[House Hearing, 110 Congress]
[From the U.S. Government Printing Office]




 
      THE U.S. DEPARTMENT OF VETERANS AFFAIRS CONSTRUCTION PROCESS

=======================================================================

                                HEARING

                               before the

                         SUBCOMMITTEE ON HEALTH

                                 of the

                     COMMITTEE ON VETERANS' AFFAIRS
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                            NOVEMBER 1, 2007

                               __________

                           Serial No. 110-59

                               __________

       Printed for the use of the Committee on Veterans' Affairs



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                     COMMITTEE ON VETERANS' AFFAIRS

                    BOB FILNER, California, Chairman

CORRINE BROWN, Florida               STEVE BUYER, Indiana, Ranking
VIC SNYDER, Arkansas                 CLIFF STEARNS, Florida
MICHAEL H. MICHAUD, Maine            JERRY MORAN, Kansas
STEPHANIE HERSETH SANDLIN, South     RICHARD H. BAKER, Louisiana
Dakota                               HENRY E. BROWN, Jr., South 
HARRY E. MITCHELL, Arizona           Carolina
JOHN J. HALL, New York               JEFF MILLER, Florida
PHIL HARE, Illinois                  JOHN BOOZMAN, Arkansas
MICHAEL F. DOYLE, Pennsylvania       GINNY BROWN-WAITE, Florida
SHELLEY BERKLEY, Nevada              MICHAEL R. TURNER, Ohio
JOHN T. SALAZAR, Colorado            BRIAN P. BILBRAY, California
CIRO D. RODRIGUEZ, Texas             DOUG LAMBORN, Colorado
JOE DONNELLY, Indiana                GUS M. BILIRAKIS, Florida
JERRY McNERNEY, California           VERN BUCHANAN, Florida
ZACHARY T. SPACE, Ohio
TIMOTHY J. WALZ, Minnesota

                   Malcom A. Shorter, Staff Director

                                 ______

                         SUBCOMMITTEE ON HEALTH

                  MICHAEL H. MICHAUD, Maine, Chairman

CORRINE BROWN, Florida               JEFF MILLER, Florida, Ranking
VIC SNYDER, Arkansas                 CLIFF STEARNS, Florida
PHIL HARE, Illinois                  JERRY MORAN, Kansas
MICHAEL F. DOYLE, Pennsylvania       RICHARD H. BAKER, Louisiana
SHELLEY BERKLEY, Nevada              HENRY E. BROWN, Jr., South 
JOHN T. SALAZAR, Colorado            Carolina

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Veterans' Affairs are also 
published in electronic form. The printed hearing record remains the 
official version. Because electronic submissions are used to prepare 
both printed and electronic versions of the hearing record, the process 
of converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.


                            C O N T E N T S

                               __________

                            November 1, 2007

                                                                   Page
The U.S. Department of Veterans Affairs Construction Process.....     1

                           OPENING STATEMENTS

Chairman Michael Michaud.........................................     1
    Prepared statement of Chairman Michaud.......................    28
Hon. Jeff Miller, Ranking Republican Member......................     2
    Prepared statement of Congressman Miller.....................    28
Hon. Corrine Brown...............................................     2
    Prepared statement of Congresswoman Brown....................    29
Hon. Cliff Stearns...............................................     3
Hon. Shelley Berkley.............................................     4
Hon. Henry E. Brown, Jr..........................................     5
Hon. John T. Salazar.............................................     5

                               WITNESSES

U.S. Department of Defense, Major General David W. Eidsaune, 
  Commander, Air Armament Center, Eglin Air Force Base, FL, 
  Department of the Air Force....................................     6
    Prepared statement of General Eidsaune.......................    29
U.S. Department of Veterans Affairs, Donald H. Orndoff, Director, 
  Office of Construction and Facilities Management...............    23
    Prepared statement of Mr. Orndoff............................    44

                                 ______

American Legion, Shannon L. Middleton, Deputy Director, Veterans 
  Affairs and Rehabilitation Commission..........................    18
    Prepared statement of Ms. Middleton..........................    42
Clarkson Group, L.L.C., The, Jacksonville, FL, Charles A. 
  Clarkson, Founder and Chairman.................................    11
    Prepared statement of Mr. Clarkson...........................    39
Haskell Company, The, Jacksonville, FL, William Wakefield, Vice 
  President, Healthcare Division.................................    10
    Prepared statement of Mr. Wakefield..........................    34
Veterans of Foreign Wars of the United States, Christopher 
  Needham, Senior Legislative Associate, National Legislative 
  Service........................................................    17
    Prepared statement of Mr. Needham............................    40

                   MATERIAL SUBMITTED FOR THE RECORD

Post-Hearing Questions and Responses for the Record:
    Hon. Michael Michaud, Chairman, Subcommittee on Health, 
      Committee on Veterans' Affairs, to Dennis Cullinan, 
      National Legislative Director, Veterans of Foreign Wars of 
      the United States, letter dated November 8, 2007, and VFW 
      response...................................................    46
    Hon. Michael Michaud, Chairman, Subcommittee on Health, 
      Committee on Veterans' Affairs, to Steve Robertson, 
      National Legislative Director, American Legion, letter 
      dated November 8, 2007, and American Legion response.......    48
    Hon. Michael Michaud, Chairman, Subcommittee on Health, 
      Committee on Veterans' Affairs, to Hon. Gordon H. 
      Mansfield, Acting Secretary, U.S. Department of Veterans 
      Affairs, letter dated November 8, 2007, and VA response....    50


      THE U.S. DEPARTMENT OF VETERANS AFFAIRS CONSTRUCTION PROCESS

                              ----------                              


                       THURSDAY, NOVEMBER 1, 2007

             U.S. House of Representatives,
                    Committee on Veterans' Affairs,
                                    Subcommittee on Health,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 10:00 a.m., in 
Room 334, Cannon House Office Building, Hon. Michael Michaud 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Michaud, Brown of Florida, Snyder, 
Berkley, Salazar, Miller, Stearns, and Brown of South Carolina.

             OPENING STATEMENT OF CHAIRMAN MICHAUD

    Mr. Michaud. I would like to call the Subcommittee on 
Health to order. I would like to thank everyone for coming this 
morning.
    The purpose of this hearing is to learn more about the 
construction process within the U.S. Department of Veterans 
Affairs (VA). In 2004, the VA completed the Capital Asset 
Realignment for Enhanced Services (CARES) process. CARES was 
supposed to be a map to future VA facility development. It is 
unclear to me how closely the VA is following this map, and it 
is also unclear how well CARES will address the medical and 
demographic needs of current and future veterans of Afghanistan 
and Iraq.
    This Subcommittee is committed to providing the highest 
quality of care to our Nation's veterans, and we understand 
that a key part of this care are the facilities in which it is 
provided.
    We are here today to get a better understanding of the 
entire construction process from the concept to the opening of 
a facility. Understanding this process is particularly 
important right now.
    Many of the VA hospitals and medical facilities are aging 
and are in need of major renovation or replacement. Many VA 
facilities need to be upgraded in order to meet the standards 
for earthquakes, fire and patient privacy. Population shifts 
require new facilities in new locations. The VA is in the 
process of planning several new hospitals in cities such as Las 
Vegas, Denver, and New Orleans. This process can be long and 
drawn out. It can take much longer than similar projects built 
in the private sector.
    We look forward to working with the VA to ensure that our 
veterans receive the best possible care in medical facilities 
that are modern and safe while being built efficiently and 
cost-effectively. I look forward to hearing about the current 
construction process, the VA's plans and needs for future 
construction and how this Committee can support this effort, 
with the goal always being to provide the best possible 
healthcare for our veterans.
    I now would like to recognize Mr. Miller for an opening 
statement.
    [The prepared statement of Chairman Michaud appears on p. 
28.]

             OPENING STATEMENT OF HON. JEFF MILLER

    Mr. Miller. Thank you very much, Mr. Chairman. I appreciate 
you holding this hearing today.
    As you have already said, access to different types of 
outpatient and inpatient facilities is critical in addressing 
the unique healthcare needs of our changing veteran population. 
Most of the Department of Veterans Affairs infrastructure was 
built more than 50 years ago. Many of these facilities continue 
to age and are not well suited for the 21st century healthcare 
that is provided now. The facilities need repair and 
replacement, and they are sometimes simply located too far away 
from the veteran's choice of living arrangements.
    I have a full statement that I would like to have entered 
into the record, but because we do have votes coming up in a 
few minutes, I would like to ask unanimous consent that my 
statement be entered into the record.
    I do want to say a special welcome this morning to our 
first witness, Major General David Eidsaune, who is here from 
Eglin Air Force Base in my district, the First Congressional 
District of Florida.
    We are glad to have you here with us this morning, General.
    I yield back.
    [The prepared statement of Congressman Miller on p. 28.]
    Mr. Michaud. Thank you very much. Without objection, your 
full statement will be put in the record.
    Ms. Brown.

            OPENING STATEMENT OF HON. CORRINE BROWN

    Ms. Brown of Florida. Thank you. Mr. Chairman, I want to 
thank you for calling this hearing today. Thank you very much. 
I had requested this hearing, and have been pressing for it, 
and now we have it.
    This issue is very important to me as I represent part of 
Orlando, Gainesville, and Jacksonville. I would say most of 
Florida. Some of my colleagues might disagree. Central Florida 
waited 25 years before the VA decided to put a VA medical 
center there earlier this year. Twenty-five years is too long 
for those men and women who have defended this country and 
their freedom that it holds dear. It is 25 years too long for 
the oldest veterans population to wait for proper care. Twenty-
five years. I do not want to have to wait another 15 years for 
this hospital to open.
    In New Orleans, it has been 2 years since Hurricane Katrina 
hit the Crescent City and devastated the city. The employees at 
the VA medical center performed heroically for the patients and 
in evacuating everyone safely. However, we are no closer to 
rebuilding that hospital now than we were 2 years ago.
    I have heard good things about design-build, where the 
design and construction aspects are contracted for or with a 
single entity known as a ``design-builder'' or a ``design-
builder contract.'' The design-builder is usually the general 
contractor, but in many cases it is also the architect or the 
engineer. This system minimizes the project risks and reduces 
the delivery schedule by overlapping the design phases and 
construction phases of the project.
    Why can't the VA use this modern device to speed up the 
process?
    I look forward to the hearing, the testimony of the 
witnesses today, and I will put my complete statement in the 
record, Mr. Chairman.
    [The prepared statement of Congresswoman Brown appears on 
p. 29.]
    Mr. Michaud. Without objection.
    Mr. Stearns.

            OPENING STATEMENT OF HON. CLIFF STEARNS

    Mr. Stearns. Well, thank you, Mr. Chairman.
    I also share similar things with my colleague from Florida, 
Ms. Brown. We represent the University of Florida, and we have 
the Gainesville Hospital up there, and so we are working 
together on this, and we are trying to get additional money for 
it and for also the new Summerfield Clinic in South Marion 
County, both of which are in the construction budget and are in 
the process. The one in Summerfield is a 95,000-square-foot 
facility, which is in my hometown.
    I think a lot of us are concerned about a lot of the VA 
facilities that are aging, and in fact, I guess, a U.S. 
Government Accountability Office (GAO) report found that one 
out of every four medical care dollars goes to the maintenance 
and operation of the infrastructure, and we are losing millions 
of dollars annually on the upkeep of these facilities.
    So, obviously, that is why the CARES program got started, 
and that is why we are interested so much in the construction.
    There are, obviously, other projects throughout the United 
States. I think there are about 100 major construction projects 
in 37 States, including in the District of Columbia and in 
Puerto Rico. So I am very sensitive to that fact that you have 
this many in a priority situation. The Military Construction 
and Veterans Affairs Appropriations Act, 2008, would provide 
$1.4 billion for major construction and $650 million for minor 
projects. So that is the good news.
    Like other Members of Congress, we have heard from our 
districts, and we need the facilities, and so we are 
particularly pleased that there is going to be additional 
funding for the Gainesville Hospital, and also, we want to get 
money for the Summerfield Clinic.
    So, Mr. Chairman, I am glad we are having the hearing. I 
compliment you on it. I look forward to the testimony.
    Thank you.
    Mr. Michaud. Thank you very much.
    Ms. Berkley.

             OPENING STATEMENT HON. SHELLEY BERKLEY

    Ms. Berkley. I thank you very much, Mr. Chairman, for 
holding this very important hearing, and thank you very much 
for being here.
    I represent the Las Vegas area, and as you are well aware, 
we are on schedule to get a full VA medical complex that 
includes a VA hospital, a long-term care facility and a VA 
outpatient clinic, a full-service VA outpatient clinic. We have 
moved heaven and earth to do this. We had 147 acres transferred 
from the U.S. Department of the Interior to the Department of 
Veterans Affairs to save on costs of the land. I was at the 
Paiute Indian blessing of the land, which was quite an 
extraordinary ceremony. I was there for the groundbreaking with 
then Secretary Nicholson. They are moving dirt out there. Right 
now, it is in the middle of nowhere, but I know the growth 
patterns of my Congressional district and the entire State of 
Nevada. It is going to be in the middle of North Las Vegas in 
very short order.
    My biggest concern--and the appropriations have already 
been made, and we are moving forward. My biggest concern and 
what keeps me up at night, quite frankly, given the fact that I 
have the fastest growing veterans population in the United 
States in the Las Vegas Valley, is that I have 300,000 veterans 
in the State of Nevada. Two hundred and fourteen thousand of 
them call my district home. They have no healthcare facilities. 
There is nothing to repair. There is nothing there right now, 
and that is why this is so critical. I have 1,600 veterans who 
have returned from the Iraq-Afghanistan theater of war, and 
they are already accessing whatever healthcare system we have 
in Nevada.
    I need to keep this on track, and I need to have periodic--
I mean other than my going over there and looking at the 
facilities going up, I need to know that we are moving in a 
positive direction. With the construction costs in Las Vegas 
skyrocketing beyond anybody's wildest beliefs, my concern is 
that this gets more costly with every passing day. The sooner 
we get it up, the sooner we are going to save millions and 
millions of taxpayers' dollars.
    So anything I could do to be working with you to move this 
in a very rapid and a positive direction, I am there for you, 
but I need to get these facilities up, and I need to get them 
up fast.
    Mr. Stearns. Will the gentlelady yield?
    Ms. Berkley. Of course, Mr. Stearns.
    Mr. Stearns. On this Indian blessing for the site, perhaps 
others might have to have that same kind of ceremony.
    How long a ceremony was it?
    Ms. Berkley. It was quite remarkable.
    Mr. Stearns. Quite remarkable.
    Ms. Berkley. The Paiute Indians were in full regalia, and 
there were blessings and a lot of smoke. I do not think it was 
peyote, but it smelled good. It was quite an extraordinary 
cultural experience.
    Mr. Stearns. That is the first I have heard of something 
like that occurring.
    So, Mr. Chairman, if you do not mind, I just indulged 
myself to find out a little more about it. Thank you.
    Ms. Berkley. By the way, that is all former Paiute land.
    Mr. Michaud. Mr. Brown.

         OPENING STATEMENT OF HON. HENRY E. BROWN, JR.

    Mr. Brown of South Carolina. Thank you, Mr. Chairman.
    Thank you, General, for coming, and I look forward to 
hearing your testimony and that of the other members of the 
panel.
    I represent the First Congressional District of South 
Carolina. We have been working for some time now to try to 
develop a model that we feel would upgrade, I guess, the 
healthcare delivery for veterans across the Nation. It is to 
partner with the local, you know, State-run Medical University. 
We have been working on that plan for a long time, but it seems 
to me that we just cannot quite move to the next level.
    The Medical University now is in the process of building a 
complete new hospital complex. What we were hoping to do is to 
be able to incorporate in that development the replacement for 
the old VA hospital now in Charleston.
    We are facing a similar situation that you find in New 
Orleans today where the VA hospital was built on the peninsula 
of Charleston, which was built in a low-lying area, and we 
could almost sense, if we had a Katrina-type storm come through 
the region, that we would be out of business just like the 
folks in New Orleans. The Medical University is sensing that 
concern and is building on higher ground, and we were hoping 
that we would be able to replace the old VA hospital in the 
same time and manner as the current Medical University complex. 
By doing so, we would be able to unite some services between 
the VA and the Medical University that we currently are not 
doing.
    Ninety-five percent of those doctors who operate in the VA 
hospital actually come from the Medical University, so there is 
already some sharing; some imaging equipment is also being 
shared. What we were looking for is to get the units closer 
together in a physical sense so we would be able to unite more 
services and, I think, upgrade particularly in the highly 
specialized areas and, I think, in the clinical care area for, 
I guess, mental patients and some of the prostheses and for the 
heart and for some of the other high-tech procedures where we 
could better utilize the taxpayers' dollars by uniting both of 
those units, but we cannot seem to move to the next level.
    We have appropriated--we have not appropriated, but we 
authorized some $38 million last year in the authorization 
bill, but we cannot seem to get the connectivity with the 
administration to be able to move that project forward, and I 
certainly would like to address that as you make your 
statements today.
    Thank you, Mr. Chairman.
    Mr. Michaud. Mr. Salazar.

           OPENING STATEMENT OF HON. JOHN T. SALAZAR

    Mr. Salazar. Thank you, Mr. Chairman.
    I just wanted to thank the General for being here.
    Of course, I share the same concern as many of my 
colleagues here around the table. We have been working on the 
Fitzsimons Hospital construction in conjunction with the 
University of Colorado, which will be, I hope, soon a state-of-
the-art facility. I want to thank you for your service as well.
    So I will submit my full statement for the record, Mr. 
Chairman. Thank you very much for holding this hearing.
    Mr. Michaud. Without objection.
    It is my pleasure now to recognize the first panel, Major 
General David Eidsaune. I want to welcome you here. A lot of 
comments you heard this morning so far actually deal with the 
VA jurisdiction, but hopefully those folks from the VA heard 
those opening remarks and will be able to address them when 
they come up to do their part.
    So, without further ado, Major General, I want to thank you 
once again for your service to this great Nation of ours. I 
look forward to your testimony here today.
    So please begin.

