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The Fort Bliss Hospital Replacement Military Construction Project DODIG-2018-125

DODIG-2018-125

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Objective:

This report has been updated to ensure compliance with the U.S. Workforce Rehabilitation Act of 1973, section 508.  Formatting revisions may have resulted in minor changes to the appearance of the report; however, no changes were made regarding facts or content.

We performed this audit in response to the FY 2018 National Defense Authorization Act (NDAA) requirement that the DoD Office of Inspector General (OIG) provide a report on the design errors and omissions related to the construction of the Fort Bliss Hospital Replacement project at Fort Bliss, Texas. To fulfill the NDAA requirement, we reviewed the requirements development, the design‐bid-build contract award processes, design suitability, and contractor oversight.

Background:

The Fort Bliss Hospital Replacement (FBHR) is an ongoing construction project. The FBHR will include a main hospital, inpatient and outpatient clinics, an administrative building, a research building, a central utility plant, two access control points, and surface parking. The FBHR medical facility will be 1.13 million square feet and include 135 hospital beds, 10 operating rooms, and 30 specialty clinics.

Findings:

To fulfill the NDAA requirement we reported on the following five elements.

First, we examined the detailed description of the specific design errors and omissions that resulted in the cost increase for the hospital replacement project. As of March 15, 2018, the FBHR project had 978 contract change requests, including 132 cancelled change requests that occurred during construction. The change requests included 453 engineering changes, including design errors and omissions. The FY 2018 budget request for $251.3 million included three line items for design errors and omissions, valued at $165.6 million. The Headquarters United States Army Corps of Engineers (HQUSACE) Medical National Program Manager stated that the requested amount for design errors and omissions of $165.6 million was an estimated amount and that this amount was revised based on negotiations. We identified the modifications awarded as of March 2018, with the negotiated amounts related to the three line items for design errors and omissions.

  • Design errors and Omissions (through May 2016) [Legacy Issues] for $32.1 million – The USACE Fort Worth District Medical Project Manager stated that design errors and omissions through May 2016 are referred to as legacy issues, which are requests for equitable adjustment made by the construction contractor before May 31, 2016. For example, one design error and omission legacy issue was related to costs and time associated with the Government’s direction that structural steel beams and columns be refabricated to correct errors in the design of the structure and that the contractor cease delivery of steel to the site. This direction impacted the steel erection activities, resulting in reordering work and suspending critical work activities until the refabricated steel was delivered to the site. The cost and time increase for this change was $9.8 million and 65 calendar days.
  • Impact Costs (through May 2016) [Time‐Delay Costs] for $142 million − Impact cost is the cost of the overall time delay that the USACE Fort Worth District contracting officer or administrative contracting officer negotiated with the construction contractor. The time delay specifically resulted from changes to the contract related to requests for equitable adjustment before May 31, 2016. One example of a time‐delay cost was the addition of 306 calendar days to the contract, including 126 calendar days due to USACE‐caused delays. The delays related to interior framing issues, seismic test issues, and additional commissioning. Seismic tests ensure the structure being built is earthquake proof. Commissioning is the process of verifying that all building systems perform interactively to the design intent and the systems meet the owner’s operational needs. The cost of the 306 days was $12.7 million.
  • Design Errors and Omissions (after May 2016) [Design Validation] for $3.7 million – The USACE Fort Worth District Medical Project Manager stated that Design Errors and Omissions after May 2016 were a result of the design validation. The design validation was a review of the design to identify future cost and schedule impacts that had not been previously identified and which may affect work progress. An example of design errors and omissions during design validation related to the need to correct lighting fixtures and problems with the ceiling. The cost of the lighting and ceiling issues was $1.8 million.

For the full detailed description of the design errors and omissions in the FY 2018 budget request, see the ‘Design Errors and Omissions’ section under Reporting Element 1, in the body of this report.

Second, we examined a description of DoDs planned actions to prevent further schedule delays and cost increases on this project as well as lessons learned that could be applied to future projects. We determined that the Office of the Assistant Secretary of Defense for Energy, Installations, and Environment and HQUSACE implemented, or are in the process of implementing, several initiatives, including updating guidance on roles, responsibilities, and management controls. During the FBHR project, the USACE Southwestern Division and Fort Worth District replaced Government management of the FBHR project, conducted a design validation review, and conducted a cost schedule risk analysis. USACE Fort Worth District officials stated that lessons learned would not be determined until an official after action review occurs.

Third, we describe any ongoing or completed proceedings or investigations of parties responsible for the delay or cost increase and the status of those proceedings. We determined that as of March 2018, there were no ongoing or completed proceedings or investigations related to the FBHR project.

