Review of the Major Construction Project for the New VA Medical Center in Louisville, Kentucky

Report Information

Issue Date
Report Number
25-01782-158
VISN
3
State
Kentucky
District
VA Office
Acquisitions, Logistics, and Construction (OALC)
Asset Enterprise Management (OAEM)
Office of Management (OM)
Report Author
Office of Audits and Evaluations
Report Type
Review
Report Topic
Maintenance and Construction
Major Management Challenges
Stewardship of Taxpayer Dollars
Recommendations
7
Questioned Costs
$1,172,892,283
Better Use of Funds
$0
Congressionally Mandated
No

Summary

Summary

The VA Office of Inspector General (OIG) conducted this review to assess whether VA effectively governed the major medical center construction project in Louisville, Kentucky, specifically whether the project adhered to its initially authorized schedule and budget. Because federal law requires cost estimates but not schedules for authorization, the OIG evaluated schedule performance using Office of Management and Budget (OMB) Circular A 11 guidance, which calls for establishing and monitoring schedule baselines.

The Louisville project is at least 13 years behind its initial plan and is expected to be completed in November 2027. Its projected cost has grown from the 2007 draft business case estimate of $418.8 million to more than $1.1 billion. The OIG found that VA did not implement the required acquisition governance framework, did not provide Congress a complete project cost estimate until FY 2016, and did not submit a business case to OMB. Because VA could not demonstrate compliance with OMB’s business case submission requirements, the OIG reported the over $1 billion authorized for the project as a questioned cost.

Project delays and cost growth stemmed from ineffective planning, repeated scope changes, and failure to follow required acquisition and capital programming processes. VA did not effectively use advance planning funds, delayed initiating required environmental reviews, and used a phased environmental assessment dependent on external agencies. Uncertainty, public concern, and outdated traffic studies ultimately required a full environmental impact statement, which extended the review. VA also did not consistently apply change management controls, did not update business case submissions as required, and understated total project costs by nearly $160 million through unreported obligations and VA requested changes that are required before the new facility can open.

VA concurred with the OIG’s seven recommendations to reinforce compliance with law, regulation, and policy.

Open Recommendation Image, SquareOpenClosed and Implemented Recommendation Image, CheckmarkClosed-ImplementedNot Implemented Recommendation Image, X character'Closed-Not Implemented
No. 1
Open Recommendation Image, Square
to Acquisitions, Logistics, and Construction (OALC)

Establish mechanisms to make sure business cases are developed, promptly reviewed, and approved as required by the Office of Management and Budget Circular A‑11 and VA Directive 0011.

No. 2
Open Recommendation Image, Square
to Acquisitions, Logistics, and Construction (OALC)

Perform periodic reviews to verify that business cases comply with Office of Management and Budget Circular A‑11 requirements by being updated throughout a project’s life cycle to reflect changes in scope, schedule, and cost, and to verify that if changes exceed 10 percent of the initially approved business case, they are reported to the Office of Management and Budget.

No. 3
Open Recommendation Image, Square
to Acquisitions, Logistics, and Construction (OALC)

Verify that milestones for the Louisville new medical center project are updated to incorporate critical user-requested changes and that these changes are completed in a timely manner to prevent further delays, while keeping the project within its authorized scope, cost, and schedule.

No. 4
Open Recommendation Image, Square
to Asset Enterprise Management (OAEM)

Establish controls to ensure the executive director of the Office of Construction and Facilities Management fulfills the responsibilities in VA Directive 0067 to incorporate National Environmental Policy Act analysis early on in all land acquisition, planning, design, and construction projects.

No. 5
Open Recommendation Image, Square
to Asset Enterprise Management (OAEM)

Conduct a comprehensive review of major construction project obligations to ensure all costs related to each project, including those recorded in separate funding lines, are included in the total estimated project costs reported to Congress, consistent with 38 U.S.C. § 8120, 31 U.S.C. § 1105, Office of Management and Budget Circular A‑11, and volume 8 of VA Financial Policy.

No. 6
Open Recommendation Image, Square
to Asset Enterprise Management (OAEM)

Update the responsibilities section of VA Directive 0067 to reflect the expectation that, before budget authorization, major construction projects must proactively identify advance planning fund requirements to support the initiation of NEPA environmental reviews during project development.

No. 7
Open Recommendation Image, Square
to Acquisitions, Logistics, and Construction (OALC)

Provide the VA Office of Inspector General with an implementation schedule for an acquisition framework to enable monitoring of major construction project performance.

Total Monetary Impact of All Recommendations
Open: $ 1,172,892,283.00
Closed: $ 0.00