommittee on Legislative,
Committee on Appropriations, House of
Representatives.




GAO has been providing ongoing                  Recognizing the need for a new facility to provide greater security for all
assistance to the Capitol                       persons working in or visiting the United States Capitol and to enhance the
Preservation Commission and the                 educational experience of visitors who have come to learn about Congress
Senate and House Appropriations                 and the Capitol building, Congress authorized the Architect of the Capitol
Committees in their monitoring and              (AOC) to build a new Capitol Visitor Center. The three-story, underground
oversight of the Capitol Visitor
Center construction project.
                                                facility, located on the East side of the Capitol, is designed to be a seamless
Given the current decisions facing              addition to the Capitol complex when completed without detracting from
the Congress, this testimony covers             the appearance of the Capitol or its historic landscaping.
(1) management of the project,
(2) the estimated cost for the                  Earlier this spring, GAO and the AOC determined that the estimated budget
project, (3) the status of the                  amount of $303.5 million for the Capitol Visitor Center (CVC) “base project”
project’s schedule, and (4) actions             was no longer current. Based on GAO’s recommendation, the AOC hired a
that Congress and the AOC should                contractor to help analyze and update the cost estimate for completion of
consider taking to address funding              the base project. GAO’s review of the contractor’s “base cost” estimate
gaps and other current project                  analysis identified $7 million in adjustments, therefore increasing the
issues and risks.                               contractor’s $344.3 million estimate to $351.3 million. GAO also conducted a
                                                supplemental analysis to identify potential future costs due to additional
                                                risks and uncertainties not included in the updated estimates. The result of
We propose that the Architect of                this supplemental analysis disclosed that these risks and uncertainties could
the Capitol and Congress consider               raise the estimated cost to between $380 million and $395 million. These
taking actions to                               potential additional costs do not need to be added to the base project budget
                                                now; however, a number of actions need to be taken to mitigate known
•    address the gap between the
     $303.5 million current funding             risks.
     for the “base project” and the
     updated estimates;                         The AOC’s May 2003 status report indicates the project is on schedule for
•    consider how best to address               substantial completion of the plaza deck in January 2005, substantial
     costs associated with risks and            completion of the CVC in September 2005, and final completion and opening
     uncertainties not included in              to the public in December 2005. However, the project is currently
     updated “base cost” estimates;             experiencing delays and until the AOC compiles a fully integrated schedule,
•    continue to resolve scope,                 there will not be adequate information to determine whether the estimated
     requirements, estimated costs,             completion dates are likely to be met.
     and funding sources for
     unresolved items;
•    implement controls for the
     approval of changes and use of
     contingency funds;
•    continue to resolve
     contingency tracking and
     reporting issues; and
•    expeditiously develop a
     comprehensive, integrated
     master project schedule.

www.gao.gov/cgi-bin/getrpt?GAO-03-1014T.

To view the full product, including the scope
and methodology, click on the link above.
For more information, contact Jeanette
Franzel (202) 512-9471 or franzelj@gao.gov
or Bernard L. Ungar at (202) 512-4232.
Mr. Chairman and Members of the Subcommittee:

Recognizing the need for a new facility to provide greater security for all persons
working in or visiting the United States Capitol and to enhance the educational
experience of visitors who have come to learn about Congress and the Capitol building,
Congress authorized the Architect of the Capitol (AOC) to build a new visitor center for
the Capitol. The three-story, underground facility, located on the East side of the
Capitol, is designed to be a seamless addition to the Capitol complex when completed
without detracting from the appearance of the Capitol or its historic landscaping. It is
the largest project on the Capitol grounds in over 140 years. According to current plans,
when complete it will include theaters, an auditorium, exhibit space, a service tunnel for
truck loading and deliveries, storage, and space for use by the House and Senate.

In response to requests from members of the Capitol Preservation Commission (CPC)
and the conference report to the Omnibus Consolidated and Emergency Appropriations
Act, 1999 (House Conference Report 105-825), GAO has been providing ongoing
assistance to the CPC and the Senate and House appropriations committees in their
monitoring and oversight of the Capitol Visitor Center (CVC) project. While we have
provided a wide range of assistance as the project has evolved, today, given the current
decisions facing the Congress, I will focus on (1) management of the project, (2) the
estimated cost for the project, (3) the status of the project’s schedule, and (4) actions
that Congress and the AOC should consider taking to address funding gaps and other
current project issues and risks.

Management of the Project

Shortly after we began to monitor progress on the CVC project, we made a number of
suggestions to the AOC aimed at ensuring effective management of the project based on
our previous work reviewing construction projects in all three branches of government.
AOC generally agreed with our suggestions and took the following actions.

