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Hearing of the Senate Veterans Affairs Committee - "The Veterans Affairs Department Construction Process"

Chaired By: Senator Daniel Akaka

Witnesses: Donald Orndoff, Director, Office of Construction and Facilities Management, Department of Veterans Affairs; Brandi Fate, Director, Office of Capital Asset Management and Planning Service, Veterans Health Administration; James Sullivan, Director, Office of Asset Enterprise Management, Department of Veterans Affairs; Lisa Thomas, Director, Office of Strategic Planning and Analysis, Veterans Health Administration; David Wise, Director, Physical Infrastructure Issues, Government Accountability Office; Dennis Cullinan, Director, National Legislative Service, Veterans of Foreign Wars of the United States; David Cox, National Secretary-Treasurer, American Federation of Government Employees

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SEN. AKAKA: The Committee on Veteran's Affairs of the United States Senate will come to order. Aloha. This morning, we'll take a look at the VA construction process, including how VA's vast infrastructure needs are managed. I also want to learn more about where we stand on the CARES effort, the now five-year-old plan to make sense of VA's capital assets.

VA is a large health care system with aging infrastructure and some new and growing needs. Planners have to balance large scale construction projects with costs in the hundreds of millions, along with smaller projects and non-recurring maintenance. VA's infrastructure must be adapted to meet the needs of today's veterans and prepared to respond to the changes that will come.

VA has moved from a hospital-driven health care system to an integrated delivery system that emphasizes a full continuum of care. Lion's share of VA's infrastructure was designed and built decades ago under a different concept of health care delivery. Since then, VA health care has experienced a great shift from inpatient to outpatient services and as a result, VA has a system which generally reflects yesterday's priorities, not today's.

The goal of CARES was a good one, shift resources from under use, inefficient or obsolete buildings to support better ways of furnishing health care. However, the degree to which this has happened as well as the extent to which this continues remains unclear.

In terms of current projects, VA has requested over $1.9 billion for fiscal year 2010 construction programs. While this is significant, it is clear that there is an extensive backlog of major construction projects which requires far more funding with such high dollar figures dedicated to construction projects, the committee must understand the basis for VA's decision process.

I say today's hearing is beginning a focused look at where VA is with respect to its capital infrastructure and how we might go forward. I hope that we will hear some compelling suggestions for expediting the construction process and for improving it.

I would like to now call on -- for the statement of our ranking member, after which I'll introduce our colleagues here for their statements.

SENATOR RICHARD BURR (R-NC): Thank you, Mr. Chairman. Aloha.

SEN. AKAKA: Aloha.

SEN. BURR: Senator Udall, good to have you here. I'll be brief.

Mr. Chairman, thank you for calling this hearing. Welcome to all the witnesses of all the panels.

Mr. Chairman, you've often heard me talk about the need to transform the VA's health care system to a 21st century delivery system and organization. In his budget, the president states that he wants the VA to be veteran centric, results driven, forward looking, and such transformation, and I quote, "is determined by new times, new technologies, new demographic realities, new commitments to today's veterans," end quote. This transformation includes technological advances, new pharmaceutical products and an emphasis on preventative care that greatly reduces the need for lengthy hospital stays. That's a good thing and I've talked to everyone who wanted to spend more time in a hospital.

The transformation also includes providing veterans greater access to care closer to where they live, dislocating families less. Something we've seen with increasing regularity as VA opens new outpatient clinics across the country and some with ambulatory units attached.

The president, Secretary Shinseki, have also endorsed the HCC approach, the health care centers approach to health care delivery. HCC's had the ability to provide 90 to 95 percent of the cares veterans need, including primary care, specialties care, and ambulatory surgery. One of the first HCCs was opened in Columbus, Ohio, last fall.

To supplement the outpatient care provided at the HCC, VA has collaborated with inpatient providers in the community. Although more time is needed to fully evaluate the concept, one thing is clear so far, its saved veterans living in Columbus from having to drive 144 miles to access their health care. I think that's a good thing.

More HCCs are in the pipeline, including three that are in this year's budget for the state of North Carolina. I welcome those HCCs.

These state-of-the-art facilities will eliminate the need for many veterans to drive to faraway hospitals for their care and will stretch VA's construction dollars far more than it otherwise would. We all know that construction dollars are limited. There are 66 major medical facilities -- construction projects vetted and approved by VA for the FY '10 budget. However, appropriations were requested for the design of only seven of these facilities, 59 projects will have to wait until another year.

What this suggests is that the VA and Congress must continue to think of the innovative ways to meet the vast needs that exist in the system. I am pleased we have a panel of witnesses today that can help us try and chart that path forward.

One last comment before I conclude, Mr. Chairman, it concerns the over $1.4 billion allocated to VA on the part of the stimulus package passed last February, which included $1 billion for maintenance projects. According to the administration's web site, the latest numbers indicate that just over three-hundredth of one percent of these dollars has actually been spent to date -- three hundredths of one percent.

We're now in the fourth month since the stimulus package was signed into law. I'm anxious to hear why there's been a delay in spending money that was meant to stimulate the economy and what the plan is going forward.

Mr. Chairman, I look forward to the testimony today and tour being enlightened by our good friend, Senator Udall. I thank the chair.

SEN. AKAKA: Thank you very much, Senator Burr, for your opening statement. Now, I'd like to first welcome two distinguished gentlemen from Colorado, Senator Mark Udall and Congressman Ed Perlmutter. I understand that Senator Bennet is on his way.

They're all supporters of a new VA stand alone medical center at the former Fitzsimmons Army base in Aurora, Colorado.

I can safely say that having the two and possibly three of you certainly gives us full coverage of the Denver issue. So, let's begin with Senator Udall.

Senator Udall?

SENATOR MARK UDALL (D-CO): Thank you, Chairman Akaka, Ranking Member Burr, Senator Isakson, Senator Johanns. I appreciate the opportunity to tell you a little bit about the history of the VA hospital and also where we hope to go in the near and the medium future.

We have a new, and we hope a final plan, for the VA Medical Center on the Fitzsimmons Campus in Aurora, Colorado. Some of you may know the current facility's almost 60 years old, it's at full capacity, and it doesn't meet the needs of our veterans. Sometimes veterans, Mr. Chairman, have to wait months to see a doctor and veterans with spinal cord injuries have to travel to other states for treatment and that's why the development of a state of the art veterans facility at Fitzsimmons was a centerpiece of the VA's capital construction plan under the capital asset realignment for enhanced services or as its known, the CARES program.

Five years ago, as a part of this CARES program, Denver was identified as a city in urgent need of a new VA center. Today, there's still no hospital and the need is still urgent as you can all imagine, as thousands of young veterans returning from Iraq and Afghanistan require care for their wounds, whether physical or mental or both. We also have an additional 400,000 veterans in the region who require care.

So I'm pleased to be able to say, although there've been a few bumps on the road with three secretaries of the VA and numerous plans in many intervening years that Fitzsimmons is again one of the highest priorities for the VA.

As you know, Secretary Shinseki, who came out of retirement I think in the wonderful state of Hawaii, listened to the concerns of our delegation, our local veterans' community and veteran service organizations and his own advisors, and earlier this year he concluded that a stand alone facility with comprehensive specialty care services, including a 30 bed spinal cord injury center is essential in order to meet the needs of veterans throughout the Rocky Mountain region.

We're excited that the plan also includes constructing new health care centers in Colorado Springs, Colorado and Billings, Montana, a number of new clinics and rural health sites, and an outpatient administrative building at the Buckley Air Force Base, which is in Colorado as well.

Mr. Chairman, if I could turn to costs, which are always, of course, very, very important. The new estimate for the cost -- total cost is $800 million with $119 million requested in this year's president's '10 budget. So far, we've allocated -- authorized, Mr. Chairman, $568 million for the hospital, but this isn't enough to get us all the way to the finish line. So I look forward to working with the committee to increase these levels.

I want to thank my colleague, Representative Perlmutter for his hard work and our former colleague, Senator -- now Secretary Salazar for leading the charge when it looked like the VA was going to back away from its promise to build a stand alone hospital.

Senator Bennet has quickly picked up where Senator Salazar left off and he's pushing hard to get the project underway.

In my notes here I'm also encouraged to talk about my contribution. What I would say is I have been working on this for ten years and I was working on this when Senator Burr, Senator Isakson and I were all members of the House of Representatives, all those glorious years in the past.

So, I'm delighted to be here today. Delighted to be able to, I think, see the light at the end of the tunnel. There's a ground breaking schedule in August and I want to thank the committee for giving me an opportunity to speak to you today and I really ask your support so that we can finish this project in the way that our veterans deserve.

Thank you, Mr. Chairman.

SEN. AKAKA: Thank you for your statement, Senator Udall.

I'm going to call on Representative Perlmutter for your opening statement and your statement about Denver and the hospital there. Representative Perlmutter?

