Congress deals with ‘ultimate catch-22’ on funding for VA’s $1.7 billion Denver hospital

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A decade after the Department of Veterans Affairs started planning a new hospital in Denver, everyone now agrees on two basic facts: The project has been horrendously mismanaged, but it also needs to be finished, even though it’s already more than $1 billion over budget.

The biggest remaining controversies are how to pay for it and whether VA should ever be trusted again to manage any other large construction project on its own.

The department told Congress Wednesday that, to finally complete the project originally projected to cost $604 million, it wants to tap into a $5 billion fund lawmakers established last year to help end excessive delays for veterans’ medical care. And if the department doesn’t get approval to do so, there is no backup plan.

In testimony to the House Veterans Affairs Committee, Sloan Gibson, VA’s deputy secretary, issued yet another apology for the half-finished Denver project, which the department says will require an additional $830 million to complete for a final cost of $1.7 billion.

But he told lawmakers that the department believes the only realistic funding source is the large pool Congress set aside last year to hire additional VA staff and perform minor facility upgrades as part of the Veterans Access, Choice and Accountability Act. The department, Gibson said, does not intend to ask for additional appropriations to fix the Denver problems.

“I think in the fiscal environment we’re in right now, the sense was that that would go nowhere,” Gibson said. “This is the least worst alternative we’ve got to do what we need to do, which is finish the project. I don’t have a Plan D. If we don’t get the funding here, I don’t know where we get the funding from.”

But members of Congress, who would need to pass new legislation to allow VA to use the Veterans Choice fund for the purpose VA is proposing, were generally hostile to the idea.

Rep. Beto O’Rourke (D-Texas) is among those who worry that future facility improvements and hiring programs across the country would suffer because of VA’s past mistakes in Denver.

“We all have these stories in our districts, but in El Paso, we have terrible wait times. You’ve visited our hospital and called the conditions ‘unacceptable,'” he told Gibson. “And yet, we’re going to divert funds that could be used for a more urgent crisis, which is taking care of veterans with mental health and other needs that are not being seen today. I’d be much more inclined to support a new appropriation.”

Rep. Phil Roe (R-Tenn.) spoke for several other members in expressing the sentiment that VA has put lawmakers between a rock and a hard place. Lawmakers are loathe to authorize any more funding for what they view as an irredeemable money pit, but since the project is now completely designed and halfway constructed, walking away isn’t easy either.

“I don’t see how we can do anything other than provide the resources to go ahead and finish this, but I feel like I need a bath after all of this,” Roe said. “And now we’re caught up in this. You’ve put us in the ultimate Catch-22, because we don’t want to go forward and we can’t quit. I don’t want to be a project manager because that’s not my job. But as long as I’m in the Congress, I will never vote to see VA do a major [construction] project ever again.”

Gibson acknowledged Wednesday that his department would be wise to team with the Army Corps of Engineers for any large, complex facility it carries out in the future.

He said one of the factors that led to the Denver debacle was that VA’s construction management expertise had atrophied after having gone 17 years without building any large hospital. But he resisted the idea of removing VA from the construction business entirely.

“Major construction projects are defined as anything over $10 million. We’ve got 50 of those right now, and I don’t think it makes sense to pull the Corps in on every single one of those projects,” Gibson said. “I do think it makes sense for the Corps to be our construction agent on projects of this size and complexity, and frankly on any other project where we decide their expertise is going to be helpful. But even if we end up working with the Army in the future, it’s still going to be our responsibility to lock down our requirements and decide what we’re going to build before we come to Congress and ask for funding. That has been part of our problem, but it’s not an excuse.”

But legislation already pending in the House would strip VA of its construction- management role altogether and turn that responsibility over to the Army Corps of Engineers.

The bill, sponsored by Rep. Mike Coffman (R-Colo.), would also pay for the Denver cost overruns by revoking all Veterans Affairs employee bonuses for the next several years, an idea Gibson has previously characterized as “lousy.”