The AOC hired a construction management firm, Gilbane, for day-to-day detailed
management of the project. Gilbane has provided project management, including
supervision of contractors’ work, schedule and cost monitoring, procurement of general
conditions construction work, and monitoring and protection of the Capitol building
from potential impact of construction. Recently, Gilbane has been working to implement
a cost tracking system that conforms to the AOC’s approved budget line items for the
CVC.

Recognizing the impact that construction of the CVC would have on day-to-day
congressional operations, AOC established a communication/outreach effort specifically
dedicated to meeting the ongoing need of providing Congress with information regarding
the project’s impact on congressional operations, as well as progress toward completion
of the CVC.

To supplement its in-house capability, AOC also entered into an agreement with the
General Services Administration (GSA) to provide services related to management of the


1                                                                       GAO-03-1014T
Sequence 1 and 2 procurements. Under the agreement, GSA managed the procurement
process, while the AOC (the source selection authority) awarded and now administers
the contracts.

While these positive steps have been taken, there are a number of other actions needed
to strengthen project management that are outlined in the following sections, including
developing risk mitigation strategies and improving tracking and reporting.

Estimated Cost for the Project

Earlier this spring, we and the AOC determined that the estimated budget amount of
$303.5 million for the CVC “base project”1 was no longer current. The estimate was
limited due to uncertainties related to the preliminary nature of the design work,
unknown scope of pre-construction requirements, and security adjustments to the design
after the events of September 11, 2001. In addition, it was already evident that the
expected cost of a number of line items in the estimate, such as utility relocation, tree
preservation, temporary visitor screening facilities, and historic preservation, would be
exceeded.

Based on GAO’s recommendation, the AOC and Gilbane updated the project cost
estimates as of March 20, 2003. The AOC then contracted with Tishman Construction
Corporation (Tishman) to review the March 20, 2003 estimate and perform a cost
analysis based on information currently available. We reviewed the methodology,
assumptions, and support for the analysis, dated May 16, 2003, including contingencies,
scope items not included in the estimates, and risks and uncertainties.2 We also
conducted a supplemental analysis to identify potential future costs due to additional
risks and uncertainties not included in the updated estimates.

While we identified limitations to Tishman’s analysis, our review found that Tishman’s
analysis was generally reasonable given the scope and assumptions provided by the AOC
to Tishman. However, based on information available to us as of June 16, 2003, we
identified cost adjustments to Tishman’s analysis of the base project, totaling $7 million,
that we believe need to be made. These adjustments would increase Tishman’s
estimated cost at completion for the base project from $344.3 million to $351.3 million.

Due to the nature of the uncertainties still surrounding the project’s estimated cost to
complete and the limitations of information available at this time, there will likely be
events occurring in the future that could further materially affect the project’s cost at
completion. For example, additional risks and uncertainties, which cannot be predicted
with certainty at this time, were not priced as part of Tishman’s analysis or as part of our

1
  The base project includes a finished visitor center shell and core, an extended loading dock service
tunnel, exterior finishes, improvements to the East Plaza, construction of unfinished House and Senate
expansion space, exhibits, technical security systems, and a connecting tunnel to the Library of Congress.
The base project does not include other items funded by other sources, such as finishing the House and
Senate expansion space and certain security-related enhancements.
2
  Although we performed procedures to review the methodology, assumptions, and support behind the
latest cost analysis for the CVC project, we did not conduct an audit.


2                                                                                     GAO-03-1014T
adjusted figure. The result of this supplemental analysis disclosed that these additional
risks and uncertainties could potentially raise the estimated cost at completion of the
base project to between $380 million and $395 million. (See the list of additional risks
and uncertainties below.) These potential additional costs of between $30 million and
$45 million do not need to be added to the base project budget at this time; however, a
number of actions need to be taken to mitigate known risks.



