The VA’s billion dollar boondoggle

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Greg Campbell Contributor
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A long-planned Veterans Affairs hospital being built in Denver, already hundreds of millions of dollars over its $604 million budget, has turned into a billion-dollar boondoggle for the agency.

The contractor, Kiewit-Turner, blames the VA for ignoring agreements to submit plans that can be built within budget and has asked a federal board overseeing civilian contract disputes to let the company walk away from the job.

Problems with the building emerged in January, when letters between the builder and the VA revealed the project to be running some $200 million over budget, with Kiewit-Turner blaming a pricey design that was only partially completed by the time it entered into the contract.

The two sides subsequently agreed — via a handwritten agreement — to build the hospital within the original budget, with the VA in charge of submitting a new, pared-down design reflecting a number of cost-saving measures.

But in a July 8 complaint to the Civilian Board of Contract Appeals, Kiewit-Turner said the VA submitted new plans that are even more expensive than the old ones.

“In fact, the VA has never provided Kiewit-Turner with a complete design for the Project that could be constructed anywhere close to the ECCA [estimated Cost of Construction at Award],” the complaint reads.

The new plans “were increasingly complex, including few cost reductions than expected, significantly increased the scope of work and made the budget problem worse rather than better,” the complaint reads.

The company estimates it will cost over $1 billion to complete the new hospital.

“The VA continues to direct Kiewit-Turner to perform work in accordance with its purported 100% design while at the same time acknowledging … that the VA’s design greatly exceeds both the ECCA and the Ceiling Price and yet refusing to increase the Ceiling Price.”

As a result, Kiewit-Turner said in its complaint, it would essentially be financing as much as $400 million of the VA’s building if it were to follow the new design plans without further funding from Congress.

The company alleges that the VA is breaching its handwritten agreement and therefore the company is under no obligation to continue work.

The new hospital is meant to replace an existing but aging facility. Plans for it have been in the works since 1999.

“As a combat veteran and as a taxpayer, I couldn’t be more embarrassed over what is happening with the construction of our hospital,” Colorado Rep. Mike Coffman told the Denver Post. Coffman serves on the U.S. House Committee on Veterans’ Affairs and the new building is being constructed in his district.

“Our veterans, who have made tremendous sacrifices on our behalf, deserve better than this,” he’s quoted as saying. “And the taxpayers, who are stuck with paying the bill, also deserve better than this.”

In response to the company’s complaint, Thaddeus Willoughby, a senior contracting officer with the VA, denied in a letter sent to the company in June that it breached the contract. Willoughby wrote that just because the cost is going to be higher doesn’t mean Kiewit-Turner can walk away from the job.

“A contractor cannot refuse performance on the ground that performance would entail substantial additional expense not taken into account in its bid price,” he wrote. “Receipt of subcontractor bids in excess of those anticipated by KT’s allocation on this project is not a basis for an adjustment of the ceiling price. Moreover, none of KT’s assertions form a sufficient basis for refusal to continue performance.”

The Civilian Board of Contract Appeals will take up the matter at a future date.

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