VA Testimony of Thomas A. Cappello before Congress on October 23, 1997

United States Department of Veterans Affairs

STATEMENT OF
MR. THOMAS A. CAPPELLO
DIRECTOR, VA PITTSBURGH HEALTHCARE SYSTEM
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
COMMITTEE ON VETERANS' AFFAIRS
U. S. HOUSE OF REPRESENTATIVES

October 23, 1997

It is a pleasure to be invited to this hearing today and given an opportunity to share my knowledge of the Pittsburgh project, and answer any questions you may have of me on this subject. As I have noted in the past, I feel the Office of the Inspector General has conducted a thorough review, and I will not further review their findings, but will address some issues not contained in their report.

As the Director of the VA Pittsburgh Healthcare System I take full responsibility for all that occurs on our three campuses. I am pleased to report that the positive stories greatly outnumber any negative stories you may have heard. Over the past year our Healthcare System has integrated two Medical Centers situated on three campuses into one system. We have reorganized in such a manner that expenditures over the past year have been decreased by $8 million and we have reduced by 318 FTEE. We have treated 9000 more patients this year, and this performance amounts to a decrease in the cost per patient treated of 25%. We have increased our services to the veterans of Pittsburgh in record numbers and provide the highest levels of tertiary care of any Healthcare System within and outside the VA. We continue to serve as a National Referral Center for Liver Transplantation and a Regional Referral Center for other services.

When I entered on duty in Pittsburgh in 1994, I found a brand new, state of the art VA Medical Center on the Aspinwall Campus flanked by a series of older buildings that were in desperate need of rehabilitation. The quarters buildings in particular were unacceptable. The subject Building #13 was in the most disrepair and this fact has been well documented. I was faced with an issue of either repairing these government assets or closing them. A cost-benefit analysis was conducted and it was determined that nearly $3 million had been collected in rents from 1979 to 1994, and if rehabilitated, these units would provide a positive cash flow that could be reinvested in patient services. In fact, the very reason for the disrepair of these units was directly related to the lack of maintenance and repair over the years. It was decided to renovate three vacant units and to continue this process until all of the units were completed. It is important to note that I personally never had any long range plans to live on campus, thus the renovations would not be associated with me, but only with the reality that the repairs were desperately needed. Various options for rehab were discussed ranging from cost-prohibitive restorations to more cost-effective updating. Shortly after this decision was made to renovate these units our Associate Director was detailed as Acting Director to the Bath VAMC, our Chief Engineer transferred to Bay Pines, FL, and our Contracting Section consolidated with the Highland Drive Contracting Section. These key vacancies and changes had a great deal to do with the poor project management that occurred at the operational level. I had never worked on a campus with quarters and was not very knowledgeable on the rules and regulations on this subject. I did receive guidance that I could expend up to $126,000 to rehabilitate this structure, and a project was developed whose costs conformed to this budget number. As late as July 27, 1995, three months after I had moved into the home, I was informed the total expenditures amounted to $115,000. I felt assured that all rules had been followed. When the IG arrived in April, 1996 I was pleased, and confident this review would prove that we had followed all applicable guidance and our protection of these government assets was appropriate.

As the IG report indicates, it was determined that the guidance used was incorrect and the costing of the project was in error. I cannot comment on the issues surrounding the guidance on quarters renovation in 1994, but I can comment on the costing of this project. As we all know the project exceeded the allowable limitation by $79,000. This occurred primarily because $33,000 of a $400,000 project to repair the watermains and drains on the campus was not costed to each of the quarters buildings. In addition $45,000 of station labor used on this project was not appropriately costed to this project. In each of these instances this occurred because of inadvertent and not malicious poor cost accounting and improper interpretation of the rules. It is important to note that this is costing information and not the actual cost. With regard to the costing of station labor of $45,000, it is important to note that 2305 hours of labor were costed to this project, and an independent cost estimator indicated that 540 hours was a more appropriate estimate of the hours required for the work accomplished. In fact, I was informed that roughly 2100 hours is the industry estimate for the complete construction of a 2500 square foot home. This fact does not mean VA labor is inefficient, it means our past systems for tracking cost was done anecdotally and after the fact. We have corrected this problem at Pittsburgh by now insisting on a work order for all work in quarters and the Canteen to ensure a proper estimate of work and accurate cost accounting.

Finally and probably the most publicized aspect of this renovation is the issue of above- standard amenities. I can assure everyone here that I am conservative by nature and most certainly a conservative manager. For example, I drive a ten year old car and intend to drive it for several more years. I can also assure you that I would never have knowingly selected any faucet or bathtub/whirlpool that was anything other than mid-grade, tasteful, and serviceable. I believed that all selections were within the budget of $86,000 submitted by the contractor who completed the work and I was not aware of the cost of individual line items until the time of the audit. This was an oversight.

In closing, I want to assure you and most importantly I want the veterans of Pittsburgh to know that I take very seriously the trust placed in me. I assure everyone that the important story about Pittsburgh is not one of project mistakes, but one of stretching resources to provide as many services possible and to take care of our veterans within our budget. The VA Pittsburgh Healthcare System over the past three years has served over 10,000 more veterans, reduced costs by $10 million, increased outpatient visits by 65,000, and greatly improved service to our customers.