    Additional Risks and Uncertainties That Could Affect
    Project Cost or Utilization
      •   Unforeseen conditions, including potential underground complications
      •   Potential for scope creep due to lack of a finalized and approved design
          program in some areas
      •   Cost overruns on “design-to-budget” scope, e.g., exhibitions and technical
          security
      •   Cost and schedule impacts due to contractor coordination issues
      •   Project delays and subsequent contractor claims
      •   Delays due to unique situations—e.g., government functions, terrorist
          alerts, state funerals
      •   Unanticipated client requests
      •   Inaugural support
      •   Unknown operator requirements (gift shop, kitchen, theater, exhibitions)
      •   Capitol Building settlement or other damage
      •   Impact of cost allocations to the House and Senate expansion space on
          the CVC base budget


In order to arrive at the potential estimated cost of $380 million to $395 million, which
includes the additional risks and uncertainties, we used the CVC project team’s lowest,
most likely, and highest cost estimates for 37 project elements (e.g., structure/site, East
Front structure, Library of Congress tunnel) and a simulation analysis to calculate
different combinations of the project team’s estimates that factored in risks and
uncertainties. Some of the larger risks and uncertainties include unforeseen conditions
(including potential underground obstructions); building settlement; contractor
coordination issues, especially as they relate to any delays experienced; and the lack of
an approved design program in some areas.

While it is not possible to eliminate all risks and uncertainties, certain steps can and
should be taken to lessen their potential impact on the final cost of the project. Research
by the Construction Industry Institute (CII) shows project scope is the major




3                                                                         GAO-03-1014T
determinant of the cost of a project.3 Tishman noted that the reasonableness of AOC’s
and Gilbane’s March 20, 2003, estimate could not be determined for several items
because detailed requirements for those items have not been fully determined or
approved by the CPC. CII research also shows that the lack of scope definition is the
root cause of cost overruns, late completion dates, excessive rework, unnecessary
disputes among project participants, and other problems associated with construction
projects.4 While we did not identify any scope or quality changes to date that have not
been brought to the CPC’s attention, we are concerned that allowances for the “design to
budget” items (for example, the exhibition space and technical security) may not be
sufficient to cover the expected scope and quality. We believe there is a continual need
for the AOC to align customer expectations with the project’s scope, quality, and cost
considerations. The Tishman analysis noted that the percentage of pending changes to
date compared to the Sequence 1 contract cost is already above industry norms and that
there is the potential for scope creep. As a result, it will be important for the AOC to
implement controls for the advance and formal approval of any scope changes.

It is general practice when performing budget estimates for construction projects to
carry a contingency allowance to cover such issues as unforeseen field conditions and
design and price changes. The Tishman analysis evaluated the adequacy of the estimated
contingency amounts and increased the amounts in several areas. Based on the
information we gathered, we also increased the estimates for contingencies in certain
areas. As the project moves forward, it is important that the AOC implement controls for
using these contingency funds. Furthermore, we understand that the method to be used
for tracking and reporting on contingency balances remains unresolved.

There are also items not in the base project that need to be resolved. For example, the
                                                                            5
requirements, estimated costs, and funding sources for wayfinding signage, additional
furniture, fixtures, and equipment, and artwork have not been fully determined. In
addition, the method for operating and maintaining the CVC has not yet been
determined. Consequently, neither the updated estimates nor our supplemental analysis
include provisions for these items.

Although not considered part of the base project, the $70 million already appropriated
for the House and Senate expansion space may not be sufficient to make the space fully
functional. Our review noted that substantial funds have already been allocated from the
House and Senate expansion space budgets. Also, substantial risk exists because the
design for the House and Senate expansion space is not complete, and it is assumed that
the expansion space will be “designed to budget.” However, to the extent that the future
design and requirements exceed the remaining budget amounts, additional funds may be
needed.



3
  Construction Industry Institute, Project Change Management, Special Publication 43-1 (Austin, Tex.:
November 1994).
4
  Construction Industry Institute, Improving Early Estimates, Implementation Resource 131-2 (Austin,
Tex.: September 1998).
5
  Code-required signage is included in the estimated cost of the base project.


4                                                                                   GAO-03-1014T
Status of the Project’s Schedule

To expedite the project schedule and maintain the option for use of some portion of the
CVC for the inaugural events of January 20, 2005, the AOC divided the project into the
following stages, rather than bid the total project after completion of all design work:

Pre-construction (largely complete)
• Pre-construction work includes utility relocations, historic preservation efforts, tree
   care, and temporary visitor facilities. These efforts were conducted in advance of
   building construction to expedite the start of the construction contractor work. The
   work is basically completed, with the exception of ongoing tree preservation.

Construction (in process)
• The construction contract for structural/foundation work, referred to as Sequence 1,
  was awarded to Centex Construction in June 2002 and, assuming no delays, is
  scheduled to be substantially complete in Spring 2004. As discussed below, the
  Sequence 1 contractor has experienced delays and the AOC is working with the
  contractor to determine the impact of these delays to the project.

•   The construction contract for the project interface with the East Front of the Capitol,
    known as Sequence 1C, was awarded on July 11, 2003. Assuming no delays, this work
    is scheduled to be complete in Summer 2004.

