oversight

VA Construction: Contract Award Delays

Published by the Government Accountability Office on 1997-06-16.

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

      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Health, Education and Human Services Division

      B-276638
      June 16, 1997
      The Honorable Christopher S. Bond
      Chairman
      The Honorable Barbara A. Mikulski
      Ranking Minority Member
      Subcommittee on VA, HUD,
        and Independent Agencies
      Committee on Appropriations
      United States Senate
      The Honorable Jerry Lewis
      Chairman
      The Honorable Louis Stokes
      Ranking Minority Member
      Subcommittee on VA, HUD,
        and Independent Agencies
      Committee on Appropriations
      House of Representatives
      Subject: VA Construction: Contract Award Delays

      The Department of VeteransAffairs’ (VA> annual appropriations act for each
      fiscal year since 1984has set deadlines for awarding contracts for major
      construction projects.’ VA is required to award a construction documents2
      contract by September30 of the fiscal year in which funds were appropriated
      for a major construction project, and award a construction contract by




      ‘A major construction project is a project with an estimated cost of $3 million
      or more. P.L. 104-262,dated Oct. 9, 1996,changed the defmition of major
      construction projects to those estimated to cost $4 million or more, starting in
      FY 1997.
      %onstruetion documents are working drawings and other documents that an
      agency must have prepared in order to offer a construction contract to bidders.
                                       GAOMEHS-97-107R      VA Construction    Delays
September30 of the following fiscal year. VA’s annual appropriations act also
requires
      VA to report to your Committees and the Comptroller Genera3the
      projects that did not meet these time limits and

      GAO to review the contracting delays of reportable projects for
      impoundment implications under the Impoundment Control Act of 1974.
VA’s fiscal year 1996appropriation (P.L. 104134) contained funding for five new
projects that required construction documents contracts by September 30, 1996.
In addition, VA’s appropriation for fiscal year 1995 (P.L. 103327) included
funding for 12 projects for which VA was required to award construction
contracts by September30, 1996.
On December 12, 1996,VA reported that, as of September 30, 1996,it had not
awarded 15 contracts (for 11 major construction projects) with award deadlines
of September 30, 1996,or earlier. The delayed awards, which are described
individually in the enclosure to this letter, follow:
      construction documents contracts for two of the five fiscal year 1996
      projects;

      construction documents contracts for 3 of the 12 fiscal year 1995
      projects, which had award deadlines of September 30, 1996;

      a construction documents contract and a construction contract for each
      of four projects first funded between 1991 and 1995;and
      two construction contracts for projects funded in 1990and 1993,
      respectively.

To meet our responsibility under the Impoundment Control Act of 1974,we
reviewed these contract award delays to determine whether they had any
impoundment implications. We first assessedwhether VA had reported all of
the project awards it should have reported as delayed by identifying

       projects first funded in fiscal year 1996,with construction documents
       contracts due by September 30, 1996;
       projects first funded in fiscal year 1995,with construction contracts due
       by September 30, 1996;



2                              GAO/HEHS-97-107R       VA Construction     Delays
I%-276638

      projects that were delayed as of September 30, 1995,as we reported in
      August 19963;and
      any projects funded before fiscal year 1995that meet reporting
      requirements.
To identify this universe of projects, we reviewed the legislative histories of
VA’s major construction appropriations for fiscaI years 1995and 1996,and VA’s
budget requests for those fiscal years. We then identified delayed contract
awards by comparing the universe of required awards with VA’s December 5,
1996,status report on aU current construction projects. Finally, we compared
our list of delayed projects with VA’s December 12, 1996,major construction
delay report (which covered projects with required award dates through
September 30, 1996).

We discussedprojects that appeared to be delayed with staff in the Veterans
Health Administration’s Office of Facilities Management to determine the
projects’ status and reasons for delays. When VA indicated it had made a
contract award after September 30, 1996,we obtained and reviewed award
documents. We used this information to determine whether VA had withheId
funds from obligation instead of awarding contracts as required by the acts.
We conducted this review during March and April 1997in accordance with
generally accepted government auditing standards.
RESULTSOF REXIEW
VA’s December 12, 1996,letter to your Committees identified 15 awards, for 11
major construction projects, for which VA did not award a construction
documents contract or a construction contract by September 30, 1996. In
addition, through our review of VA’s construction project status report, we
identified two more awards that we believe VA should have reported as
delayed:
      a construction contract for site development at Palo Alto and




3Letter to the Chairmen and Ranking Minority Members, Subcommittees on VA,
HUD, and Independent Agencies, Senate and House Committees on
Appropriations (GAO/HEHS-96188R,Aug. 9, 1996).