REPRESENTATIVE ED PERLMUTTER (D-CO): Thank you, Mr. Chairman, Senator Burr, and distinguished members, thank you for inviting a member of the House to come testify before your committee. But this is a great opportunity for the veterans of Colorado. We've been dealing with this project, as Senator Udall said, for at least 10 years. Sort of back and forth.

And the issue that we're dealing with is the need for a new state of the art Veterans Administration stand alone medical center at the former Fitzsimmons Army Base in Aurora, Colorado.

I would like to acknowledge the work of former Senator Ken Salazar, as well as Senator Wayne Allard, both of whom were strong partners in moving this project forward.

I'm equally pleased that Mark Udall now is a member of your chamber and Senator Mike Bennet are also champions for this particular facility, one that's been long, long overdue, and, Chairman, in your remarks, you talked about sort of the fits and starts within the CARES program and this is one of those examples.

But finally, I think with the concerted effort of the Congress as well as the administration, we can move forward and fulfill the promises that we made to these veterans a long time ago.

General Shinseki, two and a half months ago, in a clear statement said, "we are going to move forward with a stand alone facility, which will serve the Rocky Mountain west and the western plains," so, Nebraska, Kansas, Colorado, Utah, Idaho, Montana, Wyoming, all will be served and the 700,000 veterans within that region will be served as part of this effort.

Our veterans deserve this medical facility. This is one that's worthy of their service. We found, and the CARES report is clear, that the current facility that we have simply is obsolete, it's undersized and isn't meeting the needs of our veterans.

The commission had 38 public hearings and over 200,000 public comments and was completed and accepted by Secretary Principe five years ago and we are on our fourth secretary of the VA and we hope that this time things will move forward with a ground breaking scheduled for the end of August.

The CARES committee report concluded that the -- there was a space deficit of 242,000 square feet. So, as Senator Udall said, the Congress has authorized $568 million for the project, of which $188,300,000 has been appropriated. Property has been purchased and we are ready to turn dirt.

So Senator Burr, your question about the stimulus and moving forward for jobs now to help us within this recession, this project is ready to go.

The new medical center will provide a full range of medical, laboratory, research and counseling services, including a new spinal cord injury unit recommended by the CARES report. Moreover, it will be a joint facility with the Department of Defense to provide care for personnel stationed at installations throughout Colorado and VISN 19.

In order to accomplish this, the president's budget proposes $119 million be appropriated this year for the Fitzsimmons facility.

I applaud Secretary Shinseki and President Obama for bringing closure to this long awaited decision to move forward with this project.

The veterans of Colorado very much appreciate the support of this project that it's received from this committee. The VSOs have been involved from day one in this project and are very supportive and very determined to have this go forward as the chairman knows from a visit he made to Colorado a few months ago.

I thank you for the opportunity to speak to you. This is a critical project for our state and for the Rocky Mountain west and the western plains, and I look forward to your questions and to your support of this project.

SEN. AKAKA: Thank you very much Representative Perlmutter and thank you for your statement.

Now we'll hear from Senator Bennet from Colorado.

SENATOR MICHAEL BENNET (D-CO): Thank you, Mr. Chairman. I apologize for being late. Mr. Chairman, Ranking Member Burr and other members of the committee, thank you very much for inviting me to be a part of today's hearing.

I want to start by thanking Senator Udall for his hard work on the Denver VA hospital and I'd also like the committee to know that Congressman Perlmutter, in particular, has been indispensable in getting this critically important project off the ground.

When I came to the senate just a few months ago, one of the first things that I did was joined Senator Udall, Congressman Perlmutter, and the rest of the Colorado delegation, many of whom had been working on getting this facility built for several years in communicating to the new administration my support for a stand alone facility in the Denver area.

Secretary Shinseki told us he supported a stand alone facility, and as you know, he and President Obama have included $119 million in funding for it in their request for the upcoming fiscal year. We were particularly proud that this was the first decision that the VA made in capital construction this year. This funding will put the $800 million, 200 bed facility, which will serve 400,000 Colorado veterans on track to open in 2013. When it does, 92 percent of Colorado veterans will be within one hour of VA primary care and 81 percent of Colorado veterans will be within two hours of a medical center or health care center.

The new Denver facility will set the bar high. It will bring together the best resources the VA has to offer and enable more veterans to access the high quality care they need and deserve. With capacity for addressing mental health needs and spinal cord injuries, it will be a shining example of how we can do right by our veterans, one that this committee can point to for years to come.

As the committee considers the president's budget for fiscal year 2010, I join my colleagues and ask, on behalf of Colorado's veterans, that you preserve the $119 million the administration has requested for this important project.

I'd also ask you, when the time comes, you increase the authorization of the project to reflect its full estimated costs of $800 million. As the congressman said, the project is currently authorized at $568 million.

I want to just close by saying thank you for your consideration, thank you for your leadership on these issues. To Congressman Perlmutter, everybody in Colorado knows and should know that his commitment to this project has been tireless over many, many years and it's extremely gratifying to see it finally being brought home. So I want to thank you on behalf of all the citizens of Colorado for your tireless work on this. Thank you, Mr. Chairman.

SEN. AKAKA: Thank you very much, Senator Bennet, for your statement.

Before I ask for additional opening statements, I would like to take up Representative Perlmutter's words. There may be some questions that you may -- do you have any questions for him?

Well, thank you very much, Representative, for being here and for your statement.

REP. PERLMUTTER: Thank you very much.

SEN. AKAKA: Thank you.

And now I'll ask for further opening statements.

Senator Isakson?

SENATOR JOHNNY ISAKSON (R-GA): Thank you very much, Chairman Akaka. And I won't make a statement, except unfortunately, given the fact the health committee is getting ready to start marking up the health care bill, I'm going to have to leave. But I did want to raise a question for the panelists that hopefully they'll be able to address to my office.

In Georgia, we are fortunately having a total renovation and completion of the VA hospital on Clairmont Road and we are very grateful for that and I'm very grateful to the committee members who helped me get the appropriation and the appropriations act to do that.

However, we have run across a great problem during the course of the construction and that is, we've lost almost all of our accessible parking, or at least a significant amount of it. Clairmont Road is a very busy road that connects Interstate 85 with downtown Decatur. The VA is operating a shuttle from an offsite parking lot to get patients to there, but we have a number of people who are on oxygen who are being required, even with the shuttle, to walk extensive distances to get to the shuttle to get to the hospital and we have expressed to the VA our concerns and we have had some good attention, I'm not complaining, but I do think when the discussion about logistics and planning for construction is done, and that's part of the purpose of this particular hearing, when there's a displacement of parking, which his oftentimes the case at a site when you do a renovation or improvement, we need to be very conscious in the planning to make parking a high consideration during that period of renovation or construction so as to minimize the amount of difficulty it causes our veterans, patients and with that said, that's my principal question, Mr. Chairman, and I hope during the course of the discussion this morning, although I won't be here, that can be addressed and our office can get a response on the question.

Thank you, Mr. Chairman.

SEN. AKAKA: Thank you Senator Isakson.

Senator Johanns?

SENATOR MIKE JOHANNS (R-NE): Mr. Chairman and Ranking Member, thank you very much for putting this hearing together. I might just spend a moment talking, if I could, about the Nebraska, western Iowa veterans facility that is there and I want to alert the panelists that of course I have an interest in that, having worked my way through government for many, many years as a county commissioner, and a city council member, a mayor and governor et cetera, I'm very used to working with capital improvements processes and budgets and I understand that there's a process that needs to go -- we have to go through. But let me, if I might, cite some of the deficiencies we found in this veterans facility.

There are dust, contaminants, potential infectious vectors are distributed throughout much of the hospital via the HVA system. The hospital could not support a pandemic flu outbreak, which of course is on everybody's mind these days. The system was graded "F" in VA assessments dating back to 1999. In the electrical system there's not enough emergency power that is available to support equipment requiring emergency power.

Now in our state, like probably so many states, emergency power is absolutely necessary. Storms do come through this area and you need that power.

Plumbing and medical gas systems, repairs and renovations require a whole hospital shut downs for water and oxygen. Piping is 50 years old, it's corroded, it fails on a recurring basis.

Moisture is pulled into wall cavities because of the faulty HVAC system, creates a perfect breeding ground for mold in that facility.

Over 4,000 square feet of hospital space isn't occupied, even though we have a deficiency in space in this hospital because there's reactor water in concrete that has yet to be removed.

Now, I could go on and on, that's the bad news of what we're dealing with here. It is not a good situation for our veterans who need care. Really appreciate the work that Colorado is doing, but if you live on the eastern side of the state of Nebraska, that's a ten- hour drive to Colorado. Now we love to visit Colorado but --


-- Except when the football team beats us, but that's a long way away and most of our population, as you know, is in the Omaha, Lincoln, on that eastern one third of the state. So nothing I say here stands in the way of what they're trying to do, I applaud them for their efforts.

That's the tough news. The good news about this project is the community is pulling together and the state is pulling together and western Iowa is pulling together to say how can we be helpful in bringing first class medical care to these veterans who have served our country so well.

