VA Real Property: Realignment May Benefit from Adopting Elements of Defense Base Realignment and Closure Process, Provided Process Challenges Are Addressed

VA operates one of the largest health care systems in the United States, utilizing more than 6,000 federally owned and 1,500 leased buildings. DOD has repeatedly applied the BRAC process to reduce the amount of unneeded property that it owns and leases and to save billions of dollars that could be applied to higher priority defense needs.

This statement is based on GAO's April 2017 report related to VA facility alignment ( GAO-17-349 ) and numerous GAO reports related to the BRAC process as summarized in a June 2011 testimony ( GAO-11-704T ) and a March 2012 testimony ( GAO-12-513T ). This statement addresses (1) the factors that affect VA's facility alignment and the extent to which VA's capital-planning process facilitates the alignment of facilities with the veterans' population, and (2) the key elements and challenges affecting DOD and the Commission in BRAC 2005. Detailed information on our scope and methodologies for this work can be found in these published products, cited throughout this testimony.

Geographic shifts in the veterans' population, changes in health care delivery, aging infrastructure, and limited stakeholder involvement affect the Department of Veterans Affairs' (VA) efforts to align its services and real property portfolio to meet the needs of veterans. For example, a shift over time from inpatient to outpatient care will likely result in underutilized space once used for inpatient care. Further, the historic status of some VA facilities adds to the complexity of converting or disposing of them. In such instances, it is often difficult and costly for VA to modernize, renovate, and retrofit these older facilities.

GAO reported that two of the planning processes VA uses to align its facilities—VA's Strategic Capital Investment Planning (SCIP) and the VA Integrated Planning (VAIP)—have limitations that undermine VA's efforts to achieve its goals. Specifically:

VA relies on the SCIP process to plan and prioritize capital projects, but VA routinely asks its facility planners to submit their next year's planned project narratives before knowing if their previous submissions have been funded. The overlapping budget cycle, which is outside of VA's control, combined with other SCIP limitations—including subjective narratives, long time frames, and restricted access to information—make it difficult for VA to rely on SCIP to accurately identify the capital necessary to address its service and infrastructure gaps. VA concurred that it needs to address SCIP limitations that are within its control, as GAO recommended; VA has made some progress in implementing the recommendation has made some progress in implementing the recommendation.\

The VAIP process is estimated to cost $108 million and to produce market-level service delivery plans and facility master plans. However, the VAIP master plans incorrectly assume that all future growth in services will be provided directly through VA facilities without considering alternatives, such as purchasing care from the community. GAO recommended that VA consider discontinuing the VAIP facility master plans pending an assessment of their value as a facility-planning tool. VA agreed with the recommendation and is implementing it while pursuing a national realignment strategy..

Key elements of the Department of Defense's (DOD) 2005 Base Realignment and Closure (BRAC) process could benefit VA's asset and infrastructure review. The key elements included: (1) establishing goals for the process, (2) developing criteria for evaluating closures and realignments, and (3) establishing an organizational structure to develop closure and realignment options. GAO identified key challenges that affected DOD's implementation of BRAC 2005 and the results achieved; these challenges would need to be addressed if VA is to successfully apply the process. These challenges included: (1) large, complex recommendations required sustained senior leadership's attention and a high level of coordination among many stakeholders, and (2) the large number of actions that depend on each other for successful implementation.

In the April 2017 report, GAO made recommendations related to capital planning and stakeholder involvement. VA concurred with the recommendations to the extent that they were within its control and has started making improvements.

We are pleased to be here today to discuss our work related to the  Department of Veterans Affairs’ (VA) efforts to align its medical facilities  and services, as well as our work on the Department of Defense’s (DOD)  military Base Realignment and Closure (BRAC) process. These efforts  are both relevant to challenges the federal government faces in real  property management.

