VA's progress since CARES

An Online Interview with Jim Sullivan, VA Office of Enterprise and Asset Management

Q: One of the main objectives of CARES (Capital Asset Realignment for Enhanced Services) was to reduce the cost of maintaining unnecessary facility space, at the time estimated at $1 million per day. Have new VA construction efforts made headway toward reducing that cost?

VA: CARES had many goals and drivers, including reducing the cost to maintain un-needed assets. In addition to the CARES figures, the Government Accountability Office did a study in 2008 that estimated VA was spending $175 million annually on maintaining vacant or underutilized assets. While VA disagreed with the number presented by GAO, we agree that maintaining un-needed assets was a concern.

VA has made a concerted effort to dispose of, or reuse, underutilized and vacant assets across its real-property portfolio. In the last five fiscal years – 2008-2012 – VA has disposed or repurposed 538 buildings totaling 5,168,481 gross square feet. In the same period, VA has reduced its vacant square footage from 7,248,661 to 5,731,854, a decrease of 21 percent. These reductions have had a positive impact on the cost to operate un-needed assets.

In fiscal 2012, VA executed 40 enhanced use leases (EULs), many of which originated as part of VA's Building Utilization Review and Repurposing (BURR) initiative. These 40 EULs are expected to result in the repurposing of more than 200 buildings of underutilized capital assets and are expected to provide approximately 4,400 units of housing for veterans and their families who are homeless or at risk of homelessness.

At the end of Fiscal Year 2008, VA estimated it spent approximately $45 million annually – approximately $123,000 per day – to maintain vacant or underutilized assets. This is based on the operational cost guidance established by the Federal Real Property Council (FRPC) and is used as a standard for federal real property reporting. At the end of fiscal 2012, VA estimated it spent $23 million annually (approximately $63,000 per day) maintaining vacant or underutilized assets, a reduction of 49 percent from FY 2008. The aforementioned disposals and reuse projects are the primary driver for this reduction in operational costs. VA also has plans for further disposals and reuse projects in the coming years that will further reduce the amount spent on these un-needed assets.

Q: Another point of CARES was to put more VA facilities in the proximity of veterans where they live – thus, Las Vegas and Orlando, and many more community-based outpatient clinics. Are there now enough medical centers and CBOCs in the right geographic locations for the veterans they serve?

VA: VA engages in thorough and continuous analyses of several factors when planning for veteran health care delivery in communities. Identifying appropriate locations to site VA health-care facilities requires extensive analysis of a multitude of factors. These factors include projected total veteran population, veteran-enrollee population and utilization trends over a 20-year planning horizon. VA is continually working to assure that there are enough resources in the right geographic locations for the veterans we serve.

Specifically, VA's Enrollee Health Care Projection Model projects the number of veteran enrollees in a geographic area; the total continuum of more than 50 enrollee outpatient and inpatient health-care services, including specialty care; the portion of care enrollees are expected to receive in VA versus from other health care providers over a 20-year planning horizon; and population and demand projections, which account for current service members and new veterans from recent conflicts (Operation Enduring Freedom/Operation Iraqi Freedom/Operation New Dawn) and include gender-specific health-care needs.

Assessment of veterans health-care delivery needs is based on model projections and on criteria such as existing and planned points of service (both VA and non-VA), access standards, market penetration, cost effectiveness, waiting times, and other unique factors using VHA's Health Care Planning Model (HCPM).

The HCPM provides a standard 10-step study methodology to proactively evaluate the comprehensive health care needs of veterans in Veterans Integrated Service Network (VISN) markets, and develop strategies to meet those needs. The HCPM uses a live portal for systematic data analysis. The appropriate data sources are built into the portal to maximize the time VISNs spend in analysis versus data gathering. Identified capital initiatives are entered into VISN Strategic Capital Investment Planning (SCIP) Action Plans and Strategic Capital Assessments.

VA's thorough and statistically rigorous planning ensures that veterans receive the highest quality care in the most appropriate locations for inpatient and outpatient services.

Q: Is the CARES blueprint still considered, or has it run its course? Is now the time for another roadmap for future facility construction?

VA: VA initiated a new long-term planning process called the Strategic Capital Investment Planning (SCIP) process in 2010 for the 2012 budget. This process built upon the lessons learned in CARES, and enhanced planning and budgeting to ensure all VA capital investments are prioritized in an integrated manner. The SCIP process ensures that VA capital investments address VA's most critical infrastructure gaps and the needs of the veteran.

Q: The last new VA medical center built by VA was West Palm Beach. What was its cost, time of construction and budget performance?

VA: The West Palm Beach VAMC was completed in March 1996 with a total cost of $127.965 million, below the total cost estimate of fiscal ‘90. The project began design in June 1985. The total estimated cost when requesting initial design funding in FY ‘88 was $115 million. The total estimated cost when requesting the remaining construction funding in FY ‘90 was $138.1 million. The hospital took approximately 11 years to build, from design through completion.

Q: How does VA's effort to better serve women veterans affect construction planning?

VA: Each business case application for a capital project is rated on how well it addresses 20 scoring criteria. The scoring criterion where women veterans' issues are addressed is called Supporting Initiatives. Point values for projects that address the women veterans Supporting Initiative are based on ratings given by the SCIP Panel members and the priority weight of the Supporting Initiative scoring criterion.

Q: In the era of sequestration, how well protected is VA facility construction? As a discretionary budget item, is construction an area where reductions can be expected?

VA: In fiscal 2013, VA programs were exempt from sequestration. In the case of a FY 2014 cap breach, VA's discretionary administrative expenses, in all accounts, would be subject to sequestration. Administrative expenses represent roughly 85 percent of VA's discretionary budget authority, including administrative expenses to provide medical care. VA mandatory spending, including veterans disability compensation, education, and survivor and pension benefits, would be exempt from sequestration. The impact of sequestration on VA services would depend on the size of the reduction.

