Colorado Republican Rep. Mike Coffman is demanding that the U.S. Department of Veterans Affairs respond to charges that it is breaking federal contracting rules while trying to build a problem-plagued VA hospital near Denver.
The $600-million hospital is already significantly over budget, with the primary contractor Kiewit-Turner claiming that VA-demanded design changes will run up the cost to $1 billion.
In a letter sent Wednesday to Veterans Affairs Sec. Eric Shinseki, Coffman says the agency is violating federal contracting regulations by demanding changes without modifying agreements for contractors and subcontractors to ensure they get paid.
As a result, he wrote, suppliers are demanding cash up front for such material as rebar and concrete. That’s forcing contractors to lay out their own money for the hospital’s construction with no guarantee they’ll be repaid.
“This process is problematic,” he wrote, “because the work can only be billed against an agreed schedule of values … It is well established that the government will not make payment to the contractor absent a contract requirement to do so, which means that no payment for additional work is made until a contract modification is issued.”
Coffman is the chairman of the Subcommittee on Oversight and Investigations of the House Committee on Veterans Affairs. Ranking member Rep. Ann Kirkpatrick also signed the letter.
Problems with the hospital construction emerged in January when Kiewit-Turner complained that it was going to run at least $200 million over budget because of the VA’s expensive design, which is said wasn’t completed when bids were entered.
The company has since asked the Civilian Board of Contract Appeals for permission to abandon the project, saying that new designs the VA agreed to submit were even more costly than the originals. Kiewit-Turner now estimates the project will cost $1 billion.
The VA disputes that the hospital is running way over budget and has said the board should require Kiewit-Turner to prove it, according to an article in the Denver Post.
But Coffman’s letter seems to take it at face value that the hospital is more expensive than planned. He cited a parking garage that will add $4 million to the cost of the project as an example of how the VA isn’t following the rules in dealing with contractors.
“While the VA is telling the subcontractors to keep track of the costs and then submit the costs with their monthly bills for base contract work, there has been no attempt to negotiate a contract modification that would enable the subcontractor to bill for this work [on the parking garage],” he wrote.
Without such a guarantee of payment, local companies that supply construction material are refusing to deliver it without payment up front. In the example of the parking garage, a sub-tier contractor has been charged $200,000 for a load of rebar that it couldn’t pay for out of pocket, requiring another contractor to finance the materials.
“Suppliers to these subcontractors, in recognition of the problems of payment on this project, are demanding cash on delivery terms (COD) before they will provide materials or deliver to the site,” Coffman wrote.”
Coffman asked Shinseki’s office for a formal briefing on the issue. Shinseki’s office hasn’t yet responded to the letter.
“I am committed to working with the VA to ensure the construction of this hospital is done efficiently and responsibly so that both the veterans and taxpayers can benefit,” Coffman concluded. “However, the completion of this project will not happen if the contractor and subcontractors are treated poorly and unfairly by an unlawful change order process.”
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