VA operates one of the largest health care systems in the United States,  providing care to more than 8.9 million veterans each year. VA is also one  of the largest federal property-holding agencies. In September 2014, VA’s  reported inventory included 6,091 federally owned buildings and 1,586  leased buildings. However, in recent decades, the veteran population and  preferences have shifted. VA has recognized this shift and the need to  modernize its aging infrastructure and align its real property assets to  provide accessible, high-quality, and cost-effective services to veterans.  Aligning VA facilities to improve veteran access to services integrates two  of GAO’s high risk areas: veterans’ health care and federal real property.  In 2015, GAO placed veterans’ health care on its High Risk List due to  persistent weaknesses and systemic problems with timeliness, cost- effectiveness, quality, and safety of the care provided to veterans. In  2003, GAO placed federal real property management—including  management of VA real property—on its High Risk List due to long- standing challenges, such as effectively disposing of excess and  underutilized federal property.

DOD has repeatedly applied the BRAC process to reduce the amount of  unneeded property that it owns and leases. DOD has undergone five  BRAC rounds since 1988 as a means of reducing excess infrastructure  and realigning bases to meet changing force structure needs. The most  recent BRAC round in 2005 also provided opportunities for furthering  transformation and fostering jointness. As a result of these rounds, DOD  reported that it had reduced its domestic infrastructure and transferred  hundreds of thousands of acres of unneeded property to other federal  and nonfederal entities. DOD data show that the department generated  an estimated $28.9 billion in net savings or cost avoidances from the prior  four BRAC rounds through fiscal year 2003 and expects to save about $7  billion each year thereafter. Regarding the 2005 BRAC round, we  estimated that DOD saved about $15.2 billion from fiscal years 2006  through 2011 with an annual recurring savings of $3.8 billion beginning in  fiscal year 2012. These savings reflect money that could be applied to  other higher priority defense needs as well as savings from what DOD  estimated it would likely have spent to operate military installations had  they remained open.

Our testimony today is based on our April 2017 report examining VA’s  efforts to align its facilities with veterans’ needs, and on numerous GAO  reports related to the BRAC process as summarized in June 2011 and  March 2012 testimonies. Today’s testimony addresses (1) the factors  that affect VA’s facility alignment and the extent to which VA’s capital- planning process facilitates the alignment of facilities with the veterans’  population, and (2) the key elements and challenges affecting DOD and  the Commission in BRAC 2005. For our April 2017 report, we reviewed  VA’s facility-planning documents and data and interviewed VA officials in  headquarters and at seven medical facilities selected for their geographic  location, veteran population, and past alignment efforts. Additional  information on our scope and methodology is available in our April report.  Detailed information on our scope and methodologies for our BRAC work  can be found in the published products, which are cited throughout this  testimony. The work on which this testimony is based was conducted in  accordance with generally accepted government auditing standards.

Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

VA’s Efforts to Align its Facilities Are Affected by Several Factors and Are Impeded by Limitations in Its Capital-planning Processes

Facility Alignment Is Challenged by Shifting Veterans’ Populations, Evolving Care Standards, Aging Infrastructure, and Limited Stakeholder Involvement

Geographic shifts in the veterans’ population, changes in health care  delivery, an aging infrastructure, and limited stakeholder involvement  affect VA’s efforts to align its services and real property portfolio to meet  the needs of veterans. For example, there has been a shift over time from  inpatient to outpatient care. This shift will likely result in underutilized  space once used for inpatient care. In such instances, it is often difficult  and costly for VA to modernize, renovate, and retrofit these older  facilities. In June 2017, VA reported that its facility inventory includes 430  vacant or mostly vacant buildings that are, on average, more than 60  years old, and an additional 784 buildings that are underutilized.

The historic status of some VA facilities adds to the complexity of  converting or disposing of them. In 2014, VA reported holding 2,957  historic buildings, structures, or land parcels—the third most in the federal  government after DOD and the Department of the Interior. In some  instances, it may be more expensive to renovate than to demolish and  rebuild outdated facilities. In other cases, however, there may not be an  option to demolish if these buildings are designated as historic. For  example, planning officials at four medical facilities in our review told us  that state historic preservation efforts prevented the VA from demolishing  vacant buildings, even though these buildings require upkeep costs and  pose potential safety hazards. (See fig. 1.)