3                            GAOLREHS-97407R        VA Construction    Delays
B-276638

-         a construction documents contract for the renovation of Waco’s building
          11.

We believe the contracting delays for these projects, as described in the
enclosure, do not constitute impoundments of budget authority under the
Impoundment Control Act of 1974. In our view, VA has shown no intent to
refrain from using the funds appropriated.

Instead, information VA provided indicated that legitimate programmatic
considerations caused the contracting delays. Common reasons for delays, as
cited by VA, included (1) changes in project scope or design, (2) funding of
projects before VA had completed design work, and (3) insufficient funds
appropriated for the scope that VA planned. VA made 5 of the 15 reported
delayed awards after September 30, 1996: construction documents contracts for
the Albany National Cemetery and the Boston Ambulatory Care Addition, a
construction contract for the Honolulu Ambulatory Care Addition, and a
designIbuild4 contract for the Portland Research Addition. VA expects to
award the Mountain Home laundry and warehouse design/build contract in June
 1997.

    Of the two additional awards that we identified as being late, VA plans to award
    a construction documents contract to renovate Waco’s Building 11 in August
    1997 and a construction contract for site development at Palo Alto in March
    1998.

    AGENCY COMMENTS AND OUR EVALUATION

    Officials at VA’s Office of Facilities Management reviewed a draft of this letter
    in which we suggested that four projects not reported by VA be reported as
    having delayed contracts. On the basis of a discussion with VA officials, we
    revised the letter to say that only two projects had been omitted from VA’s
    report. That is, the construction contracts for the Leavenworth and Travis
    ambulatory care clinics need not have been reported by VA In the case of
    Leavenworth, although design funds were appropriated, no construction funds
    were awarded through 1996. For the ambulatory care clinic at Travis, the
     Congress appropriated funds for fiscal year 1996, and VA correctly reported in
    its 1996 report only that the construction documents contract was not awarded.


    4A design/build contract is a combined construction documents and
    construction contract.

    4                               GAOEIEHS-97-107R       VA Construction    Delays
B-276638

Originally, we believed that the construction contract was also reportable for
fiscal year 1996because $22.6million was appropriated in fiscal year 1995for a
replacement medical center. But becausethe Travis medical center project was
disapproved in 1996,no contracts for it are reportable. Seethe enclosure for
more details on the history of this project.

The two projects that VA should have reported are the Waco and Palo Alto
construction projects. VA officials agreed that the construction documents
contract for Waco should have been reported in addition to the construction
contract that VA did report. Funds were awarded in 1990,and neither contract
has yet been awarded.
However, VA disagreeswith our position that the construction contract for the
Palo Alto site development should be reported as a delayed project and
expressed concern that our reporting the project as delayed would suggest a
deliberate omission on their part. VA officials did not report this contract
because they considered it the last phase of a single project for which
approximately 90 percent of the funds had been obligated and becauseit was
not reported in earlier construction delay reports. Site development must await
demolition of the old building which, in turn, has been delayed pending
construction of the replacement building. Although these facts reasonably
explain the delay in awarding the construction contract for site development
and do not constitute a deliberate omission, we believe the delay should have
been reported for the following reasons: The December 1996project status
report from VA’s Construction ManagementInformation Systemlists site
development for Palo Alto as a separateproject, construction funds were
awarded before 1995,and the total cost estimate of $6.8 million exceeds the $3
million reporting threshold.
We incorporated other VA comments into the letter and the enclosure as
appropriate.




                              GAOLHEHS-97-107R       VAConstruction    Delays
B-276638



We are sending copies of this letter to the Secretary of Veterans Affairs; the
Director, Office of Management and Budget; and other interested congressional
parties. We will also make copies available to others on request.

Lawrence L. Moore was Evaluator-m-Charge on this assignment. Please contact
me or him at (202) 512-7101 if you have any questions about this letter. George
F. Poindexter, Assistant Director, and Edda Emmanuel&Perez, Senior Attorney,
also contributed to this letter.




Stephen P. Backhus
Director, Veterans’ Affairs and
   Military Health Care Issues

Enclosure




 6                                GAO/HEHS-97-107R    VA Construction    Delays
ENCLOSURE                                                                  ENCLOSURE


                 MAJORCONSTRUCTIONPROJECTSFORWHICH
          VAHADNOTAWARDEDCONTRACTSASOFSEPTEMBER30.1996


ALBANYNATIONALCEMETERY,           NEWYORK

Type of project: Phase I development
Type of contract: Construction documents
Time limit: September 30, 1996

Award date: November 15, 1996
Reason for delay: Lengthy price negotiations with the architect/engineer firm delayed
award of the construction documents contract. According to VA officials, the
construction documents work is now on schedule.