The good news is that in Omaha you have two medical centers, two medical schools, great university, my alma mater, first class in the University of Nebraska Medical Center. They want to join forces. They want to do everything they can to bring the best medical care to bear to help these veterans.

Now, again, I understand capital improvements processes, but these conditions are not good and I am hoping that if we can all work together and cooperate on not only this project, but other projects that have this awful list of problems, that we can work together to solve these problems, hopefully work together to get the funding and move these projects forward. No one would like front page stories about these conditions. They are not good.

And so, Mr. Chairman, and Ranking Member, again, I just thank you so very much. This gives us a forum to debate and discuss how best to deal with these issues. The reassuring thing about this committee and the people that come before the committee is we share one common goal and that is, how do we improve the conditions for our veterans and I'm anxious to be a partner in that.

Thank you.

SEN. AKAKA: Thank you very much, Senator Johanns.

And now I want to welcome our principal witness from VA, Donald Orndoff, who's director of the office of construction and facilities management. He is accompanied by Brandi Fate, director of VHA's office of capital asset management and planning service, James Sullivan, temporary director of VA's office of asset enterprise management, and Dr. Lisa Thomas, director of VHA's office of strategic planning and analysis.

I thank all of you for being here this morning. VA's full testimony will appear in the record. So, Mr. Orndoff, will you please begin with your statement?

MR. ORNDOFF: Thank you, Mr. Chairman. Mr. Chairman and members of the committee, I'm pleased to appear today to discuss the status of the Department of Veterans Affairs Facility infrastructure. I'll provide a brief oral statement.

Current medical infrastructure, VA has a real property inventory of more than 5,400 owned buildings, 1,300 leases, 33,000 acres of land and approximately 159 million gross square feet of occupied space, both owned and leased.

Our aging facilities were not designed to meet the changing demands of clinical care for the 21st century. Continuing our recapitalization program is critical to providing world class health care for veterans now and into the future.

MR. ORNDOFF: Our current major construction program. VA continues the largest capital investment program since the immediate post-World War II period. Since 2004, VA has received appropriations totaling $4.6 billion in health care projects, including 51 major construction projects. These projects include new and replacement medical centers, poly-trauma rehabilitation centers, spinal cord injury centers, ambulatory care centers and new inpatient nursing units.

Background CARES. In 2000, the Veterans Health Administration embarked upon the capital asset realignment and enhanced services program, or CARES. CARES assessed the veteran health care needs and promoted strategic realignment of capital assets. In 2003, VA released its draft, national CARES plan and created the CARES commission for further analysis. In May 2004, the secretary published his CARES decisions and identified 18 sites whose complexity warranted additional study. VA completed these studies in May 2008.

Today, strategic facilities planning process. The tools and techniques acquired through CARES are now incorporated into VA's strategic health care facilities planning process. VA no longer distinguishes between CARES and other project planning needs.

Our goal, high performance medical facilities. VA new medical facilities contribute to world-class health care for veterans today, tomorrow and into the 21st century. Our designed goal is to deliver high performance buildings that are functional, cost efficient, veteran centric, adaptable, sustainable, energy efficient and physically secure.

Our acquisition strategies. VA uses a range of acquisition tools that are tailored to best satisfy the unique requirements of each project. We partner with industry leaders through architect engineer design contracts, design bid build contracts, design build contracts, integrated design construct contracts, construction management contracts and operating leases.

Our fiscal year 2010 request, VA's FY '10 budget request continues our recapitalization effort supported by a strategic facilities planning process. VA requests $1.1 billion in FY '10 for major construction to replace or enhance VA medical facilities and $196 million authorization for 15 new medical facility leases. VA also requests $112 million for major construction to expand two national cemeteries.

In closing, I thank the committee for its continued support to improve the department's fiscal infrastructure to meet the changing needs of American's veterans. My colleagues and I stand ready to answer your questions.

SEN. AKAKA: I'd like to now call on our senator from Illinois for any opening statement he may have before we continue with the question.

SENATOR ROLAND BURRIS (D-IL): Not at the moment, Mr. Chairman.

SEN. AKAKA: Thank you.

SEN. BURRIS: Thank you, sir.

SEN. AKAKA: Thank you very much. Mr. Orndoff, accompanying you are various officials involved in the construction process. At the offset, tell me, what these other individuals do specifically and how do they interact with one another?

MR. ORNDOFF: Yes, sir. First, I'll begin with Ms. Lisa Thomas on my far left. She is in the VHA's strategic planning area, which basically defines our strategic requirements and ultimately, identifies where areas of need are, gaps in veteran service need and capabilities. So that office basically defines initially the requirement that needs some type of a solution, a facilities solution being potentially one of those.

Moving to my right, Ms. Brandi Fate, her office is then -- takes that output as input and plans projects -- further defines requirements and develops a project that would move forward. Of course she works closely with the people at the regional level, at the VISN level and at the local level, at the medical centers to fully flesh out the requirements and make sure that a project is coming forward is, in fact, a valid requirement and would be one that would make -- hopefully make the priority list.

The total output of that effort is the list of projects that we have in our five year capital plan, which is 66 projects that were identified earlier, and all of those projects have been validated and are on the list in a priority order.

Mr. Sullivan, to my left, is from our office of management, the asset enterprise management office and he is the key player in working with our office of management and on our fiscal officer to develop the input of where we are in terms of prioritizing projects and his office takes the lead in developing the criteria that's used, certainly, a recommendation that comes forward, ultimately approved by the secretary, using that established list of criteria against the list of projects, we then basically score them and come up with a priority order. The top of the priority list, of course, then is included in the department's budget -- annual budget that would come forward.

So, basically Mr. Sullivan's office sort of manages the process of getting their requirements prioritized and into the budget where the budget limits are and so forth, working with the fiscal officer and so it starts with strategic requirements, project requirements, prioritization, budgeting and then, at the end, I catch the result of all of that and I'm the execution guy, the guy that delivers projects, the brick and mortar that we all know and love.

SEN. AKAKA: Thank you for that explanation.

Now, you stated in your testimony that VA no longer distinguishes between CARES and non-CARES planning. Of all the projects approved by Secretary Principe in his CARES decision, how many were undertaken and where do we stand on those?

MR. ORNDOFF: Yes, sir. Since fiscal year 2004 basically when CARES was initiated, we've had a total of 58 projects identified. Nine of those are complete, 20 are under construction, 13 are in design, 15 are in planning.

Many of them are projects that are continuing to work through the process, as we said, in construction. Certainly, the Denver project that was discussed earlier is one of those projects that's moving forward. Many of the projects that we have partially funded today are a result of the CARES process. All of those requirements that have made that prioritization list, as we continue to refresh it every year, move forward.

Any time a project is partially funded; at that point, there is no longer a prioritization of that project. It is automatically above the line, if you will, and moves forward to completion. So really, it just project specific as to where any particular project is in terms of scheduling and delivery, but in every case where we have a valid output from CARES they have moved forward.

SEN. AKAKA: Thank you. Let me just -- before I call on Senator Burr, what were the lessons learned from CARES?

MR. ORNDOFF: Let me turn that one to Ms. Thomas, if I may.

SEN. AKAKA: Ms. Thomas?

MS. THOMAS: Good morning, Mr. Chairman. As you know, CARES is a data driven assessment of our health care system and it was used to guide the strategic allocation of our assets to support health care delivery. Our goals under CARES were to improve access and quality in the delivery of health care to make sure that it was done in a cost effective manner and mitigated any impacts to our staffing or our communities.

We have several very good results as a result of our CARES program. It did help us identify our priorities and improve our physical infrastructure. It also helped us increase access to services to veterans. And one of the things it did is it really improved our strategic planning and capital facilities planning process in that it led to our first ever five-year capital plan, which now drives all of the budget requests from that point forward.

As Mr. Orndoff said in his statement, we no longer distinguish between CARES and non-CARES because we learned so many lessons as a result of CARES that we've now incorporated all of those tools and techniques that we've learned as a result of CARES into our regular standard operating procedures for strategic and facility capital planning. We developed a ten-step health care model that replaced the nine-step CARES model that we used. Very much is similar to that model. It's a web-based portal whereby it will increase our efficiency with identifying what our strategic needs our. And it has greatly enhanced our ability to continue on the traditions that we learned during CARES.

SEN. AKAKA: Thank you very much. Senator Burr?

SEN. BURR: Thank you, Mr. Chairman. Just one thing on CARES. Did CARES take into account the demographic shift that's happened in American in military retirees?

MS. THOMAS: Absolutely, sir. What we build our planning upon is our enrollee health care projection model, which identifies for us the number of enrollees that we have, where they are, the types and volume and kind of services that they -- health care services that they need and the cost of those services and that model is updated every year.

SEN. BURR: And when the CARES model originally came out, North Carolina wasn't projected to be the recipient of three HCCs, or whatever the equivalent would have been under that, yet I'm not sure anything would fully encapsulate the demographic shift, the decision of retirees to choose North Carolina as home and it does put tremendous stress and strain on the delivery system when the infrastructure is not there to deliver that much care to that many veterans. We appreciate them making the decision to retire in North Carolina; we just want to make sure we've got the capacity to deal with them.