VA has also encountered challenges to its facility alignment efforts, in  part, because it has not consistently followed best practices for effectively  engaging stakeholders. VA may align its facilities to meet veterans’ needs  by expanding or consolidating facilities or services. Stakeholders— including veterans; local, state, and federal officials; Veterans Service  Organizations; historic preservation groups; VA staff; and Congress— often view changes as working against their interests or those of their  constituents, especially when services are eliminated or shifted from one  location to another. We found that VA has not consistently engaged with  stakeholders, and, in some cases, this inconsistency resulted in  adversarial relationships that reduced VA’s ability to better align facilities  with the needs of the veteran population.

In our April 2017 report, we recommended that VA improve stakeholder  communication guidance and evaluate its efforts. VA agreed with our  recommendations and outlined a plan to implement them.

Limitations in VA’s Capital- planning Processes Impede Its Alignment of Facilities SCIP Process

Two of the planning processes VA uses to align its facilities—VA’s  Strategic Capital Investment Planning (SCIP) and the VA Integrated  Planning (VAIP)—have limitations.

VA relies on the SCIP process to plan and prioritize capital projects  system-wide, but SCIP’s limitations—including subjective narratives, long  timeframes, and restricted access to information—undermine VA’s ability  to achieve its goals. For example, the time between when planning  officials at VA medical facilities begin developing the SCIP narratives and  when they are notified that a project is funded has taken between 17 and  23 months over the past 6 fiscal-year’s SCIP submissions. (See fig. 2.)  As such, VA routinely asks its facility planners to submit their next year’s  planned project narratives before knowing if their project submissions  from the previous year have been funded.

An official from the office that oversees SCIP told us that the timing of the  budgeting process, which is outside VA’s control, contributes to these  delays. While these aspects are outside of VA’s control, VA has chosen  to wait about 6 to 10 months to report the results of the SCIP scoring  process to the medical facilities. This situation makes it difficult for local  officials to understand the likelihood that their projects will receive  funding. A VA official said that for future SCIP cycles, VA plans to release  the scoring results for minor construction and non-recurring maintenance  projects to local officials earlier in the process. At the time of our review,  however, the official did not have a time frame for when VA would do this.  Although VA acknowledges many of these limitations, it has taken little  action in response. Federal standards for internal control state that  agencies should evaluate and determine appropriate corrective action for  identified limitations on a timely basis. If VA does not address known  limitations with the SCIP process, it will not have reasonable assurance  that SCIP can be used to accurately identify the capital necessary to  address VA’s service and infrastructure gaps.

In our April 2017 report, we recommended that VA address identified  limitations to the SCIP process, including limitations to scoring and  approval, and access to information. VA concurred with the  recommendation to the extent the limitations were within its control. While  VA has taken some actions, the recommendation remains open.

The VAIP process produces a market-level health services delivery plan  for each Veterans Integrated Service Network (VISN) and a facility master  plan for each medical facility. VA has estimated the entire process to  create plans for VISNs and facilities to cost $108 million when fully  complete. However, the VAIP process’s facility master plans assume all  future growth in services will be provided directly through VA facilities.  This assumption is not accurate given that (1) VA obligated about $10.1  billion to purchase care from non-VA providers in fiscal year 2015 and (2)  VA can provide care directly through its medical facilities or purchase  health care services from non-VA providers through both the Non-VA  Medical Care Program (referred to as “care in the community” by VA) and  clinical contracts. The Office of Management and Budget’s acquisition  guidance notes that investments in major capital assets should be made  only if no alternative private sector source can support the function at a  lower cost.

In our April 2017 report, we recommended that VA assess the value of  the VAIP’s facility master plans as a facility-planning tool, and based on  conclusions from the review, to either (1) discontinue the development of  VAIP’s facility master plans or (2) address the limitations of VAIP’s facility  master plans. VA concurred with the recommendation, and in August  2017, VA noted that it has discontinued its VAIP facility master plans  while VA pursues a national realignment strategy, after which it plans to  adjust its future facility master plans to incorporate pertinent information,  including care in the community realignment opportunities.