 STATEMENT OF MAJOR GENERAL DAVID W. EIDSAUNE, COMMANDER, AIR 
 ARMAMENT CENTER, EGLIN AIR FORCE BASE, FL, DEPARTMENT OF THE 
             AIR FORCE, U.S. DEPARTMENT OF DEFENSE

    General Eidsaune. Thank you, Mr. Chairman and Members of 
the Subcommittee, and thank you for this opportunity to speak 
about the ongoing VA construction project we have at Eglin Air 
Force Base, and thank you for your great support of our 
veterans, including the many who live in the community around 
my base, and they are also very vibrant supporters of our 
mission at Eglin.
    At Eglin and across the Air Force, we are continually 
working to expand and to improve available healthcare services 
for our active duty and veteran populations. This includes 
renovating and enlarging existing healthcare facilities as well 
as planning and building new facilities such as our own VA 
community-based outpatient clinic, which is under construction.
    The VA Gulf Coast Veterans Healthcare System covers the 
gulf coast of Mississippi, Alabama, and the Florida Panhandle. 
This extensive area is covered by one VA inpatient facility in 
Biloxi and three outpatient clinics in Mobile, Pensacola, and 
Panama City.
    Because the Emerald Coast of northwest Florida is one of 
the top 10 fastest growing areas in the United States, there is 
a strong need to improve access for veterans to the medical 
services they deserve. The VA and Eglin Air Force Base have 
combined forces to address this need. The resulting VA 
community-based outpatient clinic is currently under 
construction and is scheduled to open in the spring of 2008.
    Eglin provided a 10-acre parcel, within walking distance of 
our main hospital, at no cost to the VA. The close proximity 
will enable a sharing arrangement for inpatient care, emergency 
room services, radiology, lab work, pharmacy, and specialty 
care, just to name a few.
    In closing, this VA clinic will be a tremendous joint 
success for Eglin, for the VA, and for our combined patient 
populations. I believe this cooperative effort will serve as a 
model for future initiatives to support the healthcare needs of 
our Nation's veterans.
    Thank you.
    [The prepared statement of General Eidsaune appears on p. 
29.]
    Mr. Michaud. Thank you very much, Major General.
    I have a couple of quick questions.
    What major challenges did you face in building the 
community-based outpatient clinic (CBOC) at Eglin Air Force 
Base? Were you able to stay on schedule and on budget for this 
project?
    General Eidsaune. In fact, there were no major challenges. 
It all went very well. We have been on schedule, on budget, and 
I know Congressman Miller has been out there to observe the 
construction, and he was very happy with that. So I would say 
it is a great success story so far.
    Mr. Michaud. Great. You are to be commended.
    Mr. Miller.
    Mr. Miller. Thank you, Mr. Chairman.
    I think the focus of your testimony is unique now; it was 
not so unique 5 years ago. It was not even thought about that 
much, the cosharing between the VA and the U.S. Department of 
Defense (DoD).
    When I was elected in 2001, it was interesting to me that 
there was a huge disconnect between the DoD and the VA. Now, I 
think everybody is trying to bring them together as there is a 
possibility of providing much better service for both DoD and 
VA patients.
    In El Paso, the VA Medical Center and the William Beaumont 
Army Medical Center at Fort Bliss are colocated. VA inpatient 
care is provided through a VA/DoD cosharing agreement. 
Obviously, one was entered into in Florida because of the 
Community-Based Outpatient Clinic at Eglin.
    Were there great problems in putting that agreement 
together? What do you see as the future at Eglin or at other 
facilities of being able to expand inpatient care for VA 
patients?
    General Eidsaune. In fact, it made a lot of sense for us to 
have the big hospital right there at Eglin and one of the top 
five in the Air Force, in terms of size, to put a clinic right 
outside the fence and to provide primary care. If a veteran 
needs specialty care follow-up, they can walk right next door. 
We plan on putting in a golf cart shuttle system to take them 
back and forth through the gate, an electronic-type gate, to 
make it easy. So it all makes sense that we should put these 
two together and share arrangements.
    Mr. Miller. What type of security issues are you having to 
deal with, going through the fence between the two facilities?
    General Eidsaune. What we plan to do is, for people who 
have appointments the next day, we will provide a list of those 
patients to the security forces, and when they come in the next 
day, they just show a picture ID and their VA patient badge, 
and they will be let right in to go to the hospital. For same-
day appointments, we will use that gate I talked about--it will 
be an electronic gate--so the staff that accompanies the 
patient on the golf cart over there will just be able to swipe 
a card through the gate and get through to the hospital. So we 
do not see any major security concerns at all.
    Mr. Miller. Do you think that adding veterans to the mix of 
patients that Eglin currently has is going to provide a broader 
range of services than currently exists? Do you see VA patients 
coming in helping the physicians and the facility at the 
hospital expand what they do?
    General Eidsaune. In fact, I think it will.
    Part of our certification progress is we have to have a 
wide range of patient population, including aging patients. 
Well, we do not have that many on base right now in terms of 
the active duty. We also have a fairly good active residency 
program, and those residents need to see those types of 
patients also, so this really benefits our own hospital in 
terms of these VA patients coming over.
    Mr. Miller. You came in when the process was already 
started, but what type of stumbling blocks have you seen 
through the VA and the DoD working together that you have had 
to overcome?
    General Eidsaune. Yes, I wish I could give you some, but it 
has been just a very smooth process so far. I know the folks in 
my hospital worked this really hard with the VA, but nothing 
has bubbled up to my level as being a major stumbling block in 
making this happen.
    Mr. Miller. I think it is important for the Subcommittee to 
hear that both VA and DoD have worked seamlessly in making this 
transition, in providing the ability for veterans to receive 
healthcare as close to home as possible.
    As you heard this morning, there is a cry, a need for 
community-based outpatient clinics to be located throughout the 
United States. As my colleague, Ms. Berkley, and I go back and 
forth about who has the most veterans, she obviously has a 
tremendous need and has for many years been an advocate for a 
full service hospital in her district. Finally it has been 
authorized, and the process is beginning.
    The veteran population has changed tremendously over the 
years; therefore, VA has had to modify the way that they 
provide healthcare. I want to say ``thank you'' to the DoD for 
being willing to partner with VA to help solve the problem. 
Today, once people leave active duty and become veterans or 
retirees within the system, they are still able to gain the 
healthcare that they deserve as people who have served this 
country, through VA and DoD collaboration.
    General, thank you for coming and for representing Eglin 
Air Force Base, Big Blue, and certainly the DoD. It is great to 
have somebody from northwest Florida here today. Thank you.
    General Eidsaune. Thank you, sir.
    Mr. Michaud. Ms. Brown.
    Mr. Brown.
    Ms. Berkley.
    Ms. Berkley. Because of your experience, what would you 
recommend to me? What should I be doing? What can I do to be 
most effective to keep this on track in Las Vegas?
    General Eidsaune. Well, what is really important is the 
working level relationships between the VA and the DoD hospital 
there, and to make sure that is vibrant and working very well, 
and they just have a way of working things out.
    Ms. Berkley. Okay. I am not sure if I understand how that 
helps get my facility built.
    General Eidsaune. Well, I am not familiar with where you 
are going to build it. Are you close to a DoD hospital?
    Ms. Berkley. The Michael Callahan Hospital that services 
Nellis Air Force Base.
    The reason that we are getting this VA facility is because 
it is just totally inadequate for the number of enlisted that 
we have at Nellis and the extraordinary number of veterans. 
That is why we are getting our own separate hospital.
    Mr. Miller. If the gentlelady would yield for a minute, I 
think part of the issue is, yours is a stand-alone VA facility, 
and we are talking about the joint facility. So there is a 
difference, but I think he is right. What I have learned is the 
more times you visit the site, talk to the contractor, remind 
people that you are there, and your staff is there all the 
time, that is a lot. What we are looking at now is a 
collaborative effort, not a stand-alone facility.
    Ms. Berkley. I think, Mr. Miller, I will bring you to my 
district, and we can talk to them together. I will watch you in 
operation.
    Mr. Miller. Let's go. I am ready.
    Ms. Berkley. Thank you.
    Mr. Michaud. Mr. Salazar.
    Mr. Salazar. Thank you, Mr. Chairman.
    Major General, as you know, out in rural communities, we 
face a severe problem when we try to set up CBOCs. You know, 
sometimes the sufficiency ratio is not very good, and so 
sometimes there has been some talk in this Committee about 
partnering with private facilities, such as other hospitals, to 
help run these CBOCs.
    Do you have any suggestions as to how we address the issue 
out in small rural communities where you are not close to a 
military base?
    General Eidsaune. Well, in our own hospital at Eglin, we 
have some sharing relationships with private hospital 
facilities downtown, and if our workload is too high and we 
cannot see patients, we will send them downtown. We have worked 
that out. So I would suggest the same thing, maybe working with 
some of the smaller medical facilities out in the rural areas 
in terms of sharing arrangements like that.
    Mr. Salazar. Doing, maybe, some type of a contracting 
arrangement?
    General Eidsaune. Right.
    Mr. Salazar. I do not know. I know that Mr. Miller has the 
same problem--I believe it is you--and also the Chairman. So we 
might look at something like that in the near future because I 
do believe that, you know, the VA set up a CBOC out in Craig, 
although it is not a full facility. People have to travel, or 
veterans have to travel over 5 hours to get to a VA hospital 
from that area, and so I would really encourage us to look at 
something like that.
    I yield back.
    Mr. Michaud. I concur, Mr. Salazar. We definitely will. In 
the rural areas we have our own unique problems, and I 
definitely look forward to working with you as we move forward.
    If there are no other questions, once again, Major General, 
I want to thank you very much for your testimony and for coming 
here today and for your enlightening the Subcommittee on how 
well projects can move forward if you work together in a 
cooperative effort. So, once again, thank you very much, and 
thank you for your service to this great Nation of ours.
    General Eidsaune. Thank you, Mr. Chairman.
    Mr. Michaud. I would like to ask the second panel to come 
forward.
    I will also ask Congresswoman Brown if she would introduce 
the second panel. Ms. Brown has been a very strong advocate, to 
put it mildly, in making sure that we had this hearing today. 
As well, she feels deeply about this issue, and I appreciate 
her passion and her willingness to move forward as we look at 
the VA construction process.
    So, Ms. Brown.
    Ms. Brown of Florida. Once again, Mr. Chairman, thank you 
for holding this hearing.
    I would like to introduce the panel and really thank them. 
Mr. William Wakefield is the Vice President of The Haskell 
Company, the division leader for healthcare in Jacksonville. He 
has been involved in developing medical facilities for over 30 
years, and he is a board certified architect. Yesterday, he was 
in Atlanta. He, I guess, flew to Jacksonville and flew back up 
here to be with us.
    So I want to thank you so very, very much, and make sure 
you thank Mr. Haskell, too.
    Mr. Bucky Clarkson, Charles Clarkson, has been involved in 
the real estate industry for over 25 years as an investor, 
developer and manager. Mr. Clarkson has also associated in the 
past with the Ross Company, a large national developer. He 
received his initial real estate experience as a real estate 
negotiator for the Safeway Stores in the Washington, D.C. area. 
He is a graduate of Princeton University and of George 
Washington Law School, and most importantly, he has been a very 
personal friend of mine for over 25 years.
    Thank you very much, also, for flying up here. I talked 
with him yesterday morning. He got on a plane and came up here 
to be here today.
    So thank you all very much.
    Mr. Michaud. Once again, thank you as well.
    Mr. Wakefield, would you begin?

  STATEMENTS OF WILLIAM WAKEFIELD, VICE PRESIDENT, HEALTHCARE 
DIVISION, THE HASKELL COMPANY, JACKSONVILLE, FL; AND CHARLES A. 
  CLARKSON, FOUNDER AND CHAIRMAN, THE CLARKSON GROUP, L.L.C., 
                        JACKSONVILLE, FL

                 STATEMENT OF WILLIAM WAKEFIELD

    Mr. Wakefield. Yes. Thank you very much for having me today 
on short notice. I would like to make a few comments if I can 
about the----
    Mr. Michaud. Is your microphone on? Press the button.
    Mr. Wakefield. Thank you very much.
    Again, thank you very much for having me today. I am 
delighted to come to talk to you today.
    My principal area of focus today will be on design-build as 
an alternative delivery model for your consideration. I am, 
again, Vice President for Healthcare Facilities at the Haskell 
Company. Haskell is a firm that provides design and 
construction services to a number of markets, including 
healthcare providers, principally in a design-build delivery 
mode. What I would like to--and I have spent most of my career 
also, similarly, in the design-build delivery mode.
    What I would like to comment on just before we get started 
into questions is I would like to particularly draw your 
attention to a Penn State University-published study that was 
done in 1997, an objective study that looked at a variety of 
delivery models for design and construction. It studied 351 
projects, and their findings are very interesting in terms of 
the benefits that design-build can offer to clients.
    As to the unit cost in terms of the actual cost of a 
facility, they found that, of the 351 projects that were 
studied, those delivered under the design-build delivery model 
were the lowest cost. They also represented the lowest cost 
growth, if you will, and that is the cost from the initial 
budget to the final construction cost of the completion and 
occupancy of the building. There were similar results for 
delivery speed in terms of the shortest period of time through 
design and construction and for the shortest or the least 
scheduled growth during the process.
    Finally, of course, none of that would be of much benefit 
if you did not have similar results in terms of quality, and 
again, the Penn State study indicates that quality, as ranked 
by the owners of the various facilities, was highest for 
design-build delivery projects.
    There are a number of other advantages to design-build and, 
obviously, a number of nuances in terms of a design-build 
delivery versus a design-bid-build or a construction 
management-type delivery.
    I would be delighted to entertain your questions on those 
as we get into the discussion. Thank you very much for the 
opportunity to give opening comments.
    [The prepared statement of Mr. Wakefield appears on p. 34.]
    Mr. Michaud. Thank you very much, Mr. Wakefield.
    Mr. Clarkson.

                STATEMENT OF CHARLES A. CLARKSON

    Mr. Clarkson. Thank you, Mr. Chairman. Thank you, 
Congresswoman Brown and Members of the Subcommittee.
    I am pleased to share the limited amount of knowledge that 
I have on an extremely important topic. I just have three brief 
comments as I have a slightly different view than my friend Mr. 
Wakefield and my dear friend Congresswoman Brown.
    In my experience in development, design-build definitely 
applies when you have what I would simply call a cookie cutter 
opportunity, in my experience. Making sure--and this is not 
always the case in design-build. Making sure that you have 
complete plans before you break ground is critical in terms of 
managing time, costs and risks. However, clearly, the positive 
elements of design-build that lend itself toward the 
encouragement of standardization are very important points.
    To the extent that products can be standardized, whether 
for hospitals or for any other type of product, the more you 
can standardize, the more you get the benefits of design-build, 
because the more you standardize, the more you will reduce time 
in design--you will reduce some cost in the design cost itself, 
and you also will reduce overall risk.
    So, as a developer, I have chosen the alternative, mainly 
because our projects are high-barrier-to-entry opportunities 
where we have to squeeze them into downtown Savannah or into 
downtown Tampa or somewhere like that.
    Clearly, any project that has some previously established 
standardized approach will really get the benefits of 
streamlining and cost reduction and risk management.
    Thank you.
    [The prepared statement of Mr. Clarkson appears on p. 39.]
    Mr. Michaud. Thank you very much, Mr. Clarkson.
    I have a couple of questions for both of you.
    What difference do you see between the private development 
process and the VA development process? What lessons about 
development and construction do you feel the VA could learn 
from the private sector to make construction more efficient and 
cost-effective?
    Mr. Wakefield, do you want to start off with that?
    Mr. Wakefield. Yes, I would be happy to. Thank you.
    I do think that Mr. Clarkson's comments are valid with 
respect to the ability to control cost and schedule, to a large 
extent, through somewhat of a standardization in terms of 
design. Many of our clients, private-sector clients, do have 
standard designs for patient rooms and for other types of 
patient-care areas. From our perspective, of course, each is 
different, and therefore, each is unique.
    So for a design-build firm, we deliver with a variety of 
design concepts, but from our owner's standpoint, the 
provider's standpoint, somewhat of a standardization on design 
is an important aspect. I do believe that the VA can benefit 
somewhat from that standardization. That is not to imply that a 
certain facility will not provide the service or the quality of 
service that one would wish, but to the degree that you can 
replicate patient rooms, for example, in inpatient facilities, 
the process becomes much easier, much more streamlined, and it 
can be more predictable in terms of time and in terms of cost.
    Mr. Clarkson. I just thought--I have not done any public 
projects, but I would expect an empowered decisionmaker in the 
private sector would be a critical difference. The public 
sector is not my area.
    You could streamline the decision-making process and have 
an empowered decisionmaker to drive the project forward. There 
are probably a lot of things going on in the public sector. 
Whereas, in the private sector, we cannot afford it. Somebody 
has got to get it done.
    Mr. Michaud. Great. Thank you very much.
    Mr. Miller.
    Mr. Miller. I pass, and will yield my time to Ms. Brown.
    Ms. Brown of Florida. Thank you very much.
    Let me just ask; there is another problem, it seems.
    Recently, I visited the Gainesville facility, and it is on-
line. We have the authorization and the funding, but there is 
going to be a hospital built right next-door, and that hospital 
will probably come up--you know, and this is private--like 2 
years before our VA facility is going to come up. In that 
facility, you have five patients in a room, and they do not 
have a bathroom. Now, that does not make any sense. There has 
to be a way--like I said earlier, Orlando, 25 years.
    How can we streamline the process? Should we think about a 
one-stop process? Because part of it is permits and those kinds 
of things, and they are all our agencies. Why can't we have 
kind of a one-stop facility so that you can get everybody in a 
room with these high-priority projects and work through the 
permitting process or something like that?
    Mr. Clarkson. Without knowing that project particularly, it 
just sounds like maybe nobody is in charge, really. Again, my 
gut would tell me to go back to the empowered decisionmaker who 
is breaking the logjam. I know there is bureaucracy at every 
level of industry. In any place where you have more than 300 
people involved, there is a bureaucracy, and the only way you 
can get through it is to have an empowered decisionmaker.
    Ms. Brown of Florida. So you are suggesting something like 
an ombudsman----
    Mr. Clarkson. It could be. It could be.
    Ms. Brown of Florida. [continuing.] Or a building czar or 
something?
    Mr. Clarkson. Right. It is going to make somebody unhappy, 
but that happens in the private sector where the contractor is 
not happy or the architect is not happy, but ``this is what we 
are going to do.'' That is my gut. I would suspect that nobody 
is in charge, so they are waiting for somebody else to tell 
them to do something.
    Ms. Brown of Florida. Mr. Wakefield.
    Mr. Wakefield. Yes. I do think that the team that is 
selected to implement the project can have an impact on that. 
Certainly, again, I believe that in a design-build arrangement, 
where you do have a single source that is in charge at least 
from the delivery side, it is an important aspect but it is not 
the only aspect.
    We recently completed a hospital, a 100-bed hospital, in 
the Tulsa area for the St. John Health System 16 months from 
conceptual design to occupancy. So I think that the delivery 
speed and the cost control, and so forth, are available through 
an integrated design-build process, but I would reflect the 
comments that were made here, that the decision-making process 
and the permitting processes are probably the largest variables 
in terms of a schedule for completing a new hospital.
    Ms. Brown of Florida. So you were able to complete this 
hospital in 16 months.
    Mr. Wakefield. From beginning conceptual design to 
occupancy in 16 months, yes, ma'am.
    Ms. Brown of Florida. What do you think are some of the 
contributing factors?
    Mr. Wakefield. Well, I think some of the contributing 
factors are the streamline design--or the decision-making 
process on the owner's part. This is the first new, free-
standing hospital that St. John Health Systems has built, but 
nonetheless, they organized themselves in a very efficient, 
committee-like organization to manage the overall process. So 
from our perspective, the things that slow us down is 
indecision about design issues, indecision about, you know, how 
patient floors will be organized, and so forth.
    While, again, St. John does have some standards for the 
design process, any new hospital is going to have a lot of 
custom questions and decisions to be made, St. John organized 
themselves very efficiently in terms of providing that guidance 
to us that enabled us to deliver on such a schedule.
    Ms. Brown of Florida. Mr. Chairman.
    Mr. Michaud. Thank you very much, Ms. Brown.
    Mr. Salazar.
    Mr. Salazar. Thank you, Mr. Chairman.
    I am not quite clear on the difference between design-build 
and whatever. Could you just explain it to a layman farmer?
    Mr. Wakefield. Yes, I would be happy to.
    In what is often referred to as the ``traditional 
process,'' an owner will hire an architect under a contract 
where that architect will provide design and engineering 
services. Once the architect's design is complete, the project 
would be put out for bid to contractors. Contractors would then 
bid on the project, and you know, the lowest qualified 
contractor's bid would be accepted, and that contractor would 
be hired also by the owner under a separate contract with the 
construction firm then. So the owner holds two contracts. They 
hold an architectural agreement with the architect, and they 
hold a construction agreement with the construction company.
    In the design-build setting, the architect and the 
contractor are one in the same; they are the same entity, and 
the owner holds a single contract with that design-build firm.
    The differences are that, in the traditional setting the 
owner is placed in a position of mediating, if you will, 
reconciling differences. When there are errors in design 
documents, the contractor is going to come back and look for 
extras as a result of that, and so forth, and that is part of 
the reason--and because the team is not as closely coordinated, 
that is part of the reason why that process does not 
necessarily result in as fast or as cost-effective a delivery.
    In the design-build setting, under a single contract, there 
is a single point of accountability, so the design-builder is 
responsible for not only the close coordination of their work, 
but they are also responsible for the quality of the documents, 
the completeness of the documents, and so forth. So, if there 
were an error in the design documents, for example, that would 
result in additional construction costs to remedy, it would be 
the design-builder's responsibility, not the owner's 
responsibility.
    Again, because it is one integrated party, they can 
coordinate their work much better. We can order materials. 
Critical lead item materials we can order before the design is 
completed, for example, and there are a number of techniques 
like that we can take advantage of as an integrated firm to 
increase the delivery speed.
    Mr. Clarkson. Let me just add to that.
    The enemy of managing construction costs is the change 
order. In a very specialized project, when the contractor and 
the architect--the architect has had to run off sophisticated 
designs. Often, the contractor--certainly not the Haskell 
firm--looks for his profit opportunity within the change order 
where the architect did not quite get it right, and he has got 
to make some changes. Then the contractor comes in and makes a 
nice adjustment in the cost.
    So, to the extent that the project is more specialized and 
less cookie cutter, there is more risk for change orders, and 
therefore more risk for delays, cost controls and people 
yelling at one another. It also comes back to the importance of 
making sure those plans are not 90 percent, not 95 percent but, 
hopefully, 100 percent, but even with those that are 100 
percent, there are still going to be some issues in terms of 
execution by the contractor and what the plans actually said.
    So the more complicated the project, the greater the risk 
is. So when you have tension between the architect and the 
contractor, they are sort of balancing one another. Whereas, if 
it is a single point and the architect screwed up, it will get 
buried--certainly not with this firm--but the project will get 
built anyway, and that is the way to manage the best bottom 
line for the contractor.
    So there is in my testimony a little bit of reference to 
the fox guarding the hen house. As to the architect's working 
for the contractor, is the quality of the resolution of that 
issue going to be the best resolution or is it going to be the 
best resolution for the contractor? So that is the advantage of 
the traditional.
    To the extent that you standardize and you reduce the 
potential for confusion between the design and the execution, 
you are really then taking advantage of the design-build 
approach. So that is why I am saying it is cookie cutter. But 
if it is not cookie cutter, increasing standardization will 
reduce time issues, cost issues and risk issues. The more 
chance you have for a disagreement between the contractor and 
the design, the more you have change orders, the more you have 
delays, et cetera, et cetera.
    There are contractors that will bid at cost, knowing they 
are going to make money on change orders, but again that 
applies to the very customized project, not a more standardized 
project.
    As Congressman Miller and the previous witness were talking 
about working with the DoD and the VA, the potential for 
standardization between those two agencies could be huge, which 
again could spread the savings and risk across a much bigger 
area.
    Mr. Michaud. Ms. Brown, do you have any more?
    Ms. Brown of Florida. I do have some follow-up.
    If you all could just kind of walk us through the process, 
one of my questions is:
    A lot of times, it is the lowest possible bid. We start out 
with that. In design-build, maybe the best thing to do is to 
have prequalifying first so that you go through the process, 
you evaluate the participants, and then after the prequalifying 
you select a firm. Maybe the lowest possible bid is not the 
best thing. Maybe qualifications and experiences have to be 
included in the building process.
    We are getting ready to fund the largest VA budget in the 
history of the United States. We have a lot of projects that 
have been shelved, but part of the pressure that I am feeling 
is the veterans are saying, you know, ``What are you all 
doing?'' ``Why do we have to wait so long?'' I am with them. So 
I am trying to find out from you what some of the best ways are 
that we can alleviate this problem.
    Mr. Wakefield. The second part of my submitted testimony 
addresses the procurement process, and I chose to treat the 
delivery system as a design-build versus traditional, separate 
from the procurement process, because any number of procurement 
processes can be followed for either delivery model, and 
design-build is quite often selected on a qualifications-based 
procurement process because, again, the design-build contractor 
or the design-build builder is selected before final plans are 
done, of course, before the design is started, so the final 
cost is not necessarily known at the time that the design-build 
firm is engaged.
    So, oftentimes, a process will follow a qualifications-
based selection process, which is very similar to the way an 
architect would be hired. So you prequalify a few number of 
firms that you know are experienced in the field and that have 
the resources to deliver and that have a proven track record, 
and so forth. Then you look for their qualifications; also, 
establish what their costs will be in terms of fees, in terms 
of general conditions, overhead costs, and so forth, so that 
you know that--and design fees so you know that the fees that 
are controlled by the design-builder are competitive, and you 
can look at those across each of the design-build firms. Then 
as the design evolves, additional input is provided from 
subcontractors for the cost of the masonry work, for the cost 
of the mechanical system, and so forth, and those are usually 
taken on a competitive basis. So, again, you know that you have 
a competitive price for each of the relative components.
    So it enables one to take advantage of a design-build 
delivery system while being assured that you are getting the 
best value for your dollar. This is a system that is followed, 
incidentally, especially by the State of Florida now in terms 
of the procurement of a number of their projects, and they 
similarly realize the benefits.
    Mr. Clarkson. That idea makes sense, a lot of sense, 
particularly if that firm has previously built a VA hospital 
and you know exactly what they have done. Standardization.
    Ms. Brown of Florida. Thank you very much.
    Mr. Michaud. Once again, I would like to thank you, Mr. 
Clarkson and Mr. Wakefield, for your testimony this morning. I 
look forward to working with you, and----
    Ms. Brown of Florida. One other thing. They did not have an 
opportunity to put their written statements into the record. So 
will they have adequate time to do that?
    Mr. Michaud. Without objection, they will be included in 
the record.
    Ms. Brown of Florida. Thank you.
    Mr. Michaud. Thank you.
    Now I would like to call up panel three, Christopher 
Needham, who represents the Veterans of Foreign Wars (VFW), as 
well as Shannon Middleton, who is the Deputy Director for the 
American Legion.
    We will start off with Mr. Needham.