•   The construction contract for mechanical, electrical, plumbing and interior finishes
    work, referred to as Sequence 2, was awarded on April 18, 2003 to Manhattan
    Construction. Assuming no delays, completion of the construction work is scheduled
    for December 2005. However, as discussed below, current delays in Sequence 1
    could impact the Sequence 2 schedule.

Senate and House Expansion Space (in design phase)
• The design of these spaces is scheduled to be completed late in 2003. The
   construction of these spaces is scheduled to begin in the summer of 2004, with
   completion in 2006.

Exhibits (in design phase)
• The final phase of the project will involve the fabrication and installation of the
  exhibits. Because installation involves climate requirements only available in
  completed space, this contract is scheduled to be awarded and begin in late 2003,
  with projected completion in December 2005.
The AOC’s May 2003 status report indicates the project is on schedule for substantial
completion of the plaza deck in January 2005, substantial completion of the CVC in
September 2005, and final completion and opening to the public in December 2005. The
project, however, is currently experiencing delays and the AOC is working with Gilbane
to develop a fully integrated schedule. Until the AOC develops a fully integrated
schedule, it will be difficult to determine whether the estimated completion dates are
likely to be met. A fully integrated schedule would combine schedules for all of the


5                                                                       GAO-03-1014T
interrelated CVC projects, activities, and long-lead-time procurements (e.g. Sequence 1,
Sequence 2, East Front interface, west refrigeration plant expansion, 2005 inauguration)
into one coordinated schedule. (The Sequence 2 full schedule is currently not available
but is due from Manhattan in August.) According to Gilbane’s June 5, 2003, report, the
                                                            6
Sequence 1 contractor’s May update shows a 134-workday delay to the completion of
Sequence 1. The AOC and contractor are negotiating the potential impact of any delays
on the project schedule and budget. The AOC has indicated that current Sequence 1
delays have possibly led to a 40 workday overlap between the Sequence 1 and Sequence
2 schedules. Although Gilbane and the AOC are working with Centex and Manhattan to
mitigate the impact of the 40 workday overlap to the schedule, it is currently unclear
what the total effect of the current Sequence 1 delays will be to the final project
completion date or costs. Because the project is still in the early stages of construction,
there is risk of additional delays. We included an additional $2 million in contingency in
our adjustments to the Tishman estimated cost-to-complete for possible delay and
acceleration costs.

Matters for AOC and Congressional Consideration

Although the AOC has already initiated some actions to address some issues, we
identified the following specific matters for the AOC’s and your consideration:

•   Expeditiously address the current funding gap between the $303.5 million provided
    for the base project and the updated estimates.

•   Consider how best to address the potential costs associated with the risks and
    uncertainties not specifically included in the updated estimates for the base project.

•   Ask the AOC to develop a plan to mitigate risk factors, to the extent practicable, and
    implement recommendations made by Tishman in the May 16, 2003, report including,
    but not limited to:

             o revalidate the program of requirements for each cost element,
             o identify, contract for, and begin coordination of all operator requirements
               with existing design and construction efforts,
             o identify and involve the exhibit and audio visual equipment operators as
               soon as possible, and
             o institute a proactive schedule management and tracking system related to
               potential contractor delay claims.

•   Determine whether to establish and fund a reserve account for any additional
    amounts above the current estimates to cover future costs due to risks and
    uncertainties that cannot be priced or estimated at the current time and establish
    procedures for timely release of the funds to the CVC project.


6
 The current contractor schedule indicates a 5 day workweek. Therefore, 134 workdays is equivalent to
187 calendar days, or approximately 6 months.


6                                                                                  GAO-03-1014T
•   Continue to resolve the scope, requirements, estimated costs, and funding sources for
    unresolved items in the base project, such as fitout of the CVC administration, guide
    service, first aid and gift shop spaces.

•   Continue to resolve the scope, requirements, estimated costs, and funding sources for
    the items not in the base project, including the House and Senate expansion space.

•   Implement controls for the approval of changes and AOC’s use of contingency funds.

•   Continue to resolve contingency tracking and reporting issues to achieve a single and
    standardized budget and reporting format.

•   Expeditiously develop a comprehensive, integrated master project schedule.

We will continue our monitoring efforts throughout construction. I will be happy to
answer any questions at this time.

For further information regarding this testimony, please contact Jeanette M. Franzel at
(202) 512-9471 or Bernard L. Ungar at (202) 512-4232.




(194320)



7                                                                      GAO-03-1014T
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