“The only lousy idea I’ve heard is to allow VA to continue paying bonuses to bureaucrats who have overseen secret waiting lists, billions of dollars in cost overruns and other travesties that have seriously endangered veterans,” Coffman said. “This is not just a regional problem, and it is not the VA’s only construction failure. VA has a systemic pattern of failures.”

Gibson minced no words about the failure in Denver, saying his department “bungled” the operation in several ways and vowed that reforms have been instituted to ensure the experience is never repeated.

VA has already asked the Army Corps of Engineers to take over long-term management of the project, and the Corps is in the process of completing an independent cost estimate that it hopes will be lower than the additional $830 million VA now believes it needs to finish construction.

Under current plans, the Army Corps would enter into a new contract to finish the job with Kiewit-Turner, the current prime contractor, assuming Congress goes along with VA’s plan to use funds from the Veterans Choice law.

But the department faces another, even shorter-term problem. After an appeals panel found VA was in breach of its original contract with Kiewit-Turner last December, VA signed a bridge contract with the contractor so that construction work could continue for at least a few months while the larger project transitions to the Army Corps.

But the funding VA is using to pay for that work will run dry by next month unless Congress approves a reprogramming request. And if it doesn’t, construction activities will grind to a halt. Lloyd Caldwell, the director of military programs for the Army Corps of Engineers, said that would only serve to drive costs up further.

“In addition to the increased costs to complete the work whenever it’s restarted at some point in the future, there are a lot of costs associated with just stopping and starting again,” he said. “The contractors have to remove their equipment, close everything up and close up the site. They have to ensure the buildings are tight so that there’s no deterioration to the things that have already been constructed, and they have to ensure there are no public safety hazards left behind. In any case, unless the authorized amount for the project is increased, there’s no authority to spend any more funds on it.”

Aside from the staggering cost overruns, members of Congress are almost universally upset about what they perceive as a lack of accountability on the part of VA leaders who made some of the first decisions for Denver, including approving the start of construction long before the facility was completely designed, and demanding that it be delivered for a firm, fixed price while continually delivering new requirements to the contractor.

None of the VA officials who made those crucial decisions are assigned to the Denver project any longer, and only one is still employed by the department at all. But so far, none seem to have faced severe disciplinary action.

The department has convened an administrative investigation board to examine the entire affair. Three weeks ago, it deposed Glenn Haggstrom, VA’s then-director for acquisition, logistics and construction. One day later, he arrived at work with papers in hand to retire from government service, effective immediately.

Gibson said he began to look over Haggstrom’s testimony for potential disciplinary action the evening after the review board heard his deposition, but soon discovered that Haggstrom was no longer a VA employee.

“I recognize that his retirement has been criticized and has been frustrating to many. But the law allows federal employees to retire if they are eligible to do so, and as I reflect on 30 years’ experience in the private sector, that’s pretty much the way it works there too,” Gibson said. “While I understand and share in the frustration, I will continue to pursue accountability actions wherever the evidence from our investigation board supports it.”

VA replaced Haggstrom last week by naming Greg Giddens, a longtime federal procurement official who has worked for the Defense Department, the Air Force and the Coast Guard as its new acquisition and construction chief.

But several members found the fact that Haggstrom was allowed to retire in lieu of any potential disciplinary action especially upsetting in light of a whistleblower account that came to light earlier in the week: The Denver Post reported on Tuesday that a former VA contract specialist, Adelino Gorospe, had warned in emails that the project would be wildly overbudget several months before construction even began, and suggested that Haggstrom had fired him for raising red flags.

“What’s confusing is that VA leaders can make mistakes that cost billions and billions of dollars and they face no accountability,” said Rep. Jeff Miller (R- Fla.), the chairman of the House Veterans Affairs Committee. “We keep being told that it’s impossible to fire people, and yet somehow the low-level guy got the axe. How does that happen?”

“It’s no more acceptable to me than it is to you,” Gibson replied.

He said he first learned of Gorospe’s story via press accounts, but promised to ensure that it would become part of the ongoing review board investigation.

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