     STATEMENTS OF CHRISTOPHER NEEDHAM, SENIOR LEGISLATIVE 
 ASSOCIATE, NATIONAL LEGISLATIVE SERVICE, VETERANS OF FOREIGN 
  WARS OF THE UNITED STATES; AND SHANNON L. MIDDLETON, DEPUTY 
   DIRECTOR, VETERANS AFFAIRS AND REHABILITATION COMMISSION, 
                        AMERICAN LEGION

                STATEMENT OF CHRISTOPHER NEEDHAM

    Mr. Needham. Mr. Chairman and Members of the Subcommittee, 
on behalf of the 2.3 million men and women of the Veterans of 
Foreign Wars, I am pleased to be before you today and to be 
presenting testimony on the VA construction budget.
    For the better part of a decade, the construction process 
has been dominated by CARES, the Capital Asset Realignment for 
Enhanced Services. CARES was a systematic, data-driven 
methodology of assessing the VA's present/future healthcare 
needs based upon changing veterans demographic data.
    While the review was underway, we had strong concerns about 
the lack of funding for VA construction projects. There was a 
demonstrated need for construction even while the process was 
ongoing. The House agreed with this when they approved the 
Veterans' Hospital Emergency Repair Act. Despite this obvious 
need, little funding was actually appropriated, with CARES 
being used as the excuse.
    Upon completion of the CARES review, former VA Secretary 
Anthony Principi testified before this very Subcommittee in 
July 2004 that CARES would require $1 billion of funding each 
year for the next 5 years. Since then, funding has not kept 
pace. In fiscal year 2006, it was about $600 million. In fiscal 
year 2007, it was around $400 million for major construction. 
We sit here today, 1 month into the current fiscal year, 
without a budget. We are certainly very appreciative of the 
money the House has appropriated or has chosen to appropriate 
in their version of the budget, but until that money is 
actually allocated, nothing can be done. All of the 
construction projects the VA currently has cannot move forward. 
It simply needs on-time funding.
    The need for increased funding is self-evident. The VA's 
facilities are very old, with an average age of over 50 years. 
The VA has always recapitalized at a rate well below industry 
standards. From 1996 to 2001, for example, the average 
construction budget, including major and minor construction, 
was $246 million. This corresponds with a 0.64 percent 
recapitalization rate. Basically, this means that the VA was 
funded on a level that would have required its hospitals to 
stand for 155 years.
    In 1998, PricewaterhouseCoopers studied the VA's facility 
management programs and recommended a recapitalization rate of 
4-8 percent per year, bringing them in line with the private 
sector. If applied to VA, this would correspond with the total 
major and minor construction budget of at least $1.6 billion 
per year, far above what the VA has historically received.
    Another major issue with VA's facilities is not directly 
included in the medical construction account but is just as 
important, and that is nonrecurring maintenance, or NRM. 
Although not a VA facility, the deplorable conditions at Walter 
Reed were an example of what could happen without proper 
maintenance, and it is certainly something that none of us 
wants to see happen at the VA.
    After the news of Walter Reed broke, the VA conducted an 
immediate review of its facilities to identify potential NRM 
projects. Although the majority were cosmetic, there were a 
number of them that were more serious. One facility found 
suicide threats and problems with fixtures in a mental health 
unit. Another had problems with smoke barriers and fire alarms.
    While we are certainly appreciative of the VA's efforts to 
identify these problems and with Congress' efforts to increase 
NRM funding in the emergency appropriations bill, it should not 
have come to this. These problems should have been cared for 
before.
    Industry standards in that same PricewaterhouseCoopers 
review cite the need for NRM funding at 2-4 percent of the VA's 
plant replacement value. Further, the VA's own documents cite 
that same figure. Their asset management plan recommends an NRM 
funding level of between $800 million and $1.6 billion per 
year. Yet, over the previous 2 fiscal years, not including that 
emergency funding, only about $1 billion in total was actually 
appropriated. Future funding requests must be large enough so 
that these problems are taken care of before they develop, and 
if left unchecked, NRM can cause minor construction projects to 
cost much more money, and they can inconvenience veterans.
    Providing a safe, clean and modern healthcare environment 
is critical to the overall delivery of care. Congress and the 
administration must provide the VA with all of the funding it 
needs to address these maintenance shortcomings but also to 
fully fund all current and future construction priorities. We 
must be proactive in our approach to do what is right for this 
Nation's veterans.
    Mr. Chairman, thank you for the opportunity to testify. I 
would be happy to answer any questions you or the Members of 
the Subcommittee may have.
    [The prepared statement of Mr. Needham appears on p. 40.]
    Mr. Michaud. Thank you.
    Ms. Middleton.

               STATEMENT OF SHANNON L. MIDDLETON

    Ms. Middleton. Mr. Chairman and Members of the 
Subcommittee, thank you for allowing the American Legion to 
present its views on the Department of Veterans Affairs 
construction process.
    With the rapid advancement in technology and medicine that 
the national healthcare system is experiencing, VA will be 
compelled to perpetuate the evolution of its healthcare 
delivery system far into the future. An important part of this 
evolution is ensuring that VA has adequate facilities that are 
safe and located in needed areas to make access to its 
healthcare facilities readily available for veterans.
    The healthcare facilities of VA are aging: physical plants 
in need of replacement; substantial renovations and 
improvements related to fires, safety and privacy standards; as 
well as modernization and reconfiguration to meet the demands 
of the advances in medicine. The increasing demands placed on 
the outpatient ambulatory care service facilities of VA require 
substantial alterations to meet changing space requirements. No 
healthcare delivery system can be expected to provide quality 
care if the physical setting that houses the care is allowed to 
deteriorate to a state which places it beyond redemption.
    In March 1999, GAO published a report on VA's need to 
improve capital asset planning and budgeting. The report found 
that VA's asset plan indicated that billions of dollars would 
be used operating hundreds of unneeded buildings over the next 
5 years or more. The report went on to state that VA did not 
systematically evaluate veterans' needs or asset needs on a 
geographic basis or compared asset life cycle costs and 
alternatives to identify how veterans' needs could be met at a 
lower cost.
    VA developed a Capital Asset Realignment for Enhanced 
Services program, or CARES, to address the issue. The CARES 
decision of 2004 contained hundreds of construction requests, 
upgrades and alterations of current buildings that would 
require a substantial increase in funding for major and minor 
construction within VA.
    During the initial stages of the CARES process, the 
construction budget was nearly flatlined, pending the outcome; 
this caused a major backup in construction projects and needed 
seismic repairs. Major and minor construction appropriations 
for VA have been consistently targeted for reduction since such 
funding is regrettably the most vulnerable to annual assault. 
For several years VA's facility directors have been forced to 
use nonrecurring maintenance funds to provide care.
    The American Legion urges Congress to annually appropriate 
sufficient funds for the VA's construction program to ensure 
the continued provisions of quality healthcare to our Nation's 
veterans and the implementation of the CARES decision.
    VA has a vast physical plant inventory that represents a 
major investment of taxpayer dollars. Despite the large number 
of aging facilities, construction funding has been limited. 
CARES construction is estimated at $6.1 billion over the next 6 
years.
    Sufficient funding to implement new initiatives and the 
proposed physical plant changes will be critical to the success 
of the planning initiatives. Delays in the process have a 
profound impact on access to healthcare for veterans.
    Veterans serving in Iraq and Afghanistan have returned home 
with severely debilitating injuries. VA must be available to 
help them heal and rehabilitate, be capable of providing 
programs and services needed to help them live the most 
productive and healthy lives possible and be able to 
accommodate the needs of an ever-changing population of 
veterans. To do this, adequate funding is a must.
    The American Legion believes that VA has effectively 
shepherded the CARES process to its current state by developing 
the blueprint for the delivery of VA healthcare. It is now time 
for Congress to do the same and adequately fund the 
implementation of this comprehensive and crucial undertaking.
    Thank you, Mr. Chairman, again. We look forward to working 
with the Subcommittee to help shape the future of VA's 
healthcare delivery.
    [The prepared statement of Ms. Middleton appears on p. 42.]
    Mr. Michaud. I would like to thank both of you for your 
testimony. Just a couple of quick questions.
    The CARES process, both your organizations have been very 
involved in that particular process. It took a lot of time and 
effort to come up with that final report, and I appreciate 
that. Since then, things have changed somewhat when you look at 
the war in Iraq and Afghanistan and the needs might not be 
there; as explained in the CARES report, they might have 
changed.
    Do you think we ought not to start over again, but reassess 
the CARES process and update it before we go further with major 
construction? That is my first question.
    Then my second question, to try to speed up the process we 
can put up more Federal dollars, but do you think there is an 
opportunity here to work with a private sector, such as, 
hospitals and healthcare clinics in the rural areas to help 
collaborate and try to get more of the facilities up in the 
rural areas in a timely manner by utilizing or working with the 
private sector?
    So I will start off with Mr. Needham.
    Mr. Needham. As to the first question about whether to 
update CARES, I mean, certainly--the war has certainly changed 
things. But we sort of view CARES as--one of the strengths of 
that was not that it was a one-time snapshot, but that it 
really is, in many ways, sort of a living document. They use 
the framework and the methodology from that to produce that 
annual 5-year plan from which the construction priorities are 
drawn.
    To that end, certainly, they probably do need to pay more 
attention to, particularly, the mental health issue, those 
sorts of needs. But it is not a case of doing it over, but just 
sort of revising and updating.
    As to the second question, in terms of collaboration, that 
is certainly something we are highly supportive of, 
particularly, I know, the challenges faced in rural healthcare. 
The catch is--and I think we have seen with many other 
facilities, collaboration sometimes introduces a problem with 
timeliness of construction--that the more parties that get 
involved, the more difficult and more drawn out the 
construction process can be. Not that that should keep us from 
doing collaboration, but that is something to keep in mind, 
particularly some of the concerns expressed earlier today.
    Ms. Middleton. I don't think I can say it better than that, 
but I will try to give some input.
    As far as redoing CARES, I think that would just take way 
too much time. Reassessing changing needs, that is always 
important. So definitely it should be just reevaluated, just to 
make sure that the changing needs of the returning Operation 
Iraqi Freedom/Operation Enduring Freedom veterans are being 
addressed. That part is definitely a must because if not then, 
on down the road the same thing might have to happen. You might 
have to do the whole thing over just to make sure that these 
veterans are being taken care of the way that they should be.
    And as far as working with the private sector to improve 
access to care for rural veterans, the American Legion believes 
that in the case of rural veterans it might be necessary to 
have contracting with the private sector that is more local if 
there is a VA medical facility too far away that the veteran 
can't get to.
    So, yes, we would definitely be supportive of something 
like that.
    Mr. Michaud. Thank you both.
    Mr. Miller.
    Mr. Miller. Thank you, Mr. Chairman.
    This question would go to both of you in talking about 
CARES, both of you referenced VA's aging infrastructure.
    Give me your thought process on the need to continue to 
maintain some of those aging facilities versus construction of 
new facilities in better locations. Better locations meaning 
closer to the veterans, the centers of the veteran population. 
One of the things, we heard during the hearings that were held 
on CARES, a lot of people were in favor of maintaining the 
status quo, keeping the exact same number of buildings that 
were already in existence. I am wondering if that is smart, 
keeping the status quo, given the competition for dollars. 
Would your organizations support new construction over the 
maintenance issues that we have on existing structures today?
    Mr. Needham. That is a good question. It is definitely a 
tough balance there. I am not sure that we have a position one 
way or another, other than just following the priorities has VA 
has laid out in terms of their five-year capital plan.
    Mr. Miller. If I could, because CARES recommended some 
facilities be closed, what were the positions of your 
organizations generally? Did you subscribe to closing some 
facilities?
    Mr. Needham. The position we had was that we were generally 
supportive of CARES as long as the ultimate outcome was--the 
emphases on the ES portion of CARES' enhanced services, that 
ultimately, if veterans are having their healthcare needs and 
their facilities taken care of in the end, then we were 
supportive of the process.
    Ms. Middleton. I am not exactly sure how we felt about 
closing certain facilities, so I would definitely have to 
submit a response for the record in writing to that part of the 
question. But I would think that if the facility posed a health 
hazard, if there were certain structures that couldn't be 
repaired because there was some kind of safety issue, I would 
think that we would be in support of closing something like 
that.
    As far as, would we prefer maintaining the existing 
facilities or constructing new ones, I think that would have to 
be on a case-by-case basis. If you are in an area where the 
veteran population is definitely growing, then the demand for 
healthcare would definitely grow with it. And if there is not a 
facility around or just a distance away, I would think that it 
would make sense to bring the care closer to the veteran.
    Mr. Needham. If I may, one more point to that. Because of 
the aging infrastructure, the majority of--I don't want to say 
majority, but many of VA's facilities--the hospitals; they 
refer to them as a Bradley-type building, and it is basically 
the infrastructure of the older healthcare facilities, is not 
compatible with sort of modern healthcare delivery.
    So it is not just simply a matter of being able to renovate 
some of these older facilities. In many cases, it really is an 
example where you do have to provide new construction.
    Mr. Miller. Ms. Middleton, reversing your theory, if you 
have a growing population, then you need to move the healthcare 
to where that population is, would you subscribe to the same 
theory if you have a declining veteran population, there may be 
a need to relocate or move facilities in order to better serve 
the greater number of veterans?
    If you don't want to take that in an open hearing, I would 
like to know the position of both of your organizations on the 
CARES report in relationship to downsizing or closing 
facilities that were recommended. Again, everybody wants to 
battle for the facility that is in their district, everybody 
wants to make sure that we have as much available healthcare as 
possible. I think this Congress, and when I say ``this 
Congress,'' I don't mean the 110th, the 109th; I am talking 
about Members that are here representing their districts. We 
want to provide the greatest access to healthcare possible, and 
in some instances that is going to be relocating facilities 
where some veterans are used to getting their healthcare to a 
newer facility to provide it. Not in all instances, but in 
some.
    If you would, for the record, I would like to see what your 
positions were.
    Thank you Mr. Chairman. I yield back.
    [The information was provided in the answer to Question 2 
in the post-hearing questions and responses for the record from 
the VFW and the American Legion, which appears on p. 47 and p. 
49.]
    Mr. Michaud. Dr. Snyder.
    Mr. Snyder. Thank you for holding this hearing. I don't 
have any questions now. I'm sorry I was late getting here.
    Mr. Michaud. Mr. Brown.
    Once again, I would like to thank this panel very much.
    Mr. Miller. May I ask one question quickly?
    Also, for the record, what are the positions of your 
organizations on VA's decision in regards to the site of the 
New Orleans facility? VA has made the decision to keep the 
facility downtown versus possibly locating it a couple of miles 
away. Obviously, the facility was not in the CARES process, but 
New Orleans has a declining veteran population with a huge 
medical center. There are growing populations in other parts of 
the Gulf Coast; therefore, I would like to get your position on 
the New Orleans facility as well.
    [The information was provided in the answer to Question 1 
in the post-hearing questions and responses for the record from 
the VFW and the American Legion, which appears on p. 47 and p. 
49.]
    Mr. Michaud. Once again, thank you very much. I appreciate 
it.
    Our last panel is Donald Orndoff, who is the Director of 
the Office of Construction Facilities Management with the 
Department of Veterans Affairs; he is accompanied by Robert 
Neary, who is the Director of the Service Delivery Office, 
Office of Construction and Facilities Management; Patricia 
Vandenberg, who is the Assistant Deputy Under Secretary for 
Health for Policy and Planning; and Brandi Fate, who is the 
Acting Director of Capital Asset Management Planning Service in 
the Department of Veterans Affairs.
    Mr. Michaud. So I would like to thank the fourth panel, and 
without any further ado, I will start off with Mr. Orndoff.