Q: When you look at the recent and ongoing medical center projects – Las Vegas, Orlando, New Orleans, Denver – why do they differ so greatly in terms of construction performance, time and cost? Can't hospital and clinic construction be standardized in some way?

VA: Construction contractors set the means and methods for how a project is built, and control the schedule. Each contractor may use different methods for accomplishing the project. These are based on their experiences and those of their subcontractors. These play a significant part in advancing the construction.
Project costs are generally market based at the point of award. Labor markets and availability of subcontractors have a great influence on price.

VA has not adopted standardized designs for new hospitals. Each project is unique in the programs (services) that will make up the hospital. These programs also vary in size based on projected demographics of the local veteran population. Additionally, each project site has physical characteristics that influence the layout of the facility.

VA does, however, have design criteria and specifications that provide each project's designers guidelines for developing departmental layouts and adjacencies. VA is exploring various concepts to streamline designs, such as modular blocks that can be assembled for projects.

Q: The American Legion has long advocated for a very aggressive veteran-hiring drive for VA construction, as well as the use of veteran-owned businesses as subcontractors. How well is VA doing on that front?

VA: VA is doing well with regard to including Service Disabled Veteran Owned Small Businesses (SDVOSBs) and Veteran Owned Small Businesses (VOSBs) on our major construction projects.

VA continues to set aside procurements to SDVOSBs and VOSBs based on market research. The Office of Construction and Facilities Management (CFM) holds Industry Day Forums on major projects and invites SDVOSBs and VOSBs to participate. CFM collaborates with the VA's Small Business Office and Small Business Administration's local and regional offices to identify SDVOSBs and VOSBs.

In addition, on full and open procurements, CFM has selection factors of past performance for subcontractors. On large procurement awards, CFM evaluates how to divide portions of the projects for small businesses to include SDVOSBs and VOSBs. Furthermore, during the evaluation process, extra points are given to contractors when they include small businesses such as SDVOSBs and VOSBs above and beyond the statutory contracting goals.

Based on CFM's Electronic Subcontracting Report for 2012, we met or exceeded our goals. The following information is based on large prime contractor awards to small businesses to include SDVOSB and VOSB totals for 2012:
• SDVOSB total subcontract awards percentage goal: 7.64% / Actual: 12.3%
• VOSB total subcontract percentage goal: 10.17% / Actual: 15.31%

Q: We have to ask about parking. At many VA Medical Centers nationwide, veterans have to wait in valet lines, drive around in circles in overfilled parking garages and often can't see a doctor because they can't get a place to park. Is VA making progress on this problem? If so, how?

VA: Parking has been a significant issue for VHA for years, and the need continues to increase due to the focus on outpatient care and family support. Many medical centers have made several successful attempts to positively impact the demand, such as valet parking, shuttle buses for employees, incentivizing employee carpooling, etc. VHA dedicated 10 percent of VHA's minor construction funding from fiscal 2008 to fiscal 2012 to construct parking garages. With the inception of the SCIP cycle, parking was included as a significant sub-criteria for prioritizing and weighting each initiative. VHA is collaborating with Office of Construction and Facilities Management to update the parking model based on industry and latest design standards. This model has been used over the years to help estimate the parking needs at medical centers, and results have appeared to be fairly close to target.

It is anticipated that this latest update will provide a more refined estimate, resulting in even greater accuracy in the anticipated need for parking over the next 10 to 20 years. Since the Strategic Capital Investment Planning process began in fiscal 2012, a total of 43 parking projects have been approved for funding: seven in fiscal 20012; 16 in fiscal 2013; and 20 in fiscal 2014.

Each business case application for a capital project is rated on how well it addresses 20 scoring criteria. The scoring criterion where parking gaps are addressed is called Other Gaps. Point values for projects that address parking gaps are based on the percentage of the gap filled and the priority weight of the Other Gaps scoring criterion.

Q: How have the regulations with Congressional Budget Office scoring of leases changed, and what impact has that caused for Community Based Outpatient Clinics currently and in the future?

VA: The proposed scoring rule would require VA to obligate all leasing costs in the first year instead of spreading out over 10- or 20-year lease terms. This significant change in the interpretation of leases has prevented VA from going forward with any of the 27 authorization level leases that were proposed both in 2013 and 2014. The department is very concerned about the potential negative effects on veterans utilizing VA health care. If the department is unable to pursue these planned projects, six existing clinics may have to close, 14 will have constrained services to already over-populated facilities, and long-planned expansions to address veterans' health care needs will not move forward. VA is working to minimize or avoid disrupting or degrading veterans' access to health care and hopes to continue to work with Congress to resolve this issue.

Q: At the current construction funding level, how long will it take VA to correct the 4,600 deficiencies accounted for in VA's Strategic Capital Investment Plan?

VA: The 2014 SCIP identified $54 billion in capital needs, this includes $5.7 billion in prior approved partially funded major construction projects. The 2014 request totaled $2.4 billion. It would take 22.5 years to fully fund the SCIP action plan. This estimate does not factor in changes in VA policy or capital-management practices, advances in construction or medical delivery technologies or further degradation of VA's aging infrastructure.

Q: What consequences and concerns do you foresee if VA's construction budget is not sufficiently funded?

VA: VA aged infrastructure will continue to degrade, facilities will become more obsolete as technology and health care and benefits modes of delivery evolve and change, improvements to safety, security, access, space realignment will be hampered.

Q: What can The American Legion do to help VA on the construction front?

VA: The American Legion can help VA by continuing their efforts to ensure veterans gets the facilities, care and benefits that they have earned. The American Legion's assistance is needed to support VA's Budget and Authorization requests.