Let me move to you, Donald, if I can, and relative to my opening statement where I made the reference that less than three-hundredths of one percent of the stimulus money had actually gone out, I hope you're going to tell me that my numbers were wrong.

MR. ORNDOFF: So I'm going to, if I may, refer to our subject matter expert, Ms. Fate. Yes, as you mentioned the funding was targeted at maintenance and repair type projects and that function is managed from Ms. Fate's area. So if I may let her respond.

SEN. BURR: Be happy to.

MS. FATE: Sir, the number that we have today, as of our obligations are $27.5 million for the NRM stimulus funding. While that is a small percentage, it took us a while to get engaged because we changed our process to be 100 percent competitive in all of our contracting as well as trying to engage in as many small businesses and 8(a) set aside as we could for these contracts and so that took an additional contract time to write these clauses as well as the Buy American Act and a few other requirements that were put into the contract requirements from OMB.

SEN. BURR: So is the lesson to Congress, that if we're looking at divvying out stimulus money that's more immediate from the standpoint of its need, we probably shouldn't do maintenance projects.

MS. FATE: No, absolutely, sir. We were ready to go with several of these projects and in fact, in March we had a substantial number of projects ready to go, but we wanted to be competitive to the local market so that everybody had an opportunity to get this stimulus funding and within the next few months we anticipate to award about -- at least 40 percent of the stimulus funding.

So, it's -- we're gearing up to go, we just had a few stumbling blocks at the very beginning, but we are projected and targeted to end FY '09 on a positive note.

SEN. BURR: And I appreciate that and I appreciate your diligence at making sure that communities get what, in fact, they deserve. I think the difficult is the American people had expectations that the stimulus money was going out immediately and that's not exclusive to the VA, I think it's across the board and I think they're shocked at the difficulty we're having pushing that money out the door, creating the jobs, having the impact that it was intended on. And I think it's just -- it's absolutely vital that we know the reasons so that we can explain it to them.

Let me go on to another point. Let me go to Denver just really quick.

Mr. Orndoff, it has been a long process and I, for one, have had objections with it at certain times.

Under the original footprint, taking Senator Isakson's comments to heart, what's the parking conditions at the Denver facility as currently designed?

MR. ORNDOFF: Sir, I don't know the specific numbers, but I assure you that the full requirement is part of the solution. We have both structured parking and surface parking as part of the schematic design solution. There is no limitation or trade off on parking. It will meet the full requirement.

SEN. BURR: The last time I looked at the plan it was the billion dollar plus plan.

MR. ORNDOFF: Yes, sir.

SEN. BURR: That's been scaled back to $800 million.

At that time the parking for the Denver facility, because the way the footprint was designed meant that the parking was roughly a half a mile from the hospital and that every patient and visitor would have to be bused to the hospital. Do you know if that's currently still the configuration?

MR. ORNDOFF: No, sir. It is not. The solution is that in the northern part of the site, and it is somewhat of a challenging site in that it's a relatively narrow rectangular site, so it drive a linear solution, facility solution to work on that site. But the schematic design has a -- I think an incredibly well thought out and designed solution. I've personally been involved in reviews of all the phases of schematic design.

The parking is located to the north, but it's on the site and it is connected literally by pedestrian bridge and some of the parking, as I mentioned, is structured and that is actually embedded, almost essentially within the facility itself at the southern part and the mid part of the design solution.

So, there's not a long travel distance. It may be a little longer than in a perfect scenario where we had a site that was larger and a little bit more square in shape or round in shape, but I think it -- there is certainly a lot of attention in the design process to minimize the travel impacts and look creatively on how to do that.

SEN. BURR: Any concern by you or any of your colleagues that are with you today whether the $800 million threshold can be met?

MR. ORNDOFF: In terms of working within that budget?

SEN. BURR: Yes, sir.

MR. ORNDOFF: That is a relatively recent estimation of the new solution. As was mentioned earlier, we changed the design solution when the secretary made a decision to return to the stand alone hospital concept. We did a re-estimation of the project, based on that. Of course part of that is that part of the design solution is growing in other areas, and as was mentioned, Colorado Springs and in Billings, Montana. So part of the design solution is pushed out. So that's why the cost has come down a little bit from the one I believe you referred to earlier, which was about a $1.1 billion solution.

That's not to say we have less service, in fact, we have the same level or arguably a higher quality of service as it's closer to veterans that are served, but in aggregate it's the same capability. The Denver project, specifically, at $800 million will meet the requirement and that also includes an additional scope -- project scope issue of adding renewable energies into the design solution. So it will be --

SEN. BURR: I'm going to try to sneak one more question in --

MR. ORNDOFF: Yes, sir.

SEN. BURR: I assure the chairman, if he gives me the latitude, I won't have to have a second round.

There've been 36 major medical facility projects that have been completed since 2004, how many of those projects ended up costing more than the original projection?

MR. ORNDOFF: Sir, I don't have the specifics on that. I could certainly get it for the record. I think it's fair to say that all projects were delivered within ultimately what was the approved budget. In some cases we had an extremely aggressive market in the construction industry, hard to believe by today's news, but in not too distant past there was a very tough construction market. We had very difficult times getting competition on our projects. Incredible as it may seem to have multi-hundred million dollar projects out when in some cases we had one or two proposals on a project.

SEN. BURR: Would you for the record provide me that number that went over budget?

MR. ORNDOFF: Yes, sir.

SEN. BURR: And in addition, would you add to that how the VA tracks --

MR. ORNDOFF: Yes, sir.

SEN. BURR: The accuracy of its construction budget forecast.

MR. ORNDOFF: Yes, sir.

SEN. BURR: And more importantly, how the VA tracks delays in construction as well.


SEN. BURR: I appreciate it, thanks.

MR. ORNDOFF: Just to be clear sir, you're talking from the original budget?

SEN. BURR: From -- of those 36 projects --

MR. ORNDOFF: Yes, sir.

SEN. BURR: Since 2004, I'd like to know how many were over budget from the standpoint of the ongoing process at VA. What your method is to track the budget relative to the -- what was forecast.

MR. ORNDOFF: Yes, sir.

SEN. BURR: And track delays in construction.

MR. ORNDOFF: Yes, sir. Will do.

SEN. BURR: Thank you. Thank you, Mr. Chairman.

SEN. AKAKA: Thank you very much, Senator Burr.

Senator Burris.

SEN. BURRIS: Thank you, Mr. Chairman. Mr. Chairman, I would like to indicate that we would be submitting some questions for the record because I have points that may not have all the data, although I was wondering if Mr. Orndoff, so many -- with what is happening in Danville. Illinois at that facility. Have you had any direct contact with the VA hospital in Danville?

MR. ORNDOFF: Direct contact? Do we have a project there, I'm not sure?

SEN. BURRIS: Yes, well what we're -- what the director is saying is that a lot of the buildings are old and they're seeking to have this expansion program.

MR. ORNDOFF: Yes, sir.

SEN. BURRIS: And I just wondered whether any of that has been brought to your level of yet. They have a very innovative program going on in Danville with reference to the housing where they're having community housing for our veterans, it's not really assisted living because it's almost independent living and they have at least two of those housing developments up and working where at least ten veterans can be served at these homes and that's all been approved, which I thought was a very, very innovative program for some of the aging veterans.

But they also have these older facilities because that's one of the best one inquiries, because I've visited several hospitals in Illinois and was very impressed with what's going on there except that the facilities -- there's just a need to upgrade it and some of them probably total reconstructions.

So we will be submitting the information to you if you don't -- Mr. Chairman, if you don't have that, we will certainly follow up.

MR. ORNDOFF: Yes, sir. I'd like to take that for a record and give you a full response.

SEN. BURRIS: Thank you. And to Ms. Fate, you mentioned you're working on some 8(a) programs. Now in any of this construction, are you all looking at any type of set aside contracts for minorities and women in your construction process? What are your requirements there?

MS. FATE: I do know that we have a lot of our contracts that focus on the set asides, including minority and women. I do not have the specifics, but we have our targeted socioeconomic goals and we can take that for the record again back with you on --

SEN. BURRIS: I would like to know specifically, what minorities have gotten any work on contracts from any of the VA projects, minorities and women and what is your percentage of that and how is your process in reference to selecting those particular contractors?

MS. FATE: I'll take that for the record.

SEN. BURRIS: Thank you, Mr. Chairman.

SEN. JOHANNS: Thank you, Mr. Chairman. I, as you know, in my opening statement went through some of the challenges we're facing in the western Iowa, Omaha facility. As I understand it, a feasibility study has started with that facility and I think it's been completed. Does anybody on the panel know the status of that?

MR. ORNDOFF: Yes, sir.

Ms. Fate, like to respond?


MS. FATE: Thank you, Don. Yes, sir. We received those -- the feasibility study, the final recommendations at the beginning of May and so we're -- it's four volumes, very thick book -- thick for books, and we're looking through that and we anticipate to have a recordation for VA, hopefully by and within the next couple months.

