Report: Canal Street VA Hospital over budget, behind schedule

The VA hospital under construction on Canal Street is $370 million over budget and 14 months behind schedule, according to a report by the U.S. Government Accountability office that examined the local hospital’s progress, as well as other VA hospital projects across the country.

The New Orleans hospital’s initial cost, according to the GAO report, was $625 million, and work was supposed to be finished by December 2014. But the cost has swelled by 60 percent to $995 million, and now the work is expected to take until February 2016, 14 months later than anticipated.

The delays stem from a change in plans to operate the hospital as a stand-alone facility rather than jointly with the new University Medical Center and other unanticipated events, according to the GAO report.

The delays and cost overruns are not unique to the work here, according to the report. The VA’s four largest ongoing construction projects, which include New Orleans, have seen total costs increase by $1.5 billion and delays that range from 14 months to 39 months.

Locally, the cost increases and delays can largely be blamed on Hurricane Katrina’s lingering effects.

After the storm the VA planned to build a shared hospital with LSU but shelved that idea because of veterans’ concerns about the quality of care they would receive at a shared facility, according to the GAO report.

A VA analysis also found that operating the hospital as a joint venture with LSU would result in “financial and operational” issues.

Delays began to snowball almost immediately after the VA decided to build its own hospital.

The VA signed an agreement with the city in November 2007 that would have required local officials to turn over land for a site within a year of the VA deciding where it wanted to build its hospital.

Instead of getting its lower Mid-City location in 2008, the VA had to wait until June 2010 to get its first parcel of land as the city fought a contentious battle with homeowners and businesses that sat in the planned footprint but did not want to give up their property. The remaining land was handed over to the VA in April 2011.

The city began to demolish and relocate properties in November 2010. And though that work was done within five months, the VA then had to remove hazardous materials it found on the site before it could begin work.

Change orders, which are common in construction projects and deal with altering some aspect of the work, also have been the cause of some delays, according to the GAO report. Officials at the construction site here told the GAO that it was common for the VA to take six months to process a change order. Other federal agencies said it should take no more than a few weeks to approve change orders, Lorelei St. James, director of physical infrastructure issues for the GAO, told a congressional subcommittee earlier this month.

Two years ago the secretary of the VA established a Construction Review Council to oversee the work. An internal report from November found problems in estimating costs, designing projects and managing contracts.

“The analyses revealed that the challenges identified on a project-by-project basis were not isolated incidents but are indicative of systemic problems facing the VA,” according to the GAO report.

St. James said during her testimony that the VA has worked to resolve issues that have caused budget overruns and delays, including the creation of the Construction Review Council. The VA also has begun to work with other federal agencies involved with medical facilities construction to examine best practices and is involving contractors earlier in some projects for greater coordination.

While the New Orleans hospital is one of four large medical centers the VA is building, it actually has 46 other major projects it is working on. Of that figure, 26 are under construction or were recently completed. Thirteen of those saw cost increases while the other 13 saw no change in cost or had a decrease in costs. However, 19 of 24 projects being worked on now are behind schedule, according to the GAO report.

In his response to the GAO, VA Chief of Staff John Gingrich wrote that the department had “significant concerns” about the report, mainly in regard to the cost overruns and delays. But Gingrich wrote that the VA agrees with the GAO that more can be done to improve its processes.

Locally, the department has worked to streamline change orders. Gingrich wrote that the VA has placed contracting officers on site in New Orleans and several other locations to shorten review and processing time.

“(The) VA understands that opportunities exist to improve project management planning and execution processes and continues to take action to close gaps in order to deliver state-of-the-art medical facilities our veterans deserve, on time and on budget,” Gingrich wrote.

The New Orleans VA hospital campus will include 10 buildings on 30 acres bounded by South Galvez Street, Tulane Avenue, South Rocheblave Street and Canal Street.

Hospital officials in February told the City Council’s Health, Education and Social Services Committee that the facility will serve roughly 40,000 veterans in 23 parishes. It also will be a regional referral center, meaning other veterans throughout the southeast United States will use it.