AURORA | Aurora’s replacement veterans medical center is now years behind and hundreds of millions of dollars over budget with no clear path for how to rein in costs, leaving officials across the country to shake their heads but offer little in the way of new direction.
Kiewit-Turner, the contractor in charge of building the massive medical center on the corner of the sprawling Anshutz medical campus, says cash is so short for the Veterans Affairs’s hugely inflated $1 billion design, it’s now footing the bill.
“By the end of this year, we will be out $100 million,” said Kiewit spokesman Tom Janssen. He said Kiewit-Turner is not stopping construction on the medical center, but it is asking the VA to make that money available by taking funds from the tail end of the project to cover Kiewit’s 2014 construction costs. He said the cost dispute has delayed the opening of the hospital until 2017, two years behind the VA’s anticipated schedule.
Illustrating what has become a huge disconnect between the VA and Kiewit, VA officials remain firm on the hospital being completed by May 25, 2015 for $800 million.
Glenn Haggstrom, the principal executive director of the VA’s office of acquisition, logistics and construction, said at a hearing held April 22 in Denver by U.S. Representative Mike Coffman, R-Aurora, that the project was 44 percent complete. He said the VA has paid Kiewit-Turner $254.9 million for work performed under the contract agreement, and had increased the budget to $630 million to reflect approved changes to the contract.
The hearing was part of legislation Coffman introduced in February that would require an emergency manager from the Army Corps of Engineers be appointed to provide oversight for all existing VA major medical facility projects under construction — especially the Aurora project. It was held in front of the subcommittee on oversight and investigations, under the U.S. House of Representative’s Committee on Veterans’ Affairs, which Coffman chairs.
The VA, which has employed the joint venture H+L/SOM LLP/CRA/S.A. Miro to design the hospital, has asked Kiewit-Turner for proof that the project is over budget.
Janssen said the request has been impossible to respond to because the VA never delivered a design that could be built for the agreed-upon budget. “Our contract was to build the hospital for $604 million if they delivered a design that could be built for their budget. That never happened. Their design was 10 months late and more than $400 million over their budget,” he said. “From the beginning, we consistently communicated that the real cost exceeded the VA’s budget. We gave them multiple options to reduce costs.”
Last July, Kiewit filed a complaint with the Civilian Board of Contract Appeals that said after the initial agreement over the hospital’s budget in November 2011, the VA submitted design plans to Kiewit that were more complex and that “significantly increased the scope of the work.”
The new medical center is slated to be 1.2 million square feet with nine buildings that will include two inpatient facilities, three clinics, as well as a research facility and an energy center with solar panels. There are plans for three parking structures, one which will be located underground next to the outpatient buildings.
Haggstrom testified at the hearing that the VA would not respond “to the matters at issue in litigation.” He confirmed that as of March, Kiewit had filed 23 complaints with the Civilian Board of Contract Appeals seeking $13.3 million in monetary relief for the project. A federal judge in Denver will hold a hearing on the cost dispute between the VA and Kiewit at the end of May.
A 2013 Government Accountability Office report that surveyed four major VA regional hospital projects in the U.S. found them on average, 35 months behind schedule and $336 million over budget. Aurora’s VA hospital cost increase of 144 percent was the largest of any of the four surveyed at $472 million, with an increase from $328 million in June 2004 to $800 million in November 2012.
Lorelei St. James of the GAO testified at the hearing that the VA had taken steps suggested by the report to reduce cost overruns and delays. Those included developing guidance on the use of medical equipment planners, and streamlining the change-order process.
“Since completing our April 2013 report, we have not reviewed the extent to which these actions are being employed for or have affected the Denver project or other projects, or the extent to which these actions may have helped to avoid the cost overruns and delays that occurred on that specific project,” she said.
Michael Gifford, president of Associated General Contractors of Colorado, also testified at the hearing in support of Coffman’s bill.
“This is a cash flow crisis for businesses on the project, and quite frankly not a risk that contractors working for a federal agency should have to worry about so they do not have to price anticipated late payments into their initial bids,” he said.
The VA Office of Acquisition, Logistics, and Construction said in a statement in response to questions about the hearing that the “VA has changed the way it conducts its construction business significantly,” since implementing recommendations from the April GAO report. The statement continued, “The VA remains focused on managing this project to completion, and refuses to be distracted by the claims, allegations and media attention. VA continues to work with the contractor to keep the project moving forward.”
Coffman said in a statement in response to the hearing,“Given the potential additional costs and delays due to litigation brought on by VA’s refusal to pay the contractors and subcontractors for honest work and the inevitable additional costs associated with start-up, there is no doubt that this facility will reach an unbelievable cost of approximately $1 billion.” “It seems apparent that Mr. Haggstrom is not the guy to get this job done, and VA is not capable of running a large construction project.”
Sara Castellanos contributed to this story