      STATEMENT OF DONALD H. ORNDOFF, DIRECTOR, OFFICE OF 
 CONSTRUCTION AND FACILITIES MANAGEMENT, ACCOMPANIED BY ROBERT 
      NEARY, DIRECTOR, SERVICE DELIVERY OFFICE, OFFICE OF 
  CONSTRUCTION AND FACILITIES MANAGEMENT, U.S. DEPARTMENT OF 
  VETERANS AFFAIRS; PATRICIA VANDENBERG, MHA, BSN, ASSISTANT 
  DEPUTY UNDER SECRETARY FOR HEALTH FOR POLICY AND PLANNING, 
  VETERANS HEALTH ADMINISTRATION, U.S. DEPARTMENT OF VETERANS 
 AFFAIRS; AND BRANDI FATE, DIRECTOR, CAPITAL ASSET MANAGEMENT 
    PLANNING SERVICE, VETERANS HEALTH ADMINISTRATION, U.S. 
                 DEPARTMENT OF VETERANS AFFAIRS

    Mr. Orndoff. Mr. Chairman and Members of the Subcommittee, 
I am pleased to appear here today to discuss VA's healthcare 
construction program and, specifically, the processes we use to 
plan, design and construct state-of-the-art healthcare 
facilities. I will provide a brief oral statement and request 
that my full statement be included in the record.
    Mr. Michaud. Without objection.
    Mr. Orndoff. As Director, Office of Construction and 
Facilities Management, I am responsible for the execution of 
the VA's major construction program. Joining me today are Ms. 
Patricia Vandenberg, Assistant Deputy Under Secretary for 
Health for Policy and Planning, Mr. Robert L. Neary, Jr., 
Director, Service Delivery Office, Office of Construction and 
Facilities Management, and Ms. Brandi Fate, Director, Capital 
Asset Management and Planning Service of Veterans Health 
Administration (VHA).
    The Department is currently engaged in the largest building 
program since the immediate post-World War II period. This 
program represents implementation of the Capital Asset 
Realignment for Enhanced Services, or CARES, program, which was 
initiated systemwide in 2002 and produced initial results 
announced in May 2004. At that time, 30 major construction 
projects were approved and funded in whole or part.
    In subsequent fiscal years, six additional projects have 
been submitted for funding and budget requests. The total cost 
of these projects approaches $5 billion. $2.83 billion, 
including hurricane supplemental funding, has been appropriated 
between fiscal year 2004 and 2007. The fiscal year 2008 budget 
now before the Congress requests an additional $560 million in 
major construction for infrastructure improvement to the 
veterans healthcare system.
    The minor construction program is also an important part of 
addressing infrastructure needs of the healthcare system 
identified by CARES. Since fiscal year 2004, $1.08 billion has 
been appropriated, including hurricane supplemental funding. An 
additional $180 million is requested in the fiscal year 2008 
budget.
    VA continues to use a disciplined multi-attribute decision 
model to prioritize capital investment needs for budget 
development. Once a project is approved, the design process 
begins. The design consists of three phases: schematic design, 
design development and construction document preparation.
    While the timing varies with the size and the complexity of 
the project, typically design takes 18 months. Once design is 
complete, the construction contract is executed and on-site 
work begins.
    The Department uses standard industry practices in the 
design and construction of VA facilities. VA selects highly 
qualified architect-engineer firms with practices that focus 
primarily on healthcare facilities.
    VA selects highly qualified construction contractors using 
a combination of quality assessment and price. Contractors are 
evaluated based on experience and past performance in 
construction on similar healthcare facilities. Approximately 
one-third of VA projects are executed using the design-build 
method where we award one contract to a designer-constructor 
team. We also engage highly capable construction management 
firms on VA's largest projects.
    VA benefits from its reliance on the private sector 
architects, engineers and contractors. Selection of top firms 
delivers the highest quality healthcare design and 
construction.
    VA's construction program is not without challenges. Since 
2004, the rising cost of construction has had significant 
impact on all government and private sector organizations with 
construction requirements. Due to a robust economy, the demand 
for skilled labor and building materials continues to outpace 
the supply. Coupled with rising fuel prices and the impact of 
recent hurricanes, building programs of all types have 
experienced significant cost growth.
    Another related challenge is attracting adequate 
competition for major VA projects. The large volume of 
construction in many markets makes it difficult to attract 
healthy competition to achieve best pricing. During the last 18 
months, we have often seen a limited number of proposals on VA 
solicitations.
    VA is taking a number of steps to minimize the impact to 
these challenges. We regularly conduct market surveys in the 
cities where we have upcoming work to better predict cost. We 
now project our future cost based on a better understanding of 
construction capacity and activity within individual markets. 
We are working closely with the contracting community to 
attract greater interest in performing VA work.
    In closing, I would like to thank the Subcommittee for its 
continued support for improving the Department's physical 
infrastructure needs.
    Mr. Chairman, my colleagues and I stand ready to answer 
your questions.
    [The prepared statement of Mr. Orndoff appears on p. 44.]
    Mr. Michaud. Thank you very much. I appreciate your 
testimony.
    And we just got called for votes, and we will have three 
votes, so it might take about 45 minutes. I have several 
questions; however, I will submit them for the record, if you 
would kindly answer them. So you are saved by the bell, as far 
as I am concerned.
    [The post-hearing questions and responses for the record 
from VA appear on p. 50.]
    Mr. Michaud. Mr. Miller.
    Mr. Miller. I would like an update on the New Orleans 
project, where it is?
    Mr. Neary. As you mentioned to the previous panel, we have 
selected a preferred site in a downtown area of the city. But 
we have not completed the environmental review work, so we are 
currently performing the environmental assessment of that site, 
as well as a site at the Oschner facility a few miles to the 
west.
    We expect the environmental review will be completed during 
the month of December, and shortly after the first of the year, 
the Secretary would be in a position to make a final decision 
on the site.
    We have selected the architectural team that will design 
the building. We are working with them now to put them under 
contract. And we are also continuing discussions with Louisiana 
State University (LSU) regarding opportunities for partnering 
with LSU and Tulane as we execute and go forward.
    Mr. Miller. Do you have an idea of the issue as it relates 
to the downtown site? I am glad to hear that there is an 
environmental study being done on both sites, that we are still 
tracking this process, because we don't need any more delays in 
getting a facility built.
    I think when we did the field hearing down there, they were 
exasperated to learn that it was still 5 years out or longer 
before the doors would actually open once the process began. 
So, when do you expect a final decision from the Secretary on 
the site?
    Mr. Neary. Shortly after the first of the year.
    Mr. Miller. I also have some other questions for the 
record, but I will submit them as well. Thank you very much.
    [No questions were submitted.]
    Mr. Michaud. Dr. Snyder.
    Mr. Snyder. Thank you, Mr. Chairman. I would just like to 
hear from your sidekicks there, Mr. Orndoff, what do each of 
them do and how do they relate to each other?
    Then you have this other group, the Capital Investment 
Panel. Could we kind of go down the line? How do you all--you 
all have four different titles, really. How do you all 
interrelate to make this process smooth?
    Ms. Vandenberg. In the Office of Policy and Planning. I am 
responsible for CARES. And so that entails the successful 
completion of the 18 business studies that were indicated in 
the 2004 decision document from the Secretary and integrating 
the methodology that we used in CARES into the ongoing 
strategic planning process.
    Ms. Fate. We then take those strategic planning documents 
from the medical centers and the VISNs, and identify with the 
medical centers where there are gaps in our infrastructure and 
where new needs for infrastructure and/or renovations are 
needed throughout the country; and then those projects and 
admissions are sent through my office up through VHA. Then the 
larger ones for the major construction projects get scored by 
the Capital Investment Panel, which you just referred to.
    Our offices are members of that panel, as well as some 
other administrations and offices; and we score all of those 
based on weights and criteria.
    Mr. Snyder. And then those plans go over to you all?
    Mr. Orndoff. Yes, sir. Basically, the output of the Capital 
Investment Panel, the decision on which projects are moving 
forward for budgeting purposes, at that point, the Office of 
Construction and Facilities Management--of which I am the 
Director and Bob heads up our Service Delivery operations--we 
will take that and begin the design process and, ultimately, 
the construction process and delivery of the project.
    Mr. Snyder. And then where does the Office of Management 
and Budget (OMB) get involved?
    Mr. Orndoff. As we develop our budget as an output of the 
CIP, Capital Investment Panel, those projects, once approved by 
the Secretary, will be laid into the project and submitted; and 
then OMB would review at that point.
    Mr. Snyder. So it may or may not get the funding.
    Ms. Fate, how is it that you are the Acting Director?
    Ms. Fate. My predecessor retired back in January. And now 
about a month ago, I was officially appointed the Director of 
the CAMPS office.
    Mr. Snyder. So you are no longer the Acting Director?
    Ms. Fate. No longer the Acting.
    Mr. Snyder. Well, we have out-of-date information here.
    Thank you, Mr. Chairman.
    Mr. Michaud. Thank you.
    Mr. Brown.
    Mr. Brown of South Carolina. Well, I guess, following Dr. 
Snyder's questioning--I represent Charleston, South Carolina, 
and we have been working on a ``Charleston model,'' they call 
it now, which we thought was going to be used down in New 
Orleans and maybe some other parts of--Orlando and then in some 
of the other parts of the United States. But we seem to have 
some kind of a bottleneck, and I am not so sure exactly where 
we are in the process.
    I know it was identified in CARES that we would develop 
this model, and we have been working on that with the VISN 
Director and, I guess, with the Secretary too. But--we have 
some funding, I guess about $38 million we put in the 
authorization last year, but we have a problem with the 
administration, and I assume maybe you folks or somebody along 
the line, that they don't want to advance the project.
    And I think you might have heard my opening statement where 
we actually now have designed and built the Medical University 
Hospital, that has already been completed, and it is adjacent 
to the VA hospital, within probably 100 feet. But we can't get 
a movement on the old VA hospital, which is over 40 years old. 
I guess through the process, the way the planning and all the 
development works, it is going to be 50 years old before we 
finally get to that point.
    But we are in a sinkhole, just like the hospital that is in 
New Orleans. And we are certainly in a storm-prone region.
    I am just wondering why that project is not moving. Maybe 
you all can give me a little address.
    Mr. Neary. Mr. Brown, as you know, we have been evaluating 
the needs in Charleston. And recently our Under Secretary for 
Health visited the Charleston facility. We are continuing to 
look for ways to further the partnership with the Medical 
University of South Carolina and see where that takes us as we 
move forward.
    Mr. Brown of South Carolina. I just mentioned, they have 
already built their hospital and they have two or three other 
phases to go. But once all of that has been designed and 
carried out, it is going to be difficult to combine those 
resources.
    I know that we got ourselves in a box down in New Orleans 
where we had Katrina damage. I don't want us to have the same 
operation down in Charleston where it is going to be maybe 3 or 
4 or 5 years before those veterans now can recover, because 
nobody is thinking forward. And I just feel like it is a real 
opportunity to become proactive and try to address some of the 
emergency needs before they become emergencies.
    The storms are going to come. We have just been blessed in 
Charleston. I guess Hugo was the last, back in 1989. But we 
know that we are vulnerable to those storms. And it looks like, 
to me, with a window of opportunity with the construction going 
on at Medical University, the VA would sense that they could be 
proactive in trying to address storm problems in the future by 
addressing them today.
    And I am just kind of amazed that nobody is wanting to 
become proactive in that situation, particularly since we have 
just experienced the problem we have down in New Orleans.
    Mr. Neary. With respect to the possibility of storms, we 
have completed a study of the Charleston facility and 
identified steps that would need to be taken to further protect 
the facility. And it is my understanding that the medical 
center, the Charleston VA Medical Center, is identifying 
opportunities to implement some of those strategies.
    We certainly have an excellent partnership with the Medical 
University of South Carolina now and will continue to look to 
foster the further development of that. And we certainly would 
agree with you, we wouldn't want to take steps that would cause 
us problems down the road in terms of meeting our future goals 
there.
    Mr. Brown of South Carolina. I understand, Mr. Chairman, my 
time is gone and we need to go vote. Thank you very much for 
your understanding.
    Mr. Michaud. If there are no further questions, I want to 
thank this panel for your testimony. And we will be submitting 
additional questions for the panel in writing.
    So, once again, thank you very much. This hearing is 
closed.
    [Whereupon, at 11:30 a.m., the Subcommittee was adjourned.]



                            A P P E N D I X

                              ----------                              

        Prepared Statement of Hon. Michael H. Michaud, Chairman,
                         Subcommittee On Health
    I would like to thank the members of the Subcommittee, our 
witnesses and all those in the audience for being here today.
    The purpose of this hearing is to learn more about the construction 
process within the Department of Veterans Affairs (VA).
    In 2004, VA completed the Capitol Asset Realignment for Enhanced 
Services (CARES) process. CARES was supposed to be a map for future VA 
facilities development.
    It is unclear to me how closely VA is following this map, and it is 
also unclear how well CARES will address the medical and demographic 
needs of current and future veterans of Afghanistan and Iraq.
    This Subcommittee is committed to providing the highest quality 
healthcare to our Nation's veterans--and we understand that a key part 
of this care is the facilities in which it is provided.
    We are here today to get a better understanding of the entire 
construction process, from conception to the opening of a facility.
    Understanding this process is particularly important right now. 
Many of the VA hospitals and medical facilities are aging and are in 
need of major renovation or replacement. Many VA facilities need to be 
upgraded in order to meet standards for Earthquakes, fires and patient 
privacy.
    Population shifts require new facilities in new locations. VA is in 
the process of planning several new hospitals in cities such as Las 
Vegas, Denver and New Orleans.
    This process can be long and drawn out. It can take much longer 
than similar projects built in the private sector.
    We look forward to working with the VA to ensure that our veterans 
receive the best possible care in medical facilities that are modern 
and safe--while being built efficiently and cost-effectively.
    I look forward to hearing about the current construction process, 
VA's plans and needs for future construction, and how this Committee 
can support this effort--with the end goal always being to provide the 
best possible healthcare to our veterans.
    I now recognize Mr. Miller for any opening statement that he may 
have.

                                 
                Prepared Statement of Hon. Jeff Miller,
           Ranking Republican Member, Subcommittee on Health

    Thank you, Mr. Chairman. Access to different types of outpatient 
and inpatient facilities is critical in addressing the unique 
healthcare needs of our changing veteran population. However, most of 
VA's infrastructure was built more than 50 years ago. Many of these 
aging facilities are not well suited to 21st century healthcare, in 
need of repair or replacement, and sometimes simply located far from 
where the veterans live.
    Recognizing the need to improve and update VA's patient care 
facilities, and address identified gaps in services, VA established the 
Capital Asset Realignment for Enhanced Services (CARES) process. The 
CARES planning model was intended to provide a blueprint for the 
resources needed to meet the future veteran demand for healthcare 
services. VA has started implementing some CARES decisions and is 
moving to open more than 32 of the 156 outpatient care clinics 
identified by CARES. Still, there are far too many instances of 
veterans driving several hours for primary care, and even more 
instances of long commutes for acute inpatient care.
    VA must maintain a flexible approach to its current and future 
construction. At times, a solution for providing exceptional care will 
be obvious. At other times, VA will need to explore potential 
partnerships and other agreements whereby resources and funding are not 
needlessly wasted and veterans and taxpayers alike get the best return.
    My concern still remains for areas such as Okaloosa County in my 
district in Northwest Florida. While a VA outpatient clinic that will 
serve the basic needs of the roughly 50,000 veterans in that 
surrounding area is currently under construction, these same patients 
still have to drive over three hours to receive any sort of VA 
inpatient care. It has been more than three years since CARES 
identified this region as underserved for inpatient care. In fact, it 
is the only market area in the VISN, VISN 16, without a medical center.
    There is a tremendous opportunity to collaborate with the 
Department of Defense (DoD) for inpatient medical services on the 
campus of Eglin Air Force Base that would benefit both veterans and 
active duty servicemembers in this region. The collaboration would 
expand VA/DoD sharing in a cost-effective manner and provide long 
overdue inpatient care to veterans in Northwest Florida.
    It is my sincere wish that VA constantly monitor and adjust its 
construction efforts to best meet the geographic and healthcare needs 
of veterans throughout the entire nation, especially those who face the 
most difficulty in obtaining access to that healthcare.
    I look forward to today's testimony, and would also like to give a 
special welcome to Major General David Eidsaune who joins us from Eglin 
Air Force Base in Florida's first congressional district.

                                 
               Prepared Statement of Hon. Corrine Brown,
         a Representative in Congress from the State of Florida

    Thank you, Mr. Chairman, for calling this hearing today.
    This issue is very important to me as I represent part of Orlando, 
Florida.
    Central Florida waited 25 years before the VA decided to put a VA 
Medical Center there earlier this year.
    Twenty-five years. Too long for those men and women who have 
defended this country and the freedoms it holds dear.
    Twenty-five years. Too long for the oldest veteran population to 
wait for proper care.
    Twenty-five years. I do not want to have to wait for another 15 
years for this hospital to open.
    And New Orleans!
    It has been over 2 years since Hurricane Katrina hit the Crescent 
City and devastated the city. The employees at the VA Medical Center 
there performed heroically for the patients and evacuate everyone 
safely. However, we are no closer to rebuilding the hospital now than 
we were 2 years ago.
    I have heard good things about design-build--where the design and 
construction aspects are contracted for with a single entity known as 
the design-builder or design-build contractor. The design-builder is 
usually the general contractor, but in many cases it is also the 
architect or engineer.
    This system minimizes the project risk and reduces the delivery 
schedule by overlapping the design phase and construction phase of a 
project.
    Why can't the VA use these modern devices to speed up the process?
    I look forward to hearing the testimony of the witnesses today.

                                 
   Prepared Statement of Major General David W. Eidsaune, Commander,
             Air Armament Center, Eglin Air Force Base, FL,

        Department of the Air Force, U.S. Department of Defense
Executive Summary
    Eglin Air Force Base (AFB) and the Veterans' Affairs (VA) Gulf 
Coast Veterans Healthcare System (VA GCVHS) have developed a 
partnership to provide more accessible healthcare to eligible 
Department of Defense (DoD) and Veterans' Affairs (VA) patients in the 
Northwest Florida region, that will be the cornerstone for future 
sharing activities.
    Eglin Air Force Base is continually working to expand available 
healthcare services for our eligible patients. This has included 
renovating and expanding existing healthcare facilities to meet the 
needs of our expanding patient population as well as planning new 
facilities such as the VA Community Based Outpatient Clinic (CBOC), 
highlighted today.

                               __________

    There is a clear need for additional healthcare for our veterans; 
the VA and Eglin AFB have combined forces to address this need. The 
resulting VA Community Based Outpatient Clinic (CBOC) is currently 
under construction and scheduled to open in the spring of 2008. It is a 
huge step toward meeting the needs of our veterans in northwest 
Florida.

The Need
    The Veterans Affairs (VA) Gulf Coast Veterans' Healthcare System 
(VA GCVHS) covers the gulf coast of Mississippi, Alabama, and the 
Florida panhandle. This extensive area is covered by one VHA inpatient 
facility located in Biloxi, MS, and three outpatient clinics in Mobile, 
AL, and Pensacola and Panama City, FL. 107,979 veterans, 47% of the 
total veteran population for the VA Gulf Coast Veterans Healthcare 
System (VA GCVHS), reside in the Florida panhandle.
    Because the Emerald Coast of Northwest Florida is one of the top 
ten fastest growing areas in the United States, there is a need to 
provide the VA community with the medical services they deserve. This 
four-county area (Walton, Santa Rosa, Holmes and Okaloosa), that will 
be served by the VA CBOC, is primarily rural, has a total population of 
347,406 based on the 2000 U.S. census data, and a veteran population of 
50,902 (based on FY 2003 Veteran Population Projections). The VA CBOC 
will significantly improve access to VA primary care services for 
veterans residing in the Northwest Florida area, eliminating the need 
for extended travel. Improved access and timeliness of care will 
further enhance the quality of healthcare services through earlier 
intervention.

Quick Facts
      16,700 square foot facility
      Estimated cost is $5.232M
      Basic clinic with Primary Care, Mental Health, small Lab 
and Pharmacy
      Built on 10 acres of AF land
      Site allows a separate entrance for the VA
      Oct 2006: Groundbreaking
      Dec 2007: (Projected) Complete Construction
      Early 2008: (Projected) Complete Activation/Ribbon 

Cutting
Location
    The VA GCVHS requested beddown approval on Eglin AFB to improve 
access, prepare for continued population increases, and satisfy quality 
and continuity issues. This option builds upon the strong relationship 
locally with Department of Defense medical facilities.
    On June 22, 2006, the Deputy Assistant Secretary of the Air Force 
for Installations signed a land-use permit that authorized the VA to 
use the 10-acre parcel on Eglin AFB as a CBOC building site at no cost 
to the VA. This arrangement saved the VA and taxpayers $1.47M by 
avoiding the cost of purchasing the land. The 10-acre site is adequate 
for both existing and future requirements. It ensures availability of 
land for future expansion up to 50% without incurring real estate 
costs. The VA CBOC's close proximity to Eglin Hospital will provide 
tremendous opportunities for sharing arrangements. For the past 12 
months, Eglin AFB and VA GCVHS have been evaluating mutually beneficial 
sharing agreements for inpatient care, emergency room services, 
radiology, laboratory, pharmacy and specialty care. Examples of VA/DoD 
Sharing Agreements that already exist include the VA GCVHCS Panama City 
CBOC, which is located on the Navy Coastal Station in Panama City 
Beach, Florida and an agreement with the Pensacola Naval Hospital for 
inpatient and other specialty care.

Scope of Services
    The clinic will offer primary care, mental health, audiology 
services and routine/urgent care procedures, such as suturing, simple 
dermatology procedures, skin testing, dressing changes, injections and 
immunizations. VA staff will provide Primary Care and Mental Health 
Services. Each team will consist of a physician, nurse and a clerk. The 
VA CBOC will have six teams during the initial startup year with a 
patient load of 1,200 for each primary care team and 800 for the 
psychiatrist. One additional primary care team will be added in year 
two and year three.
    Two full-time psychiatrists will be hired for the VA CBOC to 
provide outpatient mental health services. The VA CBOC will feature a 
modest laboratory, capable of performing routine procedures. A sharing 
agreement will be established for prescription services. Likewise, 
Specialty Care workload will be accomplished through the use of a 
negotiated sharing agreement between VA GCVHCS and Eglin AFB.

