A Dec. 9 ruling by the U.S. Civilian Board of Contract Appeals (CBCA) has hobbled the Department of Veterans Affairs in its beleaguered efforts to complete a new VA hospital in Aurora, Colo.
The board ruled that VA had breached its contract with the Kiewit-Turner (KT) joint venture company by failing to deliver a facility design that could be built for an approved budget of about $583 million.
The American Legion has long-criticized VA's delays and cost overruns for new hospital construction in Colorado, Las Vegas, New Orleans and Orlando, Fla. The Legion passed a resolution last May that called on Congress to improve VA construction programs, and "to consider all available options," including the U.S. Army Corps of Engineers, "to ensure major construction programs are completed on time and within budget."
One day after the CBCA ruling, VA agreed to bring in the Corps of Engineers to oversee the construction fiasco in Aurora.
Louis Celli, director of the Legion's Veterans Affairs & Rehabilitation Division, said VA's Office of Acquisition, Logistics and Construction "appears to have a fundamental flaw in the way it conducts business. If senior executives in that office aren't doing their jobs, then Secretary McDonald should find more competent managers."
In its 19-page decision report, CBCA noted that VA's "current methodology appears to be counterintuitive to the Government's ability to achieve best value."
VA's construction record in Aurora, the report stated, "is replete with instances in which the agency's on-site personnel – project executive, senior resident engineer, resident engineers, contracting officer, and project coordinator for the medical center – lacked confidence in each other's abilities and respect for each other's actions."
The report said VA's construction manager on the project, James Lynn of Jacobs Engineering Group, Inc., described the department's on-site group, "prior to a shake-up in June 2013, as the least effective and most dysfunctional staff on any project that he had ever seen."
As early as October 2010, an independent advisor had cautioned VA that construction costs were increasing. A September 2011 VA project management plan stated quite plainly: "Problem with scope and design management has caused budget overruns." In March 2012, KT told VA that the cost was going over the $700 million mark and, by year's end, the cost estimate stood at $769 million.
Despite ballooning expenses, VA directed KT in March 2013 "to proceed with construction based on the drawings current at that time," according to the report. KT replied "the VA is quickly creating a massive funding issue on this project." Three months later, the company told VA that the Aurora hospital could cost more than $1 billion.
Celli said that VA's insistence to proceed in the face of such serious budgetary issues was a remarkably poor decision, "given the fact that VA agreed to supply KT with updated plans that would reduce the cost, but never did so."
American Legion representatives met with KT last August to hear its concerns about the Aurora project. "We conveyed those concerns to VA," Celli said, "especially the fact that veteran-owned subcontracting companies weren't getting paid – because VA wasn't paying KT. But our complaints fell on deaf ears, because the Legion saw no response whatsoever."
VA, the report stated, "has never sought additional funds for the project, and according to deposition testimony given by VA executives in April 2014, there were no plans at that time to ask for more money….There is little likelihood that the VA will cure its failure, given its insistence that it will neither redesign the project nor seek additional appropriated funds to complete it."
According to a statement issued by KT, the company had tried to meet with VA four times since last August to develop contingency plans to minimize the impact on the project and Colorado veterans, in case the CBCA decision went against the department. "For three months, the VA refused to meet, choosing to listen to its lawyers who said that those efforts would be 'counterproductive.'"
Eventually, VA agreed to a contingency plan meeting and scheduled one for Dec. 18, next Thursday.
In a Dec. 9 news release, KT said the CBCA hearing "revealed that the VA intentionally forced Kiewit-Turner to finance the project by demanding that they continue construction, even though third-party construction and design experts showed the project was going to be significantly over the VA's budget."
The same day, a letter was sent to VA Secretary Robert McDonald from Scott Cassels, executive vice president for the Kiewit Corporation. "The CBCA decision confirms that the contract is broken, both legally and practically," Cassels wrote. "The VA now must quickly and carefully scrutinize all aspects of this project, make appropriate design and management adjustments, and re-procure as soon as possible to minimize further delays for Colorado-area Veterans and cost increases for taxpayers."