In the meantime though we do, due to concerns raised by Mr. -- Senator Nelson of the patient -- potential patient -- safety concerns with the HVAC, working with GLHN who's the contractor for it. They garnered all -- enough information from their analysis to provide us a very basic project for -- just to replace the HVAC, which is $90 million and VA -- we were discussing this yesterday, VA is committed to ensure that that basic project, at a minimum is submitted for -- or approved for VA in FY '10 to ensure that we are being proactive to mitigate any patient safety potential issues that might occur at that facility.

But we do want to fully vet that study to ensure that we're moving forward with the right plan, with the best plan for the veterans. We just haven't had a chance to go through all four volumes.

SEN. JOHANNS: Okay, once that is done, kind of walk me through the process of what happens next and maybe even -- and I know it's hard to tell me time lines, but if you could help me understand kind of where we're at in the process and where we go from here.

MR. SULLIVAN: Sure, Senator. What will happen is once the need -- excuse me. Once the need has been verified through the study and the best way to address services is made, a resulting capital project will more than likely come forward. If it's more of a maintenance issue in terms of HVAC and electrical, it may be handled through the non-recurring maintenance program Ms. Fate spoke about, which was the $900 million solution. Should one of the options look at replacing the entire facility or moving the facility, that project then will be put through the 2011 budget formulation process where they will decide on an option, submit, if I you will, a concept paper and application for that project. That project then will be evaluated against all the other projects that are coming in the 2011 process.

In 2010, as Mr. Orndoff referred to where there were 66 projects that came in for full evaluation, it was a larger number than that, but that went through a full evaluation. That will go through that as well. That happens during the summer, in about a month or two that process will move along for 2011 and as the budget formulation process continues through July and August that listing will be submitted to the secretary. There will be a decision made by the VA of what to submit to OMB for 2011, which usually happens in the first week of September, goes through the OMB evaluation process in -- sometimes in December. Pass back will happen from OMB, where VA will get either a list of projects approved by OMB or a funding allocation and then that decision will then be wrapped into the president's submission up to the hill here in the first week of February.

SEN. JOHANNS: Okay, let me if I might, just to wrap up my questioning here, focus on this hoped for relationship with the medical centers in Omaha and the VA. You know I have such confidence in what Creighton does in the University of Nebraska Medical Center and they really want to help here. They tell me every time I see the leader of those programs, "gosh, we want to be on a team to help." Do you see that as a positive and just in terms of advice to the community, how does that interface with what you've just described for me?

MR. SULLIVAN: I think the major, and I defer to Ms. Fate, the major positive in working with the community would be on the services and how those services will be delivered and where those services will be delivered in terms of formulating the optimal solution. So in terms of them working with the medical center staff and the vision staff, that would be helpful in terms of determining where those services should be and what's the best service delivery vehicle. You know whether it be in a VA-owned building, in a renovated VA-owned building, in a shared building. So I mean that's on the ground is when they defined those requirements, that is the best place for, I believe, that interaction to happen.

SEN. JOHANNS: When you are ready for that, I hope you will reach out to Senator Nelson's office, my office, Congressman Terry's office for that matter. Because we -- you know in our state, we just work together on these issues and the other thing I would say, as I look through some of the challenges that we have here, they seem to be quite traumatic. Now, I think, in what you're doing, you're probably feeling like you do triage every day, because there are old facilities out there, they do need complete replacement in many, many cases. This one dates back into the 50's, it is old, its space requirements are a problem, its plumbing is a problem and you could probably say, and you know Mike, we've got a lot on the list like that.

But what I want to say is this, the medical center, myself, others are willing to try to put together working with you, working under your direction, a plan that I think, really, would provide first class medical care and we are excited about Colorado and this and that, but ten hours away for medical care is not a workable solution to this problem. We just simply need something here to try to deal with a facility that probably long ago outlived its useful life.

And the most important message I can deliver is that you're working through this. We don't want to interfere, but we want to try to be a partner in what you're doing. Okay?

MR. SULLIVAN: Yes, sir.

SEN. JOHANNS: Thank you, Mr. Chairman.

SEN. AKAKA: Thank you very much, Senator Johanns.

Senator Begich?

SENATOR MARK BEGICH (D-AK): Thank you, Mr. Chairman. And I apologize, I'll have to leave in a few minutes to go preside and if these questions have been asked, I apologize.

I just want to -- I caught a little bit of what Senator Burr was talking about, I want to kind of follow up on it. And I want to first thank you for the facility in Alaska, the new one that just opened in the Matanuska Valley, the clinic there, it's kind of a partial clinic, but it's a very good center and well received and people very excited about it. I know you have others planned in Juneau and elsewhere.

You know I come from -- after being five and a half years, almost six years as a mayor and I'm just trying to figure out how, with the stimulus money, you're going to achieve -- and if I get these numbers wrong I apologize because I just caught part of the conversation, you spent maybe $27 (million), $30 million and you're trying to get the 40 percent of the stimulus numbers expenditure by the end of September, October 1st, give or take somewhere in there.

Reassure me, I know this discussion occurred a little bit, how are you going to do that? It's a sizable amount; you have very diverse facilities all across the country. I know as a mayor what we do and how we had to do it in regards to our fees and we have to be very aggressive about it and it means that you have to have full force focus, not just normal course of business and give me a couple comments on that and then I'll have some additional follow up. I don't know who wants to respond to that.

MR. ORNDOFF: Maybe if I can just make an opening comment and then I'll let Ms. Fate speak to it as well. We have a network of acquisition professionals across VA that essentially supports every local medical center and certainly even VISN. That business model is ramping up fast and understands the requirement to execute within these timelines and has a strategy to do so. It is -- we're -- as Ms. Fate was mentioning earlier, we're marshalling the troops, we have some initial start up issues, but we fully understand the requirement and the need to execute, not only to obligate the funds, but also to get the output of those projects which will make our medical centers better for veteran care.

So we have the infrastructure in place. It was not, of course, sized to this -- to address this bow wave of requirement that came somewhat unexpectedly, but we're making certainly -- marshalling the troops and understand that those are the goals and objectives and we certainly have a commitment to make that.

So, let me see if Ms. Fate has additional thoughts.

MS. FATE: Sure. Thank you, Don. Sir, one of the tasks that were first given to us about a month ago -- or two months ago, I'm sorry, was to ensure that NRMs both the normal through the FY '09 as well as the stimulus are -- the contracting is first priority. And the contracting staff in the field have made it their first priority, they have been given overtime, they've given comp time to work on the weekends and such to ensure that this is -- that these obligations are on track and are very aggressive in pursuing obligations throughout the year and to ensure that by the end of this year we don't only meet the 80 percent rule for our normal interim, which is, I guess, a 20 percent rule for obligations, which for August -- in August and September. But it also ensures that we have the stimulus funding obligated at least by 40 percent.

But the contracting officers have also other responsibilities that they are working that have been delegated down to them. It used to be that we had a lot of the projects coming forward, once they passed a certain level, $500,000, $5 million, that a new process started backing February, January time frame that has delegated a lot of those tasks to the local level so that this increases the efficiencies of them getting the job done in oversight. And they put additional taskings for senior contracting officers, so that contracting officers weren't burdened with all of the tasks, but that they leveled it out so that they could be more aggressive.

So many steps have been taken at the local level to ensure that these projects have been the primary focus to ensure obligations and so on.

MR. SULLIVAN: And I would just say, Senator, that each of these projects were identified and submitted to Congress. They're also, every week, each project is updated and reviewed with the senior contracting official to ensure that the project is staying on schedule or if there is an issue with the project whether it be legal or technical that the appropriate resource from general counsel or the procurement side as Mr. Orndoff said, is brought to bear so that they are tracked and reported on a weekly, and sometimes twice a week.

SEN. BEGICH: Let me, if I can, just quickly end on this, and again, if you're repeating information I apologize, but if I caught your rule -- it's 40 percent obligated, not expended. Right? Because obligation expense are two different things. So you'll have it associated with a project but not in the field, necessarily, working the project. Am I right?

MR. ORNDOFF: No, obligated meaning there is an actual legal contract award, someone's selected, they've been given notice to --

SEN. BEGICH: Proceed. Okay.

MR. ORNDOFF: The expenditure would be actually paying the bill after the work is completed or put in place.

SEN. BEGICH: So the obligation, the 40 percent obligation level will mean that contracts have been awarded -- I want to repeat what you said, just make sure we're parallel -- awarded, notice to proceed has been given, whatever that time table is, but notice to proceed through the individual --


SEN. BEGICH: Contractor or contractors. Yes?


SEN. BEGICH: And then last, if I could get at a later time, I'd be very curious of a follow up with Mr. Burris and that is the component on the 8(a) components and how you utilize those. I know the Corps of Engineers utilizes -- at least Alaskan aid and 8(a) is very successfully in getting projects out done quickly because of weather conditions and very efficiently and very cost effectively, and I'd be very interested in how you utilize 8(a)s in a competitive process but also a sole source process. Again, the core has an incredible record, a positive record of sole source 8(a)s because of weather conditions especially in Alaska and how they utilize 8(a)s. So I'd be very curious in how you use that in the advantage or disadvantage. If you could share that with me at a later time.