Benefits
    In addition to providing more accessible healthcare for veterans, 
the VA CBOC will provide backup and support for DoD during times of 
military conflicts and/or national emergencies.
    The Family Residency Graduate Medical Education (GME) Teaching 
Program at Eglin is growing from 8 to 10 residents in FY 08; the Eglin 
96th Medical Group's Family Practice residency program is in need of 
higher acuity patients in order to meet GME requirements. Sharing 
agreements with the VA CBOC will help meet this need. At the same time, 
veterans will benefit by having access to highly qualified 
professionals participating in the GME program.
    Based on an expected increase in Active Daily Patient Load (ADPL) 
of 3-5 patients per day, the Eglin Hospital projects to receive $1.8 
million to $2.4 million annually in reimbursement for ancillary support 
and inpatient services rendered. This represents a 75% increase in 
their current reimbursements and will help to offset the constrained 
Operations & Maintenance (O&M) military health care budget.
    In closing, the VA Community Based Outpatient Clinic will be a 
joint success for Eglin AFB, the VA, and our combined patient 
populations. This cooperative effort should serve as a model for future 
efforts to support the healthcare needs of our Nation's veterans.

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        Prepared Statement of William Wakefield, Vice President,
       Healthcare Division, The Haskell Company, Jacksonville, FL

Introduction
    The purpose of this summary is to provide an objective summary and 
comparison of the alternatives that healthcare providers may wish to 
consider for the design and construction of new or expanded facilities.
    For this study, project delivery systems and procurement methods 
are discussed as separate, although related topics. A Project Delivery 
System is the process under which design and construction services are 
provided to complete a project. A Procurement Method is the process by 
which the Owner selects the team that will provide the services 
required to complete the project.
    The selection of the most appropriate project delivery system must 
precede the selection of the procurement method. No single delivery 
system or procurement method is optimum for all projects and 
circumstances.

Project Delivery Systems
    Until recently, the design and construction industry was 
characterized by highly contentious relationships between architects, 
engineers, contractors and subcontractors. In recent years partnering, 
alternative delivery systems and more enlightened owner-designer-
contractor relationships have improved these adversarial relationships.

Design-Bid-Build
    Design-Bid-Build has been the traditional project delivery system 
used in the United States for about 200 years. Under this system, the 
Owner contracts separately with a designer and a contractor. The 
architectural/engineering firm produces ``complete'' plans and 
specifications. Contractors provide bids to perform the work.

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    Advantages:
      Established and familiar system
      Established legal precedents
      A/E works directly for the Owner
      Appropriate for price competition (as opposed to value)
      Availability of insurance and bonding

    Disadvantages:
      Diffuses accountability for the overall process
      Contributes to adversarial relationships and disputes
      Owner is the arbiter between design and construction
      Initial low bid does not necessarily result in low final 
cost or best value
      Very late knowledge of firm costs
      Slowest of the delivery systems

Construction Management at Risk (CM at Risk)
    The CM at Risk delivery system evolved to take advantage of early 
involvement of the construction member of the project team. The Owner 
contracts separately for design and construction services as in the 
Design-Bid-Build system. However, the CM firm is selected earlier and 
is integrated into the design process.

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    Advantages:
      Early involvement of construction
      Greater collaboration between design and construction
      Construction input during design
      Earlier knowledge of firm costs
      Improved cost control
      Faster than the Design-Bid-Build delivery system

    Disadvantages:
      Same contractual relationships as Design-Bid-Build
      Diffuse accountability for the overall process
      Contributes to adversarial relationships and disputes
      Owner is the arbiter between design and construction
      Slower than the Design/Build delivery system

Design/Build
    Design/Build is a project delivery system in which the Owner 
contracts with a single entity to perform design and construction, and 
perhaps additional, services. This system offers the Owner the benefits 
of even greater design and construction integration and singular 
responsibility for the outcome and the overall process.

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    Advantages:
      Singular responsibility
      Risk management
      Early knowledge of firm costs
      Cost savings and value
      Improved cost control
      Time savings
      Improved quality
      Reduced Administration

    Disadvantages:
      Owner's unfamiliarity with the delivery system
      Greater reliance on transparency and trust
      Limited availability of insurance and bonding

Comparisons of Delivery Systems
    A major research project, conducted by Penn State University in 
1997, studied the outcomes for 351 projects and compared those outcomes 
against the delivery systems used for the projects. The measured 
outcomes included:
  Unit Cost
    A comparison of the unit cost--the cost per square foot in place--
for the different systems indicated:

       CM at Risk was 1.6% lower than Design-Bid-Build
       Design/Build was 4.5% lower than CM at Risk
       Design/Build was 6.1% lower than Design-Bid-Build
  Design and Construction Cost Growth
    The cost growth--from initial contract cost to final cost--for the 
different systems was:




Design-Bid-Build                                                  4.83%
CM at Risk                                                        3.37%
Design/Build                                                      2.17%


  Delivery Speed
    A comparison of the delivery speed--taking into account design and 
construction--indicated:




Design-Bid-Build                            3,250 square feet per month
CM at Risk                                  4,712 square feet per month
Design/Build                                6,842 square feet per month



    CM at Risk was 13.33% faster than Design-Bid-Build
    Design/Build was 23.5% faster than CM at Risk
    Design/Build was 33.5% percent faster than Design-Bid-Build
  Design and Construction Schedule Growth
    The schedule growth--from initial schedule to final schedule--was:




Design-Bid-Build                                                  4.44%
CM at Risk                                                           0%
Design/Build                                                         0%



  Quality
    Measured on a scale of 1-10, with 10 being the highest, owners 
graded the quality of their projects at turnover and startup as 
follows:




Design-Bid-Build                                                   6.00
CM at Risk                                                         7.43
Design/Build                                                       7.50



  Summary of Comparison
    A summary table of the findings of this study follows:


----------------------------------------------------------------------------------------------------------------
                                                  Design-Bid-Build \1\     CM at Risk \2\      Design/Build \2\
----------------------------------------------------------------------------------------------------------------
Unit Cost                                                                           b                    b
----------------------------------------------------------------------------------------------------------------
Cost Growth                                                                         b                    b
----------------------------------------------------------------------------------------------------------------
Delivery Speed                                                                      b                    b
----------------------------------------------------------------------------------------------------------------
Construction Speed                                                                                 b
----------------------------------------------------------------------------------------------------------------
Schedule Growth                                                                     b                    b
----------------------------------------------------------------------------------------------------------------
Turnover Quality                                                                    b                    b
----------------------------------------------------------------------------------------------------------------
System Quality                                                                      b                    b
----------------------------------------------------------------------------------------------------------------
      b Significantly outperforms     No significant difference     Significantly underperforms

\1\ Compared against other systems
\2\ Compared against Design-Bid-Build


Further Discussion--Advantages of Design/Build
  Undivided Responsibility
    Design/Build contracting provides both architecture/engineering and 
construction resources under a single contract. A single entity is 
responsible for cost control, quality assurance, schedule adherence, 
and performance of the finished project. This results in clearly fixed 
responsibility, maximum cost control and immediate responsiveness.
    The Owner can exercise his desired degree of control over design, 
with the added advantage of continuously knowing the cost implications 
of each decision. The Owner's control of the entire process is 
strengthened by contracting with a single firm unconditionally 
committed to the success of his project. It provides a comprehensive 
view of the project, as opposed to the one-piece-at-a-time method of 
multiple providers.
  Time Savings
    Design and construction are telescoped, bidding periods and 
redesign time are eliminated, and long-delivery components are 
identified and ordered early in the design process. Therefore, total 
design construction time is significantly reduced, which translates 
into earlier utilization of the completed facility.
  Reduced Possibility of Project Delays
    The integrated nature of Design/Build results in decreasing the 
risk of schedule erosion and project delay. Bidding periods and 
redesign time are eliminated. Materials and equipment procurement and 
construction work can begin earlier--in some cases, before the 
construction documents are fully completed. Since total design-
construction time is reduced, Owners enjoy earlier utilization of their 
completed facility. The chance of late entry to market or production 
downtime is greatly reduced.
  Early Knowledge of Costs
    The Design/Build team, working closely with the Owner, accurately 
conceptualizes the completed project at an early stage. Continuous and 
concurrent estimating during the development of design results in 
knowledge of firm, overall cost far sooner than is possible with other 
approaches. This process also permits making early decisions--which 
have the greatest impact upon cost--in an informed, cost-based 
environment.
  Cost Savings
    Design and construction personnel, working and communicating as a 
team, evaluate alternative materials and methods efficiently and 
accurately. From the outset of the project, both design and 
construction expertise are brought to bear upon all components of a 
project, from site work through mechanical and electrical systems. Cost 
evaluation is continuously ``fed back'' into the design process and the 
cost implications of design decisions are known at the time--not after 
design is complete. Because the Design/Builder is responsible for both 
design and construction, cost overruns resulting from design error or 
faulty coordination are the responsibility of the Design/Builder, not 
the Owner. The Owner pays only for scope changes that he initiates.
  Reduced Risk of Cost Overruns
    With Design/Build, risk reduction begins at the design stage. 
Construction specialists are an integral part of the design team, so 
construction implications are addressed early. The team works together 
to decide the most cost-effective materials and methods of delivery 
before a design is finalized, which enables them to provide more 
accurate costs and better scheduling up front. Because the same group 
is responsible for both drawings and functional performance, the 
possibility of expensive surprises in the construction phase is 
virtually eliminated. Too often with design-bid-build, design 
impracticalities are discovered during construction, which leads to 
increased cost, blown schedules, and finger pointing between architect, 
engineer, and contractor.
    Because the Design/Builder is accountable for both design and 
construction, the risk of cost overruns from design error or poor 
coordination are transferred from the Owner to the Design/Builder.
  Risk Is Transferred From The Owner To The Design/Builder
    Single source responsibility of Design/Build reduces risk to the 
Owner. The Owner no longer takes the risk of scope gaps, document 
misinterpretation or design errors. The Design/Builder carries singular 
responsibility for both the design and the construction of the project. 
This reduces the staff and management requirements for the Owner for 
those that normally manage the risk of those gaps and errors.
    In the traditional design-bid-build method, multiple entities are 
used for the various tasks required. This separate engagement of 
architect/engineer, contractor, and other parties means there is no 
single party responsible for overseeing the entire project, and the 
Owner is therefore at greater risk for undesirable outcomes.
    Design/Build presents less risk from a contractual perspective. 
There is only one contract, so Owners look to a single source for 
performance. This is a major advantage over the design-bid-build 
process, where the responsibility for any aspect of a project's outcome 
may be unclear due to language in the various provider contracts. 
Typical are phrases like, ``The Owner warrants to the contractor that 
the drawings and specifications are complete and free from error . . 
.'' This language places the responsibility for design solely with the 
Owner. If problems are encountered during construction, the contractor 
can blame the architect who, in turn, may point the finger right back 
at the contractor. This method relies on audit, inspection, and, all 
too frequently, the legal system to ensure final project quality. In 
contrast, the Design/Builder assumes all responsibility by documenting 
the Owner's requirements and expectations in performance terms. ``The 
Design/Builder warrants to the Owner that it will produce documents 
that are complete and free from error . . .'' The Design/Builder 
essentially guarantees high quality in the finished facility by 
assuming complete responsibility from design through completion and 
into operation.

Procurement Methods
    Procurement methods are distinct from, but related to delivery 
systems. Not all procurement methodologies discussed below are 
applicable to all delivery systems. The selection of the procurement 
method will follow the selection of the delivery system for a 
particular project.

Direct Selection
    Direct Selection is the process where the Owner selects a firm 
without considering other firms for the project or service and 
negotiates the terms under which services will be provided.
    Direct Selection may be appropriate when the Owner has considerable 
positive experience with that firm, the project is so highly 
specialized that only one firm is qualified for the project or where an 
umbrella purchasing agreement is in place.

Price Bidding
    Price Bidding is the process under which any reasonably qualified 
contractor can submit a bid for a given scope of work. A variation of 
this method is bidding by a small number of invited firms, who have 
been pre-qualified (see below). The Owner usually selects the lowest 
reasonable bid.
    Price Bidding requires complete construction documents, which 
limits its application to the Design-Bid-Build delivery system.

Qualifications Based Selection (QBS)
    Qualifications Based Selection is similar to the method commonly 
used for the selection of consultants, architects, engineers and 
program managers.
    Pre-Qualification: Pre-qualification is the process used by an 
Owner to restrict the pool of firms that will be invited to propose or 
bid on the work. The Owner may restrict the pool in several manners, 
the most common of which are qualifications, relevant experience, 
capacity or location.
    The Owner will often develop and issue a Request for 
Qualifications. The Owner will evaluate the submittals made by 
interested firms against criteria that was pre-established by the 
Owner. A short list of firms will be selected for further 
consideration, often involving interviews, proposals and reference 
checks.
    Proposal: The proposal process usually follows a pre-qualification 
process. Again, the Owner would develop the Request for Proposals and 
evaluate the proposals against pre-established criteria.
    Pre-Established Criteria: To create an objective selection process 
it is essential for the Owner to establish the selection criteria in 
advance. The criteria may include:

      Firm History
      Financial strength
      Backlog and capacity to deliver the project
      Depth of personnel in key positions
      Firm and team member experience
      Project work plan
      Ability to meet DBE and similar requirements
      Performance history
      References

    Negotiation: Negotiation typically follows a Pre-Qualification, 

Proposal or Direct Selection process.
    Qualifications Based Selection is most often used for the selection 
of a CM at Risk or Design/Build firm. It has the advantages of an 
accelerated selection process and a greater match of firms to the 
Owner's objectives.

Value Based Selection
    Design and price proposals are solicited in a Request for 
Proposals, which usually stipulates program requirements, design 
criteria, performance specifications, site information and contract 
terms. The teams invited to submit proposals are often pre-qualified 
and limited to a few teams. Teams then submit design and price 
proposals, which are evaluated against pre-established criteria, by a 
selection panel or jury, and the winning team is selected.
    Value Based Selection is limited to the Design/Build delivery 
system. While it has the advantage of providing a variety of design 
solutions, it can be a time and resource consuming process. Pre-
qualification of firms, issuing the RFP, preparing design and price 
proposals, evaluation of proposals and selection of the winning firm 
can take many months. A jury must be appointed to evaluate the 
proposals and the members must agree on the application of the pre-
established evaluation criteria. To offset the cost of preparing design 
and cost proposals, a stipend is often paid to the competing firms. For 
large and complex projects, stipends can exceed $100,000.

Bibliography
    ``Best Value, Performance Based Procurement System'', by Arizona 

State University
    ``Comparison of U.S. Project Delivery Systems'', by Mark Konchar 
and Victor Sanvido, published by Penn State University
    ``Construction Industry Megatrends'', by Preston Haskell
    ``Design-Build Basics for Owners'', Design-Build Institute of 
America
    Design-Build Learning Series, Successful Design-Build Project 
Delivery, Design-Build Institute of America
    Design-Build Manual of Practice, published by Design-Build 
Institute of America
    Design Build--Planning through Development, by Jeffery L. Beard, 
Michael C. Loulakis and Edward C. Wundram
    ``Design Teamwork'', published by Healthcare Design
    ``Design and Construction Survey'', published by Modern Healthcare
    Principles of Design-Build Project Delivery, Texas Chapter, Design-
Build Institute of America
    ``Project Delivery Systems: CM at Risk, Design/Build, Design-Bid-
Build'', by Construction Industry Institute
    Selecting Project Delivery Systems, by Victor Sanvido and Mark 
Konchar
    ``The Integrated Design-Build Firm'', by David Engdahl

                                 
    Prepared Statement of Charles A. Clarkson, Founder and Chairman,
              The Clarkson Group, L.L.C., Jacksonville, FL

    The recent emergence of Design-Build contracts in the U.S. building 
industry speaks to its many attributes. In lieu of the traditional 
Design-Bid-Build format, Design-Build enables fast tracking through 
continual designer-builder alignment and overlapping of job processes. 
Further, this single source of designers and contractors places the 
onus on one entity, thus resulting in fewer conflicts.
    On the other hand, Design-Build seemingly generates an equal amount 
of constraints. Perhaps the greatest disadvantage with Design-Build is 
the loss of competition inherent to the traditional bid-process. 
Without this tool, owners typically lose cost-savings garnered through 
competitive bids. Equally disconcerting, the architect (customarily the 
owner's agent) pledges allegiance to the engineers and contractor. This 
borderless relationship essentially dismantles the owner's checks-and-
balances safety net. As many laymen would say, Design-Build is 
essentially the ``fox watching the hen house.'' Given the obvious 
advantages and disadvantages of Design-Build contracts, it becomes 
important to identify the circumstances by which such advantages can be 
put to good use.
    Standardized and/or redundant projects align wonderfully with the 
mechanisms of Design-Build. Projects such as hangers, franchisor 
prototypes, highways, and industrial centers look to benefit from 
Design-Build arrangements. Given its predictability and knack for 
minimizing root causes of disputes, Design-Build proves a viable pick 
in this arena. Further, development of multiple standardized projects 
allows for future savings through the design's and methods' 
reusability.
    Another optimal scenario for utilizing Design-Build occurs when the 
importance of time outweighs that of cost. As one common example, 
government highway projects many times look to Design-Build given their 
need for an accelerated completion schedule in effort to minimize 
commuter disruption. Further, such public projects many times have 
loose budgetary parameters. In these cases, Design-Build proves more 
effective mainly due to its ability to save time.
    In more customized conditions, Design-Bid-Build tends to be the 
more risk-averse solution. Given the individuality of all sites (e.g. 
subsurface conditions, wind/rain/snow loads, topography, and zoning 
restrictions) coupled with the specialty design warranted by most 
structures, Design-Bid-Build typically proves to be the best choice. 
Because of such unknowns, Design-Bid-Build better blockades owners from 
price gauging and consultant mismanagement. In such specialized 
projects, many would recommend finalizing design before committing to a 
construction cost. Otherwise, untimely design changes will lead to 
rising costs though change orders.
    Design-Build and Design-Bid-Build are both common to today's 
building circles for good reason. Each, in their own right, presents 
advantages beneficial to designers, builders, and owners. Given their 
varying components, however, it should be remembered that choosing one 
arrangement over the other is circumstantial. Put plainly, substantial 
standardization of multiple projects increases the benefits of Design-
Build. Conversely, projects with more unknowns and the inability to 
standardize make Design-Bid-Build more attractive. Finally, given the 
continual advancements and standardization of both design techniques 
and construction methods, one should expect the applicability of 
Design-Build to expand.

