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VA Hospital Halted after JV Walks

Tuesday, December 16, 2014

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Work has stopped and federal-level fur is flying over the shutdown of a massive Veterans Affairs hospital project near Denver, after mismanagement by the agency drove the contractor off the job.

Joint venture Kiewit-Turner walked off the 11-building Denver VA Medical Replacement Project on Dec. 10, a day after the U.S. Civilian Board of Contract Appeals ruled that the VA had not provided the contractor with a $604 million design—the price of Kiewit-Turner's contract (increased after an initial round of changes).

Instead, the agency has added design elements and changes that put the project's current price tag at $1.1 billion.

DenverVAHospital
Photos, unless noted: Kiewit-Turner

The Kiewit-Turner joint venture says the VA owes it $100 million. In September, concrete was poured for the underground water storage tank at the complex's Energy Center.

Not only that, but K-T says the VA owes the joint venture $100 million.

And the VA "does not have sufficient funds to pay for construction of the entire project as currently designed and has no plans to ask for money," the Contract Appeals Board ruled.

"We find the behavior of the VA has not comported with standards of good faith and fair dealing required by the law," the board decision said. "The agency failed to provide a design that could be constructed within the estimated construction cost at award because it did not control its designer."

Walkout

The decision green-lighted K-T to make good on its longstanding threat to leave the project.

“Kiewit-Turner must cease all work on the project," Scott Cassels, Kiewit Corp. executive vice president, wrote in a letter Dec. 9 to the VA.

"We will take all reasonable actions necessary to preserve and protect work currently in place and the materials on-site as we begin a safe and orderly demobilization from the project.”

Work halted the next day, immediately idling nearly 1,400 workers and further pushing back a completion estimate that the general contractor already considered fictitious.

DenverVAHospital

Hundreds of workers attended a safety briefing in June. The shutdown has idled nearly 1,400 workers.

(VA's construction chief said in April that the hospital would be completed next May. K-T publicly said 2017.)

Subcontractors too, are awaiting payment, and prospective subcontractors are running from the project, reports said.

$100M Owed

Before the contract board ruling, Kiewit-Turner had demanded that the U.S. Army Corps of Engineers replace the VA as project manager and that the VA repay K-T $100 million in past costs. The contractor also wants a new contract that follows federal reimbursement standards.

The current delivery model—a first for the VA—is an integrated design and construct contract (IDc) that uses separate contractors for the contractor and designer, Engineering News-Record noted.

However, the design team—a joint venture of Skidmore Owings & Merrill, S.A. Miro, Cator Ruma and H+L Architects—has been under contract since January 2006; K-T was hired in 2011.

The VA says it is working with the Corps of Engineers "to bail out the sinking project and woo back Kiewit-Turner," The Gazette of Colorado Springs reported.

Status Update

Colorado officials have been pushing for the medical center for nearly a generation, The Gazette reported.

MikeCoffman
Official photo

"The VA's incompetence has done serious damage to this hospital project," said U.S. Rep Mike Coffman (R-CO), whose district includes the project.

And the overruns are not new. In January 2012, the Denver Post reported, the project was considered $57 million over the original $582 million estimate. Two months later, it was on track to reach $700 million. Then, it was $712 million.

In January 2013, the news outlet siad, the VA, K-T and the design team met to explore ways to cut what was then an approximately $200 million overrun. After sorting through more than 70 ideas totaling $400 million, the VA finally approved $10 million in cuts.

Meanwhile, the news outlet said, the VA alternately demanded new designs and told the construction contractor to keep to the current plans.

Amid the chaos, 97 percent of the structural steel (8,487 tons) has been installed and 99 percent of the pre-cast concrete in the 1.2 million-square-foot complex, the Gazette reported Saturday.

Meanwhile, the VA says it is "exploring alternatives and will provide additional information as it becomes available."

As of Monday (Dec. 15), the dispute and construction shutdown were not even mentioned on the project's web site or the VA's web site.

Seeking Options

In an opinion piece in Sunday's Denver Post, Rep. Mike Coffman (R-CO), a veteran whose district includes the project, said that Deputy VA Secretary Sloan Gibson had agreed to K-T's three demands.

DenverVAHospital

The original construction contract was $582 million. The current project estimate is $1.1 billion.

However, Coffman said, repaying K-T $100 million now would leave the VA without enough funds appropriated (about $400 million) to finish the project. And federal law prohibits the agency from signing a contract without sufficient appropriated funds.

Other options include asking the Department of Justice for funds from its "Judgment Fund," used to pay claims with federal agencies, or getting Congress to appropriate more money, which won't happen soon.

A fourth option, floated by the Colorado congressional delegation, is a 60-day temporary (bridge) contract to keep moving the project forward.

Pressure on K-T is growing to accept that option, even though the contractor would probably need to charge more for it, NBC affiliate KUSA reported.

Such a deal "is seen as the only viable method to restart work on the site by year's end," the station said.

'The VA's Incompetence'

Veterans and officials are fed up with the VA's performance on the project.

A group of veterans demonstrated Saturday outside the VA in Aurora, CO, to protest the standstill, the CBS affiliate reported.

DenverVAHospital

K-T and the VA welcomed officials from the VFW to the Concourse site in October—the last photo posted in what had been weekly project updates. None of the project principals is smiling now.

And Coffman wrote Sunday: "The VA's incompetence has done serious damage to this hospital project.

"It has harmed our veterans, who have been waiting over a decade for this state-of-the-art facility. It has harmed the workers who now have no job in the middle of the holiday season.

"And, it has harmed the taxpayers of this nation who must now come up with hundreds of millions of dollars to fix the VA's costly mistakes."

Still, Coffman said, the troubled job must be finished.

"We cannot abandon this hospital," he said. "We owe it to our veterans, the taxpayers, and to the 1,400 construction workers to get this job done."

   

Tagged categories: Architects; Bidding; Design; General contractors; Good Technical Practice; Government; Government contracts; Health Care/Hospitals; North America; Project Management; Subcontractors

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