MR. ORNDOFF: We also use what is known in VAs the VOSBs, the small -- veteran owned businesses also in that same category.

SEN. BEGICH: Which, and maybe just add -- and I'll leave on that, and that is could you give me an update in that -- response to this question on 8(a)s, what's your percentage of hit on that. Is it three percent you're trying to hit, is that -- what's the --

MR. ORNDOFF: Agency goal?


MR. ORNDOFF: Got it here, just a second.

SEN. BEGICH: That's okay you can just give me it I don't want to burn up time, Mr. Chairman, but if you cold give me that along with 8(a) in formation, that'd be greatly appreciated.

MR. ORNDOFF: Yes, sir.

SEN. BEGICH: Thank you, Mr. Chairman.

SEN. AKAKA: Thank you very much, Senator Begich.

Mr. Orndoff.

MR. ORNDOFF: Yes, sir.

SEN. AKAKA: Let me ask my last question on CARES.

MR. ORNDOFF: Yes, sir.

SEN. AKAKA: CARES was a very data rich multi layered process that involved a great deal of community input and outside review.

How much community input and outside review do you seek presently?

MR. ORNDOFF: Well, I think the main source of outside input happens at the local level. The stakeholders locally, the veteran support organizations, other veteran patients. There's a process of a continual dialogue and different forms that are developed to try to get input from veterans and the veteran support organization of what are the real priorities that the local medical centers should be focused on in order to provide better care for the veterans.

Those -- that input very much influences the development of projects coming forward and once it gets to the central office level herein D.C., the headquarters of VA, we look at that list in aggregate of course, and go through a prioritization process.

Yesterday there was discussion in a hearing about more involvement of VSOs in the prioritization process and we're going to look at how we might do that, but I think the real dialogue happens locally. I've been personally involved and in the room where giving briefings to local veteran service organizations on projects, New Orleans is a good example, and it's a very spirited discussion and you get lots of good input and I think it definitely helps shape the direction we move and our facility solutions to support veterans.

SEN. AKAKA: Thank you. I have many more questions which I will submit in writing, reflective of how important good construction planning is.

So Senator, Burr do you have any? Senator Burris?

SEN. BURRIS: Yes, Mr. Chairman. To Ms. Fate -- I just hope that that data I requested of you be broken down by categories; blacks, Hispanics, Asians, women. In terms of their ability to receive in you can select a period of time.

MS. FATE: Yes, sir.

SEN. BURRIS: Of these projects, just how many of those projects are going to minority contractors.

MS. FATE: Yes, sir. We'll break it down as far as we can.

SEN. BURRIS: Thank you. Thank you, Mr. Chairman.

SEN. AKAKA: Thank you very much, Senator Burris. I want to thank the panel for your responses; we certainly want to continue to work with you and try to move these programs as fast as we can.

MR. ORNDOFF: Thank you, Mr. Chairman.

SEN. AKAKA: Thank you very much.

Would like to welcome our second panel. First, I welcome David Wise who's director of physical infrastructure issues at the GAO. Next we have Mr. Dennis Cullinan, director of national legislative service at the Veterans of Foreign Wars. And I also welcome J. David Cox, national secretary treasurer of the American Federation of Government Employees. Thank you so much for being here. Mr. Wise, we will please begin with your statement.

MR. WISE: Chairman Akaka, Ranking Member Burr, and members of the committee, thank you for the opportunity to discuss the Department of Veterans Affairs application of enhanced use leases which allows third parties to use government property in return for consideration in cash or in kind.

As GAO noted in its June 9th testimony before the House Committee on Veterans Affairs, subcommittee on health, enhanced use leasing is one of a variety of legal authorities available to help VA manage real property and reduce underutilized space.

With more than 32,000 acres of land and over 6,200 buildings on about 300 sites, VA is one of the federal government's largest property holders, however, many VA properties are aged and not particularly well suited to providing care in the current VA system.

As a result, VA holds a significant amount of property that is underutilized or vacant because of age, condition, location and other factors.

Maintaining this property requires VA to spend funds that cold otherwise be used to provide direct care and other medical services to veterans.

In a report we issued in 2008 we estimated the VA spend $175 million in fiscal year 2007 operating under utilized or vacant space at medical facilities.

My testimony has three parts. I will discuss one -- VA's authority to enter into EULs, how VA has used its EUL authority, and 3, the relationship between VA's authorities and the amount of real property retained or sold.

My statement is based upon our report entitled, Federal Real Property, Authorities, and Actions Regarding Enhanced Use Leases and Sale of Unneeded Real Property issued February 17th, 2009.

On the first point, VA may enter into EULs for under utilized or unutilized real property for up to 75 years in exchange for cash and/or in kind consideration, such as provision of office space or construction of facilities.

After covering the cost of the EUL, VA may use the remaining proceeds for a variety of purposes, including medical care, construction, facility improvement and EULs, without further congressional appropriation or change in law. VA's current EUL authority will terminate on December 31st, 2011.

On the second point, VA has used its EUL authority to reduce the amount of under utilized and unutilized property. In its FY 2010 budget submission, VA reported disposing of 50 buildings and land in F.Y. 2008 using EUL authority. VA currently has 52 EULs including housing, health care facilities, mixed use and other projects. In one example in 2006, VA entered into an EUL that will use almost 300,000 square feet of vacant space at Fort Howard, Maryland to develop a retirement community with priority placement for veterans. While many EULs result in direct services to veterans. In some instances, the relationship is less clear.

For example, VA is leasing property in Hillsboro, New Jersey, to a company that subleases the property to a variety of commercial interests needing warehouse or light manufacturing space as well as the country government.

On the third point, in addition to EUL authority, VA may sell unneeded property and retain the proceeds under its capital asset fund, or CAF authority. However, to do so, VA must determine that the property is not needed to carry out its function and is not suitable of providing services to the homeless. Additionally, VA's use of these proceeds is subject to further Congressional appropriation or a change in law.

Despite this authority to sell property, VA has not sold any real property through its CAF authority. VA has sold only one property in Chicago and that sale occurred under its EUL authority. According to VA officials, EULs are more attractive compared to disposal and sale under CAF, in part, because VA can enter into EULs with fewer restrictions and has more flexibility on how it can use the proceeds.

For example, VA can use EUL proceeds for medical care, but cannot after selling a property.

VA officials said that implementing an EUL can take anywhere from nine months to two years. EULs may also be complex due to issues such as land due diligence, public hearings, requirements, and lease drafting and negotiations. The officials said that they are working to streamline the process.

Mr. Chairman, this concludes my statement. I'll be pleased to answer any questions you or members of the committee may have.

MR. CULLINAN: Chairman Akaka, Ranking Member Burr, aloha and good morning. On behalf of the men and women of the Veterans of Foreign Wars, I want to think you very much for inviting us to participate in today's very important oversight hearing.

In April 1999, GAO issued a report on the challenges VA faced in transforming the health care system. At the time, VA was in the midst of reorganizing and modernizing after passage of the Veterans Health Care Eligibility Reform Act of 1996.

VA then developed a five year plan to update and modernize the system, including introduction of system wide managed care principals, such as the uniform benefits package. In response to the enormous challenges brought about in implementing this plan, VA began the capital asset realignment for enhanced services where CARES process. It was the first comprehensive long range assessment of the VA health care system's infrastructure needs since 1981. CARES was a VA systematic dated revenue assessment of its infrastructures that evaluated the present and future demand for health care services, identifying changes that would help meet veterans needs.

The CARES process necessitated the development of actuarial models to forecast future demand for health care and the calculation of supply of care and the identification of future gaps in infrastructure capacity. Throughout the process we continuously emphasized that our support was contingent upon the primary emphasis being on ES or enhanced services portion of the CARES acronym. We wanted to see that VA planned and delivered services in a more efficient manner, that also properly balanced the needs of veterans and for the most part, the process did just that.

The 2004 CARES decision document gave a broad and comprehensive road map for the future.

The strength of CARES, in our view is not in its resultant one time blue print, but in the decision making framework that produced it. It created a methodology for future construction decisions. VA's construction priorities are reassessed annually, all based on the basic methodology created to support the CARES decisions. These decisions are created system-wide, taking into account what is best for the totality of the VA health care and what its priorities should be.

We continue to have strong faith that this basic framework serves the needs of the majority of veterans. Despite its strengths there are certain challenges. While a huge number of projects are underway, a number of these are still in the planning and design phase. As such, they are subject to changes, but they have also not received full funding. The Congress and this administration must continue to provide full funding for major construction account to reduce this backlog, but also to begin funding future construction priorities.

With the twin problems of funding, the speed in mind, VA's recently been exploring ways to improve the process.