                                 
     Prepared Statement of Christopher Needham, Senior Legislative 
                               Associate,

 National Legislative Service, Veterans of Foreign Wars of the United 
                                 States
    MR. CHAIRMAN AND MEMBERS OF THE SUBCOMMITTEE:
    On behalf of the 2.3 million men and women of the Veterans of 
Foreign Wars of the United States (VFW) and our Auxiliaries, I would 
like to thank you for the opportunity to testify today with respect to 
the construction process of the Department of Veterans Affairs (VA).
    For the better part of a decade, the VA construction process had 
been dominated by the Capital Asset Realignment for Enhanced Service 
(CARES) process. This systematic, data-driven assessment of VA's 
capital infrastructure aimed to plan for the current and future 
healthcare needs of veterans.
    Throughout the CARES process, we were concerned with the under-
funding of the construction budget. Congress and the Administration did 
not devote many resources to VA's infrastructure, preferring to wait 
for the final results of CARES. This is despite the fact that many 
legitimate construction projects were identified by VA's hospital 
managers and with House passage of the ``Veterans Hospital Emergency 
Repair Act,'' which authorized construction at numerous facilities. 
Needs were identified, but Congress never appropriated funding, with 
the ongoing CARES process being used as the primary excuse.
    We believe that the de facto moratorium on VA major construction 
projects was poor public policy and that some of the extra expenses 
associated with construction costs today are a result of inability to 
begin projects in previous years. With construction, time equals money, 
and the longer a project takes, even in planning stages, the higher the 
ultimate cost will be.
    In July 2004, then-VA Secretary Anthony Principi testified before 
this Subcommittee that CARES ``reflects a need for additional 
investments of approximately $1 billion per year for the next five 
years to modernize VA's medical infrastructure and enhance veterans' 
access to care.'' Yet, since then, the amount appropriated for major 
construction has lagged far behind. The Fiscal Year 2007 Continuing 
Resolution, which served as the VA Appropriation, only funded $399 
million for major construction. The fiscal year 2006 appropriation was 
just $600 million. Today, we are a month into fiscal year 2008 and 
there is still no appropriation, meaning not one of the current 
construction priorities can move forward. We are certainly appreciative 
of the amount appropriated by the House, but for VA to properly manage 
the construction process, the department needs on-time funding.
    Beyond the former Secretary's statements and the CARES decision 
documents, the need for increased construction funding is evident. VA's 
facilities are aging, with an average age well over 50 years and VA has 
historically recapitalized at a rate well below industry standards. 
From 1996-2001, for example, the average $246 million major and minor 
construction appropriation corresponded with a recapitalization rate of 
just 0.64 percent of its approximately $40 billion plant replacement 
value. This low rate means VA would rebuild its aging infrastructure 
every 155 years. Numerous reports and studies, including the 1998 Price 
Waterhouse report on VA's facility management programs, cite the need 
for a 4-8 percent recapitalization rate, which is consistent with a 
total construction budget--major and minor--of $1.6-$3.2 billion per 
year.
    One of the strengths of the CARES process was that it was not just 
a one-time snapshot of the VA healthcare system and its infrastructure 
needs. It provided the department and its managers with the tools and a 
framework to evaluate future needs and a prioritization methodology to 
determine which projects are most critical to the department. These 
prioritizations help the department to determine its budget request, 
and the full prioritization lists are included with VA's annual budget 
submission as part of its 5-Year Capital Plan.
    To determine the budget request, VA first assigns priority to 
previous year's projects that were partially funded and then adds in 
newly evaluated projects from the current budget year to create an 
ordered list. When setting the budget, VA's managers select projects 
from the top of this prioritization list. We believe that this 
apolitical methodology for determining construction priorities is an 
excellent process.
    That process also reveals the inadequacies of the fiscal year 2008 
budget request. Page 7-12 of the 5-Year Capital Plan shows that the 
budget request only funded six projects, all of which came from the 
list of projects partially funded in previous fiscal years. It included 
no additional money for six other partially funded construction 
priorities or any money for any of the top priorities identified for 
fiscal year 2008. Some of these projects were later funded as part of 
the continuing resolution that funded VA during the 2007 fiscal year, 
but it is troubling to us that funding was not requested in the first 
place.
    With respect to minor construction, we were pleased to see the 
sizeable $326 million increase in the account as part of the fiscal 
year 2007 supplemental. As with the major construction account, there 
was little progress made on the long list of construction priorities 
laid out in the 5-year Capital Plan. Table 4-8 of that report details 
numerous projects that VA has identified and that will need funding in 
the future. We thank the Congress for upping the account, but we would 
hope that future funding needs are part of the regular appropriation, 
not just a supplemental.
    Although not specifically related to the construction budget, I 
would like to place special emphasis on nonrecurring maintenance 
funding, part of the Medical Services budget account. When The 
Washington Post detailed the deplorable living conditions some wounded 
warriors faced at Walter Reed Army Medical Center, including mold, 
leaky plumbing and holes in walls, the reactions were swift, immediate 
and universal. These intolerable conditions were a national shame and 
we as a Nation can and must do better for those who have served this 
country.
    The VFW absolutely agrees, but we view the problems at Walter Reed 
as the manifestation of a problem we have repeatedly pointed out. The 
unacceptable living conditions at Walter Reed were caused, in part, 
because of an insufficient maintenance budget. Although Walter Reed is 
not a VA facility, the maintenance problems are consistent with the 
concerns we have had with VA.
    In light of the attention focused on the healthcare of veterans, VA 
Secretary Jim Nicholson ordered an immediate review of the Department's 
maintenance needs on March 7, 2007. The results, which were released on 
May 21, 2007, showed that the majority of VA's facilities were in good 
condition and that most of the deficiencies that VA's internal review 
identified were, in VA's words ``normal wear and tear.''
    The VFW, however, has some concerns with the report's findings and 
what they represent. A March 22, 2007 article in The Washington Post 
reported that VA officials concluded that 90 percent of the problems 
identified were routine, but that 10 percent were deemed more critical. 
Among the critical problems VA identified were problems with the fire 
alarm and smoke barrier systems in a hospital in Amarillo. In 
Fayetteville, the review found problems with fixtures and other objects 
in patient areas that could pose a suicide threat in its mental health 
unit. The VA Medical Center in Saginaw found that, ``[o]ld, worn out 
carpet may harbor residue/bacteria from patients' personal accidents.'' 
In Manchester the damaged and stained carpet is over 15 years old and 
was installed over asbestos floor tiles. Many other facilities had 
leaky pipes or roofs, discolored or defective ceiling tiles, peeling 
paint or holes in walls, and issues with the appearance or quality of 
the flooring.
    We, as part of The Independent Budget, have identified full and 
proper funding of the NRM account as one of the biggest challenges 
facing VA. We have cited industry standards, as well as the findings of 
the aforementioned Price Waterhouse study that found a need for VA to 
spend 2-4 percent of its plant replacement value each year on NRM.
    VA's Office of Asset Enterprise Management's most recent Asset 
Management Plan (accessible on the Internet at http://www.va.gov/oaem/
docs/FINALAMPsigned.pdf) estimates the current plant replacement value 
of VA's facilities to be roughly $40 billion. Accordingly, VA's own 
Asset Management Plan recommends an appropriate level of funding 
ranging from $800 million to $1.6 billion on NRM.
    The level of NRM funding in the past few years has fallen far below 
that. For fiscal year 2008, for example, the Administration recommended 
a paltry $573 million for NRM. Over the previous two fiscal years, only 
about $1 billion total was appropriated for this critical account, far 
below what VA itself had identified as a need.
    We were pleased to see that Congress stepped up once VA identified 
these numerous maintenance issues, with an additional $550 million for 
NRM in the fiscal year 2007 supplemental appropriation. We would hope, 
however, that future funding requests would be sufficient enough to 
eliminate the need for emergency requests. These issues must be taken 
care of before they develop into larger problems.
    We would also thank Congress for listening to our recommendations 
in previous years in exempting this funding from apportionment using 
the Veterans Equitable Resource Allocation (VERA) formula. While VERA 
does move the funding toward geographic areas with the highest demand 
for healthcare, it also tends to move funds away from facilities with 
the oldest capital structures--facilities that generally have the 
greatest maintenance needs. We would hope that future NRM goes to the 
facilities with the greatest demand.
    Providing a safe, clean, hospitable healthcare environment is 
critical to the effective delivery of healthcare and accordingly 
Congress must provide VA with all the resources it needs to address the 
shortcomings already identified, but also to stay on top of any 
problems that arise in the future. We cannot afford to have what 
happened at Walter Reed happen ever again. The VFW encourages Congress 
and VA to be proactive and to do what is right for this nation's 
veterans.
    Mr. Chairman, this concludes my testimony and I would be happy to 
answer any questions you or the members of this Subcommittee may have.

                                 
      Prepared Statement of Shannon L. Middleton, Deputy Director,
    Veterans Affairs and Rehabilitation Commission, American Legion

    Mr. Chairman and members of the Subcommittee:
    Thank you for allowing The American Legion to present its views on 
the Department of Veterans Affairs (VA) construction process. With the 
rapid advancements in technology and medicine that the national 
healthcare system is experiencing, VA will be compelled to perpetuate 
the evolution of its healthcare delivery system far into the future. An 
important part of this evolution is ensuring that VA has adequate 
facilities that are safe and located in needed areas to make access to 
its healthcare facilities readily available for veterans.
    The healthcare delivery facilities of the Department of Veterans 
Affairs (VA) are increasingly aging physical plants in need of 
replacement; substantial renovation and improvements relating to fire, 
safety and privacy standards are necessary, as well as modernization 
and reconfiguration to meet the demands of the advances of medicine. 
The increasing demands placed upon the outpatient and ambulatory care 
facilities of VA require substantial alterations to meet changing space 
requirements.
    No healthcare delivery system can be expected to provide quality 
care if the physical settings that house that care are allowed to 
deteriorate to a state which places them beyond redemption.
    In March 1999, the then General Accounting Office (now Government 
Accountability Office, GAO) published a report on VA's need to improve 
capital asset planning and budgeting. GAO cited the fact that Veterans 
Health Administration's (VHA) asset challenge was due, for the most 
part, to four reasons. First, VHA owned 4,700 buildings, over 40 
percent of which have operated for more than 50 years, including almost 
200 built before 1900. Second, over 1,600 buildings (almost one-third) 
have historical significance. Third, VHA used fewer than 1,200 
buildings (about one-fourth) to deliver healthcare services to 
veterans. They further noted that VA had over 5 million square feet of 
vacant space, which could cost as much as $35 million a year to 
maintain. Fourth, VHA's healthcare buildings have significant unused 
inpatient capacity.
    Basically, the report found that VA's asset plan indicated that 
billions of dollars might be used operating hundreds of unneeded 
buildings over the next 5 years or more. The report went on to further 
state that VA did not systematically evaluate veterans' or asset needs 
on a market (or geographic) basis or compare assets' life-cycle costs 
and alternatives to identify how veterans' needs could be met at lower 
costs.
    Additionally, GAO estimated that over the next few years, VA could 
spend one of every four of its healthcare dollars operating, 
maintaining, and improving capital assets at its then 181 major 
delivery locations including 4,700 buildings and 18,000 acres of land 
nationwide. Recommendations stemming from the report included the 
development of asset-restructuring plans for all markets to guide 
future investment decisionmaking, among other initiatives.
    VA's answer to GAO and Congress was the initiation and development 
of the Capital Asset Realignment for Enhanced Services (CARES) program. 
The CARES decision, released in May 2004, contained hundreds of 
construction requests, upgrades, and alterations of current buildings 
that will require a substantial increase in funding for Major and Minor 
Construction within VA.
    During the initial stages of the CARES process, the construction 
budget was nearly flat-lined pending the outcome. This caused a major 
backup in construction projects and needed seismic repairs. Major and 
minor construction appropriations for VA have been consistently 
targeted for reduction since such funding is regrettably the most 
vulnerable to annual assault. For several years VA facility directors 
have been forced to use non-recurring maintenance funds to provide 
care. Sufficient funding must be provided to maintain, improve and 
realign VA healthcare facilities.
    The American Legion urges Congress to annually appropriate 
sufficient funds for the VA construction program to ensure the 
continued provision of quality healthcare to our Nation's veterans and 
the implementation of the CARES decisions.

Medical Construction And Infrastructure Support
    VA has a vast physical plant inventory that represents a major 
investment of taxpayer dollars. Despite the large number of aging 
facilities, construction funding has been limited. VA is seeking to 
maximize its use of its facilities, through the CARES decision. CARES 
construction is estimated at $6.1 billion over the next six years. 
Sufficient funding to implement new initiatives and the proposed 
physical plant changes will be critical to the success of the planning 
initiatives.

Major Construction
    The CARES process identified more than 100 major construction 
projects in 37 states, the District of Columbia, and Puerto Rico. 
Construction projects are categorized as major if the estimated cost is 
over $7 million. Now that VA has a plan to deliver healthcare through 
2022, it is up to Congress to provide adequate funds. The CARES plan 
calls for, among other things, the construction of new hospitals in 
Orlando and Las Vegas, and replacement facilities in Louisville and 
Denver for a total cost estimated to be well over $1 billion for these 
four facilities. VA has not had this type of progressive construction 
agenda in decades. Major construction money can be significant and 
proper utilization of funds must be well planned. Recently, funding for 
a new VAMC in Denver was approved by Congress. However, if timely 
completion of these projects is truly a national priority, providing 
adequate funding to satisfy this obligation is vital.
    In addition to the cost of the proposed new facilities are the many 
construction issues that have been ``put on hold'' for the past several 
years due to inadequate funding, and the moratorium placed on 
construction spending by the CARES process. One of the most glaring 
shortfalls is the neglect of the buildings sorely in need of seismic 
correction. This is an issue of safety. The delivery of healthcare in 
unsafe buildings cannot be tolerated and funds must be allocated to not 
only construct the new facilities, but also to pay for much needed 
upgrades at existing facilities.
    Delays in the process have a profound impact on access to 
healthcare for veterans. Restoration of the medical center in Biloxi, 
MS--which is consolidating with the medical center in Gulfport, MS--is 
only in Design Phase 1. The project's estimated completion date is 
January 2012. With the medical center in Gulfport completely closed, 
the medical center in Biloxi will have to provide services to even more 
veterans--but construction to accommodate this increase will not be 
completed for years to come.
    The American Legion believes that VA has effectively shepherded the 
CARES process to its current state by developing the blueprint for the 
future delivery of VA healthcare--it is now time for Congress to do the 
same and adequately fund the implementation of this comprehensive and 
crucial undertaking.

Minor Construction
    VA's minor construction program has also suffered significant 
neglect over the past several years. Maintaining the infrastructure of 
VA's buildings is no small task. Because many buildings are old, 
renovations, relocations and expansions are quite common. When combined 
with the added cost of the CARES program recommendations, it is easy to 
see that a major increase over the previous funding level is crucial 
and overdue.
    The American Legion has long recognized the necessity for a 
healthcare system that revolves around the special needs of veterans. 
Veterans serving in Iraq, Afghanistan and all corners of the globe are 
returning home with severely debilitating injuries and are now faced 
with new challenges they never considered before. Loss of limb(s), 
Traumatic Brain Injury, mental conditions, stress reactions, Post 
Traumatic Stress Disorder, spinal cord injury and blindness are now 
realities to these young heroes. VA must be there, leading the way, to 
help them heal and rehabilitate. VA must be capable of providing the 
programs and services needed to help all qualified veterans lead the 
most productive and healthy lives possible. VA must continue to look to 
the future and assess the needs of this ever-changing population. To do 
this, adequate funding is a must.
    Thank you Mr. Chairman, again, for this opportunity to appear 
before this Subcommittee. We look forward to working with you to help 
shape the future of VA healthcare delivery.

                                 
           Prepared Statement of Donald H. Orndoff, Director,
           Office of Construction and Facilities Management,
                  U.S. Department of Veterans Affairs

    Mr. Chairman and members of the Committee, I am pleased to appear 
today to discuss the VA's healthcare construction program, and 
specifically the processes we use to plan, design and construct state 
of the art healthcare facilities. In August 2007, I was honored to be 
appointed the Director, Office of Construction & Facilities Management 
(CFM). In this capacity, I am responsible for the execution of VA's 
major construction program. My new assignment in the VA follows over 29 
years of service as an officer in the Civil Engineer Corps of the 
United States Navy. Joining me today are Mr. Robert Neary, Director, 
Service Delivery Office, CFM, Ms. Patricia Vandenberg, Assistant Deputy 
Under Secretary for Health for Policy and Planning, and Ms. Brandi 
Fate, Acting Director, Capital Asset Management Planning Service. Let 
me begin by briefly reviewing the status of VA's construction program 
for healthcare.
    The Department is currently engaged in the largest building program 
since the immediate post-World War II period. This program represents 
implementation of the results from the Capital Asset Realignment for 
Enhanced Services program or CARES which was initiated systemwide in 
2002 and produced initial results announced in May 2004. At that time, 
30 major construction projects were approved and funded in whole or 
part. In subsequent fiscal years, six additional projects have been 
submitted for funding in budget requests. The total cost of these 
projects approaches $5 billion and $2.83 billion (including Hurricane 
Supplemental Funding) has been appropriated between FY 2004 and FY 
2007. The FY 2008 budget now before the Congress requests an additional 
$560 million in major construction for infrastructure improvement for 
the veterans health system. These projects are in various stages of 
design and construction. I am pleased to note that construction 
contracts have been awarded on 18 projects.
    The minor construction program is also an important part of 
addressing infrastructure needs of the health system identified by 
CARES. Since FY 2004, $1.08 billion has been appropriated (including 
Hurricane Supplemental Funding) and an additional $180 million is 
requested in the FY 2008 budget.
    VA has a real property inventory of over 5,000 owned buildings, 
1,100 leases, 32,000 acres of land and approximately 158 million gross 
square feet (owned and leased). As the CARES process revealed, the 
average age of VA facilities is well over 50 years old, and many of 
these older facilities are not designed or constructed to meet the 
demands of clinical care in the 21st century. VA's management of these 
assets is critical to providing healthcare and services to our 
veterans.
    Implementing an aggressive real property management program 
includes use of a disciplined capital investment and planning process, 
development of tools, processes and methods for improved inventory and 
analytical capability and innovative acquisition methods. VA uses 
internal and external benchmarks and best practices, monitoring 
portfolio performance on a quarterly basis. VA conducts condition 
evaluations, evaluating a third of VHA facilities each year. VA 
effectively manages its vast holding of capital assets through 
performance monitoring and analysis, supporting the President's 
Management Agenda and Federal Real Property Council efforts to decrease 
underutilized and vacant space, improve facility condition, decrease 
operating costs and reduce non-mission dependent assets. In FY06 and 
FY07, VA disposed of 77 and 43 buildings, respectively. Forty-eight 
buildings are planned for disposal in FY08. In addition to disposals, 
VA also uses its authority under the Enhanced Use Program to engage the 
private sector and other public entities in the adaptive reuse and 
development of unneeded property with lease consideration flowing to 
VA. VA develops energy savings performance contracts designed to reduce 
energy consumption in federally owned facilities, reducing the demand 
and dependence on natural resources. Further, VA integrates energy and 
real property initiatives and programs. VA plans to implement energy 
metering, bill auditing and commodity purchasing for improved 
efficiency and effectiveness of both real property and energy 
management. VA's energy pilot is scheduled for implementation in FY08.
    VA utilizes a multi-attribute decision methodology enabling a 
disciplined decisionmaking approach in prioritizing its capital 
investment needs and requirements. Through this methodology, VA 
establishes its 5 Year Capital Plan. The 5 Year Capital Plan is a 
living document that reflects the changes in the composition and 
alignment of VA's assets. The plan is the document used to describe the 
selection of VA's capital acquisitions and funding requests by 
incorporating a formal executive review process.
    This process begins with Veterans Health Administration (VHA) 
strategic planning initiatives that identify capital needs based upon 
demographic data, workload, actuarial projections, cost effectiveness, 
risk, and alternatives. Once a potential project is identified, it is 
reviewed and scored based on criteria VA considers essential to 
providing high quality services in an efficient manner. The criteria VA 
utilizes in evaluating projects include service delivery enhancements, 
the safeguarding of assets, special emphasis programs, capital asset 
priorities, departmental alignment, and financial priorities. The new 
funding requirements are considered, along with existing CARES 
decisions, in determining the projects and funding levels to request as 
part of the VA budget submission. Appropriate projects are evaluated 
for joint needs with the Department of Defense and sharing 
opportunities.
    Selected projects based on VHA strategic process are vetted through 
the Department's Capital Investment Panel (CIP) to ensure all projects 
are based upon sound business and economic principles, promote the one-
VA vision, align with VA strategic goals, address the Secretary of VA's 
priorities, and support the President's Management Agenda. The CIP 
analyzes and scores these projects and submits the results to the 
Strategic Management Council (SMC) for consideration. The SMC is VA's 
governing body assigned the responsibility to oversee VA's capital 
programs and initiatives. The SMC reviews the projects and submits its 
recommendations to the Secretary, who makes the final decision on 
projects to include in the budget.
    Identification of capital needs through the Secretary's decision 
occurs annually. Major capital investment needs are requested from 
facilities in October, prioritized through each Administration and the 
Departmental review process, and vetted for the Secretary's approval by 
the following summer. Under the current process, once a decision has 
been made to include a project in the Department's budget, the design 
process begins with the selection of the design architect. The 
traditional design process consists of three phases--schematic design, 
design development and construction document preparation. While the 
timing varies with the size and complexity of the project, design 
typically takes 18 months. Once design is complete, the construction 
contractor is procured and construction begins. Approximately one-third 
of VA projects are executed using the design build method in which a 
contract is awarded to an architect/engineer (A/E) and construction 
contractor team who take a preliminary design provided by VA and 
completes the design and constructs the projects.
    The Department utilizes standard industry practices in the design 
and construction of VA facilities. The architectural and engineering 
firms that design facilities for VA are selected in accordance with 
established laws and regulations. We are pleased that highly qualified 
A/E firms with healthcare practices compete to be selected as VA 
designers. These firms are on the cutting edge of modern healthcare 
design for state-of-the-art medical care facilities for the private 
sector as well as for VA.
    Construction contractors are often selected using a combination of 
quality factors and price. Contractors that are selected through a 
negotiations process are evaluated based on their experience and track 
record in constructing similar facilities from both a corporate 
perspective as well as the company's specific personnel that will be 
managing the VA project and the firms' proposed project management 
plan.
    VA benefits from its reliance on private sector architects, 
engineers and contractors. Selection of the top firms in the Nation 
brings to VA's construction program the highest quality of expertise in 
healthcare design and construction. VA is also expanding the support 
received from the private sector through the use of Construction 
Management (CM) firms for VA's largest projects. These firms bring 
extensive expertise in managing large projects to support VA's major 
construction efforts. The first of these contracts has been implemented 
on the project to construct a new VA Medical Center in Las Vegas. Other 
projects that will benefit from the use of private sector CM are 
Orlando, New Orleans and Denver.
    VA's construction program is not without challenges. The rising 
cost of construction has had a significant impact on VA since 2004. 
This is not a problem unique to VA, but has similarly affected all 
government and private sector organizations with construction 
requirements. Cost growth is largely attributable to the robust economy 
in the United States and around the world. The demand for labor and 
building materials continues to outpace the supply. Coupled with rising 
fuel prices and the impact of the hurricanes of 2004 and 2005, building 
programs of all types have experienced significant cost growth. As VA 
monitors the industry, we regularly learn of major corporate capital 
projects which are postponed or canceled because of the price.
    Another challenge in the construction process is attracting 
competition for VA major projects. The large volume of construction in 
most markets makes it extremely difficult to attract significant 
competition. It has not been unusual for only one or two bidders to 
compete for VA work during the past 18 months and this lack of 
competition has diminished the likelihood of good pricing.
    VA is taking a number of steps to minimize the impact of these 
circumstances on the construction program. VA regularly conducts market 
surveys in the cities where we have upcoming work in an effort to 
better predict the costs we will encounter, and the labor supply that 
will be available. In our budget estimates we now vary the escalation 
rates included based on the current and predicted construction activity 
in individual markets. We are working with the contracting community to 
improve their awareness of upcoming VA projects and to attract their 
interest in performing VA work. VA is also reviewing the planning 
process to identify improvements that can be made to insure that when 
VA commits to a budget cost, a full and compete understanding of the 
project requirements is known and included in the budget estimate.
    In closing, I would like to thank the Committee for its continued 
support for improving the Department's physical infrastructure to meet 
the changing needs of America's veterans, and we look forward to 
continuing to work with the Committee on these important issues.
    Again, thank you for the opportunity to appear before the Committee 
today and my colleagues and I would be glad to answer your questions.