BOSTON.MASSACHUSElTS

‘I)pe of project: Ambulatory care clinic

Type of contract: Construction documents
Time limit: September 30, 1996
Award date: April 7, 1997
Reason for delay: This project was delayed because construction could not begin until a
parking deck construction project was completed.

BREVARDCOUNTY,FLORIDA

Type of project: Ambulatory care clinic

Type of contract: Construction documents
Time limit: September 30, 1996


7                                          GAO/HEHS-97-107R   VA Construction    Delays
ENCLOSURE                                                                    ENCLOSURE

Estimated award date: Unknown

Reasonfor delay: Recent congressional actions have affected the project’s proposed
scope. VA had proposed a new medical center and nursing home in Brevard County, and
the Congressappropriated $17.2miJJionin Escal year 1995to design this center.

Since September 30, 1995,the Congresshas significantly changed the Brevard County
project’s scope. VA’s fiscal year 1996appropriations act (P.L. 104-134),enacted April 26,
1996,appropriated $7.8 million for VA to construct a stand-alone ambulatory care clinic in
Brevard County, instead of the originally planned medical center and nursing home. The
House and SenateAppropriations Committees directed that these funds, along with the
$17.2million appropriated for the project in fiscal year 1995,be used to construct the
clinic, estimated to cost $25 million. The House and SenateAppropriations Committees
also directed VA to proceed with construction of the clinic as soon as possible.
In its fiscal year 1997budget request, VA nevertheless sought partial construction funding
for the medical center and nursing home project. VA also planned to use the ambulatory
care clinic at the Orlando Naval Hospital and convert the hospital there into a nursing
home. (See the description of the Tampa project below.) The Appropriations
Committees did not give VA the funding it requested and instead directed VA to proceed
with the ambulatory care clinic project as provided in VA’s 1996appropriations act.
Subsequently,VA’s major construction authorization law,’ enacted October 9, 1996,
directed VA to suspend work on the Brevard ambulatory care clinic and the Orlando
nursing home and report within 60 days to the Congress on the health care needs of
veterans in east central Florida. On March 10, 1997,in response to this direction, VA
reported it could best meet the health care needs of veterans in east central Florida,
including Orlando and Brevard County, by constructingthe plannedambulatorycare
clinic in Brevard County, building a 120-bednursing home facility in Orlando, converting
Orlando’s former bachelor enlisted quarters .into a 60-bed domiciJ.iary,and referring
patients to other VA facilities and the private sector for other medical care. Pending
congressional review of this report, VA has ceased all contracting activities for Orlando
and Brevard County for at least 45 days and cannot estimate when construction
 documents contracts will be awarded. VA did not request any new construction funds for
 Brevard County in its 1998budget request.




?‘he Veterans’ Health Care Eligibility Reform Act of 1996,P.L. 104262, sec. 351.

8                                        GAO/HEHS-97-107R       VA Construction    Delays
ENCLOSURE                                                                   ENCLOSURE

CLEVELAND (WADE PARK DMSION). OHIO

Type of project: Ambulatory care clinic and spinal cord injury facility
Type of contracts: Construction documents and construction
Time limit: September 30, 1994,and September 30, 1995,respectively
Estimated award date: Unknown
Reason for delay: Delays have occurred in resolving issues about the amount of space
required for this project and how the project would be developed at each of the Cleveland
VA Medical Center’s two divisions (Wade Park and Brecksville). The design completed on
March 6, 1997, significantly downsized the project from earlier plans.

HONOLULU. HAWAII
Type of project: Ambulatory care clinic and building wing remodeling
Type of contract: Construction
Time limit: September 30, 1994
Award dates: May 23 and 27, 1997
Reason for delay: VA decided to carry out the ambulatory care clinic construction and
the E wing remodeling in two phases: The ambulatory care clinic will be constructed
first, thus requiring a new design for the E wing area.

MOUNTAIN HOME. TENNESSEE

Type of project: Laundry building and warehouse

Type of contracts: Construction documents and construction
Time limits: September 30, 1991,and September 30, 1992,respectively
Estimated award date: June 1997(design/build contract for both the laundry and
warehouse)

9                                        GAOLHEHS-97407R        VA Construction   Delays
ENCLOSURE                                                                  ENCLOSURE

Reason for delay: Design was delayed becausethe Congressappropriated funds in 1991,
before VA requested funding. The amount appropriated was insufticient for the project as
originaUy planned, so VA changed the scope of this project. Instead of separate contracts
for the laundry and warehouse, a single design/build contract will be awarded for both
facilities. VA has received three bids and plans to award a contract this month.