Last year they unveiled the HCCF leasing concept. As we understand it, and HCCF was intended to be an acute care center somewhere in size and scope between a large medical center and a CBOC. It is intended to be a leased facility enabling a shorter time for it to be up and running. It provides outpatient care. Inpatient care would be provided on a contracted basis, typically in partnership with a local health care facility.

While supportive of more quickly providing greater health care access to veterans on a cost effective basis, we expressed our concerns with the HCCF concept in the IV, primarily we were concerned that this concept, which relies heavily on widespread contracting would be done in place of needed major construction. Acknowledging that the changes taking place in health care, VA needs to look more carefully before building new facilities. Costs plus projected usage must justify full blown medical centers. The leasing is the right thing to do only if the agreements make sense.

VA needs to do a better job of explaining to veterans and the Congress what their plans are for every location based on the facts. The ruinous miscommunication that plagued the Denver construction project amply demonstrates this point.

We have seen the importance of leasing facilities with certain CBOCs and vet centers, especially when it comes to expanding care to veterans in rural areas. CARES did an excellent job of identifying locations with gaps in care and VA's continue to refine its statistics especially with the improved data it is getting from DOD about OEF and OIF veterans.

Providing care to rural veterans is a major challenge for the system and the expansion of CBOCs and other initiatives can only help. We do believe, however, that much of what will improve access for these veterans will lie outside of the construction process.

VA must better use its fee basis care programs and the recent initiatives passed by Congress such as the mobile health care vans or the rotating satellite clinics in some areas are helping to fix the demand problems facing veterans and VA.

Mr. Chairman, this concludes my statement. Again, I thank you and the ranking member for inviting us to testify here today.

SEN. AKAKA: Thank you very much, Mr. Cullinan. And now we'll hear from Mr. Cox.

MR. COX: Chairman Akaka and Ranking Member Burr, greatly appreciate the opportunity to discuss AFGE's concerns about the VA's health care center facility leasing program.

I also want to thank the chairman and Senator Rockefeller for their efforts last year to make the information about this program available to the public.

The leasing program was introduced by former Secretary Peak last year and it appears that the VA continues to consider leasing as an alternative to construction of new and replacement VA medical centers.

The leasing program poses the greatest threat to the VA health care system since its creation. If Congress does not investigate and put the breaks on this program, VA medical centers as we know them today will disappear, maybe not next year or the year after, but this unique source of health care for our veterans will become extinct by leasing slow erosion of its core.

How can a 13-page PowerPoint about enhanced leases and large outpatient facilities have a devastating effect on VA medical centers? Because the leasing program is not really about leases, it's about permanently diverting major construction dollars and patient care dollars away from stand alone VA hospitals and shifting them to private hospitals and doing it without congressional authority. It's about starving VA medical centers of staff, beds and maintenance in order to support health care centers, an untested model that has never been used in the public or private sector. It's about an entirely new organizational chart for the VA, ones that have these outpatient facilities reporting to private hospitals instead of a VA medical center.

I will focus the rest of my remarks on how the leasing program is hurting the facility in my home town, that's especially near and dear to my heart, the W.G. Hefner VA Medical Center in Salisbury, North Carolina, the facility where I worked as a registered nurse for 23 years caring for America's veterans. What happened in Salisbury is a useful road map for how not to adapt VA health care to veterans' changing needs.

First, secrecy and exclusion don't work. When medical center Carolyn Adams announced last year that the acute care, intensive care and emergency services were being cut, the veterans would be getting most of the inpatient care from private hospitals that do not specialize in veterans' conditions and are already struggling to treat growing numbers of uninsured. The news same as a complete surprise to veterans, employees, and even some members of Congress. The facility had recently invested in new operating rooms and intensive care units and had recruited more physicians and nurses and veterans in Winston- Salem and Charlotte, the proposed sites for health care centers, already had large outpatient clinics.

Neither Ms. Adams nor VISN6 network director, Daniel Hoffman, who also played an active role in the proposed plan, included stake holders in the planning process. When the VA contracted for a study to consider different options for the facility, the study team did to talk to a single veteran using the facility a single employee providing care.

Second, hospitals with uncertain futures lose staff, and I would refer to that as the Walter Reed Syndrome.

Upon receiving the news of proposed cuts in core inpatient services, many of the recently hired physicians and nurses left for more secure jobs.

Third, don't break promises to veterans. After the huge outcry from North Caroline veterans and labor last fall, the VA put its leasing plans on hold, promising no cuts in services or staff reductions until 2013, yet almost immediately, hiring slowed, renovations stopped and services were cut. Management is still talking about closing the ER and replacing it with an urgent care facility.

I'd like to close by urging this committee to investigate the impact of the leasing program on the Salisbury VA and other facilities before they're irrevocably weakened and the only remaining option for other veterans is a network of contract hospitals and providers.

As for Salisbury specifically, it is clear that Mr. Hoffman and Miss Adams are not serving the interests of North Carolina veterans. North Carolina is home to the fourth largest veterans population in this country, clearly none of us, and I' sure including the ranking member, are interested in having one less VA medical center in the state of North Carolina. Yet management insists on implementing policies that are weakening a full service, nearly 500-bed VA medical center that serves as hub in North Carolina.

It's far better to plan for the future needs of North Carolina veterans, by including lawmakers, veterans receiving this care, and the employees providing this care in the planning process.

Thank you, Mr. Chairman. I'll be glad to take any questions.

SEN. AKAKA: Thank you very much. Mr. Cox for your statement and since you've been mentioning North Carolina; let me call on Senator Burr for his questions.

SEN. BURR: Thank you, Mr. Chairman. I have expressed to the chairman that I've got a mark up in three minutes down at armed services that I need to be -- to run some appointments that need to be made and the chairman was gracious enough to let me go first. And I'm not going to ask questions. I'm going to make a statement relative to specifically HCCs because they've been raised, it's been of great interest, I've spent a tremendous amount of time, I've worked with General Peak, I've worked with General Shinseki, I've worked with most at the VA.

What I've got here is a budget submission. I think it was referred to earlier that seven of the projects that were ranked got funding this year and that's pretty much -- that's not out of the ordinary. That's the available money to handle the maintenance requests.

Now you heard two impassioned pleas, one from my colleague from Nebraska, one from my colleague from Atlanta. The Nebraska project ranks number 16, that's clearly not one through seven. The Atlanta project ranks number 51, that's clearly not one through seven.

Does that lessen what they said? No, we've got veterans that in some cases are hauling oxygen across a parking lot, but let me assure you under the process that all of us agrees has to be followed, because their projects on here are 51 that it's going to be -- I'm sorry that we haven't got the last panel up, they could tell me how many years it's going to be, but I think we all know, probably not while I'm here.

Now, where have we benefited the delivery of health care for veterans if we just queue people in this system without using the flexibility that in fact was the CARES recommendation. Let me read it because everybody's referred to it, CARES. A finding, contracting for CARE provides VA with the flexibility to quickly add and subtract services to meet the changing veterans' needs, contingent on the availability of viable alternatives in the community. What have we streamed about, those of us from states that have a demographic shift of veterans. Geez, VA, Mr. Secretary, what can you do short term, to address the need that we have to deliver care to all these veterans that have moved in?

If we had a stagnant population, I agree, let's do exactly what we're doing and we'll get exactly the same outcome, but in North Carolina, in other states, we have conditions that are different than they were last year, not ten years ago. And to be honest, Mr. Cox, when you say there's a new model, referring to the HCCs, never been used in the public or private sector. My god, what is an outpatient clinic with an ambulatory unit attached to a hospital? That is exactly what an HCC is.

It's set up to take individuals out of the inpatient setting where health care can deliver a higher quality for less money, because there's a higher percentage likelihood that they don't need inpatient care connected to the outpatient procedure.

But in the unlikely nature that a surgeon who does the outpatient procedure says something during this process led me to believe I'd like to use 24 hours to observe somebody in a controlled setting, let me use the facility here versus transferring them to Asheville or to Salisbury, or to Durham or to Fayetteville. Now in the case of Fayetteville, where there's a new HCC, the referrals not going to be to a community hospital when we're got a VA hospital in that community, the likelihood is it's going to be to the VA facility. It doesn't lessen the need for Salisbury or Asheville or Durham or Fayetteville.

It begins to compliment the 21st century delivery system that this administration, the last administration and every secretary of the Veterans Administration have strived for. And I believe it is the mission of those that had a career at the VA to make sure that our veterans have the best possible care.

If doing something different is wrong, then I'm guilty. Because I have pushed every secretary since I've been here, in this capacity to do everything we can possibly do to meet the needs of veterans across the country. In some cases it's by contracting and using that flexibility because there is no service provided in that rural marketplace. in some cases it's to create new entities like HCCs because we can provide that care closer to where they live, displacing them from their family, not arguing over what the mileage reimbursement rates are, we can't keep up with the price of gasoline so we're never going to hit it in an optimal way.

But at the end of the process, having the infrastructure needed, whether it's in Denver where I may have had some disagreements, not on whether we did it or not, but how we did it, not on whether Salisbury is still an integral part of the structure of North Carolina. It's how we build up to compliment the system that we got.

