Weak Governance Threatens the Viability of a Major Construction Project at the Palo Alto VA Medical Center in California

In its fiscal year (FY) 2009 budget request, VA identified the need for the Palo Alto major construction project to improve seismic safety at the Palo Alto Health Care System. The planned construction project would also provide ambulatory and polytrauma care. Over the next 15 years, the project’s cost and timeline increased. The OIG conducted this review to evaluate the significant events that led to cost increases, schedule slippages, and scope changes for the major construction project.

The OIG found VA has still not achieved two of its three critical project objectives and is more than 21 years behind its original schedule. As of February 2025, about $458.8 million had been spent on the project. Furthermore, because VA did not provide adequate justification for a significant scope increase proposed in the FY 2012 budget, the OIG questioned the expenditure of about $716.6 million. To proceed with the project, VA will need a total of about $1.6 billion.

Cost increases and delays occurred because VA did not have adequate formal procedures for governing major construction projects from 2009 to 2017. The OIG could not obtain evidence that the Palo Alto project was ever added to the Acquisition Program Management Framework, as required. VA must consider whether it is worth continuing the project or canceling efforts to complete it. Should VA be unable to justify the business need to continue funding the project, the OIG determined taxpayers could save about $907.8 million.

The OIG made four recommendations to the VA Secretary including ensuring the project is brought into the Acquisition Program Management Framework and ensuring a decision is made about the project’s future. VA concurred with the OIG’s recommendations.