                                 

                                     Committee on Veterans' Affairs
                                             Subcommittee on Health
                                                    Washington, DC.
                                                   November 8, 2007

Dennis Cullinan
National Legislative Director
Veterans of Foreign Wars of the United States
200 Maryland Avenue, N.E.
Washington, D.C. 20002

Dear Mr. Cullinan:

    Thank you for the testimony of Christopher Needham, Senior 
Legislative Associate, National Legislative Service, of the Veterans of 
Foreign Wars of the United States at the U.S. House of Representatives 
Committee on Veterans' Affairs Subcommittee on Health hearing that took 
place on November 1, 2007 on ``The VA Construction Process.''
    Please provide answers to the following questions by January 2, 
2008, to Chris Austin, Executive Assistant to the Subcommittee on 
Health.

    1.  The veteran population projection for New Orleans is expected 
to decline by about 18% between 2001 and 2011. Given the declining 
veteran population, the downtown flood risk area, and travel time and 
distance concerns, could a replacement facility be more conveniently 
located outside downtown New Orleans, providing for easier 
accessibility and on higher ground that would be secure regardless of 
flooding?

    2.  In 1999, the Government Accountability Office (GAO) reported 
that VA was wasting millions of dollars annually on the upkeep of 
underutilized facilities that could be used to enhance veterans' 
healthcare. In response, VA initiated the Capital Asset Realignment for 
Enhanced Services (CARES) process to assess VA capital assets and 
establish a framework to modernize VA's healthcare facilities and use 
its resources more effectively to improve healthcare delivery. The 
Veterans of Foreign Wars (VFW) always agreed with CARES recommendations 
to build new facilities. However, specifically in what cases did the 
VFW support recommendations to downsize or close obsolete facilities?

    Thank you again for taking the time to answer these questions. The 
Committee looks forward to receiving your answers by January 2, 2008.

            Sincerely,
                                                 MICHAEL H. MICHAUD
                                                           Chairman
                               __________
         Responses of the Veterans of Foreign Wars of the U.S.
          to Post-Hearing Questions from the November 1, 2007

     Subcommittee on Health Hearing on the VA Construction Process

    Question 1: The veteran population projection for New Orleans is 
expected to decline by about 18% between 2001 and 2011. Given the 
declining population, the downtown flood risk area, and travel time and 
distance concerns, could a replacement facility be more conveniently 
located outside downtown New Orleans, providing for easier 
accessibility and on higher ground that would be secure regardless of 
flooding?

    Response: The VFW has traditionally deferred to the Department of 
Veterans Affairs (VA) with respect to their construction projections 
and site planning. Their efforts are based upon a rigorous model that 
aims to project the demand for healthcare and services for the next 25 
years, taking into account the age of the veterans population, 
differences in healthcare needs of various localities, and many other 
demographic factors. VA then uses the information from this model to 
prioritize its construction projects, aiming to come up with an optimal 
solution.
    In the case of the New Orleans VA facility, VA's statistics--
contained in Page 6-25, Volume III of the Fiscal Year 2008 
Congressional Budget Submission--cite a 1.1% growth rate in the number 
of veterans enrolled in the VA healthcare system in Southeast Louisiana 
area through 2025. This number rises likely due to the aging veteran 
population--older patients typically demand more services--but also 
because of an increasing number of veterans returning to their former 
homes.
    As we understand it, VA's plans for the downtown medical facility 
are in accordance with all standards for hurricane hardening and that 
it lies above the 100-year flood plain. VA's plans are for all 
essential mechanical, electrical, and medical equipment to be contained 
on higher floors, allowing the facility to remain open and usable 
should another catastrophe occur.
    Whatever choice is finally made, the VFW's paramount concern is 
that VA properly serve New Orleans' and Southeast Louisiana's veterans. 
It is critical that they have access to the same levels of first-rate 
healthcare and services as their fellow veterans throughout the 
country. This is especially true with respect to mental health issues. 
With the stresses and strains of having to rebuild, plus the high 
number of OEF/OIF veterans in the VISN who are returning from difficult 
overseas combats, the need is sure to grow. We urge swift action so 
that VA can properly care for those who are in need.

    Question 2: In 1999, the Government Accountability Office (GAO) 
reported that VA was wasting millions of dollars annually on the upkeep 
of underutilized facilities that could be used to enhance veterans' 
healthcare. In response, VA initiated the Capital Asset Realignment for 
Enhanced Services (CARES) process to assess VA capital assets and 
establish a framework to modernize VA's healthcare facilities and use 
its resources more effectively to improve healthcare delivery. The 
Veterans of Foreign Wars (VFW) always agreed with CARES recommendations 
to build new facilities. However, specifically in what cases did the 
VFW support recommendations to downsize or close obsolete facilities?

    Response: The May 2004 CARES decision document, which recommended 
closing or realigning a number of facilities, was not the final word on 
CARES construction issues. The Secretary ordered the creation of a 
number of CARES Business Plan Studies to further investigate a number 
of these facilities to determine whether the decision document's 
recommendations were in the best interest of veterans. These 18 
Business Plan studies are mostly complete, but the net result is that 
VA has earmarked only one facility--the Gulfport, MS VA Medical Center 
that Hurricane Katrina destroyed--for disposal.
    Since that GAO issued the report referenced in the question, VA has 
been aggressive about properly disposing of and planning for 
underutilized or unused space. VA has a number of metrics to measure 
their progress as part of the Federal Real Property Council. By 
eliminating space, VA is better able to use its operations and 
maintenance budgets on its primary missions, delivering high-quality 
healthcare to this nation's veterans. Per Public Law 108-422, VA 
submits an annual report to Congress on its disposal plans. Page 7-51 
of VA's Five-Year Capital Assets Plan is the first of several pages 
where VA lists buildings, sales, and realignments of its facilities. As 
these are in accordance with the larger CARES process and the 
elimination of these structures does not impair--and in many cases will 
allow for the expansion of--the healthcare VA provides to veterans, the 
VFW is supportive of these efforts.

                                 

                                     Committee on Veterans' Affairs
                                             Subcommittee on Health
                                                    Washington, DC.
                                                   November 8, 2007

Steve Robertson
National Legislative Director
The American Legion
1608 K Street, N.W.
Washington, D.C. 20006

Dear Mr. Robertson:

    Thank you for the testimony of Shannon L. Middleton, Deputy 
Director, Veterans Affairs and Rehabilitation Commission, The American 
Legion at the U.S. House of Representatives Committee on Veterans' 
Affairs Subcommittee on Health hearing that took place on November 1, 
2007 on ``The VA Construction Process.''
    Please provide answers to the following questions by January 2, 
2008, to Chris Austin, Executive Assistant to the Subcommittee on 
Health.

    1.  The veteran population projection for New Orleans is expected 
to decline by about 18% between 2001 and 2011. Given the declining 
veteran population, the downtown flood risk area, and travel time and 
distance concerns, could a replacement facility be more conveniently 
located outside downtown New Orleans, providing for easier 
accessibility and on higher ground that would be secure regardless of 
flooding?
    2.  In 1999, the Government Accountability Office (GAO) reported 
that VA was wasting millions of dollars annually on the upkeep of 
underutilized facilities that could be used to enhance veterans' 
healthcare. In response, VA initiated the Capital Asset Realignment for 
Enhanced Services (CARES) process to assess VA capital assets and 
establish a framework to modernize VA's healthcare facilities and use 
its resources more effectively to improve healthcare delivery. The 
Veterans of Foreign Wars (VFW) always agreed with CARES recommendations 
to build new facilities. However, specifically in what cases did the 
VFW support recommendations to downsize or close obsolete facilities?

    Thank you again for taking the time to answer these questions. The 
Committee looks forward to receiving your answers by January 2, 2008.

            Sincerely,
                                                 MICHAEL H. MICHAUD
                                                           Chairman
                               __________
             Questions for the Record/Subcommittee Hearing
                    ``The VA Construction Process''
                            November 1, 2007

       Follow-up Answers of Deputy Director Veterans Affairs and 
              Rehabilitation Division, The American Legion

    Question 1: The veteran population projection for New Orleans is 
expected to decline by about 18% between 2001 and 2011. Given the 
declining veteran population, the downtown flood risk area, and travel 
time and distance concerns, could a replacement facility be more 
conveniently located outside downtown New Orleans, providing for easier 
accessibility and on higher ground that would be secure regardless of 
flooding?

    Response: The New Orleans Veterans Affairs Medical Center (VAMC) 
should remain in the downtown area. The proposed location is within 
walking distance to the Tulane and Louisiana State University (LSU) 
Medical Schools, which allows staff from both medical schools to 
interact between campuses and the VAMC, all on behalf of patients. The 
close proximity also allows the medical schools to provide additional 
staff that is critical to the successful operation of the VAMC. In 
addition, the continued research, which is conducted by the medical 
schools, provides patients with quality medical care.
    To build the new VAMC in an area that is not in the immediate 
proximity of the two medical schools would not be in the best interests 
of patients, nor the VA Medical System. The American Legion believes 
building the VAMC anywhere other than downtown New Orleans near the 
aforementioned medical schools would not allow for the hospital to 
provide the level of care needed to properly treat veterans.
    Veterans who use the VAMC New Orleans are generally veterans who do 
not have medical or health insurance. Many are on fixed incomes and 
have no other alternatives. The VAMC's location in New Orleans will 
allow patients, staff and volunteers from throughout the 23-parish 
catchment area to access the hospital by major roadways and 
interstates; local and regional bus service; and rail.
    Additionally, The American Legion believes veterans and the 
community would benefit from the construction of a joint facility with 
the LSU teaching hospital. The American Legion endorses such a joint 
facility, with the condition that the veterans will be treated in a 
designated medical dwelling.

    Question 2: In 1999, the Government Accountability Office (GAO) 
reported that VA was wasting millions of dollars annually on the upkeep 
of underutilized facilities that could be used to enhance veterans' 
healthcare. In response, VA initiated the Capital Asset Realignment for 
Enhanced Services (CARES) process to assess VA capital assets and 
establish a framework to modernize VA's healthcare facilities and use 
its resources more effectively to improve healthcare delivery. The 
American Legion always agreed with CARES recommendations to build new 
facilities. However, specifically in what cases did The American Legion 
support recommendations to downsize or close obsolete facilities?

    Response: Following the 1999 Government Accountability Office (GAO) 
report, the Department of Veterans Affairs (VA) continued to experience 
an unprecedented growth in the number of veterans enrolling for VA 
healthcare services, which in turn warranted a greater presence of its 
medical facilities nationwide. The American Legion continues to support 
allocation of funding to construct new facilities, as well as the 
upgrade of existing facilities, to include buildings that are old and 
require immediate renovations.
    Enclosed, please find an American Legion report on the CARES 
process highlighting the key locations of concern.

                                 

                                     Committee on Veterans' Affairs
                                             Subcommittee on Health
                                                    Washington, DC.
                                                   November 8, 2007

Honorable Gordon H. Mansfield
Acting Secretary
U.S. Department of Veterans Affairs
810 Vermont Avenue, NW
Washington, D.C. 20420

Dear Secretary Mansfield:

    Thank you for the testimony of Donald H. Orndoff, Director, Office 
of Construction and Facilities Management, who was accompanied by 
Robert Neary, Director, Service Delivery Office, Office of Construction 
and Facilities Management, Patricia Vandenberg, Assistant Deputy Under 
Secretary for Health for Policy and Planning, Veterans Health 
Administration, and Brandi Fate, Acting Director, Capital Asset 
Management Planning Service of the U.S. Department of Veterans Affairs 
at the U.S. House of Representatives Committee on Veterans' Affairs 
Subcommittee on Health hearing that took place on November 1, 2007 on 
``The VA Construction Process.''
    Please provide answers to the following questions by January 2, 
2008, to Chris Austin, Executive Assistant to the Subcommittee on 
Health.

     1.  One of the complaints that this Committee has heard many times 
is that the VA construction process can be slow and inefficient. What 
are some ways that the VA sees that this process can be improved? What 
can this Committee do to help the VA to improve the construction 
process?
     2.  Much of VA's medical infrastructure has become old and 
outdated, with the average age of VA's facilities exceeding 50 years. 
They are increasingly in need of either being replaced or substantially 
renovated to meet fire, safety, seismic considerations as well as to 
accommodate quality of care with the advancement in medicine. What 
effect has VA's aging infrastructure had on patient care? What steps 
has VA taken to mitigate the impact on patient care?
     3.  VA stated in it's testimony that the large volume of 
construction in most markets makes it extremely difficult to attract 
significant competition for VA construction projects. What requirements 
does the VA have for contractors to bid on VA construction projects? 
What can VA do to attract more competition for their construction 
projects? Is there anything that this Committee can do to facilitate 
more competition in this area?
     4.  In order to replace and upgrade aging infrastructure, the VA 
needs to embark upon an ambitious construction agenda. Can you talk in 
detail about the VA's plan for future construction? Does the VA feel 
that it will be able to upgrade and replace aging infrastructure in a 
timely and efficient manner?
     5.  Please provide an update on the status of the New Orleans 
Medical Center reconstruction project, to include a report on the 
environmental assessments underway for the downtown site and the site 
under consideration located 4\1/2\ miles away in Jefferson Parish and 
anticipated timeline for completion of the project.
     6.  In June 2007, VA reported to Congress on the option for 
Construction of Department of Veterans Affairs Medical Center in 
Okaloosa County, Florida. The report stated, ``VISN 16 plans to 
establish a VA/DoD sharing agreement with the Air Force hospital to 
provide limited inpatient care for veteran enrollees in the Okaloosa 
Study Area. VA and Air Force are currently negotiating the scope and 
mix of these services.'' Has a sharing agreement been established? If 
so, what is the scope and mix of negotiated services? If not, what is 
the status of the negotiations?
     7.  In recent years, VA has experienced significant cost 
escalation in the construction of medical facilities. For example, the 
estimate for the construction of a new medical facility in Denver has 
almost doubled to $646 million. What are the causes for these 
increases? What steps has VA taken to prevent such escalation in the 
future? What is the status of a possible collaborative arrangement in 
Denver between VA and DoD or the University of Colorado?
     8.  In 2004, the Secretary agreed with the CARES Commission's 
recommendation that a new medical facility was needed in Orlando. 
However, over 3 years later, this project has not advanced. Has the 
site for the new Orlando facility been procured? If not, what is the 
cause for delay? How will this delay impact the cost of and time table 
for constructing a new facility?
     9.  How many major construction projects are currently underway? 
How many of these projects are behind schedule? What are the causes for 
these delays?
    10.  What effect has working under a Continuing Resolution had on 
your ability to move forward with major medical facility construction 
projects?
    11.  VA testified that two of the construction challenges were that 
the ``rising cost of construction has had a significant impact on VA 
since 2004'' and ``attracting competition for VA major projects.'' What 
steps has VA taken to prevent the escalation of costs in the future? 
What steps has VA taken to increase competition?
    12.  In March 2007, the Government Accountability Office (GAO) 
issued a report recommending that VA develop performance measures for 
assessing whether CARES is achieving the intended results. Has VA 
developed any performance measures as recommended by GAO? If so, what 
performance measures have been developed?
    13.  On January 24, 2007, President Bush issued an Executive Order 
to improve energy efficiency and reduce greenhouse gas emissions of the 
agency, through reduction of energy intensity. How does VA incorporate 
energy efficiencies into its construction planning? Among the major 
construction projects for fiscal year 2008, how many will include the 
building of a new power plant? How much does the building of a new 
power plant add to the cost of building a VA facility? What other 
options are available for powering a VA without building a new plant?

    Thank you again for taking the time to answer these questions. The 
Committee looks forward to receiving your answers by January 2, 2008.

            Sincerely,
                                                 MICHAEL H. MICHAUD
                                                           Chairman
                               __________
                        Questions for the Record
                    Hon. Michael Michaud, Chairman,
                        Subcommittee on Health,
                   House Veterans' Affairs Committee
                            November 1, 2007

                      The VA Construction Process

    Question 1: One of the complaints that this Committee has heard 
many times is that the VA construction process can be slow and 
inefficient. What are some ways that the VA sees that this process can 
be improved? What can this Committee do to help the VA to improve the 
construction process?

    Response: The Department has taken several steps to address this 
issue. One reason for recent delays has been the impact on the rapid 
escalation affecting the construction economy and the need to address 
these cost increases through project design. In response to cost 
escalation, VA now routinely conducts cost studies of the markets where 
upcoming VA major construction projects are planned to ensure that the 
best information is available to predict anticipated costs.
    Incomplete early planning can also be a cause for construction 
delays. Considerable effort is now underway to improve and streamline 
VA's construction process to increase the amount and quality of 
planning, project development and design work accomplished in advance 
of including a project in VA's budget request. This early work will 
enable the project to have a construction contract award made soon 
after the appropriation becomes available and provide less opportunity 
for delays to occur.
    While VA is certainly not satisfied with the speed of delivery and 
recognizes that opportunities for improvement exist, it should be noted 
that during the hearing, a witness from the private sector referenced a 
study of construction execution done at Penn State University. The 
study included an examination of several VA projects and the data 
developed indicated that VA projects proceeded approximately one third 
faster that the average of over 300 public and private sector projects 
studied.

    Question 2: Much of VA's medical infrastructure has become old and 
outdated, with the average age of VA's facilities exceeding 50 years. 
They are increasingly in need of either being replaced or substantially 
renovated to meet fire, safety and seismic considerations as well as to 
accommodate quality of care with the advancement in medicine. What 
effect has VA's aging infrastructure had on patient care? What steps 
has VA taken to mitigate the impact on patient care?

    Response: Despite VA's aging infrastructure, the quality of care 
patients receive at VA medical centers is among the best in the Nation; 
VA has been recognized as a leader in healthcare delivery. As in any 
large healthcare system, infrastructure deficiencies directly and 
indirectly affect the environment for patients. VA Medical Centers are 
mitigating this impact by balancing operating and infrastructure needs 
to ensure patients are in comfortable and clean environments. Medical 
Centers are prioritizing their infrastructure needs and substantial 
funding has been allocated for Non-Recurring Maintenance (NRMs) and 
Minor Construction projects to allow VA to address some patient care 
related projects more quickly. VA is committed to maintaining a safe 
and clean environment for our patients.

    Question 3: VA stated in its testimony that the large volume of 
construction in most markets makes it extremely difficult to attract 
significant competition for VA construction projects. What requirements 
does the VA have for contractors to bid on VA construction projects? 
What can VA do to attract more competition for their construction 
projects? Is there anything that this Committee can do to facilitate 
more competition in this area?