If just building stand alone hospitals was the delivery of care for the 21st century, why would every community in the United States be doing it differently? Why would they be building out these entities that provide a higher level of care?

Mr. Chairman, let me end with this, and I have overshot my time. Health care in the 21st century has to be about educating people how to stay well. Even veterans who are susceptible to needing treatment for certain things, hospital setting is not a place to do that. It's done through out patient facilities. It's done through medical homes. Medical homes aren't created through emergency rooms. Medical homes are established with the confidence that an individual has with a health care professional, and when that bond is established, the education begins.

I think we all know that if we want to bring down the overall cost of health care and raise the outcome, then we've got to bring prevention and wellness and disease management into the VA system just like we do the private sector. You're not going to do that through an emergency room though trauma facilities are important to this country's veterans and we will have them.

But don't throw something overboard that fills out and compliments the health care system, just because we've got a concern that it's leased and not owned or we've got a concern that we're duplicating an area that already has a CBOC, as a matter of fact, we just completed the Charlotte CBOC, less than a year ago and the amazing thing is on the day that I was down there to shovel the first pound of dirt we all knew that it wasn't big enough.

When we decided to build the CBOC in Charlotte, we estimated there were 125,000 underserved veterans in the metropolitan area of Charlotte, some 45 miles to Salisbury. We couldn't get them to Salisbury.

Today, the 290,000 square foot HCC that we -- (inaudible) -- in North Carolina won't replace the CBOC, it's going to be in addition to the CBOC and I'd be bold enough to say today that 290,000 square feet plus the CBOC is not enough to meet the needs of the veterans population that we're going to reach out in northern South Carolina, in southern, North Carolina. And it's not going to have an effect on how many people end up utilizing Salisbury, it's going to mean that we're delivering care to that many more veterans and hopefully we're doing it in the most effective way that we can.

I want to thank all three of you for your willingness to be here today. Want to thank the chairman for what I think is a vital hearing, and I want to thank him for his generosity at letting me go first. Thank you, Mr. Chairman.

SEN. AKAKA: Thank you, Senator Burr for your statement. I would like to ask all of you -- the three of you this question, and it has to do with BRAC, and BRAC has its own identity. The question is, would VA benefit from a BRAC like process which would bundle a variety of recommendations into one package?

I would like to hear from each of you. Mr. Wise, would you begin?

MR. WISE: Mr. Chairman, the subject of our report that I testified about really dealt with the issue of property management among a number of federal agencies, of which VA is one. We didn't really get into qualitative aspects of realignment of VA resources and that sort of thing, but from the enhanced use lease perspective, it is reasonable to assume that if you can reallocate resources from maintenance of unneeded or underutilized property and then transfer them into providing services to veterans, that should be a plus for overall care for the veteran population.

SEN. AKAKA: Mr. Cullinan?

MR. CULLINAN: Thank you, Mr. Chairman. The VFW certainly agrees that there are facilities out there that are not doing the job anymore, they are outdated, in fact they bog down the system. They consume resources that could be better applied. However, at this stage, we would continue to argue that the best course of action would be to go on a case-by-case basis in addressing these facilities. A key element here is to communicate to the veteran population.

In an instance where VAs going to do away with an outdated medical center, for example, what's essential then is for VA to determine what's necessary to take that facility's place with respect to appropriately providing health care services to veterans and then letting that veteran population know about it. Tell them in advance before it's announced that something's going to be taken away. Let them know what's coming. In place of this outdated VA medical facility, we're going to provide three CBOCs, or two HCCs to provide better care in a more accessible manner and we think that will go a long way to addressing this. We're not quite at the BRAC stage yet, we hope. Thank you.


MR. COX: Mr. Chairman, AFGE would be opposed to some process that, like for BRAC, like it's been used for the military, for VA we agree also, but you need to look state by state, facility by facility, the needs of those veterans obviously, I believe the needs of veterans in Alaska and with the vast population is going to vary with the needs of veterans in North Carolina. I mean what's happening in North Carolina is yes, we're building a large health center in Charlotte at the expense of closing a full-fledged VA medical center in Salisbury and those are real issues that I think has to be looked at and how do you close VA medical centers and create outpatient clinics, when a medical center is a hub of the operations of any health care system.

SEN. AKAKA: Thank you. Mr. Cullinan and I know that VA's construction process is something that you've been keeping your eye on for quite a while.

MR. CULLINAN: Yes, sir.

SEN. AKAKA: What are the biggest challenges for VA at this time and how should those challenges be addressed?

MR. CULLINAN: Well, it's one of the things that we just talked about really. It has to do with VA letting the veterans know what it's going to -- wait I'm talking to VA as if it were a sentient being, but letting the veterans know what they intend to do for them to provide proper health care services.

The other issue, of course, is what to do with facilities that have served their purpose because they're outdated, because of shifting demographics, the patient loads have moved elsewhere. Another huge issue of course is providing for rural veterans. I mean that's something right now, there are parts of the country where we're not always, we're not the infrastructure, they're simply aren't the providers. And the response to this has to do with providing the satellite clinics, vans, all the rest of it. But the key issue is letting veterans know what it's going to do. What VA intends to do for them?

SEN. AKAKA: Thank you. Mr. Cox, VA has requested over $1.9 billion for fiscal year 2010 for its construction projects and also faces a huge backlog of projects yet to be completed. What recommendations would you make to Congress about building versus leasing facilities?

MR. COX: Mr. Chairman, I would make the same recommendation I believe about home ownership, we all prefer to own our homes versus to rent homes, and when the VA builds medical centers, owns these clinics and various things of that nature, it's the VA's property. They have a pride in it, they take care of it, it's operated for veterans and probably about 50 percent of the people that work in it are veterans. It creates that community that veterans so often seek, and many studies have shown that, that we need to be building and owning VA facilities. The leasing, you lose sight of the veterans and they are just mainstreamed into a health care system that is already struggling greatly in this country and the care of veterans is very, very unique. And I also believe veterans deserve first priority when it comes to care in this country, sir.

SEN. AKAKA: Thank you for that response. Mr. Wise, what are the pros and cons of using enhanced use leases and how does VA's use of them compare with that of other federal agencies?

MR. WISE: Mr. Chairman, the -- I think from the perspective of the Veterans Administration, the pros for using enhanced use leasing is it gives the agency a bit more flexibility compared to other forms of property disposal or trying to get rid of property that's underutilized or unutilized, due to the way the law is structured. So the -- there are some advantages from the agency's perspective in that they have more flexibility in what they can do with the proceeds and ability to do more with the retention of the proceeds.

As far as it compares to other agencies, it's kind of all over the map. Each agency is governed by a different law and so the majority of the agencies looked at do have some authority to retain proceeds, but it varies somewhat from agency to agency. As you may know, or probably know, there's a bill that's been introduced in the House of Representatives that's currently in committee that is looking at trying to unify the proceeds retention procedures for agencies that will try to do away with these disparities between the large federal property holders.

SEN. AKAKA: I thank you for that. Let me ask my final question, I have other questions that I'll submit for each of you, how significant of a role should community input and outside review play in the VA construction process? We've been talking about transparency and you've mentioned this and what are the potential pitfalls of a system that is not completely transparent? Mr. Wise?

MR. WISE: Mr. Chairman, from the perspective of an enhanced use leasing, there are requirements and provisions that go into developing these leases that take into account certain community needs and other areas that are relevant to leases for the Veterans Administration.

SEN. AKAKA: Mr. Cullinan?

MR. CULLINAN: Thank you, Mr. Chairman. We believe that local involvement is absolutely essential to the process, both with respect to determining who need -- I mean who knows better what their needs are than those -- the potential patients or customers of the VA system.

It also has to do with expectations, letting the veteran population in this case know what they can expect, what the outcome will be of a new facility, an alteration, if a mission change in a facility.

And finally, it helps very much in the end, once all of these things are done in the political process. You're not going to have the outcries and outrage that are sometimes expressed due to not to a bad plan necessary, but that fact that it's just misunderstood. So in terms of establishing true need and involving them in the process early on to avoiding unnecessary problems, we think it vital.

SEN. AKAKA: Thank you.

Mr. Cox?

MR. COX: Taking the input of the veteran employees who take care of the veterans is essential to any process as well as the community and also for members of congress, I have to share with you, Mr. Chairman, Congressman Mel Watt read in the newspaper about the Salisbury VA Medical Center and that was the first time that he was informed that a medical center in his district was being closed and turned into an outpatient clinic, and he had no knowledge and I think certainly involving the members of congress is very, very important to the process and it does create a transparency.

SEN. AKAKA: Well, I want to thank all of our witnesses for appearing today. The VA's construction process and priorities are important to all of us. There is a lot of money at stake in these decisions and the system needs to be transparent to the public. VA construction projects have a great impact on so many of our veterans, and therefore, your input is very, very much appreciated.

As a follow up to this hearing, I will be asking GAO for a global review of the CARES process with a detailed analysis of all of the proposals.

Again, I want to say thank you very much for being here with this hearing today, the hearing is now adjourned.

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