Key Elements and Challenges Affecting DOD and the Commission in BRAC 2005

Key Elements That DOD Used to Develop Its 2005 BRAC Recommendations That Could Benefit VA Asset and Infrastructure Review

As Congress evaluates proposed legislation for disposing of or realigning  VA property, it may wish to consider seven elements DOD relied on as it  developed its recommendations for the BRAC Commission.

Establish goals for the process. The Secretary of Defense  emphasized the importance of transforming the military to make it  more efficient as part of the 2005 BRAC round. Other goals for the  2005 BRAC process included fostering jointness among the four  military services, reducing excess infrastructure, and producing  savings. Prior rounds focused more on reducing excess infrastructure  and producing savings.

Develop criteria for evaluating closures and realignments. DOD  proposed selection criteria, which were made available for public  comment via the Federal Register. Ultimately, Congress enacted the  final BRAC selection criteria in law with minor modification and  specified that four selection criteria, known as the “military value  criteria,” were to be given priority in developing closure and  realignment recommendations. Further, Congress required that the  Secretary of Defense develop and submit to Congress a force  structure plan that described the estimated size of major military units  needed to address probable threats to national security for the 20- year period beginning in 2005, along with a comprehensive inventory  of global military installations. In authorizing the 2005 BRAC round,  Congress specified that the Secretary of Defense publish a list of  recommendations for the closure and realignment of military  installations inside the United States based on the statutorily-required  20-year force structure plan and infrastructure inventory, and on the  final selection criteria.

Estimate costs and savings to implement closure and  realignment recommendations. To address the cost and savings  criteria, DOD developed and used the Cost of Base Realignment  Actions (COBRA) model, a quantitative tool that DOD has used since  the 1988 BRAC round to provide consistency in potential cost,  savings, and return-on-investment estimates for closure and  realignment options. We found the COBRA model to be a generally  reasonable estimator for comparing potential costs and savings  among alternatives. (See fig. 3.)

As with any model, the quality of the output from COBRA was a direct  function of the data DOD included in the model. Also, DOD’s COBRA  model relied to a large extent on standard factors and averages and  did not represent budget quality estimates that were developed once  BRAC decisions were made and detailed implementation plans were  developed. Nonetheless, the financial information provided important  input into the selection process as decision makers weighed the  financial implications—along with military value criteria and other  considerations—in arriving at final decisions about the suitability of  various closure and realignment options.

Establish an organizational structure. The Office of the Secretary  of Defense emphasized the need for joint cross-service groups to  analyze common business-oriented functions. For the 2005 BRAC  round, as for the 1993 and 1995 rounds, these joint cross-service  groups performed analyses and developed closure and realignment  options in addition to those developed by the military departments.  Our evaluation of DOD’s 1995 BRAC round found that few cross- service recommendations were made, in part because of the lack of  high-level leadership to encourage consolidations across the  departments’ functions. In the 1995 BRAC round, the joint cross- service groups submitted options through the military services for  approval, but few were approved. The number of approved  recommendations that the joint cross-service groups developed  significantly increased in the 2005 BRAC round. This increase was, in  part, because high-level leadership ensured that the options were  approved not by the military departments but rather by a DOD senior- level group, known as the Infrastructure Steering Group. As shown in  figure 4, the Infrastructure Steering Group was placed organizationally  on par with the military departments.

Establish a common analytical framework. To ensure that the  selection criteria were consistently applied, the Office of the Secretary  of Defense, the military departments, and the seven joint cross- service groups first performed a capacity analysis of facilities and  functions. Before developing the candidate recommendations, DOD’s  capacity analysis relied on data calls to hundreds of locations to  obtain certified data to assess such factors as maximum potential  capacity, current capacity, current usage, and excess capacity. Then,  the military departments and joint cross-service groups performed a  military value analysis for the facilities and functions based on primary  military value criteria, which included a facility’s or function’s current  and future mission capabilities, physical condition, ability to  accommodate future needs, and cost of operations.