Fourth, we report the results of any final judicial or administration actions taken because of the above proceedings or investigations. As discussed in element 3, as of March 2018, there were no ongoing or completed proceedings or investigations related to the FBHR project.

Fifth, we determined that there are areas where improvements are needed for future military construction projects. The recommendations section discusses our recommendations to the key DoD organizations involved in the FBHR project but which should be applied as guidelines for all DoD construction projects, as applicable.

Recommendations:

We recommend that the Assistant Secretary of Defense for Energy, Installations, and Environment develop guidance to implement the section 2851, title 10, United States Code reporting requirement for each military construction project that has been specifically authorized by Congress. In addition, we recommend that the Assistant Secretary of Defense for Energy, Installations, and Environment develop guidance to identify roles and responsibilities for key segments of construction and establish metrics that include financial risk management parameters and triggers. We recommend that the Defense Health Agency Director, review the actions of the individuals involved in the FBHR project to determine whether any actions resulted in the cost and time increase related to design errors and omissions and initiate action to hold them accountable as appropriate.

We recommend that the U.S. Army Corps of Engineers Commander, review the actions of the individuals involved in the FBHR project to determine whether any actions resulted in the cost and time increase related to design errors and omissions and initiate action to hold the individuals accountable as appropriate; issue guidance to improve medical infrastructure projects; complete an after action review following construction of the FBHR project; and issue guidance directing contracting personnel to issue past performance evaluations in accordance with the Federal Acquisition Regulation.

We recommend that the U.S. Army Health Facility Planning Agency Commander, review the actions of the individuals involved in the FBHR project to determine whether any actions resulted in the cost and time increase related to design errors and omissions and initiate action to hold the individuals accountable as appropriate.

Management Comments and Our Response:

The Assistant Secretary of Defense for Energy, Installations, and Environment agreed with the recommendations and stated that the planned completion for the actions associated with implementing the recommendations would occur within 1 year. In addition, because of the Assistant Secretary comments, we revised one recommendation to clarify the guidance that he plans to issue related to roles and responsibilities for key segments of a facility construction project.

The Defense Health Agency Deputy Director, responding for the Defense Health Agency Director, agreed with the recommendation to review the actions of the individuals involved in the FBHR project to determine whether any actions resulted in the cost and time increase related to design errors and omissions and initiate action to hold them accountable as appropriate. The Deputy Director stated that the Defense Health Agency, in conjunction with the U.S. Army Health Facility Planning Agency Commander will conduct a joint review, which he estimated will take 12 weeks to perform.

The USACE Commander agreed with all recommendations to review the actions of the individuals involved in the FBHR project to determine whether any actions resulted in the cost and time increase related to design errors and omissions and initiate action to hold the individuals accountable as appropriate; issue guidance to improve medical infrastructure projects; complete an after action review following construction of the FBHR project; and issue guidance directing contracting personnel to issue past performance evaluations in accordance with the Federal Acquisition Regulation.

Specifically, the Commander stated that actions have been taken in accordance with USACE internal management controls and business processes to identify accountability for the actions, which will continue through construction completion. Furthermore, the Commander stated that USACE policies related to engineering and construction quality management and reporting of projects at risk is an established, on‐going process. Additionally, the Commander stated that USACE will conduct an after action report within 180 days of construction completion, which currently is planned for September 2019. Lastly, the Commander stated that USACE will issue interim guidance within 90 days in accordance with the Federal Acquisition Regulation Subpart 42.15, “Contractor Performance Information,” requirements.

The Chief of Staff for the Office of the Surgeon General and U.S. Army Medical Command, responding for the U.S. Army Health Facility Planning Agency Commander, disagreed with the recommendation to review the actions of the individuals involved in the FBHR project to determine whether any actions resulted in the cost and time increase related to design errors and omissions and initiate action to hold them accountable as appropriate. However, the Chief of Staff stated that he would conduct an inquiry to examine military construction (MILCON) processes, management of project sites, and interactions with stakeholders to refine current procedures. He further stated that the inquiry’s finding will be reviewed and implemented on future projects. Additionally, the Chief of Staff stated that the Army Health Facility Planning Agency will assist the Defense Health Agency and USACE, as necessary, with any reviews they may undertake, as a result of this report and its findings. These alternate actions, if implemented, will address the intent of the recommendation.

All four recommendations are resolved but remain open. The recommendations will be closed when we obtain evidence to verify that the actions in response to the recommendations have been completed.