In 16 Years, the V.A. Turned This $450 Million Hospital Project Into a $1.6 Billion Boondoggle

In 2008, the Department of Veterans Affairs (V.A.) unveiled plans to raze several outdated, earthquake-prone structures at its medical center in Palo Alto, California, and replace them with newer, safer facilities, including a state of the art psychiatric hospital. By the time the construction began in 2009, it was expected to be finished in six years, with a price tag of roughly $450 million. In the 16 years since the project’s construction started, its costs have ballooned to nearly $1.6 billion—more than triple the original budget—and the project is now not expected to be completed until at least 2036, according to a recent report by the V.A.’s Office of the Inspector General (OIG).

The 65-page report provides a withering account that highlights the initiative’s many failings. For starters, it was never properly brought under the V.A.’s governance framework for capital investment, whose prerogative is to monitor costly, high-risk infrastructure projects. Despite mandates requiring comprehensive business cases, formal cost oversight, and risk management operations, V.A. bureaucrats reportedly neglected said procedures, resulting in administrative confusion. Scope and budget changes were introduced with little consideration for cost-benefit analysis. Centralized approvals were ignored, and critical decisions received no formal documentation.

What began as an initiative to improve seismic safety and veteran care now serves as a case study in bureaucratic drift. But this type of administrative breakdown is nothing new; the V.A. has long struggled to manage large capital projects and follow through on institutional commitments. From the Phoenix wait-time scandal in 2014—where staff falsified records to hide long delays in veteran care—to the more recent, failed $16 billion rollout of its Electronic Health Records (EHR) system, which was plagued by cost overruns and usability issues, the agency has a well-documented history of dysfunction. 

The OIG report calls on the V.A. to reevaluate whether the project should continue. While that’s a difficult call after spending almost half a billion dollars (as of February 2025), it is very clearly a necessary step if the wasteful project is to be shut down. The center’s board of directors might think so too; it did not prioritize the ambulatory care facility in its FY 2026 budget request, and has been indecisive on how to proceed with future budget requests necessary to finance the project.

These actions, along with the implementation of updated contract guidelines in May and the call for a full departmental review in July, might suggest the V.A. finally recognizes that it has serious problems. However, until systemic accountability becomes ingrained in the V.A., boondoggles like the one in Palo Alto will continue at the expense of taxpayers and veterans’ health.  

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