    Response: VA contracting for construction is in keeping with law 
and regulation. Some aspects of Federal contracting are not attractive 
to construction contractors, but have been found valuable for Federal 
construction including the use of strict rules of competition and 
requiring contracts to support socioeconomic goals among others. In 
general, many contractors would prefer to do work in the commercial 
sector over the public sector. This will mostly impact VA when there is 
a robust commercial construction economy as there is at present.
    VA can make efforts to attract more competition in several ways. 
One is to choose an acquisition strategy most desired by contractors. 
This might include selecting between design-bid-build and design-build 
as the contracting vehicle. In some markets, contractors will prefer 
one over the other. Another area has to do with the potential to award 
one large contract or a few smaller ones. This can attract added 
competition is some markets because it lowers the risk exposure and 
offers contracts that smaller companies can manage. We also need to 
make sure that contractors are aware of the upcoming work. VA has 
increased it communication with the contracting community throughout 
the design process in an effort to expand the number of contractors who 
are aware of the projects that will be going to the market.

    Question 4: In order to replace and upgrade aging infrastructure, 
the VA needs to embark upon an ambitious construction agenda. Can you 
talk in detail about the VA's plan for future construction? Does the VA 
feel that it will be able to upgrade and replace aging infrastructure 
in a timely and efficient manner?

    Response: VA's plan for future construction funding is based on 
specific identified gaps in capital needs for such issues as: 
addressing workload gaps, correcting patient privacy issues, and 
reducing wait times. The majority of these capital needs are addressed 
through NRM, Minor and Major Construction projects. Funding for 
projects may be decentralized (Veteran Integrated Services Network 
prioritize and fund their needs based on competing clinical demands and 
infrastructure needs) or centralized (funding approval is based on 
weighted criteria).
    VA can upgrade and replace aging infrastructure in a timely and 
efficient manner based on available funding. The timing and efficiency 
for upgrades for VA's aging infrastructure follows the budget 
submission cycle. The NRMs are a decentralized one-year program and 
Minor and Major Construction lag two years between the selection and 
submission of the projects in the budget and the project's 
appropriation and authorization.

    Question 5: Please provide an update on the status of the New 
Orleans Medical Center reconstruction project, to include a report on 
the environmental assessments underway for the downtown site and the 
site under consideration located 4.5 miles away in Jefferson Parish and 
anticipated timeline for completion of the project.

    Response: The draft environmental assessment (EA) is complete and 
available for public review and comment. When the public comment period 
is complete in February, VA will be in a position to make a final site 
determination. VA has indicated that of the two sites being considered, 
the downtown site is preferred.
    VA has recently signed an memorandum of understanding (MOU) with 
the City of New Orleans under which the City will acquire the downtown 
site if it is selected, clear the site and make it available to VA.
    VA continues to evaluate the opportunities for partnering with LSU 
and it is anticipated that early next year decisions will be made on 
the extent of the partnership which will guide a determination of the 
specific scope of VA construction. VA design will then proceed. It is 
anticipated that design will be completed by July 2009, and that 
construction will be completed by July 2012.

    Question 6: In June 2007, VA reported to Congress on the option for 
Construction of Department of Veterans Affairs Medical Center in 
Okaloosa County, Florida. The report stated, ``VISN 16 plans to 
establish a VA/DoD sharing agreement with the Air Force hospital to 
provide limited inpatient care for veteran enrollees in the Okaloosa 
Study Area. VA and Air Force are currently negotiating the scope and 
mix of these services.'' Has a sharing agreement been established? If 
so, what is the scope and mix of negotiated services? If not, what is 
the status of the negotiations?

    Response: A VA Community Based Outpatient Clinic (CBOC), located on 
Eglin Air Force Base in close proximity to Eglin Air Force Regional 
Hospital, is currently under construction with an expected completion 
date of February 2008 and activation in April 2008. The VA Eglin CBOC 
is a satellite VA Gulf Coast Veterans Healthcare System (VAGCVHCS). 
VAGCVHCS and 96th Medical Group (Eglin AF Regional Hospital) are 
nearing completion of a draft resource sharing agreement by which 96th 
Medical Group will provide, on a space-available basis, the following 
services:

      Inpatient admissions
      Emergency Room
      Some Specialty Care Referrals in Medicine, Surgery, and 
Ancillary Services.

    The VA Eglin CBOC is a 16,700 square foot clinic with primary care 
and outpatient mental health services.
    The target date to complete the resource sharing agreement is 
February 1, 2008 in order to be positioned for the planned activation 
date or April 2008.

    Question 7: In recent years, VA has experienced significant cost 
escalation in the construction of medical facilities. For example, the 
estimate for the construction of a new medical facility in Denver has 
almost doubled to $646 million. What are the causes for these 
increases? What steps has VA taken to prevent such escalation in the 
future? What is the status of a possible collaborative arrangement in 
Denver between VA and DoD or the University of Colorado?

    Response: VA is supportive of a possible collaborative arrangement. 
Collaborations have occurred with Buckley Air Force Base, and design 
plans have ensued, including Buckley's identified needs as part of VA's 
Denver Major project. Discussions are ongoing with the University of 
Colorado on possible collaborations. The construction economy in recent 
years has experienced rampant construction cost escalation in all 
market sectors nationwide. There have been significant increases in the 
cost of labor and building materials and this situation has been 
exacerbated by the rising cost of petroleum for both fuel and building 
products as well as the hurricanes of 2004 and 2005. This situation is 
not unique to VA or even healthcare in particular.
    The Producer Price Index (PPI), published by Bureau of Labor & 
Statistics, has increased by 27 percent from December 2003 through 
August 2007. Commercially published, historic construction cost indexes 
indicate a range of approximately 23 percent to 37 percent increase for 
January 2003 through July 2007. The robust economy has generated an 
unusually high volume of work in the commercial sector resulting in 
non-competitive markets throughout the country.
    While VA can have little impact on market forces that push 
construction costs higher, we can do a better job of anticipating 
market pricing at the time VA projects will go to bid. In that regard, 
VA now conducts detailed market assessments periodically in those 
cities where we expect to be bidding major construction projects. The 
information collected in these studies enables more accurate costs to 
be included in the budget estimates. VA is also revising the planning 
process in order to have earlier definition of project scope and early 
design completed before committing to a budget estimate. This estimate 
will be more accurate with this improved planning process in place.

    Question 8: In 2004, the Secretary agreed with the CARES 
Commission's recommendation that a new medical facility was needed in 
Orlando. However, over 3 years later, this project has not advanced. 
Has the site for the new Orlando facility been procured? If not, what 
is the cause for delay? How will this delay impact the cost of and time 
table for constructing a new facility?

    Response: Funding for this land acquisition of $34 million is 
included in the fiscal year (FY) 2008 budget. In FY 2004, $25 million 
was appropriated for design. The total estimated cost for the new 
Orlando VAMC is approximately $656 million.
    On December 18, 2007 VA and Lake Nona/Tavistock Group (the property 
owner) reached agreement for VA to acquire 65.9 acres of land for the 
new VAMC Orlando through a combination of purchase and donation. A 
purchase option agreement securing the site for VA acquisition has been 
developed and signed by owner and VA senior leadership is reviewing. It 
is expected that the option will be signed shortly and the closing on 
the property will occur in the near future. In the meantime, design 
work has been ongoing.

    Question 9: How many major construction projects are currently 
underway? How many of these projects are behind schedule? What are the 
causes for these delays?

    Response: As a result of the CARES process, 36 major construction 
projects have been funded in whole or part between fiscal year (FY) 
2004 and FY 2007. Eighteen are under construction and one is complete. 
With the exception of one project at Temple, TX, the remainder are in 
the planning and design process. Delays that have occurred related to 
these projects have largely been related to cost issues and 
specifically the rapid escalation in the construction economy and the 
associated need to insure that designs can be constructed within the 
available funds to the greatest extent possible. Other factors causing 
delay have been related to site acquisition issues and unanticipated 
planning requirements to validate the scope of projects. Attached is 
the medical care portion of the Department's report to the Congress on 
major construction delays required pursuant to P.L 109-114.

CONSTRUCTION
1. Atlanta, GA--Modernize Patient Wards
    Status: Funds were appropriated in FY 2005. Procurement action was 
canceled after excessive price proposals were received in September 
2006. The authorization for this project expired on September 30, 2006. 
The Department has requested reauthorization in the FY 2008 budget 
request. The Department cannot make a construction award until this 
project has been reauthorized.
2. Dallas-Fort Worth National Cemetery, Texas--Phase 2 Burial Expansion
    Status: Funds were appropriated in FY 2006. Protracted negotiations 
with the architect/engineering design firm and completion of a Defense 
Contracting Audit Agency audit significantly delayed the contract 
award. A construction documents contract was awarded in November 2006. 
Design is nearing completion. Award of a construction contract is 
scheduled for April 2008.
3. Leavenworth National Cemetery, Kansas--Gravesite Development
    Status: Funds were appropriated in FY 2000 as One VA project 
between the Veterans Health Administration (VHA) and the National 
Cemetery Administration (NCA). The original Congressional Budget 
Prospectus stated that 39 existing structures on 54 acres would be 
demolished and the existing VA national cemetery would be expanded onto 
those 54 acres. The Kansas State Historic Preservation Office remained 
steadfast in their desire to maintain all structures as historic. In 
2005, the Office of Asset Enterprise Management finalized and executed 
an enhanced use lease (EUL) to make use of the buildings through a 
public/private venture. A contract for the master plan was awarded in 
February 2007 based on the reduced available acreage. Upon review and 
acceptance of the revised master plan, a scope change notification will 
be prepared defining the updated project. The revised master plan was 
presented to NCA in November 2007. Award for the design development is 
scheduled for April 2008.
4. Palo Alto, CA--Seismic Corrections Building 2
    Status: Funds were appropriated in FY 2004. The procurement was 
canceled after excessive price proposals were received. The 
Congressional authorization for this project expired on September 30, 
2006. The Department has requested reauthorization for the project in 
the FY 2008 budget request. The Department cannot make a construction 
award until this project has been re-authorized.
5. Syracuse, NY--Addition for Spinal Cord Injury Center (SCI)
    Status: Funds were appropriated in FY 2005. After design began, it 
became apparent that a permanent parking loss would be created by the 
construction of the new addition. To offset the loss, expansion of the 
existing parking garage was added to the project as a first phase. 
Award of the construction contract for this expansion is scheduled for 
September 2008. The phase II portion of the project for the spinal cord 
injury center is under design. The in-progress cost estimate indicated 
a funding shortfall. Additional funds were requested in the FY 2008 
budget request.

DESIGN AND CONSTRUCTION
1. Biloxi, MS--Restoration of Hospital
    Status: Funds were appropriated in FY 2006. Start of design was 
delayed due to the impact of extensive storm damage and cleanup 
activity from hurricane Katrina. Discussions have been ongoing with the 
U.S. Air Force to explore the potential for co-location and sharing of 
services. Schematics, design development, and construction documents 
for the utility upgrades phase 2, clinical addition and blind rehab was 
made January 10, 2008. A construction award is scheduled for phase 1 of 
the utility upgrades in March 2008. A construction award for extended 
care is scheduled for September 2008. The mental health addition is 
scheduled for construction award in September 2008.
2. Columbia, MO--Operating Suite Replacement
    Status: Full funding was appropriated in FY 2007. During the early 
design, concern about the ability to achieve the scope of work within 
the available funds caused a delay. Award of the design development 
architect engineer contract was made in July 2007. The construction 
document contract award was made in December 2007.
3. Great Lakes National Cemetery, Michigan--Phase 1B Development
    Status: Design funds were appropriated in FY 2006. Construction 
funds were appropriated in FY 2007. The phase 1A portion of this 
project was completed in early FY 2007. The same architect engineer 
firm that developed the initial phase 1A design of the cemetery will be 
engaged to provide continuity in design for the next phase. This design 
contract required extensive legal review and negotiations, which 
delayed the contract award. The phase 1B construction documents 
contract was awarded in November 2006 and is scheduled for completion 
in January 2008. A construction award is scheduled for July 2008.
4. New Orleans, LA--Replacement Medical Center
    Status: Full funding was appropriated in FY 2006 under two separate 
emergency supplemental appropriations---$75M in Public Law (P.L.) 109-
148 and $550M in P.L. 109-234. The project is currently undergoing an 
environmental analysis which, upon completion, will allow continuation 
of the site selection process and the actual purchase of the property. 
An award for schematics is scheduled for March 2008. Award of a 
construction documents contract is scheduled for November 2008.
5. Temple, TX--Blind Rehabilitation & Psychiatric Beds
    Status: Full funding was appropriated in FY 2005. The project was 
placed on hold pending the completion of the Capital Asset Realignment 
for Enhanced Services (CARES) follow on study at the nearby Waco VA 
Medical Center. Because the CARES study determined that Waco would 
remain open; there was no longer the need for this project, which 
planned to move functions from Waco. This resulted in a proposed 
cancellation and reprogramming of this project, which was approved in 
the FY 2008 budget.
6. Fort Rosecrans National Cemetery, California--Phase 1 Development of 
        Miramar Annex
    Status: Design funds were appropriated in FY 2005. Construction 
funds were appropriated in FY 2006. VA plans to develop an annex to the 
Fort Rosecrans National Cemetery on 300 acres at the Miramar Marine 
Corps Air Station. All design contract awards are on hold pending 
receipt of an Environmental Impact Statement from the Department of the 
Navy. The Department of Navy is currently in the sign-off process on 
the environmental Finding of Determination. A design award is planned 
for July 2008, and a construction contract award is scheduled for FY 
2009.

DESIGN
1. Denver, CO--Replacement Medical Center
    Status: Funds were appropriated in FY 2004. Pre-design studies and 
environmental due diligence are ongoing. A notice to proceed was issued 
to the architect/engineering firm to begin schematic design. 
Negotiations/discussions for the remaining property acquisitions are 
ongoing. The award of a construction documents contract is scheduled 
for May 2008.
2. Fayetteville, AR--Clinical Addition
    Status: Funds were appropriated in FY 2006. The master plan and 
space program were revised and completed in November 2006. The 
architect/engineer contract for schematics and design development was 
awarded in April 2007, and the contract for construction documents is 
scheduled to be awarded in February 2008.
3. Riverside National Cemetery, California--Phase 5 Development
    Status: Funds were appropriated in FY 2005. Project requirements 
were reevaluated based on changes in gravesite use and an updated 
gravesite depletion date. Award of a design development contract is 
scheduled for FY 2009 with a construction documents contract award in 
FY 2010. While the project was funded in 2005, NCA decided to postpone 
design until 2009/2010 because the current burial inventory will not 
deplete until 2012.
4. San Joaquin Valley National Cemetery, California--Phase 2 
        Development
    Status: Funds were appropriated in FY 2005. Based on changes in 
gravesite use, project requirements were reevaluated and the scope 
adjusted to meet these requirements. A series of projects are ongoing 
to address immediate needs for crypt installation and the site 
irrigation system through FY 2009. The design development contract 
award is being deferred indefinitely due to a recount of available 
burial space. The NCA determined that a new expansion project was not 
required at this time.
5. San Juan, PR--Seismic Corrections Building 1
    Status: Funds were appropriated in FY 2005. Prior to initiating the 
development of schematic design, several studies were necessary to 
determine: 1) the exact method for retrofitting the main hospital 
structure to conform to seismic standards; 2) the optimal approach to 
packaging and sequencing contracts to provide alternative space for 
administration, clinical support and patient care activities; 3) size, 
siting and configuration of these spaces; 4) increased capacities for 
the utility system infrastructure; and 5) impact on parking and site 
traffic circulation patterns and the attendant modifications needed. 
Design development is approaching completion, and the award of a 
construction documents contract is scheduled for May 2008.
6. St. Louis, MO--Medical Facilities Improvements and National Cemetery 
        Expansion
    Status: Funds were appropriated in FY 2007. The varied and complex 
project scope involves the demolition of numerous buildings, 
replacement of the energy plant, consolidation of clinical and 
administrative functions through renovation and new construction, and 
expansion of the adjacent national cemetery to provide additional 
burial capacity. An architect/engineering firm was commissioned to 
conduct a study of these scope elements and develop a planned approach 
for completing the work. Upon completion of the study, the architect/
engineering firm was also tasked with preparing an updated cost 
estimate for the project. The study results indicated that the project 
costs far exceeded what was originally proposed. A master plan is to be 
developed to guide the Department in the approach to the further 
execution of this project. NCA portion of this project will proceed 
with the design development in FY 2008. The early turnover portion of 
the cemetery project can be built without impacting VHA portion of this 
project.

    Question 10: What effect has working under a Continuing Resolution 
had on your ability to move forward with major medical facility 
construction projects?

    Response: The continuing resolution did not impact any major 
medical facility project.

    Question 11: VA testified that two of the construction challenges 
were that the ``rising cost of construction has had a significant 
impact on VA since 2004'' and ``attracting competition for VA major 
projects.'' What steps has VA taken to prevent the escalation of costs 
in the future? What steps has VA taken to increase competition?

    Response: Over the last eighteen months, VA has undertaken in-depth 
market surveys in areas for which major projects are planned. These 
market surveys analyze the current and projected capacity of the local 
construction industry and depict other competing projects in the local 
area. General and sub contractors are contacted concerning their 
strategic plans on future work and their interest in pursing VA's 
project. Material suppliers and fabricators are made aware of VA's 
project while ascertaining reasonable pricing of goods and services. 
The surveys also look at the availability of skilled and unskilled 
labor, along with up to date data on the local conditions affecting 
cost, and current and projected construction cost escalation.
    VA uses the market survey process to stimulate interest in our 
projects within the local contracting community. Packaging or phasing 
of the work may be used to attract increased competition when market 
data dictates. VA is also investigating alternative contracting 
vehicles such as GSA's Construction Manager as Constructor (CMc) and 
similar negotiated types of contracts that will make our projects more 
attractive to qualified contractors.

    Question 12: In March 2007, the Government Accountability Office 
(GAO) issued a report recommending that VA develop performance measures 
for assessing whether CARES is achieving the intended results. Has VA 
developed any performance measures as recommended by GAO? If so, what 
performance measures have been developed?

    Response: VHA is establishing a Department-wide CARES 
Implementation Monitoring Work Group that will be responsible for 
finalizing performance measures and determining oversight and 
monitoring responsibilities in response to the Government 
Accountability Office (GAO) report, ``VA Healthcare: VA Should Better 
Monitor Implementation of Capital Asset Realignment Decisions'' (GAO-
07-408), issued March 2007. The work group will identify new outcome 
performance measures for each of the four foundational goals of CARES 
and a plan to monitor the implementation and impact of CARES decisions. 
Existing and new performance measures to be considered could include: 
activation of CBOCs; expansion of healthcare programming; enrollees 
within drive time access guidelines; underutilized and vacant space; 
patient satisfaction; project execution/status; and support to other VA 
missions, including DoD collaboration initiatives. The work group is 
expected to hold a kickoff meeting in the winter and complete their 
responsibilities no later than spring 2008.

    Question 13: On January 24, 2007, President Bush issued an 
executive order to improve energy efficiency and reduce greenhouse gas 
emissions of the agency, through reduction of energy intensity. How 
does VA incorporate energy efficiencies into its construction planning? 
Among the major construction projects for fiscal year 2008, how many 
will include the building of a new power plant? How much does the 
building of a new power plant add to the cost of building a VA 
facility? What other options are available for powering a VA without 
building a new plant?

    Response: VA has recently completed the Sustainable Design and 
Energy Reduction Manual, which defines the goals and objectives for all 
VA construction projects of 30 percent energy reduction in new 
facilities and 20 percent for major renovations, if lifecycle cost 
effective. The manual includes technical options for consideration by 
the design teams, subject to climate and building type, which include 
building orientation, high performance materials, daylight harvesting 
and lighting controls, as well as a host of high efficiency mechanical 
system suggestions. Incorporating the principles of integrated design 
to assure discussion of synergies between systems will also improve 
energy performance.
    Among the major projects for FY 2008, three include construction of 
energy plants.
    The cost of an energy plant will vary with each project, depending 
on the amount of commercially available power, the cost of that power, 
and the type of VA facility being constructed. The cost for an energy 
plant for the FY 2008 projects is approximately $40 million each, or 5 
percent to 6 percent of the total project cost.
    Options available for powering a medical facility without building 
a new plant will depend on the site, the public utility, and the type 
of VA facility being constructed. Use of utility energy service 
contracts (UESCs), where the utility provides financing to implement 
energy efficiencies, along with enhanced use leasing, are being 
pursued. VAMCs require significant amounts of energy, which can be too 
great a burden for existing municipal or co-facility power 
infrastructure to accommodate, especially if the facility must remain 
operational under the 4-day survivability requirements. However, by 
implementing design strategies that reduce energy demand the 
possibility of being able to utilize existing public services is 
increased. The use of renewable energy alternatives, although first 
cost intensive, may be cost effective if the total energy reduction 
through the use of all strategies can offset the requirements for on-
site power generation. For those locations where power generation on VA 
property is necessary, efficiency options include cogeneration (CHP), 
ground-source heat pumps, geothermal sources, wind energy, biomass, as 
well as other possible solutions.