Cost of Palo Alto Veterans Hospital Grows to $1.6 Billion

The cost of a U.S. Department Veterans Affairs project in Palo Alto has ballooned out of control.

The redevelopment of the Palo Alto Veterans Affairs Medical Center, originally slated as a $450.3 million endeavor, could now cost the federal government $1.6 billion, the Silicon Valley Business Journal reported. The department has been trying to renovate the complex for two decades.

The plan first called for demolishing six buildings at 3801 Miranda Avenue to make way for two buildings spanning more than 379,000 square feet as well as a parking garage. As time went on, the VA expanded the planned use of the development to include intensive rehabilitation care and an ambulatory care center. Those units meant more buildings added to the site, and as a result, more expenses.

Originally slated for completion in 2015, the languishing project is now expected to finish in 2036. It’s about $1.2 billion over budget, with an estimated $74 million added to the costs every year that the project goes unfinished.

“Because the Palo Alto project was never effectively governed, the costs and scope of the project grew out of control,” Larry Reinkemeyer, the VA’s assistant inspector general for audits and evaluations, wrote in a report cited by the outlet.

The office claimed that budgets and schedules were not fully analyzed and work requirements were tweaked without proper approval.

Talks of redevelopment started in 2007 when a regional branch of the Veterans Integrated Service Network requested that Palo Alto receive a new ambulatory care center. Some buildings at the Palo Alto Veterans Affairs Medical Center were in need of renovation, but the addition of the 325,000-square-foot ambulatory care center project required the VA to do major construction at the site.

Congress approved the VA’s initial request for $450 million for the construction project in 2009. The VA approved a request for an additional $266 million in 2011, though most of that tranche hasn’t been appropriated. Last year, the VA made its biggest request for a $907.8 million budget increase.

As of 2019, the VA had completed 10 phases of the project, including an intensive care unit and mental health center. The ambulatory care center has yet to be built. By February of this year, nine of the 12 buildings that were slated for demolition were still standing.

— Chris Malone Méndez