PALO ALTO. CALIFORNIA

Type of project: Site development
Type of contract: Construction
Time Unit: September 30, 1993
Estimated award date: March 1998
Reason for delay: Work on the site was delayed becausea replacement building needed
to be completed and an old building demolished before site development could begin.

PORTLAND, OREGON

Type of project: Research addition
Type of contracts: Construction documents and construction
Time limit: September 30, 1996,and September30, 1996,respectively
Award date: December 10, 1996(design/build contract)

Reason for delay: The Congressprovided funding in fiscal year 1996,before VA had
completed design development. Becausethe funding was unanticipated, VA was
unprepared to award a construction documents contract. The project was also delayed
because selecting and approving an architect/engineer took longer than anticipated.

TAMPA (ORLANDO). FLORIDA

Type of project: Conversion of former Orlando Naval Hospital into an ambulatory care
clinic and 120-bednursing home

10                                      GAO/HEHS-97-107R       VA Construction   Delays
ENCLOSURE                                                                   ENCLOSURE

Type of contracts: Construction documents and construction
Time limit: September 30, 1995,and September 30, 1996,respectively

Estimated award date: Unknown
Reasonfor delay: Congressional and other actions have delayed VA’s plans for the former
Naval Hospital that was transferred to VA The Congressappropriated $14 million for the
ambulatory care clinic in fiscal year 1996. Lengthy negotiations with the prospective
contractor delayed award of the design development contract until March 1996. In
addition, the Congress’ directed VA not to obligate funds for the nursing home conversion
until VA had completed a study of east central Florida veterans’ health care needs.
On March 10, 1997,VA reported its needs for medical facilities in East Central Florida,
including Orlando and Brevard County. VA concluded that veterans’ needs could be best
met by constructing an Outpatient Clinic in Brevard County, constructing a 120-bed
nursing home facility in Orlando, converting Orlando’s former bachelor enlisted quarters
into a 60-beddomiciliary, and referring patients to other VA facilities and the private
sector for other medical care. Pending congressional review of this report, VA has
ceased,for at least 45 days, all contracting activities in Orlando and Brevard County and
cannot estimate when construction documents contracts will be awarded.


TRAVIS AIR FORCE BASE, CALIFORNIA

Type of project: Ambulatory care clinic
Type of contracts: Construction documents
Time limit: September 30, 1996
Estimated award date: Unknown
Reasonfor delay: The required contracts have not been awarded because of continuing
discussions between the Congress and the administration about the scope of this project.




‘Sec. 361(b) of the Veterans’ Health Care Ehgibflity Reform Act of 1996 (P-L. 104262) and
the House Appropriations Committee report on VA’s fiscal year 1997 appropriations.
11                                        GAOLHEHS-97-107R     VA Construction    Delays
ENCLOSURE                                                                  ENCLOSURE

 Through fiscal year 1996,the Congresshad appropriated $22.6million to partially fund a
joint VA/Air Force medical center project at Travis Air Force Base, which was estimated
to cost $211million. VA planned to award both construction documents and construction
 contracts during fiscal year 1996but put them on hold because of discussions about its
 fiscal year 1996budget request.

For fiscal year 1996,instead of funding the full project, the Congressappropriated $26
million for an ambulatory care clinic at Travis. However, VA did not award any contracts
becauseit still sought permission for the full medical center.

VA’s 1997appropriations act provided $32.1 million in additional construction funds for
the medical center, which are not to be released before January 1, 1998,without further
congressionalaction. The act also directed VA to study the medical needs of veterans in
Northern California before obligating the funds. VA hired a consultant for that study
whose report is due in June 1997. All new spending has stopped pending that report.


WACO,TEXAS
Type of project: Renovatation of building 11
Type of contracts: Construction documents and construction
Time limit: September 30, 1990,and September 30, 1991,respectively
Estimated award date: August 1997for construction documents and February 1998for
construction

This project has been delayed because it was the last of a series of projects at the
medical center. Originally, it was approved as one project, but VA chose to divide the
project into several phases,thereby requiring multiple contract awards. When the other
phaseswere completed in 1996,the remaining funds were inadequate to complete
Building 11. Thus, the contract awards were delayed until the Congress approved VA’s
reprogramming of $8.8 million and also because VA changed the scope of the project.




(406137)

 12                                     GAOLHEHS-97-107R       VA Construction   Delays
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