Develop BRAC oversight mechanisms to improve accountability  for implementation. In the 2005 BRAC round, the Office of the  Secretary of Defense for the first time required the military  departments to develop business plans to better inform the Office of  the Secretary of Defense of the status of implementation and financial  details for each of the BRAC 2005 recommendations. These business  plans included: (1) information such as a listing of all actions needed  to implement each recommendation; (2) schedules for personnel  relocations between installations; and (3) updated cost and savings  estimates by DOD based on current information. This approach  permitted senior-level intervention if warranted to ensure completion  of the BRAC recommendations by the statutory completion date.

Involve the audit community to better ensure data accuracy. The  DOD Inspector General and military department audit agencies  played key roles in identifying data limitations, pointing out needed  corrections, and improving the accuracy of the data used in the  process. In their oversight roles, the audit organizations, which had  access to relevant information and officials as the process evolved,  helped to improve the accuracy of the data used in the BRAC process  and thus strengthened the quality and integrity of the data used to  develop closure and realignment recommendations. For example, the  auditors worked to ensure certified information was used for BRAC  analysis and reviewed other facets of the process, including the  various internal control plans, the COBRA model, and other modeling  and analytical tools that were used in the development of  recommendations.

Key Challenges Affecting DOD and the Commission in BRAC 2005

We identified two key challenges that affected DOD’s implementation of  BRAC 2005 and would need to be addressed for VA to adopt a BRAC- like process for its asset and infrastructure review.

Some transformational-type BRAC recommendations required  sustained senior leadership attention and a high level of  coordination among many stakeholders to complete by the  required date. Implementation of some transformational BRAC  recommendations—especially those where a multitude of  organizations had roles to play to ensure the achievement of the goals  of the recommendation—illustrated the need to involve key  stakeholders and effective planning. For example, the Defense  Logistics Agency committed sustained high-level leadership and  included relevant stakeholders to address implementation challenges  faced with the potential for disruptions to depot operations during  implementation of the BRAC consolidation recommendation. To  implement the BRAC recommendations, the agency had to develop  strategic agreements with the services that ensured that all  stakeholders agreed on its plans for implementation, and had to  address certain human capital and information technology challenges.

Large number of actions and interdependent recommendations  complicated the implementation process. The large number and  variety of BRAC actions presented challenges during implementation.  The BRAC 2005 round had more individual actions (813) than the four  prior rounds combined (387). The executive staff of the Commission  told us that it was more difficult to assess the costs and the amount of  time for the savings to offset the implementation costs since many of  the recommendations contained multiple interdependent actions, all of  which needed to be reviewed. Specifically, many of the BRAC 2005  recommendations were interdependent and had to be completed in a  sequential fashion within the statutory implementation period. In cases  where interdependent recommendations required multiple relocations  of large numbers of personnel, delays in completing one BRAC  recommendation had a cascading effect on the implementation of  other recommendations. Specifically, DOD had to synchronize the  relocations of over 123,000 people with about $24.7 billion in new  construction or renovation. Commission officials told us that in prior  BRAC rounds each base was handled by a single integrated  recommendation. However, in BRAC 2005, many installations were  simultaneously affected by multiple interconnected BRAC  recommendations. Given the complexity of interdependent  recommendations, the Office of the Secretary of Defense required the  military departments and defense agencies to provide periodic  updates on implementation challenges and progress.

Chairman Roe, Ranking Member Walz, and Members of the Committee,  this concludes our prepared statement. We are happy to answer any  questions related to our work on VA’s efforts to align its medical facilities  and services or on DOD’s BRAC process.

If you or your staff members have any questions concerning this  testimony, please contact David Wise at (202) 512-2834 or  wised@gao.gov regarding federal real property, or Brian Lepore at (202)  512-4523 or leporeb@gao.gov regarding the BRAC process. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this statement. Other individuals who made  key contributions to this testimony include Keith Cunningham, Assistant  Director; Gina Hoffman, Assistant Director; Tracy Barnes; Jeff Mayhew;  Kevin Newak; Richard Powelson; Malika Rice; Jodie Sandel; Eric  Schwab; Amelia M. Weathers; and Crystal Wesco.

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