A long-running Department of Veterans Affairs hospital replacement project in Palo Alto, California, has tripled in cost and slipped more than a decade behind. Approved in 2009 with an estimated budget of $450 million to replace six “seismically deficient” buildings, the initiative is now expected to exceed $1.6 billion, according to the inspector general. The watchdog warned completion may not come until 2036.
The Office of Inspector General found the project was never onboarded into VA’s Acquisition Program Management Framework and lacked required artifacts and decision reviews. Officials skipped required planning documents, bypassed approvals and failed to manage risks. Those gaps halted work on the project and allowed design changes, driving delays and rising expenses.
Download the Straight Arrow app today to get the stories that matter free from manipulation, bias or agenda.™
Point phone camera here
What has been completed so far?
As of February 2025, VA had spent about $458.8 million. The polytrauma rehabilitation facility and a parking garage are complete. Five of the original six buildings slated for demolition remain, and the ambulatory care center has been on hold since summer 2022.
Current completion plans contemplate demolishing nine buildings, which would require about $907.8 million in additional congressional funding.
What did the OIG find?
The report urged senior VA officials to reassess whether proceeding was wise, noting weak explanations for past cost hikes. The project skipped required approvals, never updated its business plan and lacked both a full project team and stop-points to halt runaway costs or delays.
The office also notes that the VA has not updated the Office of Management and Budget with a realistic total cost in agency capital plans.
How does this compare to other public projects?
The project’s struggles mirror those of other large public works, such as California’s high-speed rail. Launched with a $33 billion budget in 2008, California’s high-speed rail has since swollen past $106 billion without running a single train. A state memo recently warned that the Bakersfield–Merced section could require $3.2 billion beyond current estimates.
California Gov. Gavin Newsom suggested redirecting climate program revenue to cover the shortfall, but President Donald Trump said